Finding Text
Funding agency: U.S. Department of Transportation, Federal Highway Administration. Title: Highway Planning and Construction. CFDA number: 20.205. Award year and number: 2025 – PO-73000-00034057. Criteria: Under 2 CFR Part 200, Subpart E, costs charged to a federal award must be allowable, reasonable, allocable, and consistently treated. Indirect costs may not be charged both directly and through application of an approved indirect cost rate, as this results in duplicate reimbursement of the same costs. Condition: OCWCOG submitted a grant budget that included indirect-cost-type expenditures within direct expense line items as well as within the indirect cost rate submission calculation, which resulted in indirect costs being charged twice to the federal award. Questioned Costs: None reported. The known likely questioned costs are below $25,000. Cause: As a result of turnover within the planning department, management did not have adequate controls over the preparation and review of grant budgets and reimbursement calculations to ensure indirect costs included in grant budgets were excluded from the indirect cost rate calculation. Effect: The federal award was charged unallowable duplicate indirect costs. Although the amount identified was less than the Uniform Guidance questioned costs reporting threshold of $25,000, the practice resulted in noncompliance with federal cost principles and increases the risk that federal awards may be overcharged. Auditor’s Recommendations: We recommend the governmental entity strengthen internal controls over grant budgeting and claims for reimbursement by: 1. Reviewing grant budgets to ensure indirect costs are not embedded in direct cost line items when an indirect cost rate will be applied; 2. Requiring supervisory review of the indirect cost base and related calculations prior to submission; 3. Providing training to personnel responsible for federal grant accounting on allowable cost requirements under 2 CFR Part 200; and 4. Evaluating whether any adjustment or correction to the grantor is necessary for the duplicate indirect costs identified. Management’s Response: Management is revising procedures to ensure their methodology of applying indirect costs is consistent throughout all grants to ensure that only allowable indirect expenses are charged. These updates are being made in the current budget cycle.