Oregon Human Development Corporation

Finding 2019-001 17.264 - National Farmworker Jobs Program, Department of Labor Significant Deficiency in Internal Control over Compliance - Allowable Costs and Cost Principles CRITERIA: The funding received by OHDC is governed by the principles described in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Specifically, the requirements for allowable costs and cost principles are contained in 2 CFR part 200, subpart E. CONDITION: OHDC directly charged the cost of an external board consultant to the major Federal program identified above. The cost benefited multiple programs and should have been allocated to programs benefited based on OHDCs indirect cost rate agreement. CAUSE and CONTEXT: OHDC experienced multiple transitions in both the executive director and fiscal director positions during the fiscal years ended June 30, 2019 and 2018, which caused a significant gap in institutional knowledge at the organization. As a result, the initial agreement with the external board consultant changed over time and benefited more than the major Federal program identified above. But the full cost of the contract, $36,000, was directly charged to the major Federal program, rather than being allocated based on the indirect cost agreement. We sampled 20 cash disbursements charged to the program and noted one disbursement for the aforementioned contract. This does not appear to be systematic problem, rather a specific contract, as identified by OHDC management. POSSIBLE EFFECT: Noncompliance with Uniform Guidance requirements and the potential requirements to pay-back the costs incurred. QUESTIONED COSTS: $39,240 in total. $36,000 in direct costs charged from March to June 2019 for the aforementioned contract plus $3,240 in indirect costs charged based on OHDCs 9 percent indirect cost rate. RECOMMENDATION: We recommend OHDC to (1) review their cost allocation policy for both direct and indirect costs to ensure costs are charged to Federal programs in compliance with Uniform Guidance and (2) continue working with the Department of Labor to resolve the questioned costs identified. MANAGEMENT RESPONSE: Management agrees with the audit finding and is working closely with the Department of Labor to develop a plan for resolution of the questioned cost. In addition, management has reviewed and revised its cost allocation plan to comply with federal guidelines.

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