Audit 408759

Finding 2025-001 – Internal Control Deficiency and Noncompliance over Indirect Cost Rates Repeat finding: Yes – Prior year finding 2024-003 Identification of the federal program: Federal grantor: United States Department of Health and Human Services (HHS) Assistance Listing No.: 93.048 Program name: Special Programs for the Aging, Title IV, and Title II, Discretionary Projects Criteria or specific requirement (including statutory, regulatory, or other citation): Under 2 CFR 200.403 costs must be allowable; 2 CFR 200.405 allocable; and indirect costs must follow 2 CFR 200.414 and Appendix IV to Part 200 (nonprofit rate determination). Entities without a current negotiated rate may elect the de minimis rate (2 CFR 200.414(f)). HHS codified these requirements at 45 CFR Part 75 for periods through September 30, 2025 and effective October 1, 2025, HHS adopted 2 CFR Part 200 directly, with HHS-specific provisions relocated to 2 CFR Part 300. Condition: The Organization applied and included an expired provisional indirect cost rate in its HHS grant application and budgets. HHS approved the application and budgets; however, the rate in use was not current and the Organization had no active negotiated indirect cost rate agreement (NICRA). Subsequent to year end, in March 2026, the Organization submitted a NICRA proposal to HHS Cost Allocation Services. The Organization was informed by HHS that they may continue to use the provisional rate until a new rate agreement is issued, with an understanding any adjustments identified during the review process will be incorporated into future fixed rates and any applicable carryforward amounts. Cause: Lapse in monitoring and renewing the negotiated indirect cost rate. Effect or potential effect: Risk of noncompliance with cost principles and potential unallowable indirect cost recoveries if the expired rate differs from an approved current rate. Questioned costs: Undetermined. The variance between the expired rate and an allowable rate was not calculated. Recommendation: Continue the application process started in March 2026 to obtain an approved NICRA from the cognizant agency (HHS) and apply it prospectively and, if required, retroactively. Implement controls to track rate expirations and require documented verification of the current rate before grant applications, budget submissions, and draw requests. Views of responsible officials: Management concurs with the recommendation. See Management’s Corrective Action Plan.