Finding Text
Criteria or Specific Requirement: Reasonable direct administrative costs and indirect costs at an institution?s approved negotiated indirect cost rate may be charged against Assistance Listing 84.425F (the Institutional portion). All such costs must be reasonable and necessary and conform to Cost Principles described in 2 CFR Part 200 Subpart E of the Uniform Guidance. Further, in accordance with the College?s cognizant agency approved indirect cost rate, the approved rate should be applied to its Modified Total Direct Costs (MTDC) base. This MTDC base should exclude equipment, capital expenditures, among other things. Condition: During our testing, we noted certain costs that were charged as supplies when they should have been recognized as capital assets/ equipment purchases. As a result, the indirect costs were calculated incorrectly by including these costs in the MTDC base. The MTDC should have excluded equipment and capital expenditures. As a result, $298,372 of indirect costs were incorrectly calculated and charged to the award. Questioned Costs: $298,372 Context: During testing, it was noted the College did not follow the proper steps and the College?s capital asset policy. Thus, these costs were expenses as supplies rather than as capital items. Cause: The College did not appropriately record expenditures in accordance with its capital asset policy and therefore erroneously calculated its indirect costs that were charged to the grant. Effect: The College had questioned costs of $298,372. Repeat Finding: No Recommendation: We recommend the College review its existing policies around calculating its MTDC and recording capital expenditures to ensure it is in compliance with federal regulations. Views of responsible officials: Management agrees with finding.