Discussion:
Imagine that you work for an auditing firm performing a local government audit. The government has received federal grant funding. The audit manager on the engagement has asked you to perform the necessary research, reviewing the following costs charged to the federal grant in order to determine whether or not they are allowable. Those costs include:
1. travel to a conference overseas, the primary purpose of which is the dissemination of technical information
2. employee recreational activities and counseling services
3. charges for investment counsel incurred to enhance income from investments
4. lobbying activities undertaken to obtain a grant
5. depreciation
6. insurance
Required:
1. What document will you research to determine whether the costs can be allowed?
2. Write a short memo to document your opinion about whether these costs would be allowable indirect costs to be recovered in part by federal grants. If certain limitations or specifications must be met for allow-ability, note them in your memo.