Finding Text
#2021-004 – Material Weakness – Activities Allowed or Unallowed, Reporting, Cash Management, Period of Performance
Opioid STR Grant ALN 93.788
Criteria
The Office of Management and Budget issuance of the Code of Federal Regulations (CFR) specifically states uniform administrative requirements, cost principles, and audit requirements for federal awards.
In accordance with 45 CFR § 75.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:
(a) be necessary and reasonable for the performance
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
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(g) Be adequately documented.”
Condition
During the audit we noted the Organization reported the following expenses that were not supported by the accounting records or supporting documentation:
For the monthly reports tested, we were unable to examine supporting invoices or supporting documentation for $85,874 of the $152,072 charges reviewed. Additionally, for these items, because invoices or other support was not available, we were unable to verify the service period and whether the expense was charged to the correct grant period.
Additionally, we were unable to examine support for $56,528 which was reported as fringe benefit expense to the Pennsylvania Department of Military and Veterans Affairs. This amount included health insurance expense. For the year ended December 31, 2021, the Organization was unable to support $100,879 of health insurance expense reported in the accounting records or provide invoices to support all expenses reported. We were unable to test the Organization’s health insurance expense and determine how it was allocated to the grant programs.
We also noted expenses totaling $50,838 that were not deemed to be reasonable for the performance of the federal awards.
Cause
The cause is a lack of a proper control structure that includes retention of all supporting documentation for expenses and proper tracking of expenses charged to the grant programs.
Effect
The potential effects are overbilling the grant program and unsupported charges.
Questioned Costs
$190,502
**** - Citations not pertinent to this finding.
Perspective Information
We reviewed a sample of reports filed with the Pennsylvania Department of Military and Veterans Affairs and the Drug and Alcohol Program. We examined the payroll for each employee charged to the grant for a total of twenty-six employees. We also tested nonpayroll related expenses charged to the grant. The finding represents the unsupported costs noted from this review.
Identification as a repeat finding
A similar issue was noted in prior year finding #2020-004.
Recommendation
We recommend that the Organization develop a system to track all expenses charged to each grant contract by month and systematically file all supporting documentation in a manner that can easily be accessed. This information must be retained in accordance with the Federal and grant guidelines. The monthly reports filed for the grants should be supported by the Organization’s accounting records and invoices. We further recommend that the Organization perform a reconciliation between the monthly reports and the accounting records.
View of responsible officials and planned corrective action
In 2022 and 2023 we have developed a system that better separated and tracked expenditures by grant. We have made the following adjustments already:
1. We have purchased software and a device to read and store receipts into the computer system. We have purchased and are using Quick Books. All expenditures and incoming funds will be placed into the Quick Books system. Any expenditure is then filed by grant, by month with a copy of the invoice, bill, etc. documentation as well as the receipt that corresponds. All files will be kept in a locked cabinet in the fiscal office. At the end of each year all past year records will be stored and kept for 7 years.
2. We have hired a person to do data entry and booking part time.
3. We have devoted our Administrative Coordinator to take responsibility for HR and fiscal matters to serve as a check and balance system as well as to take the larger load from the Fiscal Coordinator since we have grown.
4. The final thing JFT has done is to hire an accounting firm called The Gift to come in as a final check and balance. The Gift has been able to give our agency training on fiscal matters that were not clear, they have been able to expand our knowledge and use of the Quick Books System and helped us set up proper checks and balances to better ensure that everything that is charged to each grant is well documented.