Finding Text
Section III – Federal Award Findings and Questioned Costs (Continued)
FINDING 2023-002 – Significant Deficiency – Controls Related to Charging Expenses to Programs
CONDITION: The Agency inadvertently overcharged related to Worker’s Compensation and State Unemployment expenses across all Federal programs as noted in Finding 2023-001
CONTEXT: We noted the Agency relied upon its accounting software to allocate costs related to Worker’s Compensation and State Unemployment expenses to Federal programs. However, the Agency did not adequately maintain internal controls to ensure that rates charged were aligned with actual costs being incurred. As a result, Federal programs were charged more than the actual costs incurred.
CRITERIA: In accordance with applicable cost principles, charges to Federal programs should be reasonable and based on sound methodology. Proper internal controls would necessitate a periodic review and monitoring of rates at which certain expenditures are being charged to Federal programs within the Agency’s accounting software.
CAUSE: Internal controls do not include provisions for a recurring review of rates at which certain expenditures are being charged to programs.
EFFECT: In the absence of proper internal controls, the Agency may be reimbursed amounts for which it may not be eligible.
RECOMMENDATION: Procedures should be revised to ensure a periodic review of cost allocation practices to ensure that costs are being allocated properly. Any identified discrepancies should be immediately remedied with proper credit provided to applicable Federal programs.
AUDITEE RESPONSE: Refer to the Agency’s Corrective Action Plan