Finding Text
Department of Education and Passed through State of Iowa Department of Education
Federal Financial Assistance Listing #84.287, C14-SHIP, C15-SHIP, C16-SHIP, C17-SHIP, 7/1/2022 – 6/30/2023
Twenty-First Century Community Learning Centers Program
Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Material Weakness in Internal Control over Compliance and Material Noncompliance
Criteria: The Organization is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E – Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 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 the terms and conditions of the federal award.
The Iowa Department of Education Guide to Program Budgets and Accounting for the 21st Century Community Learning Centers program provides that an organization participating in the program may expend no more than 8 percent of annual funding on general administration and indirect costs. Further, indirect costs are to be recovered only to the extent of direct costs incurred.
Condition: Through review of indirect costs charged to the federal awards, we noted the following:
• The Organization charged an 8% administrative indirect cost rate to the federal awards, however, calculated the 8% on the budgeted grant award rather than on the actual direct costs incurred under the federal award, resulting in overcharging the award by $14,704.
• The Organization serves as an employer of record for organizations that need assistance in providing benefits, payroll, and human resources to employees. A fixed rate is applied to total payroll wages and charged as additional payroll costs to cover administrative time incurred. In addition to the amount charged above, the Organization charged $49,049 to the federal program under this methodology resulting in an overcharge to the award.
Cause: The Organization was not aware that the indirect cost rate should be applied pro rata to the underlying direct costs. In addition, the Organization believed this employer of record rate could be charged on grant wages incurred under the federal program.
Effect: The Organization’s controls did not detect or correct the errors identified, which resulting in disallowed costs being charged to the federal award.
Questioned Costs: Total questioned costs are $63,753.
Context: For the Twenty First Century Community Learning Centers Program, a non-statistical sample of 60 direct expenditures were selected for testing, including 41 payroll transactions and 19 nonpayroll transactions. The 41 payroll transactions accounted for $20,888 of $358,025 total payroll costs charged to the federal award. The 19 nonpayroll transactions accounted for $10,368 of $168,717 total nonpayroll costs charged to the federal award. Additionally, all indirect costs charged to the federal awards were selected for testing, accounting for $105,893.
Repeat Finding from Prior Year: No
Recommendation: We recommend management review procedures over the allocation of indirect costs to ensure indirect amounts charged to the program are based on actual underlying direct costs and that the total indirect allocation of general administration costs does not exceed the rate allowed by the federal program.
Views of Responsible Officials: Management is in agreement.