Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
U.S. Department of Agriculture Passed through Michigan Department of Education Child Nutrition Cluster ? COVID-19 School Breakfast Program #10.553, National School Lunch Program #10.555, Summer Food Service Program for Children #10.559 #2022-002: Material Weakness in Controls over Compliance: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding #2021-002 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management and procurement do not meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: Grand Rapids Christian Schools has written policies and procedures contained within the Schools? Policy Manual and the Accounting Procedures Manual that apply to the operations and administration of the Schools. Certain of these policies and procedures cover activities relevant to the federal awards programs and address some of the direct and material compliance matters important to the major federal program. However, the Schools has not adopted the policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that apply to its federal programs. Recommendations: Grand Rapids Christian Schools should adopt the following written policies as required by Uniform Guidance: ?Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ?Identification - Title of the award, federal assistance number ?Complete disclosure of accurate and current financial results of each federal award ?Source and application of funds for federal award activity ?Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability to access the records (?200.333 - ?200.337) ?Written procedure to implement cash management requirements (see below) ?Written procedures for determining the allowability of costs (see below) ?Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ?Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the School ensures compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ?Procurement Standards (2 CFR 200.317 ? 200.326) The School must have and use documented procurement procedures, including written standards that promote full and open vendor competition. Written conflict of interest standards must cover the actions of employees engaged in the selection, award and administration of contracts. Methods included in written standards covering the acquisition of property or services under a Federal award or sub-award must be consistent with specific thresholds as set forth in CFR 200.320. There are five allowable procurement methods described in ?200.320, depending upon the dollar value of the purchase or contract. Views of Responsible Officials and Planned Corrective Actions: ?Grand Rapids Christian Schools follows procurement and record retention standards provided by the USDA. ?GRCS does not have actual written policies and procedures for Financial Management, Cash Management, Allowable Costs, and Procurement Standards, but do have practices in place to follow USDA guidelines. In the case of cash management, the only location that takes cash is GRCHS. In that instance, along with Meal Magic, cash registers are zeroed out and balanced to Meal Magic and cash deposits are made daily. ?GRCS Business Office will work with the Food Service Director to begin formulating written policies and procedures specific to Grand Rapids Christian Schools. GRCS will utilize the resources from Uniform Guidance and the Code of Federal Regulations (CFR) to develop policies that are compliant with those requirements prior to June 30, 2023.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
2022-018 The Office of Financial Management did not have adequate internal controls over and did not comply with requirements to ensure Coronavirus State and Local Fiscal Recovery Funds were used only for allowable activities. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Known Questioned Cost Amount: $300,000,000 Background The Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic or its negative economic effects. Washington has received approximately $4.4 billion of SLFRF money from the U.S. Department of the Treasury (Department). Federal law stipulates that states may use SLFRF funds to: ? Support public health expenditures, including COVID-19 prevention and mitigation efforts ? Address negative economic impacts caused by the public health emergency ? Replace lost public sector revenue ? Provide premium pay for essential workers ? Invest in water, sewer, and broadband infrastructure States may only use funds to cover costs incurred during the period of performance, which began on March 3, 2021, and ends on December 31, 2024. Under the Department?s final rule, SLFRF recipients could use funds to replace lost public sector revenue to provide government services. Recipients could elect a one-time standard allowance of $10 million to spend on the provision of government services during the grant?s period of performance. Alternatively, SLFRF recipients could calculate lost revenue based on a formula established by the Department to determine the amount of SLFRF funds that can be used for the provision of government services. Washington chose to calculate its lost revenue rather than used the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that can be used to provide government services by a recipient. For reporting purposes on the Schedule of Expenditures of Federal Awards (SEFA), the aggregate expenditures for all eligible use categories must be reported, not the result of the revenue loss calculation or the standard allowance. Washington received the first half ($2.2 billion) of its total $4.4 billion SLFRF allocation in May of 2021. When received, the funds were accounted for in the state?s Coronavirus State Fiscal Recovery Fund (Fund 706). Washington State Substitute Senate Bill 5165, section 408, included distributions totaling $600 million from Fund 706 into various state transportation-related accounts. According to the Office, the purpose of these distributions was to compensate for revenue losses in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019 and to be used to maintain government services. The Office attributed $300 million of this as SLFRF expenditures for transportation related accounts on the State?s fiscal year 2022 SEFA. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls and did not comply with requirements related to the SLFRF revenue loss provision. While SLFRF funds are allowed to replace lost public sector revenues, the State was required to identify actual expenditures that were provided for government services. At the time of audit, the State had not identified such expenditures. Rather, the state asserted that all expenditures in the Transportation accounts receiving the SLFRF funds were appropriated for government services and, therefore, there was no doubt as to the allowability of the use of funds. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office does not believe federal requirements and the Department?s final rule required the State to separately identify actual expenditures that equal the amount of SLFRF expenditures claimed. It is the Office?s position that all expenditures in the Transportation related accounts were for government services and, therefore, the state had sufficient expenditures to meet the grant requirement. During the audit, the Office contacted the Department to obtain guidance on the matter. The Office cited the Department?s FAQ Question 13.15, which states in part, ?recipients should not deviate from their established practices and policies regarding the incurrence of costs, and that they should expend and account for the funds in accordance with laws and procedures for expending and accounting for the recipient?s own funds.? A Department representative acknowledged this FAQ and said the Department does not have additional specific requirements about how recipients should internally track their use of SLFRF funds used for revenue replacement. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify costs charged to the grant were only for allowable activities, met cost principles, and were incurred during the grant?s period of performance. In our judgment, without identifying the specific expenditures charged to the SLFRF, the Office did not comply with federal requirements. Therefore, we are questioning $300 million in costs that were not supported by specifically identified expenditures for government services. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its federal expenditures. Recommendations We recommend the Office: ? Identify the actual government service expenditures that are the basis for the $300 million in SLFRF expenditures recorded on the State?s fiscal year 2022 SEFA ? Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF and are adequately documented, while also documenting the details of this review ? Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office?s Response The Office does not concur with the audit finding. The state of Washington created a separate fund to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. The state, through legislation, approved the transfer from the SLFRF account to various state transportation accounts. Each transportation account that received SLFRF funds was established in statute and is for a specific ?government service? purpose. Therefore, all payments from those accounts would be considered an actual government service expenditure. The U.S. Department of Treasury FAQ 3.2 states that ?Government services generally include any service traditionally provided by a government, unless Treasury has stated otherwise.? We reaffirm that all expenditures from the transportation accounts that received the SLFRF funds were used to maintain government services. The State Administrative and Accounting Manual requires all state agencies to establish internal controls over payments for goods and services, including ensuring payments are lawful and for proper purposes, reviewing payments to ensure they are supported, as well as documenting the review of all payments. State agencies continued to follow their established internal controls to ensure expenditures from the transportation accounts were proper and allowable. Additionally, the Office followed consistent policies and practices regarding the incurrence of costs in the transportation accounts for both non-SLFRF and SLFRF funds, which complied with federal guidance. We disagree that the total amount of lost revenue transferred to the transportation accounts should be considered questioned costs because the auditors were unable to design tests for compliance. The following table lists the accounts and the amounts received from SLFRF during fiscal year 2022. We know all expenditures in these accounts are for government services, and therefore are allowable costs for the program. Account Authority Amount transferred from Account 706 (CSLFRF) 1 Account 039 - Aeronautics Account RCW 82.42.090 $ 388,500.00 2 Account 081 - State Patrol Highway Account RCW 46.68.030 $ 6,179,000.00 3 Account 082 - Motorcycle Safety Education Account RCW 46.68.065 $ 9,000.00 4 Fund 099 - Puget Sound Capital Construction Account RCW 47.60.505 $ 1,446,000.00 5 Account 09H - Transportation Partnership Account RCW 46.68.290 $ 19,773,500.00 6 Account 102 - Rural Arterial Trust Account RCW 36.79.020 $ 1,546,000.00 7 Account 106 - Highway Safety Account RCW 46.68.060 $ 4,109,500.00 8 Account 108 - Motor Vehicle Account RCW 46.68.070 $ 49,708,000.00 9 Fund 109 - Puget Sound Ferry Operations Account RCW 47.60.530 $ 42,983,000.00 10 Fund 16J - State Route Number 520 Corridor Account RCW 47.56.875 $ 29,783,500.00 11 Account 17P - SR520 Civil Penalties Account RCW 47.56.876 $ 2,721,000.00 12 Account 144 - Transportation Improvement Account RCW 47.26.084 $ 7,922,000.00 13 Account 186 - County Arterial Preservation Acct RCW 46.68.090 $ 969,500.00 14 Account 20H - Connecting Washington Account RCW 46.68.395 $ 33,831,500.00 15 Account 215 - Special Category C Account RCW 46.68.090 $ 1,987,500.00 16 Account 218 - Multimodal Transportation Account RCW 47.66.070 $ 57,805,500.00 17 Account 511 - Tacoma Narrows Toll Bridge Account RCW 47.56.165 $ 7,853,500.00 18 Account 550 - Transportation 2003 Account RCW 46.68.280 $ 14,340,500.00 19 Account 595 - I-405 and SR-167 Express Toll Lanes Acct RCW 47.56.884 $ 16,446,500.00 20 Account 780 - School Zone Safety Account RCW 46.61.440 $ 196,500.00 $ 300,000,000.00 We requested that the auditors perform testing of the entire population of expenditures in the transportation accounts for compliance. Questioned costs, if any, could have been identified through relevant audit procedures. During multiple trainings offered by the U.S. Treasury, there has been communication that the grantor will be working with grant recipients through ongoing desk audits to ensure no questioned costs are required to be repaid. The Office will work with the legislature to ensure SLFRF funds can be tracked separately from other funds. Auditor?s Remarks We believe that the federal requirement is that SLFRF recipients must separately identify actual expenditures that equal the amount of SLFRF expenditures stated on the Schedule of Expenditures of Federal Awards. Furthermore, that is the practice used by the State for all other federal programs. We appreciate that the Office will make efforts to work with the Legislature to ensure future SLFRF funds can be tracked separately from other funds. We reaffirm our finding and will follow-up on the Office?s corrective actions in the next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 302, Financial management, states in part: The financial management system of each non-Federal entity must provide for the following (see also 200.334, 200.335, 200.336, and 200.337) (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (3) Records that identify adequately the source of the application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Title U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 403, Factors affecting allowability of costs, states in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Child Nutrition Cluster ?School Nutrition Program ? Assistance Listing #10.555 and Summer Food Service Program ? Assistance Listing #10.559 2022-005 ? Significant Deficiency in Controls over Compliance and Compliance Finding: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding 2021-006 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management, procurement and compensation are in need of adoption and enhancement to meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: The Catholic Secondary Schools of the Diocese of Grand Rapids have limited written policies and procedures that are applicable to federal awards and address the direct and material compliance matters important to the major federal program. In addition, there are unique policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that are relevant to the Schools? federal programs. Recommendations: The Catholic Secondary Schools of the Diocese of Grand Rapids should adopt the following written policies and updates: ? Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ? Identification - Title of the award, CFDA number ? Complete disclosure of accurate and current financial results of each federal award ? Source and application of funds for federal award activity ? Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability access the records (?200.333 - ?200.337) ? Written procedure to implement cash management requirements (see below) ? Written procedures for determining the allowability of costs (see below) ? Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ? Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the Schools ensure compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ? Procurement Standards (2 CFR 200.317 ? 200.326) The Schools must have a written policy that promotes full and open vendor competition, conflict of interest policies should cover employees as well as the organization, and general purchase requirements with specific thresholds as set forth by the Uniform Guidance. There are five allowable procurement methods as described in ?200.320. ? Policy Guide (2 CFR 200.400) In summary, the Schools must have written policies that document the efficient and effective administration of federal awards through sound management practices. The Schools have the primary responsibility for employing whatever form of sound organization and management techniques may be necessary to assure proper and efficient administration of the federal awards. The accounting practices must be consistent with Uniform Guidance cost principles, support the accumulation of costs as required, and must provide for adequate documentation to support costs charged to the federal award. Views of Responsible Officials and Planned Corrective Actions: Child Nutrition Cluster ?School Nutrition Program ? Assistance Listing #10.555 and Summer Food Service Program ? Assistance Listing #10.559 2022-005 ? Significant Deficiency in Controls over Compliance and Compliance Finding: Administrative Requirements of Uniform Guidance ? Administrative Policies This is also a compliance finding, not just controls - UPDATED This is a repeat of prior year finding 2021-006 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management, procurement and compensation are in need of adoption and enhancement to meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: The Catholic Secondary Schools of the Diocese of Grand Rapids have limited written policies and procedures that are applicable to federal awards and address the direct and material compliance matters important to the major federal program. In addition, there are unique policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that are relevant to the Schools? federal programs. Recommendations: The Catholic Secondary Schools of the Diocese of Grand Rapids should adopt the following written policies and updates: ? Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ? Identification - Title of the award, CFDA number ? Complete disclosure of accurate and current financial results of each federal award ? Source and application of funds for federal award activity ? Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability access the records (?200.333 - ?200.337) ? Written procedure to implement cash management requirements (see below) ? Written procedures for determining the allowability of costs (see below) ? Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ? Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the Schools ensure compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ? Procurement Standards (2 CFR 200.317 ? 200.326) The Schools must have a written policy that promotes full and open vendor competition, conflict of interest policies should cover employees as well as the organization, and general purchase requirements with specific thresholds as set forth by the Uniform Guidance. There are five allowable procurement methods as described in ?200.320. ? Policy Guide (2 CFR 200.400) In summary, the Schools must have written policies that document the efficient and effective administration of federal awards through sound management practices. The Schools have the primary responsibility for employing whatever form of sound organization and management techniques may be necessary to assure proper and efficient administration of the federal awards. The accounting practices must be consistent with Uniform Guidance cost principles, support the accumulation of costs as required, and must provide for adequate documentation to support costs charged to the federal award. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings of the auditors. We have developed a plan to address the findings, and are actively working to implement that plan. The corrective action plan is attached to this report.
Child Nutrition Cluster ?School Nutrition Program ? Assistance Listing #10.555 and Summer Food Service Program ? Assistance Listing #10.559 2022-005 ? Significant Deficiency in Controls over Compliance and Compliance Finding: Administrative Requirements of Uniform Guidance ? Administrative Policies This is a repeat of prior year finding 2021-006 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management, procurement and compensation are in need of adoption and enhancement to meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: The Catholic Secondary Schools of the Diocese of Grand Rapids have limited written policies and procedures that are applicable to federal awards and address the direct and material compliance matters important to the major federal program. In addition, there are unique policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that are relevant to the Schools? federal programs. Recommendations: The Catholic Secondary Schools of the Diocese of Grand Rapids should adopt the following written policies and updates: ? Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ? Identification - Title of the award, CFDA number ? Complete disclosure of accurate and current financial results of each federal award ? Source and application of funds for federal award activity ? Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability access the records (?200.333 - ?200.337) ? Written procedure to implement cash management requirements (see below) ? Written procedures for determining the allowability of costs (see below) ? Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ? Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the Schools ensure compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ? Procurement Standards (2 CFR 200.317 ? 200.326) The Schools must have a written policy that promotes full and open vendor competition, conflict of interest policies should cover employees as well as the organization, and general purchase requirements with specific thresholds as set forth by the Uniform Guidance. There are five allowable procurement methods as described in ?200.320. ? Policy Guide (2 CFR 200.400) In summary, the Schools must have written policies that document the efficient and effective administration of federal awards through sound management practices. The Schools have the primary responsibility for employing whatever form of sound organization and management techniques may be necessary to assure proper and efficient administration of the federal awards. The accounting practices must be consistent with Uniform Guidance cost principles, support the accumulation of costs as required, and must provide for adequate documentation to support costs charged to the federal award. Views of Responsible Officials and Planned Corrective Actions: Child Nutrition Cluster ?School Nutrition Program ? Assistance Listing #10.555 and Summer Food Service Program ? Assistance Listing #10.559 2022-005 ? Significant Deficiency in Controls over Compliance and Compliance Finding: Administrative Requirements of Uniform Guidance ? Administrative Policies This is also a compliance finding, not just controls - UPDATED This is a repeat of prior year finding 2021-006 Conditions and Criteria: Written policies associated with financial management, allowable costs, cash management, procurement and compensation are in need of adoption and enhancement to meet the administrative requirements of Uniform Guidance (2 CFR 200). Cause/Context: The Catholic Secondary Schools of the Diocese of Grand Rapids have limited written policies and procedures that are applicable to federal awards and address the direct and material compliance matters important to the major federal program. In addition, there are unique policy requirements of Uniform Guidance related to financial management, allowable costs, cash management and procurement that are relevant to the Schools? federal programs. Recommendations: The Catholic Secondary Schools of the Diocese of Grand Rapids should adopt the following written policies and updates: ? Financial Management (2 CFR 200.302) The financial management policy should include records documenting compliance, and the tracking of funds to determine that expenditures are in accordance with the terms and conditions of the federal awards. The financial management and reporting system must provide the following: ? Identification - Title of the award, CFDA number ? Complete disclosure of accurate and current financial results of each federal award ? Source and application of funds for federal award activity ? Record retention and access ? define the time period for which records must be kept (can vary by grant agreement), and who has the ability access the records (?200.333 - ?200.337) ? Written procedure to implement cash management requirements (see below) ? Written procedures for determining the allowability of costs (see below) ? Cash Management (2 CFR 200.305) A written policy is required by Uniform Guidance detailing the Schools? procedures to minimize the time that elapses between draw and expenditure of federal dollars. ? Allowable Costs (2 CFR 200.302(b)(7)) The Schools must have written procedures for determining the allowability of costs in accordance with Subpart E - Cost Principles of Uniform Guidance and the terms and conditions of the Federal award. This includes the determination of allowable costs and the review of this determination. The standard assumes policies and procedures are in place for disbursements, and the allowable cost policy will demonstrate how the Schools ensure compliance. The criteria for costs to be considered allowable are documented within 2 CFR 200.403. ? Procurement Standards (2 CFR 200.317 ? 200.326) The Schools must have a written policy that promotes full and open vendor competition, conflict of interest policies should cover employees as well as the organization, and general purchase requirements with specific thresholds as set forth by the Uniform Guidance. There are five allowable procurement methods as described in ?200.320. ? Policy Guide (2 CFR 200.400) In summary, the Schools must have written policies that document the efficient and effective administration of federal awards through sound management practices. The Schools have the primary responsibility for employing whatever form of sound organization and management techniques may be necessary to assure proper and efficient administration of the federal awards. The accounting practices must be consistent with Uniform Guidance cost principles, support the accumulation of costs as required, and must provide for adequate documentation to support costs charged to the federal award. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings of the auditors. We have developed a plan to address the findings, and are actively working to implement that plan. The corrective action plan is attached to this report.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.
Finding 2022 001 Federal Program Title ? Research & Development Cluster (R&D) Assistance Listing Nos. ? As listed on the Schedule of Expenditures of Federal Awards Federal Agencies ? U.S. Department of Agriculture, U.S. Department of Commerce, U.S. Department of Defense, U.S. Department of Interior, U.S. Department of Justice, Department of State, U.S. Department of Transportation, National Aeronautics and Space Administration, National Endowment for the Humanities, National Science Foundation, U.S. Department of Veterans Affairs, U.S. Department of Energy, U.S. Department of Education, and U.S. Department of Health and Human Services Federal Award Numbers ? As listed on the Schedule of Expenditures of Federal Awards Grant Award Periods ? Various Compliance Requirement ? Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.430 includes the standards for documentation of personnel expenses. According to 2 CFR 200.430(i)(1), charges to federal awards for salary and wages must be based on records that accurately reflect the work performed. Among other requirements within 2 CFR 200.430(i)(1), section (i) states records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated and section (v) states that the records must comply with established accounting policies and practices. Also, the HHS Grants Policy for educational institutions requires a plan confirmation system (system) for professorial and other professional staff members that is based on budgeted, planned, or assigned work activity and that is updated to reflect any significant changes in work distribution. The system must be incorporated into the organization?s official records and must identify activity applicable to each sponsored agreement and to each category needed to identify indirect costs and the functions to which they are allocable. At least annually, the employee, principal investigator, or responsible official will verify, by suitable means, that the work was performed and that the salaries and wages charged to sponsored agreements, whether as direct charges or in other categories of cost, are reasonable in relation to the work performed. A system, supported by after-the-fact activity reports, that reflects the distribution of covered employees? activity allocable to each grant and includes identification and recording of significant changes in work activity when initial charges were based on estimates. For professorial and other professional staff members, the activity reports will be prepared each academic term, but at least every 6 months. The University?s `Effort Reporting Policy? states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? Additionally, as set forth in 2 CFR 200, the University is required to ensure allowable costs do not consist of improper payments, including payments that should not have been made or that were made in incorrect amounts (including overpayments and underpayments). Indirect costs are required to adhere to 2 CFR 200, Appendix III. Further, the National Institutes of Health (NIH) Grants Policy Statement section 7.5, Cost Transfers, Overruns, Accelerated and Delayed Expenditures, states that cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. Documentation must be maintained of cost transfers, pursuant to 2 CFR Part 200.337 and 45 CFR Part 75.364. The recipient should have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, recipients are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. Lastly, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Conditions Found: While performing procedures related to personnel expenses, we noted the University had not followed their `Effort Reporting Policy? which states ?Subjects must return the certified effort verification report no later than 30 calendar days after they have been distributed.? We noted two of our sixty sampled effort reports that had not been returned within the 30-calendar day policy. Total payroll and fringe totaled approximately $13,200,000 during fiscal year 2022. While performing procedures related to indirect costs, we noted three of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges during the University?s fiscal year ended June 30, 2022 for a total overstatement of $1,888 as noted below: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted indirect costs were overcharged for two of forty sampled grants (totaling $3,385,750) where transactions were originally recorded to an incorrect object class during the University?s fiscal year ended June 30, 2021 that resulted in F&A being applied to the grant instead of to the correct object class which resulted in overcharges. These overstatements were corrected during the University?s fiscal year ended June 30, 2022 for a total of $18,377 as noted below: See Schedule of Findings and Questioned Costs for chart/table Total indirect costs during fiscal year 2022 totaled approximately $8,360,000. While performing procedures related to cost transfers, we noted the University had not followed their `Cost Transfer Policy? which states ?Cost transfers for current transactions must occur on a timely basis?. The University?s cost transfer policy defines timely as ?occurring no later than two accounting periods after the month end of the date of the original transaction (no later than 90 days total)?. The University did not have an effective system of internal control in place to timely discover errors and get them corrected as we noted thirty-two of our sixty-seven sampled cost transfers (totaling $3,153,441 positive and $2,900,348 negative) where the cost transfer date was between 91 and 581 days past the date the original expenditure was incurred (21 were between 91 and 180 days past, 6 were between 181 and 270 days past, and 5 were greater than 271 days past). While testing cost transfers, we noted the following exceptions: We noted a transaction which was originally recorded to an incorrect object class that resulted in F&A being applied to the grant instead of to the correct object class that did not allow F&A costs to be applied: See Schedule of Findings and Questioned Costs for chart/table Additionally, we noted a transaction recorded to a grant that exceeded the amount of the award resulting in the costs being unallowable to the grant: See Schedule of Findings and Questioned Costs for chart/table Positive cost transfers were approximately $4,060,000 and negative cost transfers were $3,510,000 during fiscal year 2022. The University did not have an effective system of internal control in place to ensure compliance with activities allowed/unallowed and allowable costs/cost principles. Questioned Cost: Questioned costs are not determinable. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2022, they continued reconciliation procedures related to `grant level? activity as a result of implementing the grants module of Workday in the previous fiscal year. Grant level activity allows them to track the specific budget provided by the individual R&D Cluster agreement as well as monitor other key compliance requirement aspects. The University continued to process an increased volume of cost transfers and experienced delays in posting necessary cost transfers for identified unallowable costs stemming from the reconciliation efforts. Repeat Finding: A similar finding was reported in prior year audit as finding number 2021 001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University take a fresh look at its processes, policies and internal controls to determine what is needed, post Workday implementation, to prevent and detect noncompliance with activities allowed and unallowed and adherence to allowable cost principles/cost principles. Additionally, we recommend the University determine and address the underlying root cause that is contributing to the volume of cost transfers and take necessary action to prevent unallowable costs from posting to the grant. We also recommend the University consider implementation of an automated control to ensure F&A is charged appropriately when cost transfer entries are made. Lastly, we recommend the University determine what additional Workday automated reporting is available to monitor compliance for personnel expenses, including effort verification reporting, F&A, etc. for activities allowed or unallowed and allowable costs/cost principles.