Finding Text
Criteria: 2 CFR §200.403 and §200.412–.415 require recipients to utilize consistent and equitable methods for allocating indirect costs to Federal programs. Condition: The Organization was unable to provide adequate supporting documentation to substantiate its allocation of indirect costs to various Federal award programs. Cause: The Organization has not established written policies and procedures regarding the methodology and allocation of indirect costs to Federal programs. Effect: The absence of a formal policy leads to an increased risk of inconsistent or non-compliant cost allocation practices, which may lead to questioned costs, audit findings, or indemnification of Federal awarding agencies. Questioned Costs: None Context: The Organization does not have formal or informal procedures in place to allocate indirect costs to Federal awards and other activities using a specific allocation method set forth in the Uniform Guidance. While performing testing over indirect costs, we proposed adjustments for allocated indirect costs based on rates approved by Federal awarding agencies. Recommendation: We recommend that management establish and implement a comprehensive indirect cost allocation policy that aligns with the requirements of the Uniform Guidance. The policy should clearly define the methodology for calculating, allocating, and applying indirect costs to Federal programs and other activities. Views of Responsible Officials: See management’s view and corrective action plan at the end of this report.