Finding Text
Criteria Per 2 CFR § 200.403 and § 200.412–415 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must have consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal awards. Cause The Organization does not have formal policies and procedures for the allocation and application of indirect costs to federal awards. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.