Finding Text
2023-005 Allocation of Costs Based on Budgeted Numbers
Federal Program – Continuum of Care
Assistance Listing # 14.267
Compliance & 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 – The Organization’s current method of charging some indirect costs to grants is based on budgeted allocations. Specifically, the allocation of workers compensation and facilities charges are based on budgeted allocations. Also, several individuals who work on multiple programs allocate their time to grants based on a budget allocation. The Organization 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 the change in the accounting system, the true up of these costs was not performed as required in the financial policies.
Effect – Some of the programs and related federal grants may have been overcharged.
Recommendations – The Organization 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 – Management agrees with the finding and plans to true up budgeted allocations with actual allocations annually effective fiscal year 2024.
Responsible party for corrective action: Laura Straw, Finance Director
Repeat Finding: Yes, 2022-002