Finding Text
2024-002 No Indirect Cost Allocation Methodology
Program Name/Assistance Listing Number: 93.788 Opioid STR
Federal Agency: Department of Health and Human Services
Federal Award Identification: Unknown
Type of Finding: Significant Deficiency
Compliance Requirement: Allowable Cost/Cost Principles
Criteria: According to 2 CFR Part 200 subpart E, Appendix IV, NPOs that receive Federal Awards are required to comply with the cost principles outlined in the Uniform Guidance when charging indirect costs to those awards. The criteria for NPO documentation of indirect cost allocation methodology include identifying the methods used to allocate indirect costs, documenting the basis for determining the allocation of each indirect cost, describing changes made to the methodology, accounting for differences between estimated and actual amounts, supporting the indirect cost rate(s) used, and demonstrating compliance with any specific limitations on indirect cost reimbursement imposed by the Federal Award.
Condition: The Organization does not have a documented cost allocation methodology to ensure costs are properly allocated to the projects or activities that benefit from them.
Cause of Condition: The organization has not established formal policies or procedures for documenting and applying cost allocation methodologies across programs. There is a lack of clear guidance on how to determine the proportional benefit of costs shared between multiple programs.
Potential Effect of Condition: If an organization's indirect cost allocation methodology is not properly documented, it may be difficult for the auditors to verify that the indirect costs allocated to a particular federal award are reasonable, necessary, and allocable. This may result in disallowed costs or findings in the audit report, which could impact the organization's ability to receive future federal awards.
Questioned Cost: Not quantifiable.
Recommendation: We recommend that the organization should develop and implement a documented cost allocation methodology in accordance with CFR 200.405(d). This methodology should clearly define how costs are allocated when they benefit multiple projects and ensure that the allocation is based on proportional benefit, or any reasonable documented basis if proportions cannot be determined. Regular training should be provided to relevant employees who are responsible for indirect cost allocation to ensure adherence to the new methodology. Additionally, the organization should review its allocation process periodically to ensure compliance with regulatory requirements and internal controls.
Description of the Nature and Extent of Issues Reported: We consider the following materiality for considerations of material noncompliance for the major program 93.788 at 5% of the total awards expended amounting to $106,845.
Management Response: Management concurred with the finding. The Organization will use the Full-Time Equivalent (FTE) as an allocation method for such costs.