University of Connecticut University of UC Title Fallback Connecticut

SUMMARY REPORT ON AUDITS OF RECHARGE

Department of Health and Human Services

OFFICE OF INSPECTOR GENERAL
SUMMARY REPORT ON AUDITS OF RECHARGE CENTERS AT 12 UNIVERSITIES
JANUARY 1994 A-09-92-04020

TABLE OF CONTENTS

FINDINGS AND RECOMMENDATIONS

Surplus Fund Balances
Duplicate and Unallowable
Funds Used for Unrelated Purposes
Inequitable Billing
University and OIG Comments on Significant Issues
Summary of Causes
Recommendations
Management and OIG Response

FINDINGS AND RECOMMENDATIONS


During our review, we found that there was a wide variation in the operation of recharge centers among the 12 universities. Ten universities had formal written policies and procedures which were generally consistent with OMB Circular A21, while two had not established any formal policies and procedures for the financial operation of recharge centers. However, 9 of the 10 universities had adequate policies and procedures, but did not always analyze and adjust their billing rates as required by OMB Circular A-21. Although the OIG review at the University of Pennsylvania found that recharge centers were being operated in accordance with OMB Circular A-21, some recharge centers at the other 11 universities did not maintain adequate accounting systems and records to allow for the: (1) development of billing rates based on actual costs; or (2) identification of surplus or deficit fund balances. We believe that these weaknesses in the internal control structure resulted in some university recharge centers: (1) accumulating surplus fund balances and deficits that were not adjusted for in subsequent billing rates; (2) including duplicate or unallowable costs in the calculation of billing rates; (3) including recharge costs in the calculation of indirect cost rates; (4) using funds of recharge center accounts for unrelated purposes; and/or (S) billing some users at reduced rates. 

These practices caused billing rates to be overstated, resulting in overcharges of $3.2 million to the Federal Government. We believe that these overcharges primarily resulted because universities did not: (1) establish or adhere to policies and procedures for recharge centers; and (2) maintain adequate accounting systems and records. Specifically, universities did not analyze and adjust billing rates, conduct annual cost studies, or monitor recharge centers on a regular basis. Furthermore, OMB Circular A-21 does not provide specific instructions for when and how to adjust for surpluses and deficits in fund balances. 


Total Overcharges of $3.2 Million to Federal Projects by Type of Finding


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The OMB Circular A-21, section J44, “Specialized Service Facilities,” contains most of the requirements applicable to recharge centers; however, other requirements applicable to recharge centers are also contained in the Compliance Supplement to OMB Circular A-133. We recommend that HHS’ Division of Cost Policy and Oversight work with OMB to revise OMB Circular A-21 to ensure that criteria related to the financial operation of recharge centers is clear. We recommend that a separate, comprehensive section be added to OMB Circular A-21 which promulgates the requirements for the financial operation of recharge centers. The Division of Cost Policy and Oversight concurred with all of the recommendations presented in the report. . The comments are included in their entirety in APPENDIX D.

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SURPLUS FUND BALANCES


Our review disclosed that 6 of the 12 universities accumulated $6.6 million in surplus fund balances for recharge center accounts. Surplus fund balances occurred ::’hen amounts billed for services exceeded the cost for providing such services. The surplus balances accumulated by the six universities continued as the result of inadequate monitoring of recharge centers to ensure that user billing rates were analyzed arid adjusted to eliminate accumulated surpluses. As a result, federally sponsored research was overcharged by $1,280,107. This overcharge consisted of $857,359 in direct costs, $388,524 in related indirect costs, as well as $34,224 in earned interest on the surplus fund balances that was not credited to recharge center accounts. Furthermore, some of the universities incorrectly used surplus fund balances as discussed in the section of the report RINDS USED FOR UNRELATED PURPOSES.

Although most universities established policies and procedures on
recharge center billing rates, we found that some did not analyze
year-end fund balances on an annual basis nor adjust the billing
rates to eliminate surpluses. Section J44.c of OMB Circular A-21
states that universities are not allowed to recover more than the
aggregate costs of recharge center services and requires rates to be
reviewed periodically and adjusted if necessary. Specifically, OMB
Circular A-21 states that:

“Charges… should be designed to recover not more than the aggregatecost of the services over a long-teen period agreed to by the institution and the cognizant Federal agency.
“…Ids not necessary that the rates charged for services be equal to the cost of providing those services during any one [sic] year as long as rates are reviewed periodically (emphasis added) for consistency with the long-teen plan and adjusted if necessary.”

We found some variations regarding the interpretation of “periodically.” For our purposes, we reported surpluses for recharge centers which were clearly accumulating excess balances. For example, in a review of three recharge centers at one university, we analyzed the -ending balances over a 10-year period. The auditors noted that, for some of the centers, the fund balances had been relatively stable until 1987. After this period of time, the fund surplus balances began to increase steadily without any rate adjustments. Another university stated that it used a rolling 5-year operating cycle for recharge centers while other universities with similar costs and services did not operate on a 5-year cycle.

Interest Earned on Generally, universities earn income on surplus funds by investing in
Fund Balances short-term securities. For those recharge centers that maintained
surplus balances, we found that interest earnings were not always
credited to the appropriate centers. Two of the 12 universities
earned $34,224 of interest on surplus balances of recharge centers.


Section J44.b of OMB Circular A-21 states that the cost of each
service shall consist of direct and related indirect costs with
deductions for appropriate income as described in section C5.
Section C5.a states that “applicable credits” refer to those receipts
that operate to offset or reduce cost items. “Specifically, the concept
of netting such credit Items against related expenditures should be
applied by the institution in determining the rates or amounts to be
charged to sponsored agreements for services rendered …. ”

Consequently, the $34,224 in interest earned from investing the surplus fund balances represented receipts that should have been used to adjust billing rates charged by recharge centers. By not adjusting the appropriate billing rate(s), recharge centers overcharged users and Federal research.

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DUPLICATE AND UNALLOWABLE COSTS


We found that 9 of the 12 universities included duplicate or unallowable costs in the calculation of recharge center billing rates. For example, one university classified $722,179 in year-end purchases as expenditures rather than inventory, thus reducing surplus cash and the ending fund balance. We also noted that the nine universities: (1) recovered duplicate equipment costs; (2) expensed equipment rather than capitalizing and depreciating it; (3) accumulated reserves for future capital expenditures; and/or (4) included entertainment, interest and bad debt expenses in the calculation of billing rates. These practices resulted in overcharges to Federal agreements of $1,187,804 during the period June 1, 1987 through June 30, 1991.

A recharge center at one university reported a deficit balance when it improperly classified the purchase of $729,406 in inventory as expenditures.. Our review disclosed that three large purchases of inventory were made at or near fiscal year (FY) end and resulted in overcharges of $722,179 to the Federal Government. According to university officials, these purchases were made to take advantage of special discounts and to arrange for an uninterrupted supply of goods over an extended period of time. However, the purchases were not needed as part of the normal operation of the recharge center and were not sold or consumed during the year of purchase. If the $729,406 in purchases had been properly classified as inventory, the recharge center would have had a surplus balance at year-end.
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Section C4.a of OMB Circular A-21 states that an allocable cost should be charged in accordance with relative benefits received or other equitable relationships. Accordingly, these purchases should not have been treated as expenses since they were not sold or consumed during the subject FY. This misclassification of purchased inventory overstated operating expenses and understated the fund balance. As a result, Federal agreements were overcharged $722,179, consisting of $468,643 in direct costs and $253,536 in indirect costs.
Duplicate Recoveryof EquipmentCosts

We found that 3 of the 12 universities had occasionally recorded the full cost of purchased or leased (operating and capital) equipment as an expense in the year acquired, and a portion of the cost as
depreciation over the life of the asset. Two of the three universities recorded both the principal payments on bonds used to finance the equipment and depreciation expense for the same equipment to its recharge center accounts. The third university depreciated equipment that had already been fully expensed in its recharge center accounts. These improper accounting practices resulted in
overcharges to Federal agreements of $284,068. This amount consisted of $185,057 in direct costs and $99,011 in indirect costs. Expensing of Capital Equipment We found that 6 of the 12 universities expensed $3,085,296 in equipment costs which should have been capitalized and depreciated
over the useful life of the assets. Since supporting records were available for only four of the six universities, we were only able to identify $136,630 in overcharges to Federal agreements. This
amount consisted of $92,415 in direct costs and $44,215 in indirect costs.

Expensing the total cost of equipment is not in accordance with generally accepted accounting principles (GAAP) which require the cost of an asset to be spread over its expected useful life. While OMB Circular A-21 allows universities to be compensated for the use of their equipment through depreciation or use allowance, its related guidelines follow this basic concept of GAAP.
Capital Equipment Reserves Recharge centers at two universities included a markup in billing
rates above cost to accumulate a total reserve of $2,128,553 for equipment replacement and additions. The OMB Circular A-21 specifically states that “(c)harges for the use of specialized services should be designed to recover not more than the aggregate cost of the services ….” By including a markup in the billing rates, the two universities overstated the amounts charged to users and recovered more than the actual costs incurred. This resulted in one university overcharging its Federal projects by $28,302. Excess amounts charged by the other university had an immaterial effect on


We found that three universities had included $1,397,803 in unallowable costs related to entertainment, interest, and bad debt expenses in their recharge center operating accounts. Sections 115, 122, and J4 of OMB Circular A-21 state that entertainment expenses, interest on borrowed capital, and bad debt write-offs “…are unallowable.” Since supporting records were available for only two of the universities, we could only identify overcharges of $16,625 to the Federal Government. This amount consisted of $10,909 in direct costs and $5,716 in indirect costs.

We realize that it may be impractical to exclude unallowable costs in the calculation of billing rates when considering_ that recharge centers also provide services to nonfederal users. Furthermore, it would not be feasible to charge different billing rates to Federal and nonfederal users. To resolve this issue and comply with OMB Circular A-21, universities should perform periodic reviews to compare amounts charged with actual allowable costs. The Federal share of differences between billed and actual allowable costs should be reflected in the subsequent adjustment of amounts charged to Federal programs.


The OMB Circular A-133 Compliance Supplement states that over/underrecoveries should be distributed to the original users. We believe that netting surpluses and deficits from various recharge centers does not meet this requirement since billing rates would not be appropriately adjusted. When surpluses are used to offset costs in indirect cost pools, related credits are not distributed to the users who were originally billed for the services which created the surplus. Transferring deficits to indirect cost pools may result in the duplicate recovery of related costs. If recharge accounts are not closed (fund balances reduced to zero), deficit balances would be carried into the subsequent period and recovered through an increase in both the university’s indirect cost rate and recharge center’s billing rate.Costs Used in Billing Rates Were Also Included in the Indirect Cost Allocation
Three universities classified costs as expenditures and capitalized items in recharge center accounts used to-determine recharge center billing and indirect cost rates. The recovery of duplicate costs is not
consistent with the cost principles: Our review found that two of the universities included $145,819 in depreciation on equipment in their recharge center operating accounts and indirect cost rate proposals.
Because there was a lack of controls to ensure that costs associated with recharge centers were not included in indirect cost rate proposals, some of the recharge centers’ costs were recovered twice.
The results of the third university were immaterial.

Although it was beyond the scope of the individual audits of recharge centers to determine the extent of this problem at each university, we determined that one university received a duplicate
recovery of $39,501 from Federal projects. Information regarding the Federal share of duplicate equipment casts was not available for the other two universities. However, we did ask the second
university to determine the amount of duplicate overcharges and to resolve any issues with DCA. An OIG auditor determined that identified overcharges for the third university were immaterial.

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FUNDS USED FOR UNRELATED PURPOSES


We found that four universities used $3.5 million in surplus recharge center funds for unrelated purposes. This was accomplished by either transferring a fund balance from a recharge center to another fund or using recharge center funds to purchase unrelated goods or services. For example, recharge center funds were used to: (1) develop a universitywide accounting system; (2) increase general and capital improvement funds; (3) renovate academic offices; (4). purchase cables for a Federal project; and (5) supplement an athletic department’s funds. For example:

  • Three service centers at one university were charged $200,000 for the partial funding of developing, acquiring and implementing a universitywide financial accounting system (FAS). The FAS benefited the entire university and its cost should have been recovered through the indirect cost rate as a general and administrative cost charged to all risers. By recovering the cost through service center billing rates, the Federal Government paid a disproportionate share of FAS.
  • Occasionally, excess funds from recharge centers at another university were routinely used for projects not related to the operation of the recharge center which accumulated the funds. During FYs 1990 and 1991, the university transferred $225,000 in excess funds from its recharge center for telephone services to the Director of Finance for Athletics, and used an additional $75,000 to renovate academic offices. Clearly, Federal funds provided for sponsored research projects should not be used to fund athletics or instruction.


None of these expenditures or transfers were for purposes directly related to the operation of the recharge centers. Because these funds were not used to adjust the appropriate billing rates, Federal agreements were overcharged by $167,191 by three of the universities. This amount consisted of $115,273 in direct costs and $51,918 in indirect costs. We could not calculate the effect on Federal agreements for the fourth university since supporting records were not available.

An OMB Circular A-133 audit should detect such issues of noncompliance since one of many objectives of OMB Circular A-133 Compliance Supplement is to determine “…whether a refund has been made to the Federal Government for its fair share of any amounts thereof which have been removed, transferred out, or borrowed from the recharge center fund.”


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INEQUITABLE BILLING


We found that some universities did not bill all users for services or billed certain users at a reduced rate. Section J44.c of OMB Circular A-21 requires that the cost of each service be charged directly to users based on actual use of the service and that rates do not discriminate between federally and nonfederally supported activities, including university internal activities.

We found that two universities either did not bill all users for services provided by recharge centers or billed certain users at lower rates. If recharge centers provided preferential treatment to a
subset of users, either by billing them at a reduced rate or not at all, other users would have to be billed in excess of costs to cover uncollected revenues. In this way, Federal projects could be
overcharged even though a recharge center did not accumulate a surplus balance. For example, university staff and students at one university were not billed for $23,247,203 of services provided by the computer center during the period July 1, 1988, through June 30, 1991. This practice resulted in overcharges to the Federal Government of $ 111,962, which consisted of direct costs of $69,742
and indirect costs of $42,220.

Recharge centers providing multiple services may subsidize the cost of certain services by charging excessive rates for other services. Consideration should be given to size, complexity and equity in
setting multiple rates for a recharge center. Users of services provided in a more efficient manner may pay higher rates than necessary in order to subsidize less efficiently provided services.
Although we did not find this problem at the 12 universities summarized in this report, we did perform a special review of a computer center at another university where inequitable pricing occurred.

We also found that recharge centers at some of the universities we reviewed did not have adequate accounting records to track revenues and expenditures related to specific goods and services. In
these instances, billing rates may not reflect actual costs due to inadequate accounting records.

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UNIVERSITY AND OIG COMMENTS ON SIGNIFICANT ISSUES


Generally, most universities were receptive to our proposed recommendations to improve internal controls over recharge centers. Many welcomed OIG’s recommendations as a way to strengthen current university policies and procedures. However, some universities disagreed with our recommendations and believed that: (1) overcharges to Federal projects in one cost center should be offset against undercharges by other recharge centers; (2) recharge centers should not have to conduct cost studies or treat surplus balances as overcharges to the Federal Government if the billing rates are competitive, with market prices charged by outside vendors; and (3) indirect costs should be allocated to recharge centers which would reduce surpluses prior to calculating refunds. We discuss
these areas in the following section of the report.

Some of the universities believed that overcharges to Federal projects in one recharge center should be offset against undercharges by other centers. Generally, the universities believed
that if the net surplus balance of all recharge centers was reasonable, no financial adjustment should be made based on the findings of individual recharge centers.

We disagree. Each recharge center is organized to provide a specialized service to a set of users. As such, each center operates independently, and its surpluses and deficits should accrue to users
through either adjusted rates or individual adjustments to all Federal users. The OMB Circular A-133 Compliance Supplement states that the methods used to adjust for accumulated over/underrecoveries
should distribute these amounts in reasonable proportion to the same users as were originally billed for the services which created the accumulation. We believe that netting surpluses and deficits will
not meet this requirement because not all sponsored projects use all recharge centers and some use certain recharge services more than others. In addition, section C4.b of OMB Circular A-21 states that:
‘Any costs allocable to a particular sponsored agreement
under the standards provided in this Circular may not be
shed to other sponsored agreements in order to meet
deficiencies caused by overruns or other fund
considerations, to avoid restrictions imposed by law or by
terms of the sponsored agreement, or for other reasons of
convenience. ‘

Some of the universities believed that they should not have to conduct cost studies or treat surplus balances as overcharges to the Federal Government when recharge center billing rates were
comparable to market prices of outside vendors.

We disagree. Federally sponsored projects for research are generally awarded on a cost reimbursable basis whereby costs should be based on actual charges to such agreements. Section J44.c of
OMB Circular A-21 states that billing rates should be designed to recover not more than the aggregate cost of the services over a long-term period agreed to by the institution and the cognizant
Federal agency. In order to calculate the appropriate billing rates in accordance with this section, studies must be performed to determine the recharge centers’ actual costs of operation and the
volume of services provided. In addition, the use of market prices of outside vendors to establish recharge center billing rates would not be appropriate to the extent that market prices include a profit margin. Therefore, the use of market prices would result in the universities’ recovering vendor profit margins as well as recovering costs.

Some of the universities wanted to reduce financial adjustments recommended by OIG by indirect costs they believed were not included in recharge center billing rates for recharge centers. The
universities claimed that indirect costs would have been charged to the appropriate recharge centers’ accounts. This would have reduced the related fund balances and the repayment to the Federal
Government would be smaller.

Although OMB Circular A-21 allows universities to allocate their indirect costs to recharge centers, most universities do not. Rather, the billing rates for recharge centers were typically based on direct
costs. Amounts billed to federally sponsored projects were included in total direct costs whereby a university would apply its negotiated indirect cost rate to determine total indirect costs for Federal
research. Whether a university chooses to allocate its indirect costs to recharge centers or not, the development of recharge center billing rates and the development of the indirect cost rate should be
consistent and prevent duplicate charges for indirect costs. Thus, our-,determination of whether unallocated indirect costs could be used to reduce fund balances at individual universities was made
relative to the method used to develop the indirect cost rate.

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SUMMARY OF CAUSES

Our review disclosed that 10 of the 12 universities had formal written policies and procedures generally consistent with OMB Circular A-21. However, 9 of the 10 universities did not always follow their policies and procedures. We also noted that some university recharge centers did not maintain adequate accounting systems and records to allow for the: (1) development of billing rates based on actual costs; or (2) identification of surplus or deficit fund balances. We believe that DCA should require universities to implement policies and procedures consistent with OMB Circular A-21, and the Circular should be revised to provide specific instructions for when and how recharge centers should adjust for surpluses and deficits in fund balances.

University Oversight

 

Clearly, universities are in the best position to implement policies and procedures -for the operation of institutional recharge. centers. However, we found that some universities did not establish written policies and procedures for recharge centers and some of the universities had adequate policies which were not being followed. Section A2.e of OMB Circular A-21 states that:

 

“The application should require no significant changes in the generally accepted accounting practices of colleges and universities. However, the accounting practices of individual colleges and universities must support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to sponsored agreements. ”


Some universities indicated that it was difficult to require recharge centers to follow OMB Circular A-21 requirements since their internal control structure did not include a governing body designed to monitor all recharge centers. They believe that unallowable practices would continue unless Federal auditors took exception to them. Many of the universities welcomed our reports and viewed them as a means for enforcing existing policies and procedures.
Section J44.c of OMB Circular A-21 requires billing rates to be reviewed periodically and adjusted if necessary. Although several of the universities had implemented policies and procedures to analyze
and adjust billing rates to prevent accumulation of excess funds, some universities had not implemented the policies effectively and others had deficiencies such as expensing equipment or using costs
from recharge centers to calculate indirect cost rates. We also found that two universities had no formal policies and procedures to govern the financial operation of recharge centers. Although .
recharge centers at one university established their own policies, they varied from center to canter. In view of this, section CZ.c of OMB Circular A-21 requires the consistent treatment of costs through the application of GAAP.

 

Some universities clearly provided less oversight of recharge centers than others. At two universities, internal and external auditors had reported problems at recharge centers, however, the universities did
not take corrective action. Some university officials indicated that it was difficult to get recharge
centers to prepare annual cost studies even when it was required by university policy. Thus, many universities monitored recharge followed the concepts of GAAP and believed that it was necessary and proper for recharge centers to maintain a working capital reserve. Many universities were also aware that OMB Circular A-87 was being revised, allowing for the maintenance of a working capital reserve for internal service funds at State and local governments. When coupling the provisions of OMB Circular A-87 with the ambiguities of OMB Circular A-21, universities had the means to continue using rates which accumulated excess funds. Although we did not perform extensive testing of recharge centers with deficits, officials at many universities informed us that recharge centers were much more likely to adjust billing rates if a fund balance was operating at a deficit rather than a surplus.
While OMB Circular A-21 requires the accounting practices of universities to support the accumulation of costs and to provide adequate documentation to support costs charged to sponsored agreements, it is not as specific as the proposed revisions of OMB Circular A-87 which establishes cost principles for State and local governments. In support of claims made against the Federal Government in the form of recharge billing rates, governmental units under the proposed revisions of OMB Circular A-87 must provide: (1) fund balance sheets based on individual accounts contained in the accounting system; (2) revenue and expenditure statements with revenues summarized by type of user (e.g.,Federal and nonfederal programs); (3) listings of transfers into and out of funds; (4) descriptions of the procedures (methodologies) used to charge the costs of each service to users and how billing rates were determined; and (5) schedules of current rates.


We believe that it would be helpful to use OMB Circular A-21 to require university management to improve the financial operation of recharge centers. For example, one university had a centralized recharge committee which effectively monitored all of its recharge centers. The university’s recharge center policy required that each center submit a rate proposal to the centralized rate committee for review and approval annually.

The proposed revisions of OMB Circular A-87 also provide State and local governments more specific guidance with regard to the need – to bill all users than is provided by OMB Circular A-21. The proposed revisions of Circular A-87 state that:

 

“… revenues should consist of all revenue generated by the service, including unbilled and uncollected revenue. If some users were not billed for the services (or were not billed at the full rates), a schedule showing the fill



‘imputed’ revenue associated with these users should be provided.

The recommendation section of the report includes aspects of OMB Circular A-87 related to recharge centers that we believe should be adopted within OMB Circular A-21 and applied to universities.


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RECOMMENDATIONS


Our recommendations relate to two issues: (1) improved university oversight; and (2) recommended changes to OMB Circular A-21.
1. To provide more effective oversight to recharge centers, DCA
should require universities to:
Develop and implement policies and procedures for the operation of recharge centers consistent with OMB Circular A-21; Establish and maintain adequate accounting and recordkeeping procedures for recharge centers; and Analyze and adjust billing rates to eliminate deficit and surplus fund balances.

2. Without definitive guidance in OMB Circular A-21, universities’ interpretations of section J44 resulted in charges to Federal projects using billing rates which were not based on actual costs. To provide clear and definitive guidance for operating recharge centers, we recommend that HHS’
Division of Cost Policy and Oversight work with OMB to revise OMB Circular A-21 to ensure that criteria related to the financial operation of recharge centers is clear. We
recommend that a separate, comprehensive section be added to OMB Circular A-21 which promulgates the requirements for the financial operation of recharge centers. These
requirements should cover the following points:

Permit a reserve for working capital similar to that
proposed for OMB Circular A-87 by stipulating th recharge center surplus fund should not exceed 60 days in working capital;
Credit recharge center accounts with interest earned on fund balances;
at a

Require all Federal projects to be credited or refund the Federal share of funds transferred or used for purposes unrelated to operation of the center;
Specify that interest, as well as principal, should be considered as a cost, when funds are transferred out of the recharge center accounts;
Require all users to be billed at full rates or establish a procedure to assure that billed users are not subsidizing unbilled users;
Specify that indirect costs of centers should be included in billing rates;
Specify that costs cannot be used in the computation of both indirect cost rates and. recharge center billing rates except for minor variances between billed and actual costs;
Develop specific criteria for establishing recharge centers;
Require cost studies as a basis for establishing billing rates and ensure all users are billed;
Require periodic reviews to compare amounts charged with actual allowable costs. The Federal share of differences between billed and actual allowable costs should be reflected in the subsequent adjustment of amounts charged to Federal programs;
Define ambiguous terms such as materiality and periodically; and
Require universities to retain supporting documentation similar to that required of State and local governments under the proposed revision of OMB Circular A-87.

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MANAGEMENT AND OIG RESPONSE


In written comments dated October 7, 1993, the DASGAM concurred that OMB Circular A-21 should be revised to provide clearer and more definitive guidance on the financial operations of recharge centers. The DASGAM also agreed that institutions should comply with certain standards in the financial management of their recharge centers. However, it was stressed that this area should be evaluated by nonfederal auditors as part of an institution’s OMB Circular A-133 audit. The role of DCA would be to resolve any deficiencies reported by the auditors. The DASGAM’s comments are included in their entirety in APPENDIX D.
We agree that it would be appropriate for nonfederal auditors to evaluate the financial management of recharge centers as part of an institution’s OMB Circular A-133 audit. In addition, the OIG is planning a nationwide review that will encourage schools to self assess their controls to determine if the financial management of recharge centers is in compliance with OMB Circular A-21. We will refer any deficiencies identified to DCA for resolution.

To facilitate identification, please refer to Common Identification Number A09-92-04020 in all correspondence relating to this report. We request that you respond to the HHS action official within 30 days from the date of this letter. Your response should present any comments or additional information that you believe may have a bearing on the final determination.

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