Finding 2025-002 Federal Assistance #66.034 Surveys, Studies, Research, Investigations, Demonstrations, and Special Purpose Activities Relating to the Clean Air Act Criteria are the governing requirements with which the Organization is to comply. Criteria: Electronic Code of Federal Regulations (ECFR), Title 2, Section 200.400(a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. ECFR, Title 2, Section 200.68 MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25,000 of each subaward or subcontract (regardless of the period of performance of the subawards and subcontracts under the award). Please note: the Organization’s federal award is for the period 9/1/24-8/31/27. Accordingly, the requirements for the award are those that are prior to the change to cost principles effective 10/1/24. Context: The Organization has allowed participating states to choose how to pay their annual assessment for Air Data Management System (ADMS) costs. States could either A) pay their ADMS assessment directly to the Organization, or B) have the State’s EPA grant award reduced by a portion or all of the ADMS assessment with the caveat that those funds be assigned to the Organization’s EPA grant award, or C) redirect amounts budgeted within the Organization’s EPA grant award originally to be used for ad-hoc travel to instead be used to pay ADMS costs. In the details of tracking all of these internal designations within the grant, the Organization made an error in the application of indirect costs. Condition is what happened that did not meet the criteria. Condition: The Organization did not properly charge indirect costs related to ADMS direct costs in excess of $25,000. Cause is the reason the condition did not meet the criteria. Cause: The Organization has allowed participating states choices as to how the Organization received its funds to provide flexibility in managing their budgets, including matching requirements. Effect is the result of the condition. Effect: The Organization did not timely identify the incorrect application of indirect costs charged to the federal award as required by 200.68 Auditor’s Recommendation: The Organization should withhold the amount overcharged to the federal award from the next funding request. The Organization should highlight or otherwise bring attention to the place in their ASAP funding workbook where contracts exceeding the federal threshold for application of the indirect cost rate are deducted from the calculation. Perspective: There was some uncertainty as to the treatment of the contract for personal services: whether it should be treated as personal services or a contract. Upon identification of the condition and its effects, the Organization recognized a reduction in amounts receivable from EPA as of 12/31/25 for overcharged indirect costs of $44,283. This was not a repeat finding. Questioned costs: Questioned costs of $44,283 are all related to Federal Assistance #66.034 Surveys, Studies, Research, Investigations, Demonstrations, and Special Purpose Activities Relating to the Clean Air Act and were determined to be the indirect rate applied to contract costs exceeding the $25,000 threshold for one contract. Views of responsible officials: As a result of preliminary discussions regarding this condition, we have already corrected the application of indirect costs and deducted the overcharged indirect costs from 2026 requests for reimbursement.