Finding Text
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 the terms and conditions of the Federal award. Additionally, 2 CFR Appendix IV to Part 200 Section B.2(b) requires that both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs.
Per Compliance Supplement, these indirect costs must conform to the allowability of cost provisions in 2 CFR Part 200, Subpart E or award agreement.
Condition: During our testing of indirect costs, we noted that the Corporation charges the Federally approved rate of 28.7% on specific grant awards based on direct salaries and wages. However, the Corporation did not maintain supporting indirect cost pools and related documentation.
Cause: The Corporation did not have formal process and policies to demonstrate adherence to the allowability requirements of indirect costs in accordance with 2 CFR Appendix IV to Part 200 Section B.2(b).
Effect or Potential Effect: We were unable to determine whether indirect costs charged to Federal awards conform to the allowability of cost provisions in 2 CFR Part 200, Subpart E or award agreement. Allowable costs incurred by the Corporation exceeded the amount of approved grant funding, therefore no questioned costs are reported.
Questioned costs: Unknown
Context: Management was not able to provide sufficient and appropriate evidence that the reported indirect costs conformed to the allowability of cost provisions in 2 CFR Part 200, Subpart E or award agreement.
Repeat finding: No
Recommendation: We recommend the Corporation develop and incorporate internal controls and policies to demonstrate adherence to the allowability requirements of indirect costs in accordance with 2 CFR Appendix IV to Part 200 Section B.2(b).
View of Responsible Officials: Due to turnover of several key financial executives and personnel, the Corporation did not maintain any supporting indirect cost pools and related documentation.