Audit 400980

Finding No. 2025-001: Allowable Costs – Significant Deficiency – Internal Control and Compliance Finding ALN 93.068 – Chronic Diseases: Research, Control, and Prevention, Grant Number 5NU58DP006907-04-00, Grant Period: September 30, 2020 to September 29, 2025 Criteria The terms and conditions of the Foundation’s grant agreement requires that the Foundation comply with the U.S. Department of Health and Human Services grant policies. Division H, Title II, Section 202 of the CDC restricts the use of appropriated funds for salary payments to individuals under grants or extramural mechanisms. This provision limits the portion of an individual's salary that can be paid with federal funds, specifically prohibiting rates in excess of Executive Level II. Condition The Foundation did not have adequate internal control procedures in place to ensure that the salary cap is properly applied when charging the time of certain individuals who exceed the salary threshold. Context Four out of 40 payroll transactions selected for testing had used salary rates that exceeded the salary cap resulting in approximately $1,500 of unallowable costs charged to the grant. Management then reviewed and recalculated all the salary charges to the federal grant by employees whose salaries exceeded the salary cap. This resulted in reduction in salaries and benefits and indirect costs charged to the federal grant by approximately $19,000. Cause Management was aware that there was a salary cap, however, did not properly apply the salary cap to the salary base when allocating the salary to the grant. Effect Management did not fully adhere to the requirements of the grant agreement. Questioned Costs The federal expenditures were initially overstated by approximately $19,000. Management corrected the federal expenditures charged to the federal grant as part of the audit process and reduced the receivables from the Federal government. This was also adjusted in the drawdown related to February 2026 expenses. Repeat Finding No. Recommendation We recommend that management enhance current internal control procedures to ensure that the Foundation is in compliance with the grant’s terms and conditions related to the salary cap that limits the portion of an individual's salary that can be paid with federal funds. Views of Responsible Officials and Planned Corrective Actions See corrective action plan.