Criteria Under the Uniform Guidance (2 CFR Part 200, Subpart E), recipients of federal awards must maintain documentation to support costs charged to federal programs, including indirect costs. The documentation should demonstrate that costs are allocable, allowable, and in accordance with the approved indirect cost rate agreement, if applicable. Condition and Context QCHC was unable to provide sufficient records to substantiate costs charged to federal grants. As a result, we were unable to determine the accuracy or allowability of both direct and indirect costs recorded. Furthermore, due to this lack of supporting documentation, we could not verify whether indirect costs were charged, nor could we confirm that any indirect cost calculations were based on an appropriate and complete base of direct costs or were calculated properly in accordance with the approved indirect cost rate agreement. Recommendation We recommend that management implement procedures to ensure that all indirect costs claimed under federal grants are supported by adequate documentation, including detailed allocation methodologies and supporting records, in accordance with federal regulations. Views of Responsible Officials and Planned Corrective Actions QCHC acknowledges the finding and has implemented the following corrective actions: I. QCHC has implemented Section 600- Cost Accounting Policies of the Accounting Manual, which deals with the measurement, assignment and allocation of costs to various cost objectives. 2. QCHC has established Policy 619- Direct and Indirect Costs, which requires that costs benefiting more than one cost objective be consistently treated as indirect costs, and costs necessary for the overall operation of the organization be treated as management and general costs.3. QCHC has implemented the Draw Down Policy & Procedure (Policy #308 DRAWDOWN) which establishes that expenditures of Federal award funds are monitored and allowable in accordance with the terms and conditions of the Federal award and with the federal cost principles in CFR Part 75 Subpart E. 4. QCHC has established Policy 303 - Incurred Cost, which requires that outlays or expenditures represent charges made to the project or program and may be reported on an accrual basis. 5. QCHC has implemented procedures to maintain detailed records of all direct and indirect costs charged to federal grants, including detailed allocation methodologies and supporting records, in accordance with federal regulations.