Finding Text
Condition: Indirect costs, which encompass expenses incurred to support the overall operation of the organization but cannot be directly attributed to specific projects or grants, have not been recorded or allocated in accordance with federal grant regulations and the Uniform Guidance.
Criteria: 304.32 AU-C 725.07 indicates the auditor should perform the following procedures on the Schedule of Expenditures of Federal Awards (SEFA): Compare and reconcile the SEFA to underlying accounting and other records or to
the financial statements.
Cause: The failure to record and allocate indirect costs may have occurred due to inadequate training and high turnover of accounting staff during the 2022 calendar year.
Effect: Failure to record and allocate costs may lead to inaccurate financial statements, which can have regulatory and financial implications.
Recommendation: We recommend that the Center implement a training program for personnel responsible for cost allocation, establish stronger internal controls to verify cost allocation accuracy, and conduct a comprehensive review of past financial statements to identify and correct any misallocations.
Views of Responsible Officials and Planned Corrective Actions: The Center agrees with the finding and provided a corrective action plan. Prior to this finding, in April of 2023, the Center had already implemented internal controls and processes governing allocation of indirect costs to specific grants, which should prevent this type of finding going forward.