Finding 2025-001
significant deficiencyquestioned costsother matters
- Program
- CCDF CLUSTER (93.575)
- Compliance requirement
- Allowable costs/cost principles
- Questioned costs
- $94,658 (known)
- FAC record
- FY2025 audit on fac.gov
Finding text from the filing
Finding 2025-001 – Unallowable and Unallocable Expenditure Charged to a Federal Award
Federal Agency: U.S. Department of Health and Human Services
Assistance Listing Number: 93.575
Federal Program; Child Care Management Service
Compliance Requirement: Allowable Costs/Cost Principles
Type of Finding: Significant Deficiency/Noncompliance
Questioned Costs: $94,658
Criteria
Pursuant to 2 CFR § 200.403, costs charged to a Federal award must be necessary, reasonable, allocable to the Federal award, and conform to any limitations or exclusions set forth in Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR § 200.405 requires costs to be allocable to a Federal award in proportion to the relative benefits received.
Condition
During our testing of expenditures charged to the Child Care Management Services federal award, we identified a purchase of career exploration virtual reality headsets totaling $116,004. Of this amount, $94,658 was charged to the child care management services program. Based on our review of supporting documentation and the nature of the expenditure, the purchase did not meet the requirements for allowability and allocability under the Uniform Guidance. Specifically, the expenditure was not directly related to the objectives of the child care services federal program and did not provide a benefit to the federal award sufficient to justify charging the cost to the program.
Cause
The expenditure passed through multiple levels of approval without the proper assessment, program coding and determination for allowability and allocability. As a result, the expenditure was incorrectly charged to the federal program through the normal process of allocation.
Effect
Questioned Costs
The questioned costs associated with this finding total $94,658.
Recommendation
We recommend that management strengthen internal controls over federal program expenditures by implementing documented pre-approval and review procedures to verify that all costs charged to federal awards are allowable, allocable, reasonable, and adequately supported in accordance with Uniform Guidance requirements and the terms and conditions of the award. We further recommend that management determine the appropriate disposition of the $94,658 expenditure, including reimbursement to the federal program if required, and provide additional training to personnel responsible for approving and charging expenditures to federal awards.
Management’s controls did not prevent or detect the improper charging of an unallowable and unallocable expenditure, resulting in an overstatement of federal program expenditures by $94,658. This deficiency reduces the Board’s ability to obtain reasonable assurance that federal funds are expended in accordance with applicable requirements and increases the risk that material noncompliance could occur and not be timely prevented or detected.