Finding 522816 (2023-001)

-
Requirement
B
Questioned Costs
$1
Year
2023
Accepted
2025-02-12

AI Summary

  • Core Issue: Food costs were incorrectly included in the modified total direct cost base for calculating indirect costs, leading to inflated indirect costs.
  • Impacted Requirements: This violates Section 200.403 of Title 2 of the Code of Federal Regulations, which mandates consistency in classifying costs as direct or indirect.
  • Recommended Follow-Up: The Organization should use the correct cost base for future calculations and reimburse $599,140 to the nonprofit food service account by June 30, 2033.

Finding Text

Condition: The modified total direct cost base used to calculate indirect costs included food costs. Food costs are considered a distorting item and should have been excluded from the base calculation. Criteria: Section 200.403 of Title 2 of the Code of Federal Regulations lists several criteria that must be met for costs to be allowable under federal awards. One criterion is the requirement for consistency in treating costs as direct or indirect. A cost cannot be assigned as a direct cost if other costs incurred in similar circumstances, for the same purpose, are assigned as indirect costs. Effect: Including food costs in the base calculation for indirect costs results in an overstatement of indirect costs. Thus, the indirect costs charged to the nonprofit food service is too high. Cause: Distorting costs were included when calculating the indirect cost base. Recommendation: The Organization will use the correct modified total direct cost base to calculate indirect costs. Congregation Masores Hachinuch, Inc. DBA Bas Mikroh will restore the excess funds to its nonprofit food service account. Amount of Questioned Cost: $599,140 Auditor’s Summary of Auditee’s Comments: The Organization submitted a payment plan and is reimbursing its nonprofit food service for the excess indirect costs charged. The Organization does not agree that the indirect costs were improperly calculated. The requirement to omit food costs in the modified total direct cost base is being disputed by other Organizations. Anticipated Completion Date: June 30, 2033

Corrective Action Plan

Recommendation: The Organization will use the correct modified total direct cost base to calculate indirect costs. Congregation Masores Hachinuch, Inc. DBA Bas Mikroh will restore the excess funds to its nonprofit food service account. Action Taken: As per an approved payment plan, Congregation Masores Hachinuch, Inc. DBA Bas Mikroh is restoring the full amount specified above to its nonprofit food service account. We have implemented the above-mentioned recommendation regarding calculation of indirect costs to ensure that only proper indirect costs are included in the base calculation of indirect costs. We have designated Rabbi Shaul Rosengarten, administrator, to implement and monitor the plan of corrective action for this finding. Anticipated Completion Date: 06/30/2033

Categories

Questioned Costs

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program $644,559
10.553 School Breakfast Program $175,928