Finding 390520 (2023-001)

Criteria As required by the Uniform Guidance, a non-federal entity may not earn or keep any profit resulting from federal assistance, unless explicitly authorized by terms and conditions of the award. Condition Mending Hearts elected to charge the de minimis rate of 10 percent of modified total direct costs (“MTDC”) to the grant but did not calculate the de minimis rate using the appropriate base. Cause Rather than calculating 10 percent of MTDC to determine reimbursement requests, Mending Hearts allocated and requested reimbursement of indirect costs based on the total indirect costs included in the grant budget. Context The year ended June 30, 2023 represents the first year in which Mending Hearts has received a grant including budgeted indirect costs. Testing of indirect costs was based on the total direct costs requested for reimbursement during the fiscal year and, therefore, 100% of the indirect costs were tested. Auditor’s Recommendations Mending Hearts should determine MTDC prior to calculating the amount of indirect costs to include in grant reimbursement requests. The calculation should be reviewed by someone other than the individual preparing the calculation. Views of Responsible Officials Management agrees with the auditor’s recommendation and will calculate indirect cost reimbursement requests using the appropriate base going forward, and will implement appropriate review and approval procedures over the process. A future reimbursement request will be adjusted to offset the excess funding that was received during the year ended June 30, 2023. Effect Mending Hearts received excess funding of indirect costs of approximately $9,300 during the fiscal year. As correction of the excess funding will be made on a future reimbursement request, this largely represents a timing difference between costs incurred and the reimbursement of the related indirect costs allowed under the terms of the grant. Questioned Costs Questioned costs did not meet the $25,000 reporting threshold.