Finding 48391 (2022-003)

Finding 2022-002 in Section II of this schedule is also a finding with respect to the major federal program. The impact of using the prior indirect cost rate agreement throughout the year was that the major program was overcharged by approximately $39,000. An adjustment was recorded therefore there were no questioned costs related to this finding. Finding No. 2022-002: Indirect Costs ? Significant Deficiency in Internal Control Over Financial Reporting Criteria The Uniform Guidance requires federal award recipients to record indirect costs at the lower of actual costs or the approved rates. If any federal grant is reimbursing indirect costs by a means other than the latest Indirect Cost Rate Agreement, the organization should credit such costs to the affected programs. Condition ZERO TO THREE received an updated rate agreement from the Department of Health and Human Services in June 2022, but continued to bill using the prior rates. The impact of the revised rates was not assessed. Cause Internal control procedures were not effectively implemented to ensure that indirect costs were properly calculated and billed when the updated indirect cost rate agreement was received. Effect or Potential Effect Revenue and receivables from the federal government were overstated by approximately $80,000. An adjustment was posted to correct the error. Recommendation We recommend that ZERO TO THREE enhance its internal control policies to ensure indirect costs are calculated based on the most recent indirect cost rate agreement. Indirect costs should be billed at the lower of the negotiated rates or the actual charges. Views of Responsible Officials See corrective action plan.