2001 - Audit Report

U.S. Department of Labor
Office of Inspector General
Office of Audit

Maryland Department of Labor, Licensing and Regulation -- Audit of Indirect Costs Charged to Employment and Training Grants Awarded by DOL from July 1, 1995 through June 30, 2000

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MARGIN: Maryland Department of Labor, Licensing and Regulation

In the prior semiannual period, we recommended ETA recover over $1.3 million from the Maryland Department of Labor, Licensing and Regulation (DLLR) related to DLLR central service costs it charged to DOL grants. The current audit of the DLLR is related to indirect costs it charged to DOL grants.

MARGIN: OIG Recommends Recovery of $9.8 million from DLLR

The OIG conducted an audit of the Maryland DLLR to determine whether the indirect costs charged to DOL grants administered by DLLR for the period July 1995 through June 2000 were allocable and allowable.

Our audit found that although OMB Circular A-87 expressly requires that indirect costs be allocated to cost objectives on the basis of "relative benefits received," DLLR failed to comply with this requirement. We determined that for the 5-year period ended June 30, 2000, DLLR billed and received a total of $50,523,999 in indirect costs from DOL while, for this period, its actual allowable indirect costs properly allocable to DOL grant awards on the basis of "relative benefits received" totaled only $40,690,940. In short, DLLR over-charged DOL grant awards a total of $9,833,059 in indirect costs during this 5-year period ended June 30, 2000.

We recommended ETA recover the $9.8 million in questioned indirect costs and direct DLLR to develop and implement internal control policies and procedures to ensure that its indirect cost rate proposals fully comply with the Federal cost principles mandated by OMB Circular A-87. Maryland DLLR disagreed with the OIG findings and recommendations.

(Audit Report No. 03-01-006-03-315; issued Sept 21, 2001)

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