Audit 303823

Assistance Listing, Federal Agency, and Program Name – 93.866, U.S. Department of Health and Human Services, Aging Research – Role of Desumoylase SENP6 in Joint Aging and Osteoarthritis Development, Research and Development Center Federal Award Identification Number and Year – R01 AG061086 Pass through Entity – N/A – direct award Finding Type - Significant deficiency and material noncompliance with laws and regulations Repeat Finding - No Criteria – In accordance with 2 CFR 200.405, costs are allocable to a particular federal award if the goods or services involved are chargeable or assignable to that federal award or cost objective in accordance with relative benefits received. Costs must be incurred specifically for a federal award and if costs benefit multiple grants, the costs can be allocated between federal and non-federal grants using a reasonable allocation method. Allocable costs can be requested for reimbursement by the federal agency. Condition – VAIA’s controls requiring investigators to monitor expenses, ensure that costs benefitting multiple projects are allocated using a reasonable methodology, as required by Uniform Guidance, and ensure that allocation errors are timely corrected were not supported by adequate training of investigators and their delegates. Questioned Costs – N/A Identification of How Questioned Costs Were Computed – N/A Context - In December of 2023, VAIA identified it did not properly calculate an allocation of certain costs incurred that benefited both federal and institutionally funded projects. VAIA management performed a look back analysis of these costs and determined that only 50 percent of the costs benefited the federal grant activities instead of the 100 percent originally reported to and reimbursed by the federal agency, resulting in excess draws of approximately $248,000, including approximately $30,000 for the year ending November 30, 2023. The approximate $30,000 includes approximately $16,000 of direct costs and approximately $14,000 of indirect using VAIA’s negotiated rate. VAIA notified the funding agency of this error and reimbursed the federal agency in February 2024. The amount reported on the accompanying Schedule of Expenditures of Federal Awards for the year ended November 30, 2023 does not include any of these unallowable charges. Cause and Effect – VAIA’s training of investigators and their delegates regarding expense monitoring, allocation of costs benefitting multiple projects using reasonable methodologies, and the timely correction of allocation errors was inadequate and resulted in VAIA drawing down funds to which they were not entitled. Recommendation – We recommend that VAIA review its procedures and controls to ensure that principal investigators over grants funds are properly trained and knowledgeable regarding allocation of expenditures between programs. Views of Responsible Officials and Corrective Action Plan - VAIA requires laboratory personnel to review and approve monthly Vivarium transactions by protocol, since investigators and their delegates are the only individuals at VAIA in a position to know with certainty how Vivarium costs proportionately benefit multiple funding sources. Following VAIA’s customary review and approval process, VAIA’s internal controls subsequently identified an improperly calculated allocation. Taking swift action, the allocation was corrected, and funds were returned to the Federal Government within 90 days of identifying improper allocation as required by NIH Grants Policy Statement section 7.5. VAIA management disclosed this correction to our external auditors and the award’s Grant Management Officer. VAI’s corrective action plan for Vivarium charges includes the following: - Deploying an automated front-end solution that requires a protocol review and approval by our IACUC office before a protocol is made available for use by individual sponsored projects. - Evaluating additional opportunities to utilize technology to enhance the control environment, particularly with respect to cost allocation of vivarium charges, - Ensuring proper allocation through three meetings per laboratory in 2024 to review Vivarium costs charged to federally sponsored projects. - Providing additional continuing education on cost allocation principles for those making allocation determinations

Assistance Listing, Federal Agency, and Program Name – 93.866, U.S. Department of Health and Human Services, Aging Research – Role of Desumoylase SENP6 in Joint Aging and Osteoarthritis Development, Research and Development Center Federal Award Identification Number and Year – R01 AG061086 Pass through Entity – N/A – direct award Finding Type - Significant deficiency and material noncompliance with laws and regulations Repeat Finding - No Criteria – In accordance with 2 CFR 200.405, costs are allocable to a particular federal award if the goods or services involved are chargeable or assignable to that federal award or cost objective in accordance with relative benefits received. Costs must be incurred specifically for a federal award and if costs benefit multiple grants, the costs can be allocated between federal and non-federal grants using a reasonable allocation method. Allocable costs can be requested for reimbursement by the federal agency. Condition – VAIA’s controls requiring investigators to monitor expenses, ensure that costs benefitting multiple projects are allocated using a reasonable methodology, as required by Uniform Guidance, and ensure that allocation errors are timely corrected were not supported by adequate training of investigators and their delegates. Questioned Costs – N/A Identification of How Questioned Costs Were Computed – N/A Context - In December of 2023, VAIA identified it did not properly calculate an allocation of certain costs incurred that benefited both federal and institutionally funded projects. VAIA management performed a look back analysis of these costs and determined that only 50 percent of the costs benefited the federal grant activities instead of the 100 percent originally reported to and reimbursed by the federal agency, resulting in excess draws of approximately $248,000, including approximately $30,000 for the year ending November 30, 2023. The approximate $30,000 includes approximately $16,000 of direct costs and approximately $14,000 of indirect using VAIA’s negotiated rate. VAIA notified the funding agency of this error and reimbursed the federal agency in February 2024. The amount reported on the accompanying Schedule of Expenditures of Federal Awards for the year ended November 30, 2023 does not include any of these unallowable charges. Cause and Effect – VAIA’s training of investigators and their delegates regarding expense monitoring, allocation of costs benefitting multiple projects using reasonable methodologies, and the timely correction of allocation errors was inadequate and resulted in VAIA drawing down funds to which they were not entitled. Recommendation – We recommend that VAIA review its procedures and controls to ensure that principal investigators over grants funds are properly trained and knowledgeable regarding allocation of expenditures between programs. Views of Responsible Officials and Corrective Action Plan - VAIA requires laboratory personnel to review and approve monthly Vivarium transactions by protocol, since investigators and their delegates are the only individuals at VAIA in a position to know with certainty how Vivarium costs proportionately benefit multiple funding sources. Following VAIA’s customary review and approval process, VAIA’s internal controls subsequently identified an improperly calculated allocation. Taking swift action, the allocation was corrected, and funds were returned to the Federal Government within 90 days of identifying improper allocation as required by NIH Grants Policy Statement section 7.5. VAIA management disclosed this correction to our external auditors and the award’s Grant Management Officer. VAI’s corrective action plan for Vivarium charges includes the following: - Deploying an automated front-end solution that requires a protocol review and approval by our IACUC office before a protocol is made available for use by individual sponsored projects. - Evaluating additional opportunities to utilize technology to enhance the control environment, particularly with respect to cost allocation of vivarium charges, - Ensuring proper allocation through three meetings per laboratory in 2024 to review Vivarium costs charged to federally sponsored projects. - Providing additional continuing education on cost allocation principles for those making allocation determinations