Finding Text
Criteria: The requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform
Guidance), Subpart E, Cost Principles, include the following:
* The total cost of a federal award is the sum of the allowable direct and allocable indirect costs less
any applicable credits.
* A cost is allocable to a particular federal award if the goods or services involved are chargeable or
assignable to that federal award or the cost objective in accordance with the relative benefits
received.
* Indirect Facilities and Administrative Costs are those costs incurred for a common purpose
benefiting more than one cost objective, and not readily assignable to the cost objectives
specifically benefited. Indirect costs should be allocated equitably to all programs and cost centers
of an organization.
* A Direct Allocation Method for allocating indirect costs is acceptable provided each joint cost is
prorated using a basis that accurately measures the benefits provided to each federal award and
other activity of an entity. The basis must be established in accordance with reasonable criteria
and supported by current data.
* An organization should have appropriate internal controls in place to ensure the compliance
requirements indicated above are met.
Condition: During the year ended December 31, 2023, JFS had a contract with the Department of Health
and Human Services (DHHS) for the Mental Health Workforce Development Initiative. The contract is
funded on the basis of cost reimbursement. JFS prepared schedules identifying allowable direct and indirect
costs incurred during the month and submitted to DHHS based upon reimbursable costs identified in these
schedules. The largest reimbursable cost category was salary and related expenses.
Our audit testing revealed that approximately $44,000 of costs related to the pay period ending May 5,
2023, were accidentally submitted for reimbursement twice during 2023. After this was brought to the
attention of the finance office, the Organization performed a self-review and identified total billing errors
of approximately $69,000 (which includes the aforementioned duplicate payroll billing) during the contract
period. The Organization was able to identify additional eligible costs of approximately $90,000 during the
contract period that had not been included in previous reimbursement requests. The Organization plans to
work with DHHS to provide updated documentation of eligible costs utilized.
Cause: The primary cause for the finding was human error in preparing the schedules of costs that were
submitted for reimbursement.
Effect: Requests for reimbursement were made in excess of amounts allowed based on the provision of the
Uniform Guidance and the underlying contract with DHHS.
Recommendation: We recommend JFS implement procedures to ensure the proper amounts of eligible
costs are submitted for reimbursement.