Finding Text
2023-003 Allowable Costs of Indirect Costs U.S. Environment Protection Agency Pass-Through from Kansas Department of Health and Environment No. 66.460 - 319 Program: Nonpoint Source Implementation Grants John Redmond Reservoir WRAPS Implementation SFY20-22, Milford WRAPS Implementation SFY20-22, and Upper Wakarusa WRAPS Implementation SFY20-22 Grant Period Year Ended December 31, 2023 Type of Finding: Internal Control/Noncompliance Criteria: According to 2 CFR Part 200, a cost may not be allocated to a federal award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been assigned to a federal award as a direct cost. The Organization recorded audit fees as direct and indirect costs. Condition and Context: The Organization listed the single audit fees on the final grant reports as direct costs. The single audit fees were recorded as indirect costs and not as direct osts to the grants in the Organization’s financial system, which resulted in an overallocation of audit fees as direct and indirect costs. With the audit fees included in direct costs, the Organization does not have enough indirect costs to cover what was claimed on their grant reports resulting in the Organization receiving more in federal funds than the Organization’s expenses. Cause: Indirect cost allocations were not reviewed for compliance and accuracy. Effect: The Organization did not have enough indirect costs to substantiate what was claimed on the grant reports as indirect costs. The granting agency subsequently approved the carryforward of the unused money to a future period. Questioned Costs: The Organization recorded audit fees of $40,952 as direct and indirect costs to three federal grants. There is estimated additional over-allocated indirect costs of $8,800 that are not part of the major program. The reversal of the duplicate audit fees expenses were reversed and included in the audit journal entries. Recommendation: The Organization should develop a process to record indirect costs appropriately in the Organization’s financial system to avoid duplication and develop a review process for indirect costs to ensure sufficient expenses and accurate reporting. Management Response: Management agrees with finding. Procedures are being implemented to ensure an appropriate review process as well as a proper way of recording indirect costs, see attached corrective action plan.