Audit findings and questioned costs under 2 CFR 200.516

• List the seven categories of audit findings in 2 CFR 200.516(a)
• Apply the $25,000 known and likely questioned cost threshold
• Classify an amount as a questioned cost using the 200.1 definition
• Write a finding with criteria, condition, cause, effect, perspective and recommendation

What must be reported

2 CFR 200.516(a) requires the auditor to report these as audit findings in the schedule of findings and questioned costs:

1. Significant deficiencies and material weaknesses in internal control over major programs, evaluated in relation to a type of compliance requirement for a major program.
2. Material noncompliance with statutes, regulations or award terms related to a major program, evaluated the same way.
3. Known questioned costs when either known or likely questioned costs are greater than $25,000 for a type of compliance requirement for a major program.
4. Known questioned costs greater than $25,000 for a program not audited as major (for example, found during audit follow-up).
5. The circumstances behind any compliance opinion on a major program that is other than unmodified, unless reported as findings already.
6. Known or likely fraud affecting a federal award, unless already reported as a finding. This does not require public reporting that could compromise investigations, or reporting again when GAGAS direct reporting already covered it.
7. Cases where audit follow-up shows the summary schedule of prior audit findings materially misrepresents the status of a prior finding.

The 2024 revision raised the audit threshold to $1,000,000 but left the questioned cost reporting threshold at $25,000, so do not scale it up with the audit threshold.

What a questioned cost is

Under 2 CFR 200.1, a questioned cost is an amount expended or received from a federal award that, in the auditor's judgment, is noncompliant or suspected noncompliant, lacked adequate documentation at the time of the audit, or appeared unreasonable and did not reflect the actions of a prudent person. An undocumented portion is calculated as if it were confirmed noncompliant. There is no questioned cost solely because of a control deficiency, or because of reporting noncompliance that does not affect the amount expended or received. Known questioned costs are specifically identified; likely questioned costs are the auditor's best estimate of the total, usually by projection.

The elements of a finding

200.516(b) requires findings to be detailed enough for the auditee to prepare a corrective action plan and for the agency or pass-through entity to make a management decision. As applicable, include:

• program and award identification: Assistance Listing title and number, federal award identification number and year, federal agency and pass-through entity;
• criteria: the specific statute, regulation or award term;
• condition: the facts found;
• cause: why the condition happened;
• effect: the actual or potential impact;
• known questioned costs by Assistance Listing number and award, with how they were computed, or why the amount is undetermined;
• perspective: whether the issue is isolated or systemic, related to the universe and number of items examined, quantified in dollars, with a statement on whether the sample was statistically valid;
• whether it repeats a finding in the immediately prior audit, with the prior reference number;
• recommendations; and
• views of responsible officials.

Findings on the same issue (for example a control finding and the related noncompliance and questioned costs) are presented as a single finding (200.515(d)(3)(i)). Each finding gets a reference number in the format the data collection form requires (200.516(c)), and that number follows it into the corrective action plan and the summary schedule.

Writing findings agencies can resolve

Agencies have six months from FAC acceptance to issue a management decision (200.521(d)). Findings with vague criteria, no cause and no dollar computation slow that down and invite pushback. The findings writing guide and schedule of findings template give model wording.

Common file mistakes

• Reporting likely questioned costs as if they were known.
• Not reporting known questioned costs of $8,000 when likely questioned costs were $90,000.
• Criteria citing "the grant agreement" with no section.
• No perspective element, so the agency cannot tell isolated from systemic.
• Repeat findings not flagged with the prior reference number.

Marlow Township: is it a reportable finding?