Finding Text
Finding 2025-001 Assistance Listing Number(s): 81.135 Name of Federal Program or Cluster: Research and Development Cluster Name of Federal Agency: Department of Energy Federal Award Identification Number: DE-AR0001838 Federal Award Year: 2024 Award Period: March 26, 2024 through September 25, 2025 Criteria or Specific Requirement: In accordance with 2 CFR § 200.303, Convergent Research is required to establish and maintain effective internal controls over Federal awards to provide reasonable assurance that expenditures are allowable, accurately reported, and comply with the terms and conditions of the award. Condition: Convergent Research did not have effective controls to reconcile provisional fringe and indirect cost rates to actual allowable costs or to perform a final award-level reconciliation before reporting Federal expenditures. Convergent Research charged fringe costs to the award using a provisional rate of 59.24%; however, the actual allowable fringe rate was 44.45%. In addition, Convergent Research did not have controls to identify award provisions permitting unused indirect-cost budget to be applied to additional allowable direct costs incurred during the period of performance or to identify unbilled allowable costs before closeout. As a result, Convergent Research initially reported gross questioned costs of approximately $132,000. During the audit, additional allowable direct costs of approximately $120,000, net of the required 10% cost share, were identified, resulting in net questioned costs of approximately $12,000. Convergent Research identified and reconciled these matters only after audit procedures were performed. Cause: Convergent Research did not establish formal procedures for: Reconciling provisional rates to actual allowable costs; Reviewing award-specific budget and indirect cost provisions; Identifying allowable costs incurred during the period of performance; and Performing a documented final award reconciliation before submitting final expenditure reports. Effect or Potential Effect: The lack of controls increased the risk that Federal expenditures would be inaccurately reported and that allowable costs would not be identified and charged to the award in accordance with the terms and conditions of the agreement. Questioned Costs: Gross questioned costs: $132,326 Less: Additional allowable direct costs, net of required cost share: ($120,084) Net questioned costs: $12,242 Repeat Finding: No Recommendation: We recommend Convergent Research establish written procedures and management review controls to: Reconcile provisional indirect and fringe rates to actual allowable costs; Review award-specific provisions related to indirect costs, cost sharing, and budget flexibility; Identify all allowable costs incurred during the period of performance; and Perform and document a final award reconciliation before submitting final expenditure reports. Views of Responsible Officials: Management agrees with the auditor’s recommendation and has implemented enhanced grant closeout procedures, including required reconciliations, award-specific reviews, and documented management review prior to final expenditure reporting.