Finding 1239902 (2025-003)

Finding 2025-003: Deficiencies in Cost Allocation Plan and Methodology Condition: During our review of the Organization's cost allocation plan, we noted the Organization's monitoring report identified deficiencies in the current allocation methodology. Specifically, the space allocation schedule does not fully reconcile based on allocated square footage, the space allocation includes cost categories that are not allowable under the indirect cost allocation (ICA) budget category, including wages, employee benefits, maintenance costs, reserve expenditures, and contractual services. Additionally, both the space allocation schedule and telephone allocation schedule contain line items identified as "other" or "other costs" without sufficient detail to identify the nature of the expenditures being allocated. Criteria: Federal and state grant requirements require costs charged to programs to be allocated using a reasonable, documented methodology that accurately reflects the relative benefits received by each program. Cost allocation plans should clearly identify the types of costs included in each allocation pool and maintain sufficient detail to support the basis of the allocations. Cause: The Organization has not established adequate procedures to periodically review and update its cost allocation plan to ensure compliance with grant requirements and sufficient documentation of allocation methodologies and cost categories. Effect: As a result, costs may not be allocated to programs in accordance with applicable grant requirements. The lack of an adequately designed and documented cost allocation plan increases the risk that unallowable or inaccurately allocated costs may be charged to federal and state grant programs and limits the Organization's ability to support expenditures during monitoring reviews and audits. Questioned Costs: $88,159 Recommendation: We recommend management evaluate and revise its cost allocation plan to ensure allocation methodologies are appropriately documented, allocation calculations reconcile to supporting records, cost pools comply with applicable grant requirements, and allocated expenditures are adequately described and supported. Management should periodically review the cost allocation plan for continued appropriateness and compliance with grant requirements. Views of Responsible Officials: Management agrees with this finding and their response is included in the Corrective Action Plan.