Audit 412177

Allowable Costs Federal Agency: U.S. Department of State Federal Program Names: AEECA/ESF PD Programs Professional and Cultural Exchange Programs – Citizen Exchanges Assistance Listing Numbers: 19.900, 19.415 Federal Award Identification Numbers and Years: S-KZ100-24-CA-0069 – 2024 S-ECAGD-21-CA-3030 - 2021 S-ECAGD-24-CA-0508 - 2024 S-ECAGD-23-CA-0064 - 2023 S-ECAGD-24-CA-0555 - 2024 Award Periods: October 1, 2024 through December 31, 2026 March 15, 2021 through January 31, 2026 August 13, 2024 through June 18, 2029 September 15, 2023 through March 31, 2026 August 20, 2024 through March 31, 2027 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: CV's Negotiated Indirect Cost Rate Agreement (NICRA) establishes the approved fringe benefit rate authorized for application to federal awards. Federal regulations require costs charged to federal awards to be consistent with the approved rates and methodologies specified in the NICRA. Management is responsible for establishing and maintaining internal controls to ensure fringe benefit costs charged to federal awards are calculated and applied in accordance with the approved NICRA. Condition: During our testing of indirect costs charged to federal awards, we noted that CV charged actual fringe benefit costs incurred to a federal award in excess of the amount permitted under its approved NICRA. Specifically, fringe benefit costs allocated to the award exceeded the allowable amount calculated using the approved fringe benefit rate. The amount charged in excess of the approved rate resulted in questioned costs below the Uniform Guidance reporting threshold of $25,000 for reporting compliance findings. Questioned costs: None reported, see also Condition above. Context: After identifying an exception in our sample, we evaluated fringe benefit cost charges to the major programs during 2025 to determine the overall impact. Our analysis indicated that the total questioned costs associated with fringe benefit costs charged in excess of the approved fringe benefit rate were below the Uniform Guidance reporting threshold for known questioned costs. Cause: CV did not maintain adequate review controls to verify that fringe benefit costs charged to federal awards were limited to the amount allowable under the approved NICRA. Although actual fringe benefit costs were accumulated and allocated to the program, amounts charged were not reconciled to the approved fringe benefit cost rate limitation prior to submitting reimbursement requests or financial reports. Effect: As a result of the control deficiency, fringe benefit charged to the federal award exceeded the amount allowable under the approved NICRA. Failure to properly monitor fringe benefit cost calculations could result in unallowable costs being charged to federal awards and increases the risk of future noncompliance with federal requirements. Repeat Finding: No Recommendation: We recommend CV strengthen controls over the calculation and review of fringe benefit charged to federal awards. Controls should include a documented review to verify that fringe benefit cost charges are calculated using the currently approved NICRA and that charges to federal awards do not exceed the allowable rate prior to submission of reimbursement requests and federal financial reports. Views of responsible officials: There is no disagreement with the audit finding.