Finding Text
Criteria: The CARES Act provides that payments from the Fund may only be used to cover costs that - 1. are necessary expenditures incurred due to the public health emergency with respect to Coronavirus Disease 2019 (COVID-19); 2. were not accounted for in the budget most recently approved as of March 27, 2020 for the State or government; and 3. were incurred during the period that begins on March 1, 2020 and ends on December 31, 2021. The Department of the Treasury (Treasury) deemed the term “necessary” broadly to mean that the expenditure is reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending Fund payments. Treasury clarified that for a cost to be considered to have been incurred, performance or delivery must occur during the covered period but payment of funds need not be made during that time (though it is generally expected that this will take place within 90 days of a cost being incurred). The CARES Act provides that payments from the Fund may only be used to cover costs that were incurred during the period that begins on March 1, 2020 and ends on December 31, 2021 (the “covered period”). Examples of ineligible expenditures are expenses that have been or will be reimbursed under any federal program and workforce bonuses other than hazard pay or overtime. In general, costs should be determined in accordance with accounting principles generally accepted in the United States of America (GAAP), be adequately documented and properly incurred during the approved period. Condition: The Organization received an influx of federal funds (PPP loan and CARES Act funding) from various sources during the COVID pandemic and was focused on the operations of the program versus the financial accountability of the COVID-19 funds. During our audit, we noted that payroll previously reported within the 24-week PPP loan period was subsequently claimed against the CARES Act funding. Bonuses were also charged to the CARES Act which is specifically disallowed. Cause: There appeared to be a lack of knowledge of the compliance requirements as it relates to federal programs. Effect: Personnel were not knowledgeable of this new program and the expenditures that may be considered ineligible. Without the written policies and procedures required by 2 CFR 200, the Organization has insufficient internal controls over compliance with federal laws, regulations and grant agreements related to the federal awards it receives and expends. Context: Of the sixty (60) non-payroll samples selected for testing, there was one (1) instance in which the cost claimed was for an estimated amount for tuition assistance versus actual with excess claimed in the amount of $20,350. There was also one (1) instance in which the cost claimed for supplies was for the original order versus the partially filled order reflecting the credit of $19,706. Known questioned costs are $40,056. The monetary error rate was used to project likely questioned costs of $101,281. Of the sixty (60) payroll samples selected for testing, there were twenty-six (26) instances in which payroll was reflected on both the PPP loan and the COVID-19 Coronavirus Relief Fund or charged to the same COVID-19 Coronavirus Relief Fund through different grantors. There were three (3) instances in which there was a lack of adequate support for the amount claimed. There were three (3) instances in which the bonus was charged to the CARES Act which is ineligible. Known questioned costs, inclusive of $281,000 of hazard pay entirely funded by PPP funds, are $307,484. The rate of occurrence was used to project likely questioned costs of $1,089,290.