(c) A full discussion of the direct allocation base method can be found in A-122, Attachment A, subparagraph D.4.a. through D.4.c. 2. Audit Objectives Indirect Costs – a. For NPOs that charge indirect costs to Federal awards based on federally approved rates: (1) Obtain an understanding of internal controls, assess risk, and test internal controls as required by OMB Circular A-133, §___.500(c). (2) Determine whether the organization complied with the provisions of A-122 and CAS (if applicable) as follows: (a) Indirect cost rates were applied in accordance with approved rate agreements and any special award provisions/limitations (if different from those stated in the negotiated rate agreement). (b) Associated billings were the result of applying the approved rate to the proper base amount(s). (3) For fixed rate agreements, predetermined rate agreements, and provisional rate agreements determine whether the base used to distribute the approved indirect cost rate is accurate and reflects the terms of the agreement. (4) For fixed rate agreements, determine whether the organization has adequately determined the actual indirect costs for the fiscal year being audited and performed the necessary computations to accurately report the carry-forward adjustment to the rate computation for the subsequent period. b. For NPOs that charge indirect costs to Federal awards that are not based on federally approved rates: Obtain an understanding of internal controls, assess risk, and test internal controls as required by OMB Circular A-133, §___.500(c). (2) Determine whether costs that are directly allocated to an award using the Direct Allocation Method are prorated using a base that accurately measures the benefits provided to each award or activity. (3) Determine whether an ICRP was prepared and submitted to the cognizant agency (the Federal agency responsible for organization’s negotiating and approving indirect cost rates) as required by A-122. Verify that billings are based on the ICRP.
(c) A full discussion of the direct allocation base method can be found in A-122, Attachment A, subparagraph D.4.a. through D.4.c. 2. Audit Objectives – Indirect Costs a. For NPOs that charge indirect costs to Federal awards based on federally approved rates: (1) Obtain an understanding of internal controls, assess risk, and test internal controls as required by OMB Circular A-133, §___.500(c). (2) Determine whether the organization complied with the provisions of A-122 and CAS (if applicable) as follows: (a) Indirect cost rates were applied in accordance with approved rate agreements and any special award provisions/limitations (if different from those stated in the negotiated rate agreement). (b) Associated billings were the result of applying the approved rate to the proper base amount(s). (3) For fixed rate agreements, predetermined rate agreements, and provisional rate agreements determine whether the base used to distribute the approved indirect cost rate is accurate and reflects the terms of the agreement. (4) For fixed rate agreements, determine whether the organization has adequately determined the actual indirect costs for the fiscal year being audited and performed the necessary computations to accurately report the carry-forward adjustment to the rate computation for the subsequent period. b. For NPOs that charge indirect costs to Federal awards that are not based on federally approved rates: Obtain an understanding of internal controls, assess risk, and test internal controls as required by OMB Circular A-133, §___.500(c). (2) Determine whether costs that are directly allocated to an award using the Direct Allocation Method are prorated using a base that accurately measures the benefits provided to each award or activity. (3) Determine whether an ICRP was prepared and submitted to the organization’s cognizant agency (the Federal agency responsible for negotiating and approving indirect cost rates) as required by A-122. Verify that billings are based on the ICRP.
pt3.docx