Finding Text
Finding 2024-006 Allowable Costs/Cost Principles Overbilling of indirect costs – Material weakness in internal Control, material noncompliance Assistance Listing Number: 93.193 Program Title: Urban Indian Health Services Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Indian Health Services Questioned Costs: $772,209 Criteria: As per grant agreement terms, NACA is allowed to request reimbursement for indirect costs (such as "overhead" or "administrative costs") they incur when providing the services described in the grant agreements. Some of the grant agreements specifically state the allowable indirect cost rate or that recovery of indirect costs are not allowed. Condition: During 2023 and 2024, NACA used an incorrect indirect cost rate, resulting in overbilling and over-reimbursement. Additionally, amounts were recorded to contracts that did not allow recovery of indirect costs. Some of these amounts were overbilled through a reduction in the deferred revenue balance. Cause: NACA experienced the loss of key staff that previously had background and experience with grant compliance relating to cost reimbursement agreements. The individual completing the cost reimbursement forms had not reviewed the grant agreements to realize that the indirect cost rates had changed. In addition, the process for review and approval of monthly cost reimbursement requests did not include review of the indirect cost rate being utilized. Effect or Potential Effect: As a result of applying an incorrect indirect cost rate, NACA overbilled the funding source for indirect costs in the amount of $266,825 either by direct overbilling or by overcharging to the deferred revenue balance. Additionally, indirect costs totaling $505,384 were recorded to contracts that did not allow recovery of indirect costs. Recommendation: We recommend that NACA implement a communication process between an individual with grant compliance responsibilities and the individual completing the cost reimbursement requests to ensure that the correct indirect cost rate is being utilized and to communicate on any changes to the rate. In addition, we recommend that the process for reviewing and approving cost reimbursement requests includes review of the indirect cost rate being utilized to ensure the rate is correct. Views of Responsible Officials and Planned Corrective Action: NACA management concurs with the finding and will implement the recommendation above.