Finding Text
Criteria 2 CFR Sections 200.403 and 200.412–415 require non-federal entities to utilize consistent and equitable methods for allocating indirect costs to federal programs. Condition The Organization was unable to provide adequate support to substantiate its allocation of indirect costs to federal award programs. Cause The Organization does not have formal policies and procedures over procurement which requires the retention of evidence of quotes and bids. Effect Without a formal policy, there is an increased risk of inconsistent or noncompliant cost allocation practices, which may lead to questioned costs, audit findings, or disallowed reimbursements by federal awarding agencies. Questioned Costs None Context The Organization does not have procedures in place to allocate indirect costs to contracts. Auditor allocated costs based on allowed percentages as part of testing. Recommendation We recommend that management develop and implement a comprehensive indirect cost allocation policy that aligns with Uniform Guidance requirements. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to federal awards and be communicated to all relevant personnel. Views of Responsible Officials See the accompanying Corrective Action Plan.