Audit 309950

Criteria or Specific Requirement: Internal Control 2 CFR section 200.303(a) states, “a non-Federal entity must establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and 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). Compliance The National Endowment for the Humanities’ (NEH) “Administration of NEH Challenge Grants”, updated periodically by the Agency, states in Section VII, C5 the institution must “comply with the Uniform Prudent Management of Institutional Funds Act (UPMIFA) governing modern investment and expenditure practice. Please note that endowments created with NEH Challenge Grants are permanent and perpetually restricted to the uses defined in the approved challenge grant budget. Changes in the endowment may be made only in consultation with NEH.” Winterthur’s endowment spending policy as reported to the NEH states the following: “Winterthur's endowment funds are considered a long-term investment and are managed with the goal of preserving purchasing power in perpetuity. Endowment spending is based on a percentage (target 5%) of the trailing twelve-quarter average value. Interest, dividends and endowment gifts are all invested/re-invested in the endowment. Like capital appreciation/losses, they are reflected in the twelve-quarter average, but otherwise do not impact the endowment draw.” Condition: The draw is to be allocated based on a pro-rata portion of the approved twelve-quarter average value to be expended toward the purpose of the endowed funds. The program has not complied with this requirement. Context: The total amount of the draw allocated to the NEH endowed funds totaled $195,128. A test of draws from the endowment during the year showed that the draw should have been $165,473, or 85% of the draw actually taken. Draws on each of the two NEH endowed funds were not consistently calculated – one exceeded the target by $37,935, or 46%, and the other was understated by $8,280, or 10%. Our sample was a statistically valid sample. Cause: Program employees were unaware of the compliance requirement. No review of the outsourced accounting firm’s work by Winterthur Finance Office personnel was noted. Effect: Winterthur is not in compliance with its endowment spending policy. Recommendation: Policies and procedures should be developed and written to provide guidance to the outsourced accounting firm and new Winterthur Finance Office personnel concerning the endowment spending policy. Adequate and timely review of the outsourced accounting firm’s work by the Winterthur Finance Office should be conducted to ensure compliance with its policies.

Criteria or Specific Requirement: Internal Control 2 CFR section 200.303(a) states, “a non-Federal entity must establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and 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). Compliance The National Endowment for the Humanities’ (NEH) “Administration of NEH Challenge Grants”, updated periodically by the Agency, states in Section VII, C5 the institution must “comply with the Uniform Prudent Management of Institutional Funds Act (UPMIFA) governing modern investment and expenditure practice. Please note that endowments created with NEH Challenge Grants are permanent and perpetually restricted to the uses defined in the approved challenge grant budget. Changes in the endowment may be made only in consultation with NEH.” Winterthur’s endowment spending policy as reported to the NEH states the following: “Winterthur's endowment funds are considered a long-term investment and are managed with the goal of preserving purchasing power in perpetuity. Endowment spending is based on a percentage (target 5%) of the trailing twelve-quarter average value. Interest, dividends and endowment gifts are all invested/re-invested in the endowment. Like capital appreciation/losses, they are reflected in the twelve-quarter average, but otherwise do not impact the endowment draw.” Condition: The draw is to be allocated based on a pro-rata portion of the approved twelve-quarter average value to be expended toward the purpose of the endowed funds. The program has not complied with this requirement. Context: The total amount of the draw allocated to the NEH endowed funds totaled $195,128. A test of draws from the endowment during the year showed that the draw should have been $165,473, or 85% of the draw actually taken. Draws on each of the two NEH endowed funds were not consistently calculated – one exceeded the target by $37,935, or 46%, and the other was understated by $8,280, or 10%. Our sample was a statistically valid sample. Cause: Program employees were unaware of the compliance requirement. No review of the outsourced accounting firm’s work by Winterthur Finance Office personnel was noted. Effect: Winterthur is not in compliance with its endowment spending policy. Recommendation: Policies and procedures should be developed and written to provide guidance to the outsourced accounting firm and new Winterthur Finance Office personnel concerning the endowment spending policy. Adequate and timely review of the outsourced accounting firm’s work by the Winterthur Finance Office should be conducted to ensure compliance with its policies.

Criteria or Specific Requirement: Internal Control 2 CFR section 200.303(a) states, “a non-Federal entity must establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and 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). Compliance The National Endowment for the Humanities’ (NEH) “Administration of NEH Challenge Grants”, updated periodically by the Agency, states in Section VII, C5 the institution must “comply with the Uniform Prudent Management of Institutional Funds Act (UPMIFA) governing modern investment and expenditure practice. Please note that endowments created with NEH Challenge Grants are permanent and perpetually restricted to the uses defined in the approved challenge grant budget. Changes in the endowment may be made only in consultation with NEH.” Winterthur’s endowment spending policy as reported to the NEH states the following: “Winterthur's endowment funds are considered a long-term investment and are managed with the goal of preserving purchasing power in perpetuity. Endowment spending is based on a percentage (target 5%) of the trailing twelve-quarter average value. Interest, dividends and endowment gifts are all invested/re-invested in the endowment. Like capital appreciation/losses, they are reflected in the twelve-quarter average, but otherwise do not impact the endowment draw.” Condition: The draw is to be allocated based on a pro-rata portion of the approved twelve-quarter average value to be expended toward the purpose of the endowed funds. The program has not complied with this requirement. Context: The total amount of the draw allocated to the NEH endowed funds totaled $195,128. A test of draws from the endowment during the year showed that the draw should have been $165,473, or 85% of the draw actually taken. Draws on each of the two NEH endowed funds were not consistently calculated – one exceeded the target by $37,935, or 46%, and the other was understated by $8,280, or 10%. Our sample was a statistically valid sample. Cause: Program employees were unaware of the compliance requirement. No review of the outsourced accounting firm’s work by Winterthur Finance Office personnel was noted. Effect: Winterthur is not in compliance with its endowment spending policy. Recommendation: Policies and procedures should be developed and written to provide guidance to the outsourced accounting firm and new Winterthur Finance Office personnel concerning the endowment spending policy. Adequate and timely review of the outsourced accounting firm’s work by the Winterthur Finance Office should be conducted to ensure compliance with its policies.

Criteria or Specific Requirement: Internal Control 2 CFR section 200.303(a) states, “a non-Federal entity must establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and 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). Compliance The National Endowment for the Humanities’ (NEH) “Administration of NEH Challenge Grants”, updated periodically by the Agency, states in Section VII, C5 the institution must “comply with the Uniform Prudent Management of Institutional Funds Act (UPMIFA) governing modern investment and expenditure practice. Please note that endowments created with NEH Challenge Grants are permanent and perpetually restricted to the uses defined in the approved challenge grant budget. Changes in the endowment may be made only in consultation with NEH.” Winterthur’s endowment spending policy as reported to the NEH states the following: “Winterthur's endowment funds are considered a long-term investment and are managed with the goal of preserving purchasing power in perpetuity. Endowment spending is based on a percentage (target 5%) of the trailing twelve-quarter average value. Interest, dividends and endowment gifts are all invested/re-invested in the endowment. Like capital appreciation/losses, they are reflected in the twelve-quarter average, but otherwise do not impact the endowment draw.” Condition: The draw is to be allocated based on a pro-rata portion of the approved twelve-quarter average value to be expended toward the purpose of the endowed funds. The program has not complied with this requirement. Context: The total amount of the draw allocated to the NEH endowed funds totaled $195,128. A test of draws from the endowment during the year showed that the draw should have been $165,473, or 85% of the draw actually taken. Draws on each of the two NEH endowed funds were not consistently calculated – one exceeded the target by $37,935, or 46%, and the other was understated by $8,280, or 10%. Our sample was a statistically valid sample. Cause: Program employees were unaware of the compliance requirement. No review of the outsourced accounting firm’s work by Winterthur Finance Office personnel was noted. Effect: Winterthur is not in compliance with its endowment spending policy. Recommendation: Policies and procedures should be developed and written to provide guidance to the outsourced accounting firm and new Winterthur Finance Office personnel concerning the endowment spending policy. Adequate and timely review of the outsourced accounting firm’s work by the Winterthur Finance Office should be conducted to ensure compliance with its policies.