Audit 47509

FINDING 2022-001 ? Allowable Costs and Cost Principles: Significant Deficiency in Internal Control Over Compliance - See Schedule of Findings and Questioned Costs for chart/table. - Criteria ? 2 CFR 200.445 Goods or services for personal use ? The non-federal entity must adhere to certain principles establishing the allowability of items involved in determining cost. The following considerations must be made for goods or services for personal use: (a) Costs of goods or services for personal use of the non-federal entity?s employees are unallowable regardless of whether the cost is reported as taxable income to the employees. (b) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances, and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a federal awarding agency. Condition/Context ? A sample of 73 costs totaling $184,495 charged to federal research and development grants were selected from the population of all costs charged to federal research and development grants during the year ended September 30, 2022. The sample was not statistically valid. One selected cost was a gift to a retiring employee who had worked on the federal grant. The cost was not allowable per the above federal regulation. Cause ? Due to turnover in certain positions, control procedures in place did not detect the unallowable cost. Effect ? An unallowable cost was charged to a federal grant. Since the grant was still open, management returned the amount to the federal government. Repeat finding ? This is not a repeat finding. Recommendation ? We recommend management provide training to employees who charge costs to federal grants and review costs charged to grants to ensure they are aware of the above and all pertinent cost principles. - View of responsible officials ? Management agrees with the auditor?s finding regarding detecting the $73 of unallowable cost. HMRI has control procedures in place to detect unallowable costs; however, due to turnovers within the organization, the insignificant amount of the unallowable cost was not detected. HMRI hired a new Grants Director on February 6, 2023, who along with the accounting team will ensure all costs are being charged to their respective federal revenue streams in accordance with the federal agreements and guidelines. The employees who charge costs to federal grants are aware that this is an unallowable cost. In addition, HMRI will conduct training to refresh and reinforce the guidelines with employees who charge costs to federal grants. The $73 unallowable cost was returned to NIH as the grant is still open.

FINDING 2022-001 ? Allowable Costs and Cost Principles: Significant Deficiency in Internal Control Over Compliance - See Schedule of Findings and Questioned Costs for chart/table. - Criteria ? 2 CFR 200.445 Goods or services for personal use ? The non-federal entity must adhere to certain principles establishing the allowability of items involved in determining cost. The following considerations must be made for goods or services for personal use: (a) Costs of goods or services for personal use of the non-federal entity?s employees are unallowable regardless of whether the cost is reported as taxable income to the employees. (b) Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances, and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a federal awarding agency. Condition/Context ? A sample of 73 costs totaling $184,495 charged to federal research and development grants were selected from the population of all costs charged to federal research and development grants during the year ended September 30, 2022. The sample was not statistically valid. One selected cost was a gift to a retiring employee who had worked on the federal grant. The cost was not allowable per the above federal regulation. Cause ? Due to turnover in certain positions, control procedures in place did not detect the unallowable cost. Effect ? An unallowable cost was charged to a federal grant. Since the grant was still open, management returned the amount to the federal government. Repeat finding ? This is not a repeat finding. Recommendation ? We recommend management provide training to employees who charge costs to federal grants and review costs charged to grants to ensure they are aware of the above and all pertinent cost principles. - View of responsible officials ? Management agrees with the auditor?s finding regarding detecting the $73 of unallowable cost. HMRI has control procedures in place to detect unallowable costs; however, due to turnovers within the organization, the insignificant amount of the unallowable cost was not detected. HMRI hired a new Grants Director on February 6, 2023, who along with the accounting team will ensure all costs are being charged to their respective federal revenue streams in accordance with the federal agreements and guidelines. The employees who charge costs to federal grants are aware that this is an unallowable cost. In addition, HMRI will conduct training to refresh and reinforce the guidelines with employees who charge costs to federal grants. The $73 unallowable cost was returned to NIH as the grant is still open.