Allowability of Costs Claimed for Reimbursement Under Alabama's Bioterrorism Hospital Preparedness Program for the Period September 1, 2004, Through August 31, 2006

Of the $12.1 million in selected costs that the Alabama Department of Public Health claimed for reimbursement for the period September 1, 2004, through August 31, 2006, $6.4 million was allowable. However, $5.7 million was unallowable because the State advanced funds to a subrecipient that did not obligate and disburse the funds within the specified program period. In addition, the subrecipient earned interest totaling $215,783 on program funds that it did not remit to the Federal Government as required. These deficiencies occurred because the State (1) did not have sufficient procedures to ensure that subrecipients obligated and expended funds within the period specified in the grant awards and (2) was not aware of the requirement to remit interest to the Federal Government.

We recommended that the State agency (1) refund $5.7 million in unallowable costs; (2) remit $216,533 in interest earned on program funds ($215,783 less $250 allowed to be retained pursuant to Federal regulations); (3) remit any additional interest earned after the completion of our fieldwork, less the amount allowed to be retained pursuant to Federal regulations; and (4) institute procedures to ensure that subrecipients obligate and expend funds within the periods specified in the grant awards.

In written comments on our draft report, the State agency agreed to refund all interest earned on advances to a subrecipient except for approximately $37,000 that the State agency said the subrecipient used for hospital preparedness. The State agency did not agree with our finding that a subrecipient did not expend $5.7 million in grant funds within the appropriate period. However, nothing in the State agency's comments caused us to change our finding or recommendations.