Finding Text
Finding 2022-004: Higher Education Institutional Aid Allowable Costs and Allowable Activities Federal Agency: Department of Education Program: Higher Education Institutional Aid 84.031A Criteria: In accordance with the allowable cost and allowable activity requirements found in the 2 CFR Part 200, requirements for costs and activities allowed or unallowed are contained within federal awarding agency regulations and the terms and conditions of the federal award. According to the Higher Education Institutional Aid grant agreement, funds must be spent as specified in the grant award notifications and the approved application for allowable direct costs of the grant. Condition: The internal control system to ensure that this program was fully in compliance with all allowable cost and allowable activities requirements was not operating effectively. The initial grant application prepared by WCCC at the start of the five-year grant included a detailed budget by year that, in part, included the upgrade of the Enterprise Resource Planning (ERP) system. The annual budget in the application correlates with the budget shown on the annual reports. However, the final report in year five, which was completed in fiscal year 2022, showed several budget categories that were significantly overspent. In addition, the reported expenditures do not readily correlate to the actual expenditures charged to the grant in fiscal year 2022. The actual expenditures charged to the grant in fiscal year 2022 were substantially all related to the ERP upgrade that did occur within the period of grant performance. WCCC could not provide a clear, verifiable documentation trail from inception of the grant to finalization that correlates the amount and budget categories of spending relating to the ERP system to what was initially approved under the grant application. Cause: Several years of underspent grant funds accumulated into the final year of the grant. In addition, the ERP system upgrade costs changed significantly from the time of initial grant application and budget. As a result, significant ERP system costs were applied to the grant at the end of the period of performance, which caused costs by budget category to be significantly different than what was originally approved. In addition, the grant project director and any related finance personnel involved with the final report and the overall grant administration had all left employment with WCCC during fiscal year 2022. Effect: It is undeterminable whether the extent of the ERP costs that were applied to the grant are considered to be allowable costs and allowable activities based on the initial application and annual budget categories and any other grant documentation that could be provided by WCCC. Questioned costs: Undeterminable Recommendation: We recommend that WCCC implement procedures to ensure that grant funding is being spent in accordance with grant approval and budget category. Documentation should be maintained to support any changes from the original award budget and any necessary approvals should be obtained for significant changes in plans relating to spending. A clear documentation trail is critical to ensure the grant expenditures are supported even when there is turnover in grant related personnel. View of Responsible Officials and Planned Corrective Action: Grants will be reconciled to ensure that annual expenditures meet the grant budget and outcomes. The accounting and foundation/grants offices will work in partnership to ensure compliance. All documentation will be on file with the grants.