Finding Text
Federal agency: All agencies in the SEFA
Assistance Listing Number: See SEFA
Award Period: 01/01/2023 to 12/31/2023
Type of Finding: Significant Deficiency in Internal Control Over Compliance
Criteria or Specific Requirement:
The compliance requirements for Federal Assistance Number 93.558 – Temporary Assistance for Needy Families (TANF) State Programs includes a Period of Performance element. The compliance requirement related to period of performance is that a non-federal entity may charge only allowable costs incurred during the approved budget period (also identified as the grant period) of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)).
Condition:
Allocations of indirect costs are performed once during the year-end closing process based on time study data for the entire year, and when program attendance data for programs that are ran for various increments throughout the year is available. The TANF grant period that was tested as a major program was December 2022 – August 2023. As the grant period ended in September, no costs incurred after that date should be considered major program expenditures.
Questioned Costs:
Indeterminable. The questioned costs could be considered those indirect costs considered TANF expenditures that were incurred after August 2023. In addition, because the program attendance is used to allocate costs between programs, program attendance after August 2023 may be inappropriate to be considered when allocating those indirect costs to specific programs.
Context:
Indirect cost allocations are performed once during the year-end closing process by the auditee. Time studies are performed to allocate indirect costs between supporting and program functions. The indirect costs allocated to the program functions are then allocated between individual programs, including federally funded programs, based on the number of participant hours in each program. The time study and program hours used to allocate indirect costs are based on the entire year and not just the major program grant period. In addition, indirect costs that are allocated are incurred during the entire year and not just the major program grant period.
Cause:
Time and program participation data used to allocate costs are not consistent with the grant period. In addition, the costs that are allocated are not consistent with the grant period.
Effect:
The single annual allocation of costs means that costs incurred outside the major program grant/budget period are being allocated to the major program. In addition, allocation base data from outside the grant/budget period is being used as a base for the indirect cost allocation.
Repeat Finding:
No
Auditor’s Recommendation:
We recommend the auditee perform indirect cost allocations so that the costs and allocation base align with the grant/budget period. Performing the allocation of indirect costs annually may not create an equitable allocation at the individual program level.
Views of Responsible Officials and Planned Corrective Actions:
We agree that the allocation being performed once annually does not create the most equitable allocation of costs between our individual programs.
We will perform our indirect cost allocations more periodically during the course of the fiscal year to ensure that more appropriate times studies and applicable participant hours are being utilized to limit the potential of allocating unrelated indirect costs from the year to individual programs, including the federally funded programs.