Finding Text
Finding: Unallowable administrative costs charged as direct expenses. Criteria: Allowable Costs/ Cost Principles (Non-profit Organization) Per the Code of Federal Regulations § 75.467 Selling and marketing costs., costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 75.421) are unallowable, except as direct costs, with prior approval by the HHS awarding agency when necessary for the performance of the Federal award. Per the Code of Federal Regulations § 200.449 Interest, costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the recipient's or subrecipient's own funds are unallowable. Condition and Context, and Cause: During our audit, we identified unallowable marketing and financing expenditures allocated to the UC grants. See discussion above at 2024-006 for background on failure to track allowable costs. Result: Amounts identified as unallowable costs per the compliance guidance have been included in the contract liability as disclosed in Note 12. See the Summary of Unallowable Costs and Questioned Costs tables for detail on page 56. Recommendation: The auditors recommend the Organization re-implement internal controls to track allowable expenditures and reconcile qualifying costs with cash draws.