Finding Text
2024-003- Inaccurate Indirect Cost Rate Applied Federal Agency: U.S. Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Program Year: 2024 Assistance Listing Number: 21.027 Finding Type: Material weakness in internal control over compliance and noncompliance Criteria: Federal rules state that if an organization has never had a negotiated indirect cost rate, it can choose to use a flat 10% rate—called the de minimis rate—on certain direct costs. This 10% rate must be used the same way on all federal grants unless the organization gets an approved rate from the government. In this case, the grant agreement stated that the organization should use the 10% de minimis rate. Condition: During audit testing, it was noted that the District applied indirect cost rates ranging from 10% to 50% to calculate and allocate indirect costs to the federal award. However, the grant agreement specifies that the District must use the 10% de minimis indirect cost rate if they decide to charge indirect costs to the grant. Cause of Condition: The District incorrectly applied a higher indirect cost rate. Effect of Condition: The use of varying indirect cost rates resulted in excess indirect cost charges to the federal award. Preliminary estimates indicate that indirect costs were overstated by $48,370 including $47,805 that were requested for reimbursement. Recommendation: It is recommend that the District review all applicable grant agreements and ensure compliance with specified indirect cost requirements. If there is no negotiated indirect cost rate, it is recommended the District elect the de minimis rate at 10%. The District should implement stronger review controls during grant budgeting and invoicing processes to ensure only allowable indirect cost rates are applied. View of Responsible Officials and Planned Corrective Action: The District will use the correct overhead rate for future reporting. Planned Implementation Date of Corrective Action: July 2025 Person Responsible for Corrective Action: F.X. Flinn, Board Chair