Finding Text
Finding 2022-002 ? Allocation of Costs Based on Estimates Federal Program ? Emergency Solutions Grants Program Assistance Listing # 14.231 Significant Deficiency Category of Finding ? Allowable Costs/Cost Principles Criteria ? Uniform guidance cost principals require that amounts charged to federal grants be based on actual costs. These can be estimated allocations, but the estimates must be based on actual current information. The regulations specify that budget estimates may be used for interim accounting purposes, provided that they are later trued up to actuals. Condition ? Agate?s current method of charging indirect costs, which consist of administrative, development, facility use and meal costs, to grants, is based on allocating budgeted costs. During 2022, these costs were not adjusted to match actual costs incurred. Agate did not true up these budgeted costs to actual during the year as required. The dollar value effect of this is difficult to determine. Cause ? Due to turnover in the finance department, the true up of these costs was not performed as requires in the financial policies. Also due to other turnover and program changes, the variances from budget to actual were more significant than they have been in the past. The meals costs allocations were new this year due to changes caused by the merger with House of Charities. Effect ? Some of the programs and related federal grants may have been overcharged. Recommendations ? Agate should review their policies for allocating these costs and apply allocations during the year that are based on actual costs rather than budgeted, or implement a process to true up allocated costs periodically during the year. Based on current grant periods, we recommend at least quarterly reconciliations to avoid overcharging a grant which has closed. Auditee's comments and response ? Agate is aware of the Uniform guidance regulations and will follow them in the future. The Director of Finance has implemented changes to allow for adjustments to actual periodically throughout the fiscal year and at year end to accurately account for the distribution of allocations based on actual costs. Additionally, a new accounting system that includes a module to allocate indirect costs was implemented in fiscal year 2023. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: No