CONGREGATION MASORES HACHINUCH INCNon-Profit

Condition: The modified total direct cost base used to calculate indirect costs included food costs. Food costs are considered a distorting item and should have been excluded from the base calculation. Criteria: Section 200.403 of Title 2 of the Code of Federal Regulations lists several criteria that must be met for costs to be allowable under federal awards. One criterion is the requirement for consistency in treating costs as direct or indirect. A cost cannot be assigned as a direct cost if other costs incurred in similar circumstances, for the same purpose, are assigned as indirect costs. Effect: Including food costs in the base calculation for indirect costs results in an overstatement of indirect costs. Thus, the indirect costs charged to the nonprofit food service is too high. Cause: Distorting costs were included when calculating the indirect cost base. Recommendation: The Organization will use the correct modified total direct cost base to calculate indirect costs. Congregation Masores Hachinuch, Inc. DBA Bas Mikroh will restore the excess funds to its nonprofit food service account. Amount of Questioned Cost: $599,140 Auditor’s Summary of Auditee’s Comments: The Organization submitted a payment plan and is reimbursing its nonprofit food service for the excess indirect costs charged. The Organization does not agree that the indirect costs were improperly calculated. The requirement to omit food costs in the modified total direct cost base is being disputed by other Organizations. Anticipated Completion Date: June 30, 2033

Condition: The Organization does not have a written code of conduct that provides disciplinary actions for violations by officers, employees, or agents. Criteria: Section 200.318(c)(1) of Title 2 of the Code of Federal Regulations states that non-federal entities must maintain written standards of conduct that provide for disciplinary actions in cases of violations of standards by officers, employees, and agents. Effect: The Organization is not in compliance with the requirement to have a written code of conduct that provides disciplinary actions for violations of standards. Cause: The Organization’s written code for conduct does not include the disciplinary actions for violations of standards. Recommendation: The Organization will develop a written code of conduct that provides disciplinary actions for violations by officers, employees, or agents. Amount of Questioned Cost: N/A Auditor’s Summary of Auditee’s Comments: The Organization agrees with the finding and updated the written code of conduct to include disciplinary actions, in the area of acceptance of gratuities, for violations by officers, employees, or agents. Completion Date: August 31, 2022

Condition: The Organization did not maintain sufficient records to detail the history of procurement. The Organization did not ensure that vendors complied with all contract terms, conditions, and specifications. Criteria: Section 200.318(i) of Title 2 of the Code of Federal Regulations states that entities must maintain detailed records showing the history of procurement, including rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Section 200.318(b) of Title 2 of the Code of Federal Regulations states that entities must ensure that suppliers are following the terms, conditions, and specifications of their contracts. Effect: The Organization is not in compliance with the requirements to have detailed records of the procurement history and to ensure that their vendors and suppliers follow the terms of their contracts. Cause: Detailed records of procurement history were not kept by the Organization. The Organization did not follow through with ensuring that contract terms, conditions, and specifications were followed by suppliers. Recommendation: The Organization will ensure that detailed documentation is kept for every procurement and that every product/service is properly procured according to all regulations and requirements. The Organization will monitor vendor compliance with terms, conditions, and specifications of their contracts. Amount of Questioned Cost: N/A Auditor’s Summary of Auditee’s Comments: The Organization agrees with the finding and has executed a plan to ensure sufficient record keeping of the procurement process. Completion Date: August 31, 2022