Finding Text
Condition: During our testing of costs charged to the major program through the direct administrative cost recovery calculation (indirect costs), we identified certain invoices charged to the indirect pool that were unallowable under the cost principles.
Criteria: Under 2 CFR Part 200, Subpart E -Cost Principles, costs charged to a federal program must meet certain criteria to be allowable including that they be necessary and reasonable for the performance of the federal award. In addition, the cost principles outline certain costs as unallowable in federal awards.
Cause: The noted unallowable expenditures were identified during the invoice approval and coding process to be charged fully to non-federal programs however, were erroneously coded to administrative class within the accounting system and therefore, allocated to the major program.
Effect: As a result of the deficiency noted, we identified 2 transactions allocated to the major program that are unallowable.
Context: Out of a test of 40 charges made to the indirect cost pool, 2 transactions were identified as being unallowable under the cost principles. A statistical sample was not used. We believe this significant deficiency impacts the allowable costs/ cost principles compliance requirement.
Questioned Costs: $248
Recommendations: We recommend internal control procedures be reviewed by management to ensure that the coding and approval of invoices ensures that costs are captured and recorded within the correct class within the accounting system and that any costs not allowable under the cost principles, be recorded in a separate P&L class that is not allocated to federal programs.