Finding Text
Department of the Health and Human Services
Federal Assistance Listing #93.912
Rural Health Care Services Outreach, Rural Health Network Development and Small Health
Care Provider Quality Improvement
Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Significant Deficiency in Internal Control Over Compliance
Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective
internal control over the federal award that provides assurance that the entity is managing the
federal award in compliance with federal statutes, regulations, and conditions of the federal
award.
Condition: BHD, LLC calculated their indirect cost rate based on the total grant budget and
claimed an equal amount of indirect costs per month instead of calculating the indirect cost rate
per direct expenditures for each month.
Cause: BHD, LLC did not have an internal control process in place to ensure the correct amounts
of indirect costs were requested based on the direct costs for the same period.
Effect: Without an effective internal control process in place, improper costs could be charged
to the program.
Questioned Costs: None reported.
Context: A nonstatistical sample of 4 out of 12 indirect expenditures were selected for testing.
Repeat Finding from Prior Years: No
Recommendation: We recommend BHD, LLC enhance internal control procedures to ensure the
indirect cost rate is applied against the monthly direct costs when requesting program
reimbursements.
Views of Responsible Officials: Historically, the indirect cost received by this grant has not been
dependent of the direct expenditures. Based on verbal conversations with the HRSA grant
project manager, requesting reimbursement for the indirect costs evenly over the year based on
the budget submitted was acceptable. Therefore, the accounting treatment has been reflective
of that.