Finding Text
Criteria or Specific Requirement: In accordance with 2 CFR 200, Subpart E – Cost Principles, costs
charged to federal awards must be allowable, reasonable, and treated consistently across all programs.
Fringe benefit costs should be allocated based on the relative benefits expended by each program and in a
manner that reflects a consistent and equitable methodology. When a cost allocation plan is in place,
allocations must align with that plan to ensure compliance with federal requirements.
Condition and Context: During our audit of Solvista Health’s federal awards, it was determined that
fringe benefits are accounted for and applied inconsistently across federal programs. In one program,
fringe benefits were charged as direct expenditures based on actual costs; in another program, they were
applied using an allocation percentage; and in two programs, no fringe benefits were applied at all.
Questioned Costs: N/A
Cause: The inconsistent accounting and application of fringe benefit rates across federal programs
resulted from the absence of a standardized, written fringe benefit cost allocation policy and a lack of
internal controls to ensure compliance with 2 CFR Part 200 cost principles.
Effect: This inconsistency increases the risk of noncompliance with federal cost principles and may result
in misstated program costs, inequitable allocation of expenditures, and potential questioned costs by
federal awarding agencies.
Identification as a Repeat Finding: Not a repeat finding.
Recommendation: We recommend that Solvista Health revise their current written cost allocation policy
to clearly define how fringe benefits are to be accounted for, allocated and applied across all federal
programs. The policy should ensure consistency, compliance with 2 CFR 200, and equitable allocation
based on actual benefit expended.