Finding 569375 (2024-002)

2024-002 – Material Weakness in Internal Control over Compliance and Noncompliance – Allowable Costs/Cost Principles: Indirect Costs Identification of federal program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria: Uniform Guidance 2 C.F.R. § 200.414(f): Any non-federal entity that does not have a current negotiated cost rate may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely. As described in § 200.403, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all federal awards until such time as a nonfederal entity chooses to negotiate for a rate, which the non-federal entity may apply to do at any time. Condition: As defined by the Uniform Guidance, the determination of MTDC excludes equipment and capital expenditures, in addition to various other categories of expenditures. The Council properly elected to utilize the 10% de minimis rate, however, improperly included amounts related to capital expenditures in their determination of the MTDC base. Cause: The Council was aware of the proper method to be used in calculations but the inclusion of capital expenditures was overlooked in error. Effect or potential effect: The Council charged indirect costs to the federal program that exceeded 10% of the MTDC. The overage that was charged to the federal program does not exceed 5% of the total program expenditures over the lifetime of the award. Questioned Costs: $121,838 Context: Over the lifetime of the award, the Council had various capital expenditure purchases totaling approximately $1,350,520 that were improperly included in the calculation of the MTDC. Identification of Repeat Finding: Not applicable. Recommendations: We recommend that the Council works to improve processes and controls over the calculation of, and monitoring of, indirect costs charged to federal programs. We also recommend that training be provided to ensure that all parties are aware of the proper methodology and processes. Views of Responsible Officials: See Corrective Action Plan.