Finding 1181556 (2025-001)

Assistance Listing, Federal Agency, and Program Name R&D Cluster: 10.500, U.S. Department of Agriculture, Cooperative Extension Service 12.800, U.S. Department of Defense, Air Force Defense Research Sciences Program 47.074, National Science Foundation, Biological Sciences Federal Award Identification Number and Year 10.500: 2021 48709 35659, 2021 12.800: FA9550 21 1 0202, 2021 47.074: DBI 2335029, 2024 Pass through Entity N/A all direct funded awards Finding Type Significant deficiency Repeat Finding Yes 2024 003 Criteria As outlined in 2 CFR 200.305(b)(3), for recipients and subrecipients other than states, payment methods must minimize the time elapsing between the transfer of funds from the federal agency or the pass through entity and the disbursement of funds by the recipient or subrecipient, regardless of whether the payment is made by electronic funds transfer or by other means. Further, when the reimbursement method is used for payment, organizations must make a payment within 30 calendar days after receipt of the billing unless the federal awarding agency or pass through entity reasonably believes the request to be improper. Condition The University did not have adequate controls in place to ensure invoices to subrecipients were paid timely within the 30 calendar day requirement. Questioned Costs None If questioned costs are not determinable, description of why known questioned costs were undetermined or otherwise could not be reported N/A, no questioned costs. Identification of How Questioned Costs Were Computed There were no questioned costs identified. Context Out of 40 payments to subrecipients that were tested, 4 were made after the 30 calendar day requirement. In all samples tested, payment was made to the subrecipient; however, the delayed payments ranged from 33 to 190 days between the invoice being received by the University and payment being made to the subrecipient. Cause and Effect The University’s controls are not designed to ensure payment for all subrecipients was made in accordance with the 2 CFR 200.305(b)(3). Recommendation The University should implement a control to ensure that payments made to subrecipients are completed within the 30 calendar day requirement. Views of Responsible Officials and Corrective Action Plan Penn State concurs with the audit finding. Penn State has already implementing stronger internal controls to ensure its subrecipients are paid timely. This was a repeat finding and after receiving the finding last year, Penn State created a new Subaward Administration and Compliance Office to provide oversight over key subaward compliance processes. This office was created more than halfway through the current audit period and was not anticipated to be fully implemented, per our corrective action plan, until FY2026, therefore a portion of the audit period did not have central oversight from the new office. Penn State created a new Subaward Administration and Compliance Office (SACO), which is part of the new Post Award Contractual Compliance Office. The SACO is led by its own director and provides central oversight over key subaward compliance processes, such as subrecipient payments, and provide training to campus on subrecipient processes. This function has already implemented new changes and workflows in the financial system to allow for better tracking and reporting of subaward compliance activities, and continues to refine subaward processes. The creation of this office demonstrates Penn State’s commitment to compliance for subaward activities.