Finding Text
2023‐002 Department of the Treasury
Federal Assistance Listing #21.027
COVID‐19 Coronavirus State and Local Fiscal Recovery Funds
Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Significant Deficiency in Internal Control Over Compliance
Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective
internal control over the federal award that provides assurance that the entity is managing the
federal award in compliance with federal statutes, regulations, and conditions of the federal
award.
Condition: BHD, LLC calculated their indirect cost rate based on the total grant budget and took
an equal amount of that per month instead of calculating the indirect cost rate per direct
expenditures for each month.
Cause: BHD, LLC did not have an internal control process in place to ensure the correct amounts
of indirect costs were requested based on the direct costs for the same period.
Effect: Without an effective internal control process in place, improper costs could be charged to
the program.
Questioned Costs: None reported.
Context: A nonstatistical sample of 4 out of 10 indirect expenditures were selected for testing.
Repeat Finding from Prior Years: No
Recommendation: We recommend BHD, LLC enhance internal control procedures to ensure the
indirect cost rate is applied against the monthly direct costs when requestion program
reimbursements.
Views of Responsible Officials: Management agrees with the finding.