CITY OF CROOKSTON, MINNESOTA

2020-004 FINDING ? Allowable Costs/Cost Principles Coronavirus Relief Fund CFDA 21.019 Criteria The Treasury?s guidance for the Coronavirus Relief Fund as published in the Federal Register, specifies that payments from the Fund may only be used to cover costs that are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID?19). Condition The City paid sales tax when the City is tax exempt and charged the sales tax expense to the federal grant. Questioned Costs Immaterial Context As part of the single audit, five expense check payments were selected for testing. One check payment was for two invoices, both invoices had sales tax included in the invoice amount. Total sales tax was $608. The City paid the total amount of the invoice, including the sales tax and charged this to the grant. The City later filed a claim for one of the invoices and received a refund of $498 but did not credit the grant expenditures for this refund. Cause The City did not have sufficient procedures in place to detect when sales tax was charged on an invoice and avoid paying the tax. The City later realized this, filed a claim and received a refund of sales tax for one invoice. But the City did not adjust the grant expenditures for this refund. Effect The City paid sales tax when they are tax-exempt. This is an unallowable cost as it was not a necessary cost. The City charged unallowable cost to the grant. Repeat Finding No Recommendation The City should implement procedures to detect when sales tax is charged and notify the vendor that the City is tax-exempt. Views of Responsible Officials The City will implement procedures to detect when sales tax is charged and inform vendors of their tax-exempt status.

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