Our objectives were to determine whether the North Carolina Department of Health and Human Services (the State): (1) recorded and reported Program funds awarded, expended, obligated, and unobligated by focus area in accordance with the CDC cooperative agreement; (2) ensured that Program funds were used for necessary, reasonable, allocable, and allowable costs in accordance with the terms of the cooperative agreement and applicable Federal regulations; and (3) supplanted current State or local funding with Program funds.
The State recorded and reported Program funds awarded, expended, obligated, and unobligated by focus area in accordance with the CDC cooperative agreement. Costs incurred by the State for administering the Program were necessary, reasonable, allocable, and allowable. However, the two subrecipients we reviewed claimed reimbursement for $98,929 in unallowable costs that, for the most part, were incurred for operations with little or no discernible relationship to Program activities, as established in State agency subagreements and CDC program guidance. We found no evidence of supplanting of State or local expenditures with Program funds.
We recommend that the State: (1) refund $98,929 to the CDC and (2) continue to strengthen subrecipient monitoring efforts to ensure that Program funds are used only for necessary, reasonable, allocable, and allowable costs. Of the $98,929 of subrecipient costs we recommended for financial adjustment, the State concurred in its comments with only $17,289. The State also disagreed with our conclusions that it had not maintained an adequate subrecipient monitoring system and that it had not required subrecipients to submit financial reports containing sufficient detailed information to allow effective monitoring. Despite the State’s assertions, we continue to believe the entire $98,929 is unallowable in accordance with Office of Management and Budget (OMB) Circular A-87.