Finding Text
Criteria: Under 2 CFR 200.414(f), if an entity does not have a negotiated indirect cost rate, the entity may elect to charge a de minimis rate of up to 15% of modified total direct costs (MTDC). Condition: For the year ended December 31, 2025, management calculated indirect costs charged to the grant using the de minimis indirect cost rate by applying 15% to the overall grant total, rather than applying 15% to modified total direct costs (MTDC). As a result, questioned costs were identified for indirect costs of approximately $24,554 for the year ended December 31, 2025. Cause: The condition appears to have resulted from an insufficient review control over the calculation of indirect costs charged to the federal award using the de minimis indirect cost rate and a misunderstanding of the base to use when calculating the indirect amount for each draw request. Effect: The use of an incorrect base for application of the de minimis indirect cost rate resulted in indirect costs charged to the program in excess of those allowable under the de minimis calculation, resulting in questioned costs of approximately $24,554 for the year ended December 31, 2025. If not corrected, the deficiency could result in continued overstatement of indirect costs charged to the award and additional questioned costs in future periods. Questioned Costs: $24,554 Perspective: Questioned costs were determined by calculating MTDC for the year times 15% and comparing that allowable amount to actual indirect costs billed for the year; the difference represents the questioned costs of approximately $24,554. Recommendation: We recommend that management strengthen internal controls over the calculation of indirect costs charged to federal awards using the de minimis indirect cost rate by establishing and documenting procedures to determine MTDC in accordance with applicable award terms and Uniform Guidance requirements, implementing a standardized worksheet that calculates allowable indirect costs by applying the de minimis rate to MTDC, with clear identification of the MTDC base used, and providing training to personnel responsible for grant billing on indirect cost requirements, including the appropriate base for applying the de minimis rate and award-specific transition provisions