Audit 365412

2021-001 – ACCOUNTING SYSTEM POLICIES AND PROCEDURES (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Condition: The accounting system utilized did not provide for the accumulation of costs by the applicable budgetary program activities for either the 2014 or the 2020 grant awards. The accounting system also did not immediately provide for the proper allocation of direct and indirect expenses. Functional categories in the accounting system are considered direct expenses or indirect expenses contingent upon the nature of the classification. Therefore, the accounting system does not further readily classify expenditures with budget amounts for each federal award. Furthermore, the entity failed to establish policies and procedures related to the classification of direct and indirect costs and for determining the allowability of costs in accordance with subpart E of 2 CFR 200.302. Questioned Costs: Not applicable. Context: Total federal expenditures for the program as listed on the Schedule of Federal Awards was $6,267,848 with $703,925 charged to indirect expenses. As noted in subsequent findings, the compliance requirements related to Activities Allowed or Unallowed, and Allowable Costs/Cost Principles were impacted by these conditions. Cause: The accounting system utilized is not properly configured to fully comply with the provisions stipulated above. Furthermore, there is a lack of policies and procedures related to the allocation of direct and indirect expenses and the allowability of costs as determined in accordance with Subpart E of 2 CFR 200.302. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-001 – ACCOUNTING SYSTEM POLICIES AND PROCEDURES (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Effect: The lack of an accounting system to properly allocate by budgetary categories per award documents leads to a greater risk that the program could expend the federal award in a manner that is not consistent with federal award requirements. Additionally, the lack of policies and procedures related to the allocation of direct and indirect expenses and the allowability of costs creates a greater risk that costs may be improperly allocated or be unallowable pursuant to Subpart E of 2 CFR 200.302. Recommendation: Management should develop an effective correction action plan to address this matter in a timely manner. The plan should establish the methodology of designating program costs as either direct or indirect. The accounting system should be configured in a manner which allows for a timely comparison of actual expenses to the budget forecasts for the award program. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-002 – AUDIT TIMELINESS Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.512 states the audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. This would be a September 30, 2022 deadline for the fiscal year ended December 31, 2021. Condition: The financial and single audits were originally issued on September 30, 2022. However, certain conditions required a reissuance of the financial and single audits to be completed after federal guidelines. Questioned Costs: Not applicable. Context: Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848, of which $6,267,848 was related to the major program. Cause: There was a subsequent discovery of facts that became known after the original report release date that required a revision of the original financial and single audit reports and related information. Effect: The audit was reissued and resubmitted to the federal clearinghouse after the due date per federal guidelines. Recommendation: Audits should be scheduled and conducted in a manner which facilitates the timely issuance of the single audit. Views of Responsible Officials: Management does not concur with the audit recommendation.

2021-003 – ALLOWABLE COSTS/COST PRINCIPLES-PAYROLL DOCUMENTATION (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. (3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 2 CFR 200.313 stipulates the identification with the Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs. 2 CFR 200.414 stipulates that because of the diverse characteristics and accounting practices of nonprofit organizations, it is not possible to specify the types of cost which may be classified as indirect (F&A) cost in all situations. Identification with a Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. However, typical examples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-003 – ALLOWABLE COSTS/COST PRINCIPLES-PAYROLL DOCUMENTATION (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Condition: All employees paid with federal funds are paid a fixed salary pursuant to an employment contract established prior to the calendar year. Estimates for salaries were made prior to the services being performed. However, there was a lack of documentation, which substantiates that the payroll charged was accurate, allowable and properly allocated. Furthermore, there was no documentation of days or hours worked per day in accordance with federal guidelines. Officials recorded all personnel costs as indirect (which is consistent with the treatment of these expenses in prior years) expenses. However, the budget award document indicates a large portion of personnel costs to be classified as direct charges. Questioned Costs: Unknown. Context: Salaries and related fringe benefits of $576,127 were expended under the federal award. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to the payroll documentation were not effectively designed or performed. Effect: National Center for the Advancement of STEM Education, Inc. is not in compliance with the documentation requirements related to salaries and wages. Recommendation: We recommend that management implement policies and procedures to ensure that documentation of salaries and wages are maintained in a manner consistent with federal requirements. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-004 – ALLOWABLE COSTS-INDIRECT COST ALLOCATION PLAN Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Non-profit organizations that charge indirect cost to federal awards based on federally negotiated rates should charge the award in accordance with any negotiated rate agreements and specific award conditions/limitations. Condition: The entity was subject to a 13% provisional rate utilizing a simplified allocation method that provided for certain adjustments to the distribution base. It was determined that the entity charged $703,925 for indirect costs during the year. However, the maximum amount of indirect costs pursuant to the provisional rate agreement was approximately $488,427. Questioned Costs: Approximately $215,498 (subject to final negotiated rate adjustments). Context: Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848, of which $703,925 was charged to indirect costs. Cause: Management failed to ensure that indirect costs charged to the award were in accordance with the provisional rate in effect. Furthermore, internal controls and procedures related to the indirect cost allocation were not effectively designed or performed. Effect: National Center for the Advancement of STEM Education, Inc. is not in compliance with the indirect cost allocation plan requirements. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-004 – ALLOWABLE COSTS-INDIRECT COST ALLOCATION PLAN (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Recommendation: Management should implement procedures, which ensure amounts charged as indirect costs are in accordance with rate agreements in effect. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-005 – SUBRECIPIENT MONITORING – SUBAWARD AGREEMENTS Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subrecipient agreements must make the subrecipient aware of the award information required by 2 CFR section 200.331(a): (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. Furthermore, DoDGAR’s Appendix B Part 22 requires agreements make the subrecipient aware of federal provisions related to Nondiscrimination; Debarment and Suspension; Hatch Act; Environmental Standards; Drug-Free Workplace and other federal regulations. Condition: Standard Subrecipient agreements did not make reference to certain provisions which are required to be contained in the agreement. Questioned Costs: Not applicable. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-005 – SUBRECIPIENT MONITORING – SUBAWARD AGREEMENTS (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Context: There were twelve Subrecipient agreements executed during the year under the federal award with total expenditures of $2,086,200. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to Subrecipient monitoring requirements were not effectively designed or performed. Effect: The National Center for the Advancement of STEM Education, Inc. did not adequately include certain necessary language in the executed agreements to properly comply with Subrecipient monitoring. Recommendation: Management should establish proper policies and procedures which ensure Subrecipient agreements comply with applicable federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-006 – SPECIAL TESTS AND PROVISIONS – KEY PERSONNEL Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The award document specifies key personnel as chief investigators. Federal requirements stipulate the non-federal entity may change the staffing mix and level of involvement within limits specified by agency policy or in the award but may be required to obtain federal awarding agency approval of changes in key personnel (as identified in the award, which may differ from the non-federal entity’s designation in the application/proposal) and changes in the principal investigator’s/project director’s time commitment/level of participation in the project. For grants and cooperative agreements, this may include not only a change in the principal investigator or project director but also the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator (2 CFR sections 200.308(c) (2) and (3)). Condition: There was a lack of adequate payroll documentation. Payroll records did not demonstrate the level of time commitment and/or potential disengagement from the project by the designated principal investigators. Questioned Costs: Unknown. Context: Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848, of which $232,167 was related to principal investigators. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-006 – SPECIAL TESTS AND PROVISIONS – KEY PERSONNEL (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Cause: Internal controls and procedures related to the payroll documentation were not effectively designed or performed. Effect: There is a risk that the principal investigators of the National Center for the Advancement of STEM Education, Inc. may not be allocating the proper time commitment to the project in accordance with federal guidelines. Recommendation: Management should establish proper policies and procedures which ensure payroll records clearly indicate the time commitment/level of participation in the project to comply with applicable federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-007 – PROCUREMENT – PROCUREMENT QUOTATIONS Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR 200.320 establishes thresholds for procurement methods to be utilized when acquiring property or services under a federal award including small purchases defined as follows: Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. Condition: Management utilizes the federally designated micro-purchase level of $10,000 and the simplified acquisition threshold of $250,000. Purchases between $10,000 and $250,000 did not have an adequate number of price or rate quotations obtained. Questioned Costs: $151,207 Context: There were nine acquisitions for property and services with federal awards totaling $151,207 that were considered small purchases. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to procurement were not effectively designed or performed. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-007 – PROCUREMENT – PROCUREMENT QUOTATIONS (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Effect: Small purchases were made without obtaining an adequate number of price quotations. Recommendation: Management should establish proper policies and procedures which ensure transactions have the proper procurement treatment that align with federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-008 – CASH MANAGEMENT Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR 200.305 requires that non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. Condition: The National Center for the Advancement of STEM Education, Inc. drew down 49 payment advances totaling $5,870,068 from the basic scientific research grants for the fiscal year ended December 31, 2021. Of this amount, $1,031,698 was returned to the grantor. However, there was a lack of adequate documentation which demonstrated amounts advanced were expended and/or returned in a timely fashion. Questioned Costs: Not applicable. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-008 – CASH MANAGEMENT (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Context: The total amount of advances received during the year were $5,870,068. Expenditures of the federal award were $6,477,348 for the fiscal year. Cause: Internal controls and procedures related to the cash management were not effectively designed or performed. Effect: The National Center for the Advancement of STEM Education, Inc. did not comply with the cash management compliance requirement. Recommendation: Management should establish proper policies and procedures which ensure compliance with federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-001 – ACCOUNTING SYSTEM POLICIES AND PROCEDURES (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Condition: The accounting system utilized did not provide for the accumulation of costs by the applicable budgetary program activities for either the 2014 or the 2020 grant awards. The accounting system also did not immediately provide for the proper allocation of direct and indirect expenses. Functional categories in the accounting system are considered direct expenses or indirect expenses contingent upon the nature of the classification. Therefore, the accounting system does not further readily classify expenditures with budget amounts for each federal award. Furthermore, the entity failed to establish policies and procedures related to the classification of direct and indirect costs and for determining the allowability of costs in accordance with subpart E of 2 CFR 200.302. Questioned Costs: Not applicable. Context: Total federal expenditures for the program as listed on the Schedule of Federal Awards was $6,267,848 with $703,925 charged to indirect expenses. As noted in subsequent findings, the compliance requirements related to Activities Allowed or Unallowed, and Allowable Costs/Cost Principles were impacted by these conditions. Cause: The accounting system utilized is not properly configured to fully comply with the provisions stipulated above. Furthermore, there is a lack of policies and procedures related to the allocation of direct and indirect expenses and the allowability of costs as determined in accordance with Subpart E of 2 CFR 200.302. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-001 – ACCOUNTING SYSTEM POLICIES AND PROCEDURES (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Effect: The lack of an accounting system to properly allocate by budgetary categories per award documents leads to a greater risk that the program could expend the federal award in a manner that is not consistent with federal award requirements. Additionally, the lack of policies and procedures related to the allocation of direct and indirect expenses and the allowability of costs creates a greater risk that costs may be improperly allocated or be unallowable pursuant to Subpart E of 2 CFR 200.302. Recommendation: Management should develop an effective correction action plan to address this matter in a timely manner. The plan should establish the methodology of designating program costs as either direct or indirect. The accounting system should be configured in a manner which allows for a timely comparison of actual expenses to the budget forecasts for the award program. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-002 – AUDIT TIMELINESS Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.512 states the audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. This would be a September 30, 2022 deadline for the fiscal year ended December 31, 2021. Condition: The financial and single audits were originally issued on September 30, 2022. However, certain conditions required a reissuance of the financial and single audits to be completed after federal guidelines. Questioned Costs: Not applicable. Context: Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848, of which $6,267,848 was related to the major program. Cause: There was a subsequent discovery of facts that became known after the original report release date that required a revision of the original financial and single audit reports and related information. Effect: The audit was reissued and resubmitted to the federal clearinghouse after the due date per federal guidelines. Recommendation: Audits should be scheduled and conducted in a manner which facilitates the timely issuance of the single audit. Views of Responsible Officials: Management does not concur with the audit recommendation.

2021-003 – ALLOWABLE COSTS/COST PRINCIPLES-PAYROLL DOCUMENTATION (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. (3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 2 CFR 200.313 stipulates the identification with the Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs. 2 CFR 200.414 stipulates that because of the diverse characteristics and accounting practices of nonprofit organizations, it is not possible to specify the types of cost which may be classified as indirect (F&A) cost in all situations. Identification with a Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. However, typical examples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-003 – ALLOWABLE COSTS/COST PRINCIPLES-PAYROLL DOCUMENTATION (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Condition: All employees paid with federal funds are paid a fixed salary pursuant to an employment contract established prior to the calendar year. Estimates for salaries were made prior to the services being performed. However, there was a lack of documentation, which substantiates that the payroll charged was accurate, allowable and properly allocated. Furthermore, there was no documentation of days or hours worked per day in accordance with federal guidelines. Officials recorded all personnel costs as indirect (which is consistent with the treatment of these expenses in prior years) expenses. However, the budget award document indicates a large portion of personnel costs to be classified as direct charges. Questioned Costs: Unknown. Context: Salaries and related fringe benefits of $576,127 were expended under the federal award. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to the payroll documentation were not effectively designed or performed. Effect: National Center for the Advancement of STEM Education, Inc. is not in compliance with the documentation requirements related to salaries and wages. Recommendation: We recommend that management implement policies and procedures to ensure that documentation of salaries and wages are maintained in a manner consistent with federal requirements. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-004 – ALLOWABLE COSTS-INDIRECT COST ALLOCATION PLAN Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Non-profit organizations that charge indirect cost to federal awards based on federally negotiated rates should charge the award in accordance with any negotiated rate agreements and specific award conditions/limitations. Condition: The entity was subject to a 13% provisional rate utilizing a simplified allocation method that provided for certain adjustments to the distribution base. It was determined that the entity charged $703,925 for indirect costs during the year. However, the maximum amount of indirect costs pursuant to the provisional rate agreement was approximately $488,427. Questioned Costs: Approximately $215,498 (subject to final negotiated rate adjustments). Context: Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848, of which $703,925 was charged to indirect costs. Cause: Management failed to ensure that indirect costs charged to the award were in accordance with the provisional rate in effect. Furthermore, internal controls and procedures related to the indirect cost allocation were not effectively designed or performed. Effect: National Center for the Advancement of STEM Education, Inc. is not in compliance with the indirect cost allocation plan requirements. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-004 – ALLOWABLE COSTS-INDIRECT COST ALLOCATION PLAN (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Recommendation: Management should implement procedures, which ensure amounts charged as indirect costs are in accordance with rate agreements in effect. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-005 – SUBRECIPIENT MONITORING – SUBAWARD AGREEMENTS Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Subrecipient agreements must make the subrecipient aware of the award information required by 2 CFR section 200.331(a): (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. Furthermore, DoDGAR’s Appendix B Part 22 requires agreements make the subrecipient aware of federal provisions related to Nondiscrimination; Debarment and Suspension; Hatch Act; Environmental Standards; Drug-Free Workplace and other federal regulations. Condition: Standard Subrecipient agreements did not make reference to certain provisions which are required to be contained in the agreement. Questioned Costs: Not applicable. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-005 – SUBRECIPIENT MONITORING – SUBAWARD AGREEMENTS (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Context: There were twelve Subrecipient agreements executed during the year under the federal award with total expenditures of $2,086,200. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to Subrecipient monitoring requirements were not effectively designed or performed. Effect: The National Center for the Advancement of STEM Education, Inc. did not adequately include certain necessary language in the executed agreements to properly comply with Subrecipient monitoring. Recommendation: Management should establish proper policies and procedures which ensure Subrecipient agreements comply with applicable federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-006 – SPECIAL TESTS AND PROVISIONS – KEY PERSONNEL Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The award document specifies key personnel as chief investigators. Federal requirements stipulate the non-federal entity may change the staffing mix and level of involvement within limits specified by agency policy or in the award but may be required to obtain federal awarding agency approval of changes in key personnel (as identified in the award, which may differ from the non-federal entity’s designation in the application/proposal) and changes in the principal investigator’s/project director’s time commitment/level of participation in the project. For grants and cooperative agreements, this may include not only a change in the principal investigator or project director but also the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator (2 CFR sections 200.308(c) (2) and (3)). Condition: There was a lack of adequate payroll documentation. Payroll records did not demonstrate the level of time commitment and/or potential disengagement from the project by the designated principal investigators. Questioned Costs: Unknown. Context: Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848, of which $232,167 was related to principal investigators. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-006 – SPECIAL TESTS AND PROVISIONS – KEY PERSONNEL (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Cause: Internal controls and procedures related to the payroll documentation were not effectively designed or performed. Effect: There is a risk that the principal investigators of the National Center for the Advancement of STEM Education, Inc. may not be allocating the proper time commitment to the project in accordance with federal guidelines. Recommendation: Management should establish proper policies and procedures which ensure payroll records clearly indicate the time commitment/level of participation in the project to comply with applicable federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-007 – PROCUREMENT – PROCUREMENT QUOTATIONS Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR 200.320 establishes thresholds for procurement methods to be utilized when acquiring property or services under a federal award including small purchases defined as follows: Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. Condition: Management utilizes the federally designated micro-purchase level of $10,000 and the simplified acquisition threshold of $250,000. Purchases between $10,000 and $250,000 did not have an adequate number of price or rate quotations obtained. Questioned Costs: $151,207 Context: There were nine acquisitions for property and services with federal awards totaling $151,207 that were considered small purchases. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to procurement were not effectively designed or performed. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-007 – PROCUREMENT – PROCUREMENT QUOTATIONS (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Effect: Small purchases were made without obtaining an adequate number of price quotations. Recommendation: Management should establish proper policies and procedures which ensure transactions have the proper procurement treatment that align with federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.

2021-008 – CASH MANAGEMENT Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR 200.305 requires that non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. Condition: The National Center for the Advancement of STEM Education, Inc. drew down 49 payment advances totaling $5,870,068 from the basic scientific research grants for the fiscal year ended December 31, 2021. Of this amount, $1,031,698 was returned to the grantor. However, there was a lack of adequate documentation which demonstrated amounts advanced were expended and/or returned in a timely fashion. Questioned Costs: Not applicable. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-008 – CASH MANAGEMENT (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Context: The total amount of advances received during the year were $5,870,068. Expenditures of the federal award were $6,477,348 for the fiscal year. Cause: Internal controls and procedures related to the cash management were not effectively designed or performed. Effect: The National Center for the Advancement of STEM Education, Inc. did not comply with the cash management compliance requirement. Recommendation: Management should establish proper policies and procedures which ensure compliance with federal guidelines. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.