Finding Text
Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Information on the Major Federal Program:
Federal agency: U.S. Department of Health and Human Services
Pass-through entity: Council of Medical Specialty Societies
Assistance listing number: 93.083
Assistance listing name: COVID-19 Prevention of Disease, Disability, and Death through Immunization and Control of Respiratory and Related Diseases
Award number: 1NH231P922656-01-00
Award name: Improving adult immunization rates for COVID-19, influenza and routine adult vaccination through partnerships with medical subspecialty societies
Award year: 9/30/2021 – 9/30/2026
Criteria - The Uniform Guidance in 2 CFR Appendix IV to Part 200 contains the requirements for development and submission of indirect cost rate proposals and cost allocation plans for nonprofit organizations.
The guidance defines a provisional rate as a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on federal awards pending the establishment of a final rate for the period. A final rate is defined as an indirect cost rate applicable to a specified past period which is based on the actual costs of the period. Provisional and final rates must be negotiated and a final rate will be established and upward or downward adjustments will be made based on the actual allowable costs incurred for the period involved.
Organizations that have previously established indirect cost rates must submit a new indirect cost proposal to the cognizant agency for indirect costs within six months after the close of each fiscal year. The results of each negotiation must be formalized in a written agreement between the cognizant agency for indirect costs and the nonprofit organization.
In addition to the above, indirect costs charged to federal awards should conform to the allowability of cost principles in 2 CFR Part 200, Subpart E.
Condition – In fiscal year 2023, the College applied indirect costs to the major program using provisional rates established for fiscal year 2016. These rates were formalized in a written agreement with the cognizant agency on February 25, 2014. Since this agreement, the College has neither negotiated a final rate for the provisional rate nor submitted any indirect cost proposals, as required under 2 CFR Appendix IV to Part 200 of the Uniform Guidance. In the absence of submitting an indirect cost proposal, the College also did not:
- Calculate the actual indirect costs for 2023 and compare them to the indirect costs charged to the major program using the provisional rates from fiscal year 2016, to determine any necessary upward or downward adjustments for 2023.
- Ascertain which accounts or transactions were included in the indirect cost pool for the major program in 2023, and verify if they were allowable according to the cost principles outlined in 2 CFR Part 200, Subpart E.
- Determine which accounts or transactions were included in the base of the indirect cost rate for the major program in 2023.
Cause – The College's existing policies, procedures, and internal controls were inadequate to effectively manage and ensure compliance with the Uniform Guidance requirements pertaining to indirect costs, as specified in the aforementioned criteria. This hindered the College's ability to properly oversee and adhere to the established guidelines, leading to stated non-compliance.
Questioned Costs – There are $279,030 of known questioned costs related to the items presented in the condition above. This amount represents the total indirect costs presented in the Schedule.
Context – This is a condition identified per review of the College’s compliance with the allowable costs/cost principles provisions of the Uniform Guidance. The prevalence of this finding is detailed in the condition section above.
Effect – The College failed to submit indirect cost proposals, finalize its provisional indirect rate, and calculate actual indirect costs for 2023 and compare them to the indirect costs charged using the provisional rates, to determine any necessary upward or downward adjustments for 2023.
Repeat Finding – This is not a repeat finding.
Recommendation – Develop and implement comprehensive policies, procedures and controls for managing and monitoring indirect costs, including the submission of updated indirect cost proposals and negotiation of final rates with the cognizant agency. Conduct regular reviews and updates of indirect cost rates to ensure they reflect actual costs and comply with the cost principles outlined in 2 CFR Part 200, Subpart E.
Views of Responsible Officials – Questioned costs of $279,030 does not necessarily imply that the entire amount is unallowable and a further review is required to determine the portion, if any, that is unallowable under the Uniform Guidance. Consequently, some or all of the $279,030 may ultimately be found allowable and compliant with federal regulations. Management acknowledges the finding and recommendation presented. Processes and controls over federal awards will be enhanced by annually recalculating the indirect cost recovery rate. Management will assign an individual to review costs in the indirect cost pool to ensure they are allowable and will also submit an updated cost proposal to the cognizant agency and negotiate a final rate.