Finding Text
2022-004Unsubstantiated methodology to allocate indirect costs charged to a federal program - (Material Weakness)Criteria:Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statues, regulations, and the terms and conditions of the Federal award.
Condition:
Expenditures were charged to the program based on different percentages applied to indirect bills that benefit the entire organization. There was not a substantiated methodology to arrive at these percentages.
Cause:
The CDP failed to implement consistent and reasonable methodology to allocate indirect costs.
Effect:
Indirect charges allocated to a program based on unsubstantiated methodology can result in federal reimbursements that are not reflective of actual costs. Indirect costs may be overcharged to the program.
Questioned Cost:
Undetermined
Recommendation:
Management needs to ensure the CDP establishes a reasonable and consistent allocation methodology. Ideally, the methodology should be statistically based. That methodology should be used entity-wide to consistently allocate indirect costs to various programs.
Management's Views and Corrective Action Plan
Management's response is included in "Management's View and Corrective Action Plan" at the end of this report after the schedule of findings and questioned cost