2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
2024-018. USU Extension Extra Services Compensation Program Non-Compliance with Uniform Guidance (Finding Type: Significant Deficiency, Reportable Noncompliance) Federal Agency: Various Assistance Listing Number and Title: Various Federal Award Number: Various Questioned Costs: Undetermined Pass-through Entity: Various Prior Year Single Audit Report Finding Number: N/A Utah State University’s (University) Internal Audit performed a review of the University’s Extension Service (Extension) within the College of Agriculture and Applied Science. The review determined that Extension’s Extra Service Compensation (ESC) program violates Uniform Guidance requirements and University policy, bypasses critical internal controls, and provides employees with additional compensation for extra-service work related to their primary job duties without sponsor approval. Extension’s mission, under the University’s land grant mission, provides research-based programs and resources to Utah’s population using a mix of local, state, federal and sponsored funding. To incentivize its personnel to apply for grants, Extension created an ESC program that allowed personnel to replace a portion of their primary position institution-funded salary with grant-funded salary. Personnel could then request up to 20 percent of their primary position salary through an ESC secondary position funded with the replaced institution-funded salary. However, Extension’s justified purpose for the ESC secondary position was “caused by and associated with the grant.” In doing so, Extension made it possible to bypass the University’s policy and internal controls for extra-service pay by obscuring the work duties and funding source for the secondary position. Below is an illustrative example from the USU Internal Audit Report of an ESC professor with an institutional base salary of $50,000: Payment to Employee Before Receiving Award (Source: USU Internal Audit Report IAS-23-53) Uniform Guidance maintains strict requirements with regard to the allowability of compensation, including special consideration for substantial increases, particularly with: • federal award ratios (2 CFR 200.430(e)), • institutional base salary charges, including federal award proportionate shares (2 CFR 200.430(h)(2)), • prior approvals by federal awarding agencies for incidental activities with supplemental compensation (2 CFR 200.430(h)(1)), • intra-institution consulting within higher education (2 CFR 200.430(h)(3)), • institutional policy definitions to conclusively determine work resulting in extra service pay (2 CFR 200.430(h)(4), and • relevant internal controls (2 CFR 200.302(b)(4). Internal Audit cites that the ESC program does not comply with Uniform Guidance, as well as University policy (Extra-Service Compensation Policy 376), which formalizes the University’s approach to compliance with Uniform Guidance for these activities. Internal Audit identified that University personnel did not follow or were unfamiliar with established policies in addition to procedural changes that did not require sufficient level of documentation for proper approvals. Detailed fieldwork by Internal Audit identified instances of questioned costs for funding (both federal and non-federal) in excess of $25,000. Fieldwork covered the period between January 1, 2020 and June 14, 2023, but also identified evidence of noncompliance as far back as 2009 to 2018. After Internal Audit issued its report in September 2024, the University took action to begin determining the potential financial impact of noncompliance through an external third-party. A report by this external third-party has not been completed as of the date of this finding; therefore, the amount of questioned costs related to federal programs cannot be determined. The University has also taken steps to immediately address policy and control deficiencies across the institution. Recommendations: We recommend the University do the following relative to University-wide procedures: 1. Determine the potential financial impact of noncompliance with grant sponsors. 2. Evaluate and improve its policies and required documentation for extra-service compensation. 3. Evaluate and improve its internal controls for sponsored program compensation. 4. Provide adequate training to University personnel regarding sponsored programs compensation compliance. USU’s Response: Utah State University (“USU”) generally agrees with Finding One. As detailed in USU internal audit IAS-23-53, USU Extension established a program to incentivize and reward its personnel to apply for grants (referred to by Extension and within USU internal audit IAS-23-53 as the “incentive program”). While the Uniform Guidance permits incentive programs (see CFR 200.430(f)) and such programs are readily used by universities, the USU Extension incentive program was established and carried out in manner that violated USU’s policy governing extra service compensation (“ESC”) and in a manner that bypassed critical internal controls. Notably, USU Internal Audit IAS-23-53 tested compliance with USU’s extra-service compensation policy but did not review actual costs charged to federal sponsors as this was outside the scope of the audit. Consistent with the recommendations to determine the potential impact of noncompliance, USU worked with an outside consultant to review payment of ESC to all employees working on federal grants. This work identified (1) limited instances when salaries directly charged to sponsored projects included extra service compensation in the base salary and (2) limited instances when extra service compensation was charged to federal sponsors without sponsor approval. The majority of ESC payments made pursuant the USU Extension incentive program was not charged to grant sponsor or included in the institutional base salary charged to the grant. Accordingly, noncompliance with the Uniform Guidance clauses related to compensation costs was limited to a small subset of payments made under the USU Extension incentive program. Based on these findings, USU agrees with the corrective actions recommended and, as outlined in the corrective action plan summary below, has already completed and/or initiated these actions.
Develop Written Policies and Procedures Criteria: 2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award: • Understand and comply with the federal statutes, regulations, and terms and conditions of the award; • Evaluate and monitor compliance; • Take prompt action when instances of noncompliance is identified. 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). Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas: 1. Cash Management 2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. 2. Equipment Management Requirements Non-federal entities other than states must follow 2 CFR sections 200.313(c) through (e). In addition, the organizations should ensure that existing written procedures are in compliance with: a. General Procurement Standards 2 CFR 200.318 to 200.327 discusses that contracts must be established and managed in accordance with the procurement requirements in 2 CFR Part 200. Grantees must have written procurement policies and procedures that demonstrate a fair and reliable process, with standards of conduct addressing conflicts of interest, for obtaining grant-funded goods and services. Condition MARTA does not have comprehensive written policies and procedures concerning the following key compliance areas which are required by the Uniform Guidance: Equipment and Real Property Management MARTA has an Asset Inventory Policy and Procedures, however, it does not clearly define the policies and procedures that are in place for the use, management and disposition of equipment acquired under a Federal award in accordance with 2 CFR sections 200.313(c) through (e). Cash Management MARTA does not have written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. Procurement, Suspension and Debarment MARTA has a Procurement policy, however, documented procedures are not well-defined regarding the purchase process for different types of procurement, obtaining quotations, bidding, and procedures for verifying that an entity with which it plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause MARTA’s reliance on informal business practices leads to inconsistencies in its internal controls. Effect The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization. Questioned Costs None Recommendation MARTA should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of the Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed. Views of Responsible Officials and Planned Corrective Action MARTA has grown substantially in the last several years. This progress includes identifying areas that we need to update or to develop new processes and documentation. MARTA has an Asset Inventory Policy and Procedures in which the purpose is to ensure that fixed assets are properly accounted for, identified, and tracked. MARTA also has Cash Handling Policy and Procedures which addresses safeguarding public funds and maximizing resources available. This is designed to reduce the risks associated with the collection, receipts storage and reporting of cash transactions and to safeguard and maintain the security and integrity of MARTA's fiscal assets. MARTA is in the process of updating the Procurement Policy. MARTA will review and update these policies and/or create new policies to make sure that they are compliant with the Uniform Guidance. The updated or newly created policies will be brought to the October 2025 Board of Directors meeting for Board review or approval. Personnel responsible: Sandy Benson, General Manager Anticipated completion date: October 2025
Develop Written Policies and Procedures Criteria: 2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award: • Understand and comply with the federal statutes, regulations, and terms and conditions of the award; • Evaluate and monitor compliance; • Take prompt action when instances of noncompliance is identified. 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). Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas: 1. Cash Management 2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. 2. Equipment Management Requirements Non-federal entities other than states must follow 2 CFR sections 200.313(c) through (e). In addition, the organizations should ensure that existing written procedures are in compliance with: a. General Procurement Standards 2 CFR 200.318 to 200.327 discusses that contracts must be established and managed in accordance with the procurement requirements in 2 CFR Part 200. Grantees must have written procurement policies and procedures that demonstrate a fair and reliable process, with standards of conduct addressing conflicts of interest, for obtaining grant-funded goods and services. Condition MARTA does not have comprehensive written policies and procedures concerning the following key compliance areas which are required by the Uniform Guidance: Equipment and Real Property Management MARTA has an Asset Inventory Policy and Procedures, however, it does not clearly define the policies and procedures that are in place for the use, management and disposition of equipment acquired under a Federal award in accordance with 2 CFR sections 200.313(c) through (e). Cash Management MARTA does not have written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. Procurement, Suspension and Debarment MARTA has a Procurement policy, however, documented procedures are not well-defined regarding the purchase process for different types of procurement, obtaining quotations, bidding, and procedures for verifying that an entity with which it plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause MARTA’s reliance on informal business practices leads to inconsistencies in its internal controls. Effect The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization. Questioned Costs None Recommendation MARTA should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of the Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed. Views of Responsible Officials and Planned Corrective Action MARTA has grown substantially in the last several years. This progress includes identifying areas that we need to update or to develop new processes and documentation. MARTA has an Asset Inventory Policy and Procedures in which the purpose is to ensure that fixed assets are properly accounted for, identified, and tracked. MARTA also has Cash Handling Policy and Procedures which addresses safeguarding public funds and maximizing resources available. This is designed to reduce the risks associated with the collection, receipts storage and reporting of cash transactions and to safeguard and maintain the security and integrity of MARTA's fiscal assets. MARTA is in the process of updating the Procurement Policy. MARTA will review and update these policies and/or create new policies to make sure that they are compliant with the Uniform Guidance. The updated or newly created policies will be brought to the October 2025 Board of Directors meeting for Board review or approval. Personnel responsible: Sandy Benson, General Manager Anticipated completion date: October 2025
Develop Written Policies and Procedures Criteria: 2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award: • Understand and comply with the federal statutes, regulations, and terms and conditions of the award; • Evaluate and monitor compliance; • Take prompt action when instances of noncompliance is identified. 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). Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas: 1. Cash Management 2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. 2. Equipment Management Requirements Non-federal entities other than states must follow 2 CFR sections 200.313(c) through (e). In addition, the organizations should ensure that existing written procedures are in compliance with: a. General Procurement Standards 2 CFR 200.318 to 200.327 discusses that contracts must be established and managed in accordance with the procurement requirements in 2 CFR Part 200. Grantees must have written procurement policies and procedures that demonstrate a fair and reliable process, with standards of conduct addressing conflicts of interest, for obtaining grant-funded goods and services. Condition MARTA does not have comprehensive written policies and procedures concerning the following key compliance areas which are required by the Uniform Guidance: Equipment and Real Property Management MARTA has an Asset Inventory Policy and Procedures, however, it does not clearly define the policies and procedures that are in place for the use, management and disposition of equipment acquired under a Federal award in accordance with 2 CFR sections 200.313(c) through (e). Cash Management MARTA does not have written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. Procurement, Suspension and Debarment MARTA has a Procurement policy, however, documented procedures are not well-defined regarding the purchase process for different types of procurement, obtaining quotations, bidding, and procedures for verifying that an entity with which it plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause MARTA’s reliance on informal business practices leads to inconsistencies in its internal controls. Effect The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization. Questioned Costs None Recommendation MARTA should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of the Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed. Views of Responsible Officials and Planned Corrective Action MARTA has grown substantially in the last several years. This progress includes identifying areas that we need to update or to develop new processes and documentation. MARTA has an Asset Inventory Policy and Procedures in which the purpose is to ensure that fixed assets are properly accounted for, identified, and tracked. MARTA also has Cash Handling Policy and Procedures which addresses safeguarding public funds and maximizing resources available. This is designed to reduce the risks associated with the collection, receipts storage and reporting of cash transactions and to safeguard and maintain the security and integrity of MARTA's fiscal assets. MARTA is in the process of updating the Procurement Policy. MARTA will review and update these policies and/or create new policies to make sure that they are compliant with the Uniform Guidance. The updated or newly created policies will be brought to the October 2025 Board of Directors meeting for Board review or approval. Personnel responsible: Sandy Benson, General Manager Anticipated completion date: October 2025
Criteria or Specific Requirement: The Code of Federal Regulations (CFR) Section 200.302 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition: Management's grant tracking of expenditures for the federal awards was not clearly classified during the year. Questioned costs: n/a Context: Management was not able to provide a schedule of government grants for a significant period of time after audit fieldwork started. Cause: Due to continued staff turnover, sufficient training for preparing grant tracking spreadsheets is still necessary for new staff and the details of the federal awards received during the year were not clearly defined. At the start of audit fieldwork, it was unknown as to what the actual expenditures for each program were for the year. Effect: Unallowable costs could be charged to federal awards and not be detected and corrected. Repeat Finding: Yes. Finding 2023-002. Recommendation: We recommend the Organization provide training to staff responsible for tracking federal and state awards and utilize another member of management to review and approve the grant tracking spreadsheets routinely. Additionally, we recommend reconciliations be performed monthly between the grant spreadsheets and the financial reporting software. A tracking of the federal expenditures needs to be kept and classified to the proper federal and state programs. Views of Responsible Officials: There is no disagreement with the audit finding.
2024-004 - Allowable Costs/Cost Principles: Written Financial Policies Federal Program Information: US Department of Agriculture Direct Award ALN: - 10.760 Water and Waste Disposal Systems for Rural Communities Criteria: Per 2 CFR Section 200.302(b)(6), and 200.302(b)(7), a non-federal agency must establish written procedures related to the following: receipt of payment of federal funds and determination of allowability of costs in accordance with Subpart E – Cost Principles, respectively. Condition: The Town has not formally adopted certain required written financial management policies as outlined in the Code of Federal Regulations. Cause: Town personnel were unaware of this requirement. Effect: Transactions could occur that did not comply with federal regulations. Identification of Questioned Costs: None identified. Context: The finding was based on requesting the Town’s written financial policies related to federal compliance and therefore was not the result of a statistical sample. Repeat Finding: This is a repeat finding of 2023-001. Recommendation: The auditor recommends that the Town obtain an understanding of the required written policies in the Code of Federal Regulations as applicable to its federal programs, create and formally adopt those required policies. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by Town of Bridgewater, Vermont.
2024-002 Allowable Costs, Subrecipient Reimbursement Coronavirus State & Local Fiscal Recovery Funds – Assistance Listing No. 21.027 – COVID-19 Funding Award Number: 24 QAAA 186913 – Award Period: July 1, 2023 through June 30, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Condition: The Organization did not have records to adequately support costs reimbursed to a subrecipient for the month of August 2023. Criteria: According to 2 CFR 200.302(b)(3), The financial management system of each non-Federal entity must provide for the following: (3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Additionally, 2 CFR 200.303(a) states the 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 or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Questioned Costs: The total amount reimbursed to the subrecipient for the month of August 2023 of $49,772.27. Cause: The Organization did not obtain source documentation from the sampled subrecipient supporting amounts reimbursed for the month of August 2023. Effect: Costs that are not allowable per the terms and conditions of the grant and/or Uniform Guidance, or improper costs passed through to subrecipients could be charged to the grant. Unallowable or improper costs could be required to be paid back to the Federal awarding agency (and/or pass-through entity). Recommendation: The Organization should strengthen policies and procedures to support a system of internal control regarding review and approval of subrecipient reimbursement requests to ensure costs are backed by source documentation supporting accuracy and allowability prior to payment. Views of Responsible Officials and Planned Corrective Actions: Invest in Kids made multiple requests for source documentation from the subrecipient. However, due to management turnover, the subrecipient lacked personnel with the knowledge to retrieve the requested information. Acknowledging this challenge, Invest in Kids updated its policies and procedures in October 2024. Additionally, all staff participated in the organization's annual financial management and internal controls training that same month. To note, upon completion of this audit, the subrecipient is no longer involved in Invest in Kids programming.
Condition: The Organization’s written policies and procedures related to financial management and procurement do not meet the requirements of 2 CFR 200, Subpart D and Subpart E. Criteria: According to 2 CFR Section 200.302.b and 2 CFR Section 200.305 of the Uniform Guidance, the Organization is required to have a written financial management policy. Additionally, according to 2 CFR Section 200.317 – 200.326, the Organization is required to have a written procurement policy. Cause: The Organization was unaware of requirements regarding policies and procedures outlined in the Uniform Guidance. Effect: Written policies necessary for non-Federal entities receiving federal funds were not in place. Repeat Finding: Yes Questioned Costs: None reported Recommendation: We recommend that the Organization update their written policies and procedures that meet the requirements of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Views of Responsible Officials and Planned Corrective Action: We concur with the auditor’s finding and will update the Organization’s written policies and procedures for the Uniform Guidance requirements.
Condition: The Organization’s written policies and procedures related to financial management and procurement do not meet the requirements of 2 CFR 200, Subpart D and Subpart E. Criteria: According to 2 CFR Section 200.302.b and 2 CFR Section 200.305 of the Uniform Guidance, the Organization is required to have a written financial management policy. Additionally, according to 2 CFR Section 200.317 – 200.326, the Organization is required to have a written procurement policy. Cause: The Organization was unaware of requirements regarding policies and procedures outlined in the Uniform Guidance. Effect: Written policies necessary for non-Federal entities receiving federal funds were not in place. Repeat Finding: Yes Questioned Costs: None reported Recommendation: We recommend that the Organization update their written policies and procedures that meet the requirements of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Views of Responsible Officials and Planned Corrective Action: We concur with the auditor’s finding and will update the Organization’s written policies and procedures for the Uniform Guidance requirements.
2024-035 Oregon Business Development Department Ensure CDBG expenditures are recorded in SFMA under the appropriate grant year Federal Awarding Agency: U.S. Department of Housing and Urban Development Assistance Listing Number and Name: 14.228 Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii; 14.228 Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii (COVID-19) Federal Award Numbers and Years: B-20-DC-41-0001, 2020; B-21-DC-41-0001, 2021; B-22-DC-41-0001, 2022; B-23-DC-41-0001, 2023; B-20-DW-41-0001, 2020 (COVID-19); Compliance Requirements: Reporting Type of Finding: Significant Deficiency; Noncompliance Prior Year Findings: N/A Questioned Costs: N/A Criteria: 2 CFR 200.302 The department is required under 2 CFR 200.302 to have a financial management system sufficient to permit the preparation of reports required under the terms and conditions of the CDBG grant; and to track expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. Program staff tracked the obligation of grant funds and used this information to prepare the December 31, 2023 PR28 report. However, because of significant turnover in accounting, there was no review from accounting staff to ensure the program tracking reconciled to the State’s financial management application (SFMA). We audited the December 31, 2023 PR28 reports filed for awards from 2020 (including a COVID-19 award), 2021, 2022, and 2023. The expenditures reported in HUD’s Integrated Disbursement and Information System (IDIS) did not materially agree to expenditures or draws recorded in the state’s financial management application (SFMA) for those grants. Variances between cumulative expenditures in SFMA and cumulative expenditures reported ranged between $1.6 million underreported for 2020 to $4.5 million overreported for the 2020 COVID award. In total, cumulative expenditures for those grant awards were overreported by $6.5 million. The CDBG state grants are required to be expended within eight years. Failure to properly account for expenditures for a specific grant year could result in the loss of funds if not obligated and expended within the period of performance of the grant. We recommend the agency reconcile SFMA to amounts in IDIS and make adjustments as necessary to ensure CDBG expenditure reports are accurate and agree to accounting records.
2024-035 Oregon Business Development Department Ensure CDBG expenditures are recorded in SFMA under the appropriate grant year Federal Awarding Agency: U.S. Department of Housing and Urban Development Assistance Listing Number and Name: 14.228 Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii; 14.228 Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii (COVID-19) Federal Award Numbers and Years: B-20-DC-41-0001, 2020; B-21-DC-41-0001, 2021; B-22-DC-41-0001, 2022; B-23-DC-41-0001, 2023; B-20-DW-41-0001, 2020 (COVID-19); Compliance Requirements: Reporting Type of Finding: Significant Deficiency; Noncompliance Prior Year Findings: N/A Questioned Costs: N/A Criteria: 2 CFR 200.302 The department is required under 2 CFR 200.302 to have a financial management system sufficient to permit the preparation of reports required under the terms and conditions of the CDBG grant; and to track expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. Program staff tracked the obligation of grant funds and used this information to prepare the December 31, 2023 PR28 report. However, because of significant turnover in accounting, there was no review from accounting staff to ensure the program tracking reconciled to the State’s financial management application (SFMA). We audited the December 31, 2023 PR28 reports filed for awards from 2020 (including a COVID-19 award), 2021, 2022, and 2023. The expenditures reported in HUD’s Integrated Disbursement and Information System (IDIS) did not materially agree to expenditures or draws recorded in the state’s financial management application (SFMA) for those grants. Variances between cumulative expenditures in SFMA and cumulative expenditures reported ranged between $1.6 million underreported for 2020 to $4.5 million overreported for the 2020 COVID award. In total, cumulative expenditures for those grant awards were overreported by $6.5 million. The CDBG state grants are required to be expended within eight years. Failure to properly account for expenditures for a specific grant year could result in the loss of funds if not obligated and expended within the period of performance of the grant. We recommend the agency reconcile SFMA to amounts in IDIS and make adjustments as necessary to ensure CDBG expenditure reports are accurate and agree to accounting records.