Finding Text
Condition: The modified total direct cost base used to calculate indirect costs included food costs. Food costs are considered a distorting item and should have been excluded from the base calculation. Criteria: Section 200.403 of Title 2 of the Code of Federal Regulations lists several criteria that must be met for costs to be allowable under federal awards. One criterion is the requirement for consistency in treating costs as direct or indirect. A cost cannot be assigned as a direct cost if other costs incurred in similar circumstances, for the same purpose, are assigned as indirect costs.
Effect: Including food costs in the base calculation for indirect costs results in an overstatement of indirect costs. Thus, the indirect costs charged to the nonprofit food service is too high.
Cause: Distorting costs were included when calculating the indirect cost base.
Recommendation: The Organization will use the correct modified total direct cost base to calculate indirect costs. Congregation Masores Hachinuch, Inc. DBA Bas Mikroh will restore the excess funds to its nonprofit food service account.
Amount of Questioned Cost: $599,140
Auditor’s Summary of Auditee’s Comments: The Organization submitted a payment plan and is reimbursing its nonprofit food service for the excess indirect costs charged. The Organization does not agree that the indirect costs were improperly calculated. The requirement to omit food costs in the modified total direct cost base is being disputed by other Organizations.
Anticipated Completion Date: June 30, 2033