Finding Text
Finding Number: 2021-SA3 Material Weakness – Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Period of Performance Compliance and Control Finding
Federal Award: No. 64.024 VA Homeless Providers Grant and Per Diem Program
Federal Agency: U.S. Veterans Administration
Pass-Through Entity: Not applicable
Criteria or Specific Requirement: CFR section 200.403, Factors affecting allowability of costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost and be adequately documented.
2 CFR section 200.405, Allowable costs, states this standard is met if the cost is incurred specifically for the Federal award.
2 CFR section 200.430(i) Standards for Documentation of Personnel Expenses state charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award a Federal award and non-Federal award and charges for the salaries and wages of nonexempt employees… must be supported by records indicating the total number of hours worked each day.
Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. Records do not provide reasonable assurance that the charges are accurate, allowable, and properly allocated. Records do not appear to support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award or a Federal award and non-federal activity. Charges for non-exempt employees are not supported by records indicating the total number of hours worked each day.
Expenditure details included costs that were allocated to the Federal award but may not have been incurred specifically for the Federal award. These costs included unsupported journal entries and uncategorized expenditures. Additionally, due to lack of budgets for the fiscal year, it was not determinable if costs conformed to limitations or exclusions set forth in the Federal award. Costs were not adequately documented, and it is unknown if costs were accorded consistent treatment.
Cause: Factors beyond the control of current management, including poor recordkeeping, have caused financial records to be inadequate for audit purposes, as key members of the accounting department left the Organization before appropriately transferring knowledge and records related to the Federal awards.
Effect or Potential Effect: Potential for unallowable activities, unallowable costs, and costs outside of the period of performance and additional questioned costs.
Questioned Costs: Related questioned costs related to payroll expenditures are unknown. Questioned costs related to non-payroll expenditures are unknown.
Context: During the year under audit, the issues represent a systemic problem, beyond the control of current management.
Recommendation: Policies and procedures should be designed and implemented to ensure expenditures are reviewed for allowability before being charged to federal awards. Policies and procedures should be designed and implemented to ensure costs are reviewed for allowability before being charged to federal awards. Management should perform budget to actual analysis on a periodic basis to ensure that costs are not exceeding limitations.
View of Responsible Officials: In response to finding number 2021-SA3, management agrees with the finding and will design, implement, and maintain policies and procedures that ensure expenditures are reviewed for allowability before being charged to Federal awards. Management will also design, implement, and maintain policies and procedures that ensure costs are reviewed for allowability before being charged to Federal awards. Further, management will perform budget-to-actual analysis on a periodic basis to ensure costs do not exceed limitations.