Finding 2025-001 Assistance Listing Number(s): 81.135 Name of Federal Program or Cluster: Research and Development Cluster Name of Federal Agency: Department of Energy Federal Award Identification Number: DE-AR0001838 Federal Award Year: 2024 Award Period: March 26, 2024 through September 25, 2025 Criteria or Specific Requirement: In accordance with 2 CFR § 200.303, Convergent Research is required to establish and maintain effective internal controls over Federal awards to provide reasonable assurance that expenditures are allowable, accurately reported, and comply with the terms and conditions of the award. Condition: Convergent Research did not have effective controls to reconcile provisional fringe and indirect cost rates to actual allowable costs or to perform a final award-level reconciliation before reporting Federal expenditures. Convergent Research charged fringe costs to the award using a provisional rate of 59.24%; however, the actual allowable fringe rate was 44.45%. In addition, Convergent Research did not have controls to identify award provisions permitting unused indirect-cost budget to be applied to additional allowable direct costs incurred during the period of performance or to identify unbilled allowable costs before closeout. As a result, Convergent Research initially reported gross questioned costs of approximately $132,000. During the audit, additional allowable direct costs of approximately $120,000, net of the required 10% cost share, were identified, resulting in net questioned costs of approximately $12,000. Convergent Research identified and reconciled these matters only after audit procedures were performed. Cause: Convergent Research did not establish formal procedures for: Reconciling provisional rates to actual allowable costs; Reviewing award-specific budget and indirect cost provisions; Identifying allowable costs incurred during the period of performance; and Performing a documented final award reconciliation before submitting final expenditure reports. Effect or Potential Effect: The lack of controls increased the risk that Federal expenditures would be inaccurately reported and that allowable costs would not be identified and charged to the award in accordance with the terms and conditions of the agreement. Questioned Costs: Gross questioned costs: $132,326 Less: Additional allowable direct costs, net of required cost share: ($120,084) Net questioned costs: $12,242 Repeat Finding: No Recommendation: We recommend Convergent Research establish written procedures and management review controls to: Reconcile provisional indirect and fringe rates to actual allowable costs; Review award-specific provisions related to indirect costs, cost sharing, and budget flexibility; Identify all allowable costs incurred during the period of performance; and Perform and document a final award reconciliation before submitting final expenditure reports. Views of Responsible Officials: Management agrees with the auditor’s recommendation and has implemented enhanced grant closeout procedures, including required reconciliations, award-specific reviews, and documented management review prior to final expenditure reporting.
Finding 2025-002 Assistance Listing Number(s): 81.135 Name of Federal Program or Cluster: Research and Development Cluster Name of Federal Agency: Department of Energy Federal Award Identification Number: DE-AR0001838 Federal Award Year: 2024 Award Period: March 26, 2024 through September 25, 2025 Criteria or Specific Requirement: 2 CFR §200.214 requires non-Federal entities to comply with 2 CFR Part 180 regarding suspension and debarment. Under 2 CFR §180.300, non-Federal entities must not enter into a covered transaction with a party that is suspended, debarred, or otherwise excluded from participation in Federal programs. The requirements contemplate verification of eligibility before entering into a covered transaction. Documentation supporting the verification should be retained in accordance with the Federal award's applicable record-retention requirements. Condition: Convergent Research did not document that suspension and debarment verification was performed prior to entering into covered transactions. Based on inquiry with management and review of the procurement files, Convergent Research did not perform or retain evidence of a SAM.gov exclusion verification before entering into agreements. Subsequent SAM.gov searches were performed during the audit, and did not identify the vendors as currently excluded. Cause: Management indicated that suspension and debarment verification was not incorporated into the procurement process at the time the agreements were executed. Consequently, the procurement files did not contain contemporaneous evidence demonstrating that the vendors' exclusion status had been verified before award. Effect or Potential Effect: Because Convergent Research did not document the required pre-award verification, it could not demonstrate from its procurement records that it had complied with the suspension and debarment requirements applicable to these covered transactions at the time of award. Although subsequent SAM.gov searches did not identify current exclusions, those searches occurred after the respective agreements were executed and therefore do not establish that the required verification was performed before the transactions were entered into. We did not identify evidence that covered transactions were actually suspended, debarred, or otherwise excluded at the time of award. Accordingly, the finding relates to the absence of documented verification, rather than evidence that Convergent Research entered into a covered transaction with an excluded party. Questioned Costs: None Repeat Finding: No Recommendation: We recommend that Convergent Research strengthen its procurement controls to require documented suspension and debarment verification before execution of all applicable covered transactions. The documentation should identify the vendor, date of verification, source used to perform the verification, and result of the search and should be retained in the procurement file. Views of Responsible Officials: Management agrees with the auditor’s recommendation and has incorporated required suspension and debarment verification into its federal grant procurement workflow, with documentation retained in the procurement file.