Finding Text
2024-003: Significant Deficiency in Internal Control - Indirect Costs
Repeat Finding of 2023-003
Federal Program: COVID-19: Community Health Centers (Health Center Program Cluster)
Assistance Listing Number: 93.224/93.527
Federal Agency: U.S. Department of Health and Human Services
Award Number: N/A
Award Year: 2024
Compliance Requirement: Allowable Costs/Cost Principles
Questioned Costs: $6,054
Criteria: The Organization has a negotiated indirect cost rate agreement with the federal government for indirect costs. In accordance with 2 CFR Part 200, Appendix IV, indirect cost rate proposals are used to establish predetermined rates, fixed rates with carry-forward provision, provisional or final rates. A provision rate or billing rate is a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement and reporting of indirect costs pending establishment of a final rate for the period. An organization cannot charge indirect costs to a federal program in excess of its negotiated indirect cost rate agreement.
Condition and Context: The Organization's negotiated indirect cost rate agreement includes a provisional rate of 17.75% of direct costs for the period April 1, 2021 through March 21, 2024. The Organization charged indirect costs to its American Rescue Plan supplemental health center funding using a rate of 18.8% of direct costs for the period April 2023 through June 2023. The 18.8% rate that was used was obtained from an expired indirect cost rate agreement.
Effect: The Organization charged indirect costs of $6,054 in excess of what was allowed during the year ended March 31, 2024.
Cause: The Organization used the incorrect indirect cost rate due to oversight by management.
Recommendation: The Organization should implement procedures to ensure indirect costs are being charged to programs using the most recent indirect cost rate agreement in place.
Views of Responsible Officials and Planned Correction: The continued use of the expired indirecto cost rate was caused by the departure of the former CFO, who was responsible for reviewing federal grant draw downs. After the CFO let, the controller continued using the expired indirect cost rate. The new CFO has put in place a system to review the indirect cost rate in effect prior to the drawdown of grant funds.