Finding Text
Finding 2023-003–Indirect Cost and Fringe Benefit Rates
Nonmaterial Noncompliance–Allowable Costs
Identification of the federal program:
U.S. Department of Health and Human Services
Direct Award
Program Name: Head Start Cluster
ALN # 93.600
Criteria: Sections 200.414 and 200.431 of Subpart E of the Uniform Guidance require that indirect costs and fringe benefit costs charged to federal programs must be reasonable and allocated to the federal program based on a written policy, and self-insured expenses must be based on historical experience and reasonable assumptions.
Condition: The Organization did not perform a timely calculation or review of the indirect rate based on actual expenses compared to the provisional rate being used in order to determine if the amount being charged resulted in an adjustment to the billing for the program.
Cause: The expenses allocated and charged to the program based on provisional rates for both indirect and fringe benefit costs exceeded the actual expenses reported in the trial balance and allocated to the program.
Effect: The lack of timely calculations or reviews could result in having to reconcile funds due to or from the federal government a significant amount of indirect costs that were overbilled or underbilled.
Questioned costs: $123,160
Context: A recalculation was performed over the indirect expenses of the major program and determined the indirect expenses were overbilled by $123,160.
Repeat finding: No
Recommendation: We recommend the Organization review the indirect and fringe benefit cost rates at least annually and perform reconciliations between the provisional and actual rates to determine if amounts billed to the program should be adjusted.
Views of responsible officials and planned corrective actions: Management agrees with the finding. See corrective action plan.