Finding Text
Federal Program: Health Centers Program Cluster
Assistance Listing Number: 93.224/93.527
Federal Agency: U.S. Department of Health and Human Services
Award Number: N/A
Award Year: 2023
Compliance Requirement: Allowable Costs/Cost Principles
Questioned Costs: $13,486
Criteria: The Organization has a negotiated indirect cost rate agreement with the federal government for indirect costs. In accordance with 2 CFR Part 200, Appendix IV, indirect cost rate proposals are used to establish predetermined rates, fixed rates with carry-forward provision, provisional or final rates. A provision rate or billing rate is a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement and reporting of indirect costs pending establishment of a final rate for the period. An organization cannot charge indirect costs to a federal program in excess of its negotiated indirect cost rate agreement.
Condition and Context: The Organization's negotiated indirect cost rate agreement includes a provisional rate of 17.75% of direct costs for the period April 1, 2021 through March 21, 2024. The Organization charged indirect costs to its American Rescue Plan supplemental health center funding using a rate of 18.8% of direct costs for the period June 2022 through March 2023. The 18.8% rate that was used was obtained from an expired indirect cost rate agreement.
Effect: The Organization charged indirect costs of $13,486 in excess of what was allowed during the year ended March 31, 2023.
Cause: The Organization used the incorrect indirect cost rate due to oversight by management.
Recommendation: The Organization should implement procedures to ensure indirect costs are being charged to programs using the most recent indirect cost rate agreement in place.
Views of Responsible Officials and Planned Correction: In September of 2022, the Chief Financial Officer left the health center, and a replacement was not hired until February 20, 2023, a month before the end of the fiscal year on March 31, 2023. While the accounting staff have been with the health center for more than three years, they lacked guidance while the search for a replacement Chief Financial Officer was going on. The Chief Financial Officer who left the health center was the only one who was handling and administering the indirect cost rate to Federal grants but when he left the accounting staff had no clue that the new indirect cost rate needed to be administered. The new Chief Financial Officer has experience in the use and application of indirect cost rates and has cross trained the Controller in the use and application of indirect cost rates. This finding will never reoccur in future.