Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
Criteria: 2 CFR 200.431 includes the standards for documentation of fringe benefits. According to 2 CFR 200.431(c), the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits should be charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Additionally, 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: We noted several conditions that existed due to cost transfers that occurred during the fiscal year. 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 seventy-five of our one hundred nineteen transactions sampled cost transfers (totaling $246,869 positive and $66,004 negative) where the cost transfer date was between 91 and 1,002 days past the date the original expenditure was incurred (30 were between 91 and 180 days past, 15 were between 181 and 270 days past, and 30 were greater than 271 days past). While testing cost transfers and adjustments, we noted a transaction recorded to a grant that did not have supporting documentation resulting in the costs being unallowable to the grant: Additionally, we noted a transaction recorded to a grant that was recorded outside of the period of performance resulting in the costs being unallowable to the grant: During the fiscal year, positive cost transfers were approximately $2,815,865 and negative cost transfers were $1,792,678 during fiscal year 2023. While performing procedures related to fringe benefits, we noted one of twenty-five sampled grants (totaling $461,382) where transactions were originally recorded to an incorrect worktag. Management identified the error and a cost transfer was performed to move the fringe benefits to a federal research and development grant. However, the incorrect fringe rate was utilized as the University’s non-sponsored research fringe rate utilized in the original entry is a higher fringe rate than the federally approved fringe rate which resulted in an overcharge to the research and development grant during the University’s fiscal year ended June 30, 2023 for a total overstatement of $26 as noted below: Additionally, we noted fringe benefits were expensed during the University’s fiscal year ended June 30, 2023 for two of twenty-five sampled grants (totaling $461,382) where the labor transaction originated in previous fiscal years. The University booked an adjustment within Workday to correct the fringe benefit charges for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total fringe benefits charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,134 as noted below: Total fringe benefits during fiscal year 2023 totaled approximately $2,673,231.While performing procedures related to indirect costs, we noted indirect costs were expensed during the University’s fiscal year ended June 30, 2023 for two of forty sampled grants (totaling $1,817,264) where indirect costs were originally undercharged during the previous fiscal year. The University booked an adjustment within Workday to correct the indirect costs for the life of the grant. This resulted in the SEFA being overstated during the University’s fiscal year ended June 30, 2023. We noted the total indirect costs charged for the life of the grants was allowable and within the period of performance. These overstatements to the SEFA for the University’s fiscal year 2023 was for a total of $3,677 as noted below: Total indirect costs during fiscal year 2023 totaled approximately $10,484,419. Questioned Cost: Known questioned costs of $26. Cause and Effect: In discussing these conditions with University management, they stated that during fiscal year 2023, they continued reconciliation procedures related to ‘grant level’ activity as a result of implementing the grants module of Workday during fiscal year 2021. Grant level activity allows them to track the specific budget provided by the individual grant 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 2022-001. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendations: We recommend the University continue its corrective action plan and adjust internal controls as needed to prevent and detect noncompliance with and improve adherence to federal regulations.View of Responsible Official: The University concurs with the finding. As noted in our prior year response, the University continued to have cost transfers in fiscal year 2023 as it reconciled its grants. To limit cost transfers in the future, the following steps have been taken by the University: Additionally, the University is exploring additional functionality within our Workday grants management module to build in additional approvals, specifically for labor, on expense before the expenses are charged to the grant to reduce future cost transfers. In regards to the three transactions noted above (federal award number HHSN272201300021I; federal award number 5R21AG065526-02; and federal award number UH3HD096929), the erroneous charges have been refunded to the federal agency. As part of the University’s corrective action plan, during fiscal year 2023 the sponsored programs accounting team recalculated fringe and indirect costs on all federal grants to ensure the correct expense was recorded to each grant. During this reconciliation process cumulative award to date errors were identified and corrected in fiscal year 2023. The sponsored program accounting team continues to reconcile fringe and indirect costs on cost transfers at the grant level on a periodic basis to ensure accuracy.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.
2023-026 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 for only 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 Prior Year Audit Finding: Yes, Finding 2022-018 Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington has received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury (Department). Federal law stipulate 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 use the standard allowance. The calculated amount of revenue loss determines the limit of SLFRF funds that recipients can use to provide government services. 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 calculations or the standard allowance. Washington received $2.2 billion of its total $4.4 billion SLFRF allocation in May 2022. 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 to various state transportation-related accounts. According to the Office of Financial Management, these distributions compensated for revenue loss in state fiscal years 2020 and 2021 relative to revenues collected in state fiscal year 2019, and they were 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 2023 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. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. The prior finding number was 2022-018. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure SLFRF funds were used for only allowable activities. While recipients are allowed to use SLFRF funds 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, so 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. Cause of Condition Office management does not agree that 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, so the state had sufficient expenditures to meet the grant requirement. During the last audit, the Office contacted the Department for guidance on the matter. The Department has maintained a FAQ document for the SLFRF program, and the answer to question 13.15, states in part, “recipients should not deviate from their established practices and policies regarding the incurrence of cost, 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 guidance, and said the Department does not have additional, specific requirements about how recipients should internally track their use of SLFRF funds for revenue replacement. At the time of this audit, the Office had not received the Department’s management decision regarding the prior audit finding. Effect of Condition and Questioned Costs Without a population of actual expenditures to audit, we could not design tests to verify that the costs the Office 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 program, the Office did not comply with federal requirements. Therefore, we are questioning the $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 2023 SEFA • Review the supporting documentation for the expenditures to ensure they meet compliance requirements for the SLFRF program 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 implemented internal controls and created Fund 706 to track the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) expenditures. Following U.S. Department of Treasury guidance and instructions, the state of Washington determined there was approximately $3 billion in revenue loss. The state, through legislation, approved the transfer of $300 million from the SLFRF account to various state transportation accounts under the revenue loss provision. 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. 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. The Office disagrees 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. Questioned costs, if any, could have been identified through appropriate and relevant audit procedures. The Office continues to work with U.S. Treasury, through the Management Decision process, to ensure no questioned costs are required to be repaid. 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. This is consistent with the State’s practice for recording expenditures for all other federal programs. Because the Office did not identify specific expenditures for the SLFRF program in the accounting system, we were unable to test SLFRF expenditures from the State’s transportation accounts. The expenditures for the State coded to the Office’s SLFRF account (706) did not include the distributions mentioned by the Office in its response, above, and therefore there was no expenditure activity for our Office to test for compliance. We reaffirm our finding and will follow-up on the Office’s corrective action during 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. Title 2 CFR Part 200, 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. 2. 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 2 CFR Part 200, Uniform Guidance, section 410, Collection of unallowable costs, establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200, Uniform Guidance, section 403, establishes the factors affecting the allowability of costs. 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.