Finding Text
Finding Number: 2024-005 Assistance Listing Number and Title: AL # 14.251 Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Federal Award Identification Number / Year: B-22-CP-OH-0726 Federal Agency: U.S. Department Of Housing And Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? No Prior Audit Finding Number: N/A Questioned Cost, Noncompliance, and Material Weakness 2 CFR 2400 gives regulatory effect to the Department of Housing And Urban Development for 2 CFR Part 200.414(f) which provides, in part, that recipients and subrecipients that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). The recipient or subrecipient is authorized to determine the appropriate rate up to this limit. When applying the de minimis rate, costs must be consistently charged as either direct or indirect costs and may not be double charged or inconsistently charged as both. The de minimis rate does not require documentation to justify its use and may be used indefinitely. Once elected, the recipient or subrecipient must use the de minimis rate for all Federal awards until the recipient or subrecipient chooses to receive a negotiated rate. 2 CFR Part 200.1 defines Modified Total Direct Cost (MTDC) as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs and with the approval of the cognizant agency for indirect costs. The County charged $300,000 in Administrative Indirect Costs for the Economic Development Initiative, Community Project Funding, and Miscellaneous Grants AL# 14.251 using a de minimis indirect cost rate. The $300,000 was calculated as 10% of total project costs of $3,000,000, which included $300,000 in indirect costs and $2,700,000 in direct costs. Further, the $2,700,000 of direct costs expended for the project were capital expenditures related to construction on the Devola Sewer Project. Therefore, the Modified Total Direct Cost (MTDC) on the Project was $0. As a result, the County should not have charged any indirect costs on the project using a de minimus rate. The County improperly charging Indirect Costs on the Project was due to confusion over how to calculate Modified Total Direct Costs. Therefore, we consider the amount of $300,000 to be a questioned cost. Failure to properly apply the de minimus indirect cost rate could lead to future questioned costs, reduced future federal funding, and the requirement to repay grant funds. Additional controls should be implemented to help ensure proper application of the de minimus indirect cost rate.