Finding Text
2025-004 – Significant Deficiency in Internal Controls over Compliance – Activities Allowed or Unallowed and Allowable Costs/Cost Principles US Department of Agriculture / Oregon Department of Human Services / Farmers Market Fund Federal Assistance Listing Number: 10.565, 10.568, 10.569, 10.182 Federal Program Name: Food Distribution Cluster, Local Food Purchase Agreements Criteria – 2 CFR §200.414 Indirect Costs – Entities must maintain accurate records and apply indirect costs consistently across all federal awards. They must also ensure that subrecipient indirect costs are managed in accordance with federal regulations. Condition/context – Indirect costs are not being requested, applied, billed, or reported consistently by the Organization. Indirect costs are not being applied to subrecipients consistently. During the FY24 audit, we observed numerous inconsistencies in the application of indirect costs by the Oregon Food Bank, including: not requesting indirect costs in grant applications, negotiating non-de minimis rates with passthrough agencies after electing a de minimis rate, billing indirect costs in excess of indirect costs awarded in the grant agreement, erroneously including passthrough awards greater than $25,000 per subrecipient in the modified total direct cost base, approving indirect cost rates for subrecipients that did not match the subrecipient's elected de minimis rate, and including subrecipient indirect costs in the section of SF-425 reports reserved for reporting its own indirect costs. During the FY25 audit, indirect costs were not subjected to testing as the total amounts charged were less than program materiality. Due to the timing of the completion of the FY24 single audit, this finding remains applicable in the year under audit. Questioned costs – $19,788 Cause/effect – The Organization has decentralized grant controls which are not designed to ensure compliance over indirect costs and consistency of application across all federal awards. Indirect costs in excess of allowable indirect costs were billed to federal awards. Repeat finding – Yes, prior year finding 2024-004. Recommendation – The Organization should develop procedures and internal controls to ensure indirect cost rates are requested, applied, billed, and reported consistently across all federal awards using the same rate. The Organization should develop similar procedures to ensure it is awarding and reporting subrecipient indirect costs accurately. The Organization should ensure individuals responsible for these controls are adequately trained. Views of responsible officials and planned corrective actions – Oregon Food Bank acknowledges this repeat finding and agrees with the auditors' assessment. Ben Ardell, Director of Finance, is the party responsible. Since the prior audit period, management has taken steps to establish procedures and internal controls to ensure consistent application, billing, and reporting of indirect cost rates across all federal awards. Such steps include defining and documenting roles and responsibilities for applicable staff members during each phase of the grants management lifecycle, as well as implementing procedures and tools to ensure compliance with subrecipient monitoring requirements. These steps involve multiple levels of review for accurate and consistent application of indirect cost rates. Finance will continue implementing the corrective actions necessary to achieve effective controls over compliance with indirect cost rate requirements. Policy and procedures on allowable and allocable costs will be drafted to clearly document how direct and indirect costs will be billed to federal awards. Training will be provided to relevant staff members to ensure accurate implementation and ongoing compliance. These actions will improve our ability to manage indirect costs effectively and ensure compliance with federal requirements. The anticipated completion date remains June 30, 2026.