Finding Text
Finding #2025-003 – Material Weakness and Material Noncompliance – Allowable Costs. Applicable federal program: National Endowment for the Arts, Promotion of the Arts Grants to Organizations and Individuals, Assistance Listing #45.024, Annual contract periods: 10/01/23 – 09/30/24; 10/01/24 – 09/30/25. Criteria: Under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) indirect cost reimbursements are provided to a grantee in a grantor approved indirect cost rate or through a 10% de minimus rate applicable as a percentage of direct costs. Condition and context: M-AAA failed to submit its indirect cost rate application in 2024, which resulted in a lapse in an approved rate. At the direction of the program officer at the National Endowment for the Arts, M-AAA was directed to use the 10% de minimus rate; however, the billings were not adjusted for the change in indirect rates resulting in overbilling to the federal grants. Questioned costs: Approximately $75,000 was billed in excess of the amounts allowed for indirect costs for the period of July 1, 2024 to June 30, 2025. Cause and effect: Failure to timely file the indirect cost rate application resulted in reduced amounts being received for indirect costs and over billing of the grant. Recommendation: Re-emphasize internal procedures for review of allowable indirect costs based upon an approved indirect cost rate or election to use 10% de minimus rate. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.