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.
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