Finding Text
Criteria and Condition: Under the requirements of the Uniform Guidance, the drawdown of federal funds must be based on actual expenditures incurred. Context: We sampled twenty-five reimbursed amounts from various awards. We noted two instances where the Organization obtained federal funds without incurring the actual expenditure. We also noted one instance where the expenditure occurred outside of the budget period. Cause: The Organization did not properly allocate expenditures within their general ledger and did not have an adequate review process in place.
Effect: The lack of an adequate review process can cause federal funds to be obtained prior to the actual expenditure is incurred.
Recommendation: We recommend that the Organization develop a review process to ensure the drawdown of federal funds does not occur before funds are expended and that the Organization submit expenditures incurred in the budget period.
Views of Responsible Officials and Planned Corrective Actions: Management concurs that two instances noted by the auditors were instances of non-compliance. Management believes that the auditors' assessment on the third noted instance of noncompliance is incorrect and should not be reported as a finding. The findings noted by the auditors were billing errors and do not represent any attempt to defraud the Federal government. Nonetheless, management is taking appropriate steps to prevent recurrence of the errors noted. Management also believes that by supplying context regarding the errors detected, users of this report will better understand the nature and magnitude of the errors detected.
For the instance where the expenditure occurred outside of the budget period, we inappropriately reported $167. 72 in wages that were paid on July 1, 2022 in the July 1, 2022 through
June 30, 2023 grant year expenditures. The wages were paid during the grant year in question, but had been earned by the employee in the previous grant year and therefore should not have been included as a cost incurred under the grant. encircle will return $167.72 to the grantor.
For one instance where we obtained Federal funds without incurring the actual expenditure, the error involved reporting occupancy expenses. When the grant year started on January 1, 2023, the grant budget included services to be provided from two separate offices, in Richmond and Newport News. Finance staff preparing the monthly invoices included occupancy costs for our Richmond and Newport News offices in the amounts invoiced each month. However, due to office size constraints and hiring difficulties, we were not able to begin providing services in Newport News until June 2023. Accordingly, excess occupancy costs were invoiced between January 1, 2023 and June 30, 2023. The period covered by this particular grant runs from
January 1, 2023 through December 31, 2023. Management has already begun the process of adjusting amounts billed for occupancy costs on invoices submitted subsequent to June 30, 2023 in order to ensure that amounts paid under the grant do not exceed total incurred occupancy costs for the grant year. Also, management has implemented review and oversight procedures to ensure that all occupancy costs invoiced in future months are fully-substantiated by actual costs in
For the other instance where the auditors determined that we obtained Federal funds without incurring the actual expenditure, we disagree with the auditors' contention that we obtained Federal funds without incurring actual expenditures. The issue was not that costs had not actually been incurred. Instead, the auditors determined that certain costs that were in fact incurred should not have been reimbursed by Federal funds. We disagree with this determination and contend that the costs incurred were an integral part of the total occupancy cost paid for the office in question. However, we will nonetheless refund any amounts invoiced in excess of amounts allowable per the auditors' determination. The amount refundable per the auditors is $139.25, but per our detailed analysis the amount deemed to be refundable was actually $1,159.13. Management will implement procedures to ensure that only occupancy costs deemed by the auditors to be appropriate will be billed to the grant.