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Restricted Funds - Indirect Cost Recovery
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Function, Project, Program, Organization, or Activity:

Restricted Funds - Indirect Cost Recovery

Reason(s) Why Audit is needed:

During FY 1999, the University charged grants and contracts millions dollars for indirect costs. Indirect costs, broad categories of costs incurred for facilities and administration, are charged to grants and contracts as a percentage of a modified total direct cost figure that is governed by federal, primarily Office of Management and Budget, regulations. Normally, the modified total direct cost figure consists of salaries, wages, fringe benefits, materials and supplies, services, travel, and subgrant and subcontract costs up to the first $25,000. Equipment, capital expenditures, charges for patient care and tuition remission, rental costs, scholarships and fellowships as well as the portion of subgrant and subcontract costs in excess of $25,000 are excluded from the modified total direct cost figure. If indirect costs are not computed correctly, the University could be asked to reimburse federal agencies for disallowed costs or, as we found during a FY 1999 audit, the University could under-bill federal agencies. We found and reported an underbilling of more than a quarter of a million dollars.

Audit Objective:

To determine that the University has procedures in place that effectively insures that indirect costs charged to grants and contracts are accurately computed.

Priority: High


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