Audit 378000

2023-002 Allocation of Program Effort by Employees – Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Program: Research and Development Cluster (ALN 47.049-Mathematical and Physical Sciences, Award 2043575, Award Period 3/15/21 – 2/28/23) Federal Agency: National Science Foundation Criteria: The financial management requirements include processes and controls over the allocation of personnel time and effort to program activities as required by 2 CFR 200.430. Condition: Our testing of payroll expenses charged to the program noted that the Organization allocates senior personnel time and effort in one journal entry as a program expense. Cause: The Organization did not adhere to documented policies for allocating senior personnel effort and time costs to program accounting records. Effect: The Organization does not maintain a compliant effort system and is not in compliance with 2 CFR 200.430 which could lead to inaccurate allocation of personnel costs to the federal program. Identification as a repeat finding, if applicable: The finding is a repeat of Finding 2022-004 in the prior year. Recommendation: We recommend the Organization communicate and enforce policies for allocating senior personnel effort and time costs to grant and accounting personnel and implement formal processes to monitor compliance with federal awards. View of Responsible Officials: The Organization has since improved its procedures for allocating senior personnel time and effort in its accounting and financial record keeping processes. Time and effort are now allocated via approved time and expense personnel reports and the charges are reconciled to the accounting records and there is a formal process to monitor compliance with this requirement. Questioned Costs: None

2023-004 Subaward Monitoring Federal Program: Research and Development Cluster (ALN 47.041-Engineering, Award 1940055, Award Period 9/1/19 – 3/31/25) Federal Agency: National Science Foundation Criteria: Written documentation pertaining to the identification, risk assessment of and monitoring of sub awardees was not available as required by 2 CFR 200.331-333. Condition: While no funds were passed through to subrecipients during the year, the Organization still lacked documentation to indicate compliance with subaward monitoring responsibilities required Per 2 CFR 200.331-333, including the policies and procedures to identify and assess risks and monitor subaward recipients as required by grant recipients. Cause: The Organization lacked written policies and procedures to execute appropriate subaward monitoring responsibilities. Effect: The organization is not compliant with 2 CFR 200.331-333 which requires the Organization to monitor that the sub awardee is maintaining adequate financial reporting, recordkeeping and compliance with respect to funds received. The Organization could not document sub-awardee risk assessment or monitoring or reviewed debarment or suspension of the sub-awardee. Without policies to document, monitor and risk assess a sub awardee, the Organization could inadvertently engage in a relationship with a sub awardee of higher risk without the appropriate level of oversight to ensure the sub awardee is expending the funds in accordance with the provisions and terms of the subaward. Identification as a repeat finding, if applicable: The finding is a repeat of Finding 2022-006 in the prior year. Recommendation: We recommend the Organization establish policy and procedures to document how sub awardees are selected, monitored and perform required risk assessment pertaining to the selection of the sub awardee. View of Responsible Officials: The Organization has since established appropriate procedures for sub awardee monitoring. Questioned Costs: None

2023-003 Indirect Cost Allocations - Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Program: Research and Development Cluster (ALN 47.041-Engineering, Award 1940055, Award Period 9/1/19 – 3/31/25 and ALN 47.084-Technology, Innovation and Partnerships, Award 1940055, Award Period 9/19/22 – 3/31/25) Federal Agency: National Science Foundation Criteria: Program costs for allocation of indirect costs should be based on percentage of total costs at year end and allocated based on specific allocations of costs incurred and approved in a timely manner as required by 2 CFR 200.414. Condition: Our testing noted that program charges included nine monthly journal entries to allocate indirect costs based on budgeted calculations and one year-end entry to adjust the calculation based on actual results. The entries did not have the necessary review and approvals to ensure allowability of the costs to activities. Cause: The Organization lacks written policies, approval procedures and documentation to allocate indirect costs to the program. Effect: The Organization is not compliant with 2 CFR 2 CFR 200.414 which requires accurate, and complete disclosure of financial results including the allocation of approved and identified actual indirect costs incurred to the program in accordance with 2 CFR 200.414. Without a policy of reviewing and approving indirect costs on a regular basis, there is a risk that unallowable costs are allocated to the program. Identification as a repeat finding, if applicable: The finding is a repeat of Finding 2022-005 in the prior year. Recommendation: We recommend the Organization establish policy and procedures to identify and approve allowable indirect costs chargeable to the program on a monthly basis and report this allocation in the accounting ledger separately from the general expenses of the company. View of Responsible Officials: The Organization has since implemented controls and procedures to allocate indirect costs to program costs based on incurred costs. Monthly allocations are approved by the program administrator and separately reported in the general ledger. Questioned Costs: $202,309 – This is the amount of indirect costs charged to the program.

2023-005 Allowable Cost Documentation Federal Program: Research and Development Cluster (ALN 47.041-Engineering, Award 1940055, Award Period 9/1/19 – 3/31/25 and ALN 47.084-Technology, Innovation and Partnerships, Award 1940055, Award Period 9/19/22 – 3/31/25) Federal Agency: National Science Foundation Criteria: 2 CFR 200.403 requires that costs must be adequately documented. Condition: We selected 48 non-payroll expenses for testing. Of those 48, 21 were found to have insufficient documentation to determine if the cost were allowable or unallowable to the federal program. The 21 expenses found to have insufficient documentation were purchased on a credit card. Cause: The Organization did not maintain sufficient internal controls over credit card usage to ensure detailed receipts were available to support the expense charged to the federal program. Effect: The Organization was not compliance with 2 CFR 200.403 which requires that costs charged to federal programs are adequately documented. Without a policy that requires detailed receipts to be submitted for credit card charges, there is a risk that unallowable costs are charged to the program. Identification as a repeat finding, if applicable: The finding is a repeat of Finding 2022-007 in the prior year. Recommendation: We recommend the Organization implement internal controls that require detailed receipts to be submitted for all credit card charges. The charges listed on the receipts should be reviewed for allowability and approved by the appropriate personnel before charging to the federal program. View of Responsible Officials: The Organization has since implemented a formal credit card policy which requires that detailed receipts be submitted for review and approval for all credit card charges. Questioned Costs: $25,573. This is the total known cost from the 21 transactions identified in our sample to have insufficient documentation.