Finding 1157906 (2024-002)

Criteria – According to the Uniform Guidance, Title 2 U.S. Code of Federal Regulations Part 200.414, indirect costs must be allocated using the federally approved indirect cost rate agreement. Costs charged using a rate different from the approved rate are unallowable. Condition and context – As part of the Medicaid Administrative Claiming (MAC) Random Moment Time Study (RMTS) program administered by the Washington State Health Care Authority (HCA) and passed through to the Tribe, the Tribe provides HCA with its federally approved indirect cost rate. HCA then uses this rate to calculate the Tribe’s allowable quarterly claim amount. During the audit period, the Tribe negotiated two indirect cost rates with the U.S. Department of the Interior, Interior Business Center: a 58.73% rate for Indian Health Services Public Law 93-638 (IHS P.L. 638) programs, and a 31.31% rate for all other programs. The Tribe provided the higher IHS P.L. 638 indirect cost rate to HCA for use in RMTS claims. However, the MAC RMTS program does not operate under IHS P.L. 638, making the use of this rate incorrect for the program. The application of the incorrect indirect cost rate resulted in overpayments totaling approximately $103,000 during the audit period. Cause – This was the Tribe’s first year operating under two separate federal approved indirect cost rates. The Tribe misunderstood which rate should be used for the MAC RMTS program. Because most participants in the RMTS are primarily funded through the Tribe’s Indian Health Services Program, the Tribe assumed that the IHS P.L. 638 indirect cost rate was applicable to the MAC RMTS program as well. The Tribe did not recognize that this rate was limited to only Indian Health Service funded programs and did not identify the use of the incorrect rate in reports from HCA, leading to the submission of claims using the incorrect indirect cost rate. Questioned costs – None. The Tribe has worked with HCA to adjust the quarterly claims amounts accordingly. All past overpayments will be reimbursed to HCA subsequent to audit issuance. Additionally, the Tribe has recorded an adjustment to reduce the expenditures reported in the financial statements and recognized a corresponding liability for the overpaid funds. Furthermore, the Tribe reimbursed the IHS P.L. 638 indirect cost pool for the portion of funds received related to the individuals in that cost pool. As a result, there are no questioned costs associated with other programs related to this finding. Effect – The Tribe received funds in excess of the amount earned under the correct indirect cost rate, resulting in temporary overpayments. Repeat finding – This is not a repeat finding. Recommendation –Tribe should strengthen controls to ensure the correct federally approved indirect cost rate is identified and applied to each federal program. This is particularly important for programs where the indirect cost rate is calculated or applied by external entities. Specifically, all supporting RMTS reports should be submitted to the Accounting Department along with reimbursement requests. This will enable an independent review by Accounting personnel to verify the indirect cost rate used and confirm its accuracy before recorded and submission. Views of Responsible Officials – This is the first year of dual indirect cost rates. Management agrees with this finding and will implement a corrective action plan.