Finding Text
Criteria: 2CFR 200.403, Factors affecting allowability of costs, states that in order for a cost to be allowable under Federal awards it must be accorded consistent treatment. 2CFR 200.412 states that each item of cost for the same purpose must be treated consistently in like circumstances as either a direct or an indirect cost in order to avoid double-charging of Federal awards. Appendix IV to Part 200 4, Direct Allocation Method, all costs are treated as direct costs except general administration and general expenses. Under this method indirect costs consist exclusively of general administration and general expenses. 2CFR 200.425, Audit services, states the audit costs of auditing a non-federal entity that is exempted from having an audit conducted under the Single Audit Act and subpart F of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity?s fiscal year are unallowable. 2CFR200.432, Conferences, defines allowable conferences as those necessary and reasonable for successful performance under the Federal award. Condition: A portion of the audit fee for the December 31, 2021 audit was charged as a direct expense ($423). The Council was not required to have a Single Audit for 2021, so this would not be considered allowable. A portion of the fees to send the finance director and a Board member to a conference ($750) were charged as a direct expense. Neither of these attendees were involved in the direct performance of the Federal program, so this would not be considered allowable. Costs for QuickBooks accounting software and payroll services, HR related software, and website costs ($4,047) were charged as direct costs. These are general administration expenses that should have been classified as indirect costs. Further, costs were not treated consistently within the accounting system. A portion of the audit costs, conference fees and software/computer costs were recorded as direct costs to the Federal program and a portion were recorded as indirect costs to other programs. The Organization did not have internal controls in place to meet the costs principles contained in the Uniform Guidance due to the issue discussed in Comment 2022-001. Cause: The Organization was not aware the grants received were Federal awards and they were not familiar with the cost principles contained in the Uniform Guidance. They were relying on the budget accepted by the Agency that passed them the awards. Effect: Since the 10% de minimis indirect cost rate was used, any unallowable costs that were reported as direct costs would cause the calculated indirect costs to be overstated. The grantor could request that any direct costs considered unallowable be repaid. Context: The unallowable costs noted were a minor portion of the direct costs charged to the Federal program. The program was charged approximately $463,000 of direct costs. Approximately 83% ($384,000) of the direct costs were wages, benefits and independent contractor fees for providers that worked directly for the Opiod STR program and direct rent for the program space. No exceptions we noted during our testing of these. The remaining 17% of the direct costs (approximately $79,000) were for a variety of expenses. We separated these items into 2 categories: recurring/annual charges allocated to the program of approximately $24,000 and other various costs. We tested the Organization?s allocation methodology for the identifiable recurring/annual costs. The results of this testing identified items that should have been classified as general administration indirect costs, as described above, which amounted to approximately $4,500. Testing was also done on the other various direct costs. There were 177 of these items totaling approximately $55,000. We tested a sample of 20 of these items. $750 of directly allocated costs for a conference were considered unallowable out of this testing. Questioned Costs: As a result of our testing, we concluded that the potentially unallowable costs and change in the indirect calculation would not be significantly different than the amounts discussed above and would not approach the $25,000 threshold for questioned costs. As a result, no costs have been questioned. Recommendation: We recommend that personnel involved in grant management and recordkeeping receive training on the Uniform Guidance cost principles and other pertinent Federal regulations. We recommend that a system and review process be implemented to insure that all costs are treated consistently and classified properly and that costs charged to Federal awards are appropriate. The Organization should follow the cost principles when designing budgets for future programs.