Finding 943032 (2023-002)

Material Weakness
Requirement
AB
Questioned Costs
-
Year
2023
Accepted
2024-02-08
Audit: 289430
Organization: Hedco, Inc. (CT)
Auditor: Whittlesey PC

AI Summary

  • Core Issue: HEDCO, Inc. lacks a documented cost allocation plan, leading to unsupported payroll and operating expenses charged to federal awards.
  • Impacted Requirements: Compliance with Title 2 U.S. Code of Federal Regulations Part 200, which mandates reasonable and documented cost allocation methodologies.
  • Recommended Follow-Up: Management should create a formal cost allocation plan, ensure annual board approval, and conduct regular reviews of expense allocations to federal awards.

Finding Text

Finding No. 2023-002: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: All Federal Program: All Assistance Listing Number: All Type of Finding: Material Weakness in Internal Control over Compliance Criteria: Title 2 U.S. Code of Federal Regulations Part 200 establishes cost principles for determining costs applicable to federal awards. These principles include the requirement that cost allocation methodologies be reasonable and documented and that all expenses charged to federal awards are appropriately supported. Condition: HEDCO, Inc. does not have a documented cost allocation plan and operating expenditures reported on submitted grant reports did not consistently reconcile directly back to the underlying accounting records. Context: Payroll expenses and other operating expenses (for example, occupancy) charged to federal award programs were not always supported by actual documented time and effort. Cause: Management was not aware of the requirement to have a formalized cost allocation plan. In most cases, payroll and operating costs charged to grants were based on the program budget. Effect: Payroll and other operating costs that were allocated to the federal awards were made based on allocation methodologies that could not be readily traced back to the underlying accounting records. Questioned Costs: Unknown Repeat Finding: No Recommendation: We recommend that management develop a written cost allocation plan to allocate costs in accordance with Title 2 U.S. Code of Federal Regulations Part 200 which is reviewed and approved by the board of directors annually. There should also be a formal review of allocations to the federal awards to ensure that expenses are in line with the cost allocation plan. Management’s Response/View of Responsible Officials: Management concurs with the finding and has outlined its resulting actions in a separately issued Corrective Action Plan.

Categories

Allowable Costs / Cost Principles

Other Findings in this Audit

  • 366588 2023-002
    Material Weakness
  • 366589 2023-002
    Material Weakness
  • 366590 2023-002
    Material Weakness
  • 366591 2023-002
    Material Weakness
  • 366592 2023-002
    Material Weakness
  • 943030 2023-002
    Material Weakness
  • 943031 2023-002
    Material Weakness
  • 943033 2023-002
    Material Weakness
  • 943034 2023-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.024 Community Development Financial Institutions Rapid Response Program (cdfi Rrp) $1.65M
59.046 Microloan Program $128,699
14.218 Community Development Block Grants/entitlement Grants $62,655