FAC Explorer

Audit 293291

FY End
2023-06-30
Total Expended
$67.71M
Findings
4
Programs
26
Organization: Indiana State University (IN)
Year: 2023 Accepted: 2024-03-04
Auditor: Indiana State Board of Accounts

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
372042 2023-001 Material Weakness - M
372043 2023-001 Material Weakness - M
948484 2023-001 Material Weakness - M
948485 2023-001 Material Weakness - M

Programs

ALN Program Spent Major Findings
84.268 Federal Direct Student Loans $43.11M Yes 0
84.063 Federal Pell Grant Program $14.03M Yes 0
84.038 Federal Perkins Loan Program_federal Capital Contributions $3.51M Yes 0
84.031 Higher Education_institutional Aid $516,021 Yes 1
84.033 Federal Work-Study Program $472,206 Yes 0
84.007 Federal Supplemental Educational Opportunity Grants $452,851 Yes 0
59.077 Community Navigator Pilot Program $374,050 - 0
93.575 Child Care and Development Block Grant $335,416 - 0
93.884 Grants for Primary Care Training and Enhancement $248,737 Yes 0
84.326 Special Education_technical Assistance and Dissemination to Improve Services and Results for Children with Disabilities $208,482 - 0
93.107 Area Health Education Centers Point of Service Maintenance and Enhancement Awards $119,698 - 0
93.307 Minority Health and Health Disparities Research $102,119 Yes 0
47.050 Geosciences $86,447 Yes 0
84.425 Education Stabilization Fund $57,826 Yes 0
93.103 Food and Drug Administration_research $33,520 Yes 0
20.200 Highway Research and Development Program $31,807 Yes 0
10.558 Child and Adult Care Food Program $30,376 - 0
59.037 Small Business Development Centers $30,063 - 0
47.075 Social, Behavioral, and Economic Sciences $27,977 Yes 1
81.049 Office of Science Financial Assistance Program $15,880 Yes 0
84.048 Career and Technical Education -- Basic Grants to States $11,944 - 0
66.460 Nonpoint Source Implementation Grants $9,618 Yes 0
21.027 Coronavirus State and Local Fiscal Recovery Funds $8,469 - 0
43.008 Education $2,400 Yes 0
93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement $1,728 - 0
20.205 Highway Planning and Construction $1,479 Yes 0

Contacts

Name Title Type
WBLRF8Z4BEF6 Diann E McKee Auditee
8122372372 Beth Kelley, Cpa, Cfe Auditor
No contacts on file

Notes to SEFA

Title: Note 2. Federal Direct Student Loans Accounting Policies: Note 1. Basis of Presentation Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires an annual audit of any entity expending a total amount of federal awards equal to or in excess of $750,000 in any fiscal year unless by constitution or statute a less frequent audit is required. In accordance with the Indiana Code (IC 5-11-1 et seg.), audits of universities shall be conducted annually. The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant activity of Indiana State University for the year ended June 30, 2023 and is presented in accordance with the requirements of Uniform Guidance. The accompanying Schedule has been prepared in a format that presents summary financial information of the federal funds awarded to Indiana State University directly from federal agencies as well as amounts received as a subgrantee of other organizations. For purposes of the Schedule, federal assistance includes all federal assistance and procurement relationships entered into directly between Indiana State University and the federal government and subawards from nonfederal organizations made under federally sponsored agreements. Accordingly, the amount of federal awards expended is based on when the activity related to the award occurs. Because the Schedule presents only a selective portion of the activities of Indiana State University, it is not intended to and does not present the financial position, change in financial position, or cash flows of Indiana State University. Indiana State University did not elect to use the 10% de minimis cost rate. The University uses a federally negotiated facilities & administration rate of 31.1% on federal awards when the rate is not restricted by federal regulation. This facilities & administration rate was approved by the US Department of Health & Human Services and is effective from 7/1/2021 through 6/30/2026. The accounting principles followed by Indiana State University and used in preparing the accompanying schedule are as follows: Awards Other Than Student Financial Assistance Deductions (expenditures) for direct costs are recognized as incurred using the accrual method of accounting and the cost accounting principles contained in Uniform Guidance. Under those cost principles, certain types of expenditures are not allowable or are limited as to reimbursement. Moreover, expenditures include a portion of costs associated with general university activities (indirect costs) which are allocated to federal awards under negotiated formulas commonly referred to as indirect cost rates. INDIANA STATE BOARD OF ACCOUNTS 12 INDIANA STATE UNIVERSITY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) Student Financial Assistance Expenditures for non-loan awards made to students are recognized and reported in the Schedule. Student loan programs are funded by the federal government under various programs; e.g., Perkins Student Loan Program. Activity related to these loan programs includes federal capital contributions, loan repayments, interest earned on loans, cancellation of loans, and administrative and collection costs. De Minimis Rate Used: N Rate Explanation: Indiana State University did not elect to use the 10% de minimis cost rate. The University uses a federally negotiated facilities & administration rate of 31.1% on federal awards when the rate is not restricted by federal regulation. This facilities & administration rate was approved by the US Department of Health & Human Services and is effective from 7/1/2021 through 6/30/2026. The accounting principles followed by Indiana State University and used in preparing the accompanying schedule are as follows: Awards Other Than Student Financial Assistance Deductions (expenditures) for direct costs are recognized as incurred using the accrual method of accounting and the cost accounting principles contained in Uniform Guidance. Under those cost principles, certain types of expenditures are not allowable or are limited as to reimbursement. Moreover, expenditures include a portion of costs associated with general university activities (indirect costs) which are allocated to federal awards under negotiated formulas commonly referred to as indirect cost rates. INDIANA STATE BOARD OF ACCOUNTS 12 INDIANA STATE UNIVERSITY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) Student Financial Assistance Expenditures for non-loan awards made to students are recognized and reported in the Schedule. Student loan programs are funded by the federal government under various programs; e.g., Perkins Student Loan Program. Activity related to these loan programs includes federal capital contributions, loan repayments, interest earned on loans, cancellation of loans, and administrative and collection costs. The Schedule of Expenditures of Federal Awards includes Federal Direct Student Loans which were not made by Indiana State University but were received by its students. Indiana State University is responsible only for the performance of certain administrative duties with respect to these loans. The number of guaranteed loans and the total amount processed for each Direct Loan Program for the year ended June 30, 2023 were as follows:
Title: Note 3. Federal Perkins Student Loan Program Accounting Policies: Note 1. Basis of Presentation Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires an annual audit of any entity expending a total amount of federal awards equal to or in excess of $750,000 in any fiscal year unless by constitution or statute a less frequent audit is required. In accordance with the Indiana Code (IC 5-11-1 et seg.), audits of universities shall be conducted annually. The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal grant activity of Indiana State University for the year ended June 30, 2023 and is presented in accordance with the requirements of Uniform Guidance. The accompanying Schedule has been prepared in a format that presents summary financial information of the federal funds awarded to Indiana State University directly from federal agencies as well as amounts received as a subgrantee of other organizations. For purposes of the Schedule, federal assistance includes all federal assistance and procurement relationships entered into directly between Indiana State University and the federal government and subawards from nonfederal organizations made under federally sponsored agreements. Accordingly, the amount of federal awards expended is based on when the activity related to the award occurs. Because the Schedule presents only a selective portion of the activities of Indiana State University, it is not intended to and does not present the financial position, change in financial position, or cash flows of Indiana State University. Indiana State University did not elect to use the 10% de minimis cost rate. The University uses a federally negotiated facilities & administration rate of 31.1% on federal awards when the rate is not restricted by federal regulation. This facilities & administration rate was approved by the US Department of Health & Human Services and is effective from 7/1/2021 through 6/30/2026. The accounting principles followed by Indiana State University and used in preparing the accompanying schedule are as follows: Awards Other Than Student Financial Assistance Deductions (expenditures) for direct costs are recognized as incurred using the accrual method of accounting and the cost accounting principles contained in Uniform Guidance. Under those cost principles, certain types of expenditures are not allowable or are limited as to reimbursement. Moreover, expenditures include a portion of costs associated with general university activities (indirect costs) which are allocated to federal awards under negotiated formulas commonly referred to as indirect cost rates. INDIANA STATE BOARD OF ACCOUNTS 12 INDIANA STATE UNIVERSITY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) Student Financial Assistance Expenditures for non-loan awards made to students are recognized and reported in the Schedule. Student loan programs are funded by the federal government under various programs; e.g., Perkins Student Loan Program. Activity related to these loan programs includes federal capital contributions, loan repayments, interest earned on loans, cancellation of loans, and administrative and collection costs. De Minimis Rate Used: N Rate Explanation: Indiana State University did not elect to use the 10% de minimis cost rate. The University uses a federally negotiated facilities & administration rate of 31.1% on federal awards when the rate is not restricted by federal regulation. This facilities & administration rate was approved by the US Department of Health & Human Services and is effective from 7/1/2021 through 6/30/2026. The accounting principles followed by Indiana State University and used in preparing the accompanying schedule are as follows: Awards Other Than Student Financial Assistance Deductions (expenditures) for direct costs are recognized as incurred using the accrual method of accounting and the cost accounting principles contained in Uniform Guidance. Under those cost principles, certain types of expenditures are not allowable or are limited as to reimbursement. Moreover, expenditures include a portion of costs associated with general university activities (indirect costs) which are allocated to federal awards under negotiated formulas commonly referred to as indirect cost rates. INDIANA STATE BOARD OF ACCOUNTS 12 INDIANA STATE UNIVERSITY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) Student Financial Assistance Expenditures for non-loan awards made to students are recognized and reported in the Schedule. Student loan programs are funded by the federal government under various programs; e.g., Perkins Student Loan Program. Activity related to these loan programs includes federal capital contributions, loan repayments, interest earned on loans, cancellation of loans, and administrative and collection costs. Indiana State University participates in the Federal Perkins Loan Program (Program). A revolving loan fund is maintained for the administration of the Program, the balances and transactions relating to the Program are included in the University's financial statements. The Schedule of Federal Expenditures includes the entire amount of the revolving loan fund including the outstanding loans to students. The following schedule represents loans outstanding as of June 30, 2023:

Finding Details

Finding 2023-001
FINDING 2023-001 Subject: Research and Development Cluster - Subrecipient Monitoring Federal Agencies: National Science Foundation, US Department of Education Federal Programs: Social, Behavioral, and Economic Sciences; Higher Education Institutional Aid Assistance Listings Numbers: 47.075, 84.031 Federal Award Numbers and Years (or Other Identifying Numbers): 1759694, P031F180072 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters Condition and Context The University expended $1,076,005 in Research and Development funds during the audit period. Of that amount, $86,788 was passed through to five subrecipients. As a pass-through entity, the University was required to identify the award and applicable requirements and monitor the subrecipient. Procedures to monitor its subrecipients included the following:  Reviewing financial and programmatic reports as required by the University.  Following up and ensuring the subrecipient takes timely and appropriate actions on all deficiencies pertaining to the federal award provided to the subrecipient detected through audits, on-site reviews, and other means.  Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient. All five subrecipients expended more than $750,000 in federal awards in fiscal year 2022, thus subjecting each to a Single Audit as required by the Uniform Guidance. As such, each subrecipient was required to submit its Single Audit report to the Federal Audit Clearinghouse (FAC) by March 31, 2023. In November 2023, eight months after the subrecipients' report submission deadline, the University completed the review of the fiscal year 2022 audit reports for all five subrecipients. The delayed monitoring would not have allowed the University to follow up and ensure that the subrecipients took timely and appropriate action on all deficiencies pertaining to the federal awards passed through to the subrecipients from the University. In addition, it would not have allowed for the University to issue a management decision for audit findings pertaining to the federal award provided to the subrecipient within six months of acceptance by the FAC. The lack of effective internal controls and noncompliance, as related to the monitoring of the five subrecipients, were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 15 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.332 states in part: "All pass-through entities must: . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: . . . (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. . . ." 2 CFR 200.521(d) states in part: "The federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. . . ." Cause The system of internal controls as developed by management of the University was not properly implemented to ensure that subrecipient audit reports were received and reviewed in a timely manner. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, subrecipients to whom payments were made were not adequately monitored. The failure to establish a sufficient system of internal controls allowed noncompliance with the grant agreements and the Subrecipient Monitoring compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 16 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the University's management establish a system of internal controls, including segregation of duties, related to the grant agreements and compliance requirements listed above. An internal control system, including segregation of duties, should be designed and operate effectively to provide reasonable assurance that material noncompliance with the grant agreement or a compliance requirement of a federal program will be prevented, or detected and corrected, on a timely basis. In order to have an effective internal control system, it is important to have proper segregation of duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to have a separation of functions over certain activities related to the program. The fundamental premise of segregation of duties is that an individual or small group of individuals should not be in a position to initiate, approve, undertake, and review the same activity. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2023-001
FINDING 2023-001 Subject: Research and Development Cluster - Subrecipient Monitoring Federal Agencies: National Science Foundation, US Department of Education Federal Programs: Social, Behavioral, and Economic Sciences; Higher Education Institutional Aid Assistance Listings Numbers: 47.075, 84.031 Federal Award Numbers and Years (or Other Identifying Numbers): 1759694, P031F180072 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters Condition and Context The University expended $1,076,005 in Research and Development funds during the audit period. Of that amount, $86,788 was passed through to five subrecipients. As a pass-through entity, the University was required to identify the award and applicable requirements and monitor the subrecipient. Procedures to monitor its subrecipients included the following:  Reviewing financial and programmatic reports as required by the University.  Following up and ensuring the subrecipient takes timely and appropriate actions on all deficiencies pertaining to the federal award provided to the subrecipient detected through audits, on-site reviews, and other means.  Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient. All five subrecipients expended more than $750,000 in federal awards in fiscal year 2022, thus subjecting each to a Single Audit as required by the Uniform Guidance. As such, each subrecipient was required to submit its Single Audit report to the Federal Audit Clearinghouse (FAC) by March 31, 2023. In November 2023, eight months after the subrecipients' report submission deadline, the University completed the review of the fiscal year 2022 audit reports for all five subrecipients. The delayed monitoring would not have allowed the University to follow up and ensure that the subrecipients took timely and appropriate action on all deficiencies pertaining to the federal awards passed through to the subrecipients from the University. In addition, it would not have allowed for the University to issue a management decision for audit findings pertaining to the federal award provided to the subrecipient within six months of acceptance by the FAC. The lack of effective internal controls and noncompliance, as related to the monitoring of the five subrecipients, were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 15 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.332 states in part: "All pass-through entities must: . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: . . . (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. . . ." 2 CFR 200.521(d) states in part: "The federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. . . ." Cause The system of internal controls as developed by management of the University was not properly implemented to ensure that subrecipient audit reports were received and reviewed in a timely manner. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, subrecipients to whom payments were made were not adequately monitored. The failure to establish a sufficient system of internal controls allowed noncompliance with the grant agreements and the Subrecipient Monitoring compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 16 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the University's management establish a system of internal controls, including segregation of duties, related to the grant agreements and compliance requirements listed above. An internal control system, including segregation of duties, should be designed and operate effectively to provide reasonable assurance that material noncompliance with the grant agreement or a compliance requirement of a federal program will be prevented, or detected and corrected, on a timely basis. In order to have an effective internal control system, it is important to have proper segregation of duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to have a separation of functions over certain activities related to the program. The fundamental premise of segregation of duties is that an individual or small group of individuals should not be in a position to initiate, approve, undertake, and review the same activity. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2023-001
FINDING 2023-001 Subject: Research and Development Cluster - Subrecipient Monitoring Federal Agencies: National Science Foundation, US Department of Education Federal Programs: Social, Behavioral, and Economic Sciences; Higher Education Institutional Aid Assistance Listings Numbers: 47.075, 84.031 Federal Award Numbers and Years (or Other Identifying Numbers): 1759694, P031F180072 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters Condition and Context The University expended $1,076,005 in Research and Development funds during the audit period. Of that amount, $86,788 was passed through to five subrecipients. As a pass-through entity, the University was required to identify the award and applicable requirements and monitor the subrecipient. Procedures to monitor its subrecipients included the following:  Reviewing financial and programmatic reports as required by the University.  Following up and ensuring the subrecipient takes timely and appropriate actions on all deficiencies pertaining to the federal award provided to the subrecipient detected through audits, on-site reviews, and other means.  Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient. All five subrecipients expended more than $750,000 in federal awards in fiscal year 2022, thus subjecting each to a Single Audit as required by the Uniform Guidance. As such, each subrecipient was required to submit its Single Audit report to the Federal Audit Clearinghouse (FAC) by March 31, 2023. In November 2023, eight months after the subrecipients' report submission deadline, the University completed the review of the fiscal year 2022 audit reports for all five subrecipients. The delayed monitoring would not have allowed the University to follow up and ensure that the subrecipients took timely and appropriate action on all deficiencies pertaining to the federal awards passed through to the subrecipients from the University. In addition, it would not have allowed for the University to issue a management decision for audit findings pertaining to the federal award provided to the subrecipient within six months of acceptance by the FAC. The lack of effective internal controls and noncompliance, as related to the monitoring of the five subrecipients, were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 15 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.332 states in part: "All pass-through entities must: . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: . . . (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. . . ." 2 CFR 200.521(d) states in part: "The federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. . . ." Cause The system of internal controls as developed by management of the University was not properly implemented to ensure that subrecipient audit reports were received and reviewed in a timely manner. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, subrecipients to whom payments were made were not adequately monitored. The failure to establish a sufficient system of internal controls allowed noncompliance with the grant agreements and the Subrecipient Monitoring compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 16 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the University's management establish a system of internal controls, including segregation of duties, related to the grant agreements and compliance requirements listed above. An internal control system, including segregation of duties, should be designed and operate effectively to provide reasonable assurance that material noncompliance with the grant agreement or a compliance requirement of a federal program will be prevented, or detected and corrected, on a timely basis. In order to have an effective internal control system, it is important to have proper segregation of duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to have a separation of functions over certain activities related to the program. The fundamental premise of segregation of duties is that an individual or small group of individuals should not be in a position to initiate, approve, undertake, and review the same activity. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2023-001
FINDING 2023-001 Subject: Research and Development Cluster - Subrecipient Monitoring Federal Agencies: National Science Foundation, US Department of Education Federal Programs: Social, Behavioral, and Economic Sciences; Higher Education Institutional Aid Assistance Listings Numbers: 47.075, 84.031 Federal Award Numbers and Years (or Other Identifying Numbers): 1759694, P031F180072 Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters Condition and Context The University expended $1,076,005 in Research and Development funds during the audit period. Of that amount, $86,788 was passed through to five subrecipients. As a pass-through entity, the University was required to identify the award and applicable requirements and monitor the subrecipient. Procedures to monitor its subrecipients included the following:  Reviewing financial and programmatic reports as required by the University.  Following up and ensuring the subrecipient takes timely and appropriate actions on all deficiencies pertaining to the federal award provided to the subrecipient detected through audits, on-site reviews, and other means.  Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient. All five subrecipients expended more than $750,000 in federal awards in fiscal year 2022, thus subjecting each to a Single Audit as required by the Uniform Guidance. As such, each subrecipient was required to submit its Single Audit report to the Federal Audit Clearinghouse (FAC) by March 31, 2023. In November 2023, eight months after the subrecipients' report submission deadline, the University completed the review of the fiscal year 2022 audit reports for all five subrecipients. The delayed monitoring would not have allowed the University to follow up and ensure that the subrecipients took timely and appropriate action on all deficiencies pertaining to the federal awards passed through to the subrecipients from the University. In addition, it would not have allowed for the University to issue a management decision for audit findings pertaining to the federal award provided to the subrecipient within six months of acceptance by the FAC. The lack of effective internal controls and noncompliance, as related to the monitoring of the five subrecipients, were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 15 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.332 states in part: "All pass-through entities must: . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: . . . (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. . . ." 2 CFR 200.521(d) states in part: "The federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. . . ." Cause The system of internal controls as developed by management of the University was not properly implemented to ensure that subrecipient audit reports were received and reviewed in a timely manner. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, subrecipients to whom payments were made were not adequately monitored. The failure to establish a sufficient system of internal controls allowed noncompliance with the grant agreements and the Subrecipient Monitoring compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 16 INDIANA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the University's management establish a system of internal controls, including segregation of duties, related to the grant agreements and compliance requirements listed above. An internal control system, including segregation of duties, should be designed and operate effectively to provide reasonable assurance that material noncompliance with the grant agreement or a compliance requirement of a federal program will be prevented, or detected and corrected, on a timely basis. In order to have an effective internal control system, it is important to have proper segregation of duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to have a separation of functions over certain activities related to the program. The fundamental premise of segregation of duties is that an individual or small group of individuals should not be in a position to initiate, approve, undertake, and review the same activity. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.