Finding Text
2023-003 – Allowable Costs/Cost Principles – Internal Control and Compliance over Allowable Costs/Cost Principles (Significant Deficiency)
Identification of the Federal Program:
Assistance Listing Number: 21.027
Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds
Federal Agency: Department of Treasury
Pass-Through Entity: N/A
Federal Award Number and Award Year: N/A
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
Pursuant to Code of Federal Regulation §200.403 Requirements for pass-through entities.
Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
(d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
(f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also § 200.306(b).
(g) Be adequately documented. See also §§ 200.300 through 200.309 of this part.
(h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).
Condition:
During our audit, we noted that three (3) out of forty (40) samples summed up to $39,055.50 had no proper source documents to support the transactions charged to the grant brought by lost official receipts, hence, identified as not adequately documented. Alternatively, the City created a memo to document the loss of receipts signed by the department head.
Cause:
The City was not able to safeguard the documents substantiating the transactions being charged to the grant.
Effect or Potential Effect:
The City did not comply with the CFR’s requirements for allowable costs. There is an increased risk that the charges do not represent the actual costs incurred.
Questioned Costs:
Known questionable cost $39,056 and the estimated questionable cost is projected to be $69,269.
Context:
See condition above for context of the finding.
Identification as a Repeat Finding, If Applicable:
Not applicable.
Recommendation:
We recommended the City to strengthen safeguarding of source documents to properly substantiate the charges made to the grant.
Views of Responsible Officials:
Management concurs the finding.