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Latin American Health Institute Did Not Always Claim Costs in Accordance With Federal Requirements

The Latin American Health Institute (LHI) is a nonprofit community-based public health organization in Massachusetts. For the period October 1, 2010, through September 30, 2011, LHI claimed $1.4 million in Substance Abuse and Mental Health Services Administration (SAMHSA) funding against three grant awards.

Of the $1.4 million in costs that we reviewed, LHI claimed $123,000 in costs that were allowable under the terms of the grant and applicable Federal requirements. We were unable to determine whether $1.1 million in salary and related fringe benefit and overhead costs was allowable because LHI did not prepare personnel activity reports for employees whose time was charged to the grant. In addition, we were unable to determine whether $156,000 in facilities charges and related overhead costs was allowable because LHI allocated costs on the basis of the grant award budgets rather than on the relative benefit of the grant awards received.

We recommended that SAMHSA (1) either require LHI to refund $1.3 million to the Federal Government or work with LHI to determine whether any of the costs that it claimed against the SAMHSA grants were allowable and (2) require LHI to develop (i) written procedures for reporting time-and-effort on the basis of actual effort expended on programs and (ii) a documented methodology for allocating facility costs, on the basis of the relative benefits received, to all of its locations. LHI stated that it would work with SAMHSA to resolve the issues related to our findings. SAMHSA concurred with our findings and recommendations.