Finding Text
FINDING 2022-001 Condition: The Organization had allocated expenditures, which supported an activity that generated program income, to a federal award that was not a major program. This program income was not deducted from total allowable costs or added to the award. The auditor discovered the expenditures during a scan of the expenditures allocated to federal awards and requested that the Organization analyze its charges to federal awards to determine if there were additional amounts. The total of such expenditures discovered was $3,655. Criteria: The Uniform Guidance (2 CFR section 200.307(e)(1)) requires that program income be deducted from total allowable costs in order to determine the net allowable costs, rather than to increase the funds committed to the project. This method must be used if the federal awarding agency has given no prior approval for how program income is to be used and its regulations and the terms and conditions of the federal award are silent on this matter. The Organization?s federal award contracts also address program income. Cause: The Organization had inadvertently misallocated the expenditures to the award. Effect: The Organization had other expenditures, which did not support an activity that generated program income, available to allocate to the award. Accordingly, no adjustment to the financial statements was required and there was no reportable noncompliance associated with program income. This did not directly affect the major program that was tested during the audit but is considered a significant deficiency in internal control over compliance, particularly compliance related to program income, for federal awards. Recommendation: The Organization should reevaluate its procedures and controls regarding the allocation of expenditures, which supported an activity that generated program income, to a federal award to ensure proper compliance. Views of Responsible Officials and Planned Corrective Actions: The Organization agrees with the finding and plans to carry out the noted recommendation.