Finding Text
Condition: For the year ended December 31, 2023, the Academy’s allowable indirect costs were limited to $33,237 based on total modified direct costs. Based on results of audit procedures performed, $97,368 of indirect costs were charged to the grant during the year ended December 31, 2023. Criteria: The Academy embedded a 7.5% allowable overhead rate in its contract. The default 10% rate was superseded by this provision. As a result, the Academy’s indirect costs were limited to 7.5% of total modified direct costs. As defined by 2 CFR Section 200, total modified direct costs equal total direct costs less all but $25,000 of subawards (regardless of the period of performance of the subaward). Cause: The Academy did not properly calculate allowable indirect costs under the grant award during the year ended December 31, 2023. Effect: Amounts charged to the contract exceeded allowable costs by $64,130. Recommendation: Management should develop procedures to calculate allowable indirect costs under its awards.