Finding Text
Finding No.: 2025-002 – Allowability – Significant deficiency Federal Agency: Various Program Name: Research and Development Cluster ALN Number: Various Federal Award Year: July 1, 2024 – June 30, 2025 Criteria In accordance with 2 CFR 200.303(a), non-Federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). To ensure compliance with federally funded grants, particularly concerning indirect cost rates, the institution must adhere to specific criteria. Firstly, compliance with the Uniform Guidance (2 CFR Part 200) is essential. This regulation establishes uniform administrative requirements, cost principles, and audit requirements for federal awards to non-federal entities. The institution must follow these guidelines, which include the proper application and calculation of indirect cost rates. Additionally, adherence to approved indirect cost rates as specified in 2 CFR 200.414 is required. The institution must apply the federally approved indirect cost rates when charging costs to federal awards, ensuring that any deviations, such as using a de minimis rate, are appropriately justified and documented. Conditions Found During our audit we found 2 out of 9 samples selected for our compliance testwork, the College used an incorrect indirect cost (IDC) rate. This represents an overcharge, as the IDC rate is intended to cover general administrative expenses that cannot be directly attributed to a specific project. In utilizing a higher rate, the College effectively inflated the administrative costs charged to the federal grants. Cause The cause of the condition is that the College’s internal controls over the review of the rates applied to calculate the IDC charges were not operating effectively to the awards throughout the year. The College manually calculates what the IDC costs are based upon outdated rates and was booked into their financial reporting system without a supplemental review or reconciliation. Possible Asserted Effect The inflated rate has led to an unwarranted increase in administrative costs charged to federal grants, potentially resulting in the overcharge. Questioned Costs The known questioned costs are $1,836 and the likely questioned costs are $2,282. Statistical Sampling Neither samples were intended to be, and were not, a statistically valid sample. Repeat Finding The condition found constitutes a repeat finding from the prior year. Recommendation We recommend that management review its internal controls and establish a routine audit and monitoring process to regularly review the application of indirect cost rates and ensure compliance with federal regulations. Views of Responsible Officials Recommendation accepted. Please refer to corrective action plan.