ECONOMIC DEVELOPMENT AND FINANCING CORPORATIONNon-Profit

2020-001 Internal Controls Over Cost Allocations and Administrative Costs ? CFDA#21.020 US Department of the Treasury - Community Development Financial Institutions Program (CDFI) Condition: EDFC did not originally follow the requirements for allowable costs and cost principles for administrative or indirect costs in accordance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Uniform Guidance (Uniform Guidance). Criteria: Federal funding requires that costs be allocated and expensed using methods acceptable under Uniform Guidance. Cause: The federal funds were new to the Organization. Management at the beginning of the year did not understand what was required under the federal regulations for allowable and cost principles. During the year there was a change in management. The remaining staff were not aware of the complexities created by acceptance and use of the federal programs and funds. Effect/Context: Costs or awards used were initially reported to the federal agency with incorrect figures. The staff was required to go back to the beginning of the grant award period in the previous year and correct the use of awards reports. This created a prior period adjustment to move unrestricted net assets to restricted net assets in the amount of $48,768. Current management was able to use the information collected to properly allocate and report the administrative use of funds and corrected these reports prior to the issuance of these financial statements and reports. Federal funds used for direct payments of funds were not affected by this finding, nor were other federal awards that do not allow for use of federal funds for administrative or indirect costs. Questioned Costs: None Recommendation: We recommend that management and staff receive training on federal awards to enhance their new understanding of what is required for the federal funds. Internal controls should be developed, documented and implemented to ensure that federal funds are properly reported to the funding agencies and when staffing changes, there will not be a loss of continuity for reporting. Response: Management has researched the allowable costs and then developed and implemented additional procedures over time tracking of staff activities as well as tracking of administrative costs that are allowable for federal funding use. Additional training on compliance with the specific federal awards will be done to enhance and ensure future compliance.