8. 2025-008 – Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Recommendation: The auditors recommend the University implement an internal control policy that satisfies the requirements outlined in 2 CFR section 200.430(g). Planned corrective actions: Heritage University agrees with the recommendation and is strengthening its internal controls over personnel expenses charged to federal awards and sponsored projects. The University is developing and formalizing procedures to ensure personnel expenses are appropriately authorized, supported by institutional records, accurately allocated to benefiting activities, and periodically reviewed for consistency with federal award requirements. The planned process will establish clear roles and responsibilities among Sponsored Programs, Grant Accounting, Principal Investigators, supervisors, Payroll, Academic Affairs, and other appropriate offices involved in the administration of grant-funded personnel expenses. As part of this work, the University plans to strengthen controls surrounding payroll reconciliation, personnel and funding allocation changes, documentation of work performed, monitoring of payroll distributions, and review of salary cost transfers. Procedures will establish appropriate review and approval requirements, documentation standards, monitoring checkpoints, and processes for identifying and correcting discrepancies. The University is also evaluating its time and effort documentation and certification process to ensure it appropriately supports compensation charged to federal awards and is practical, consistent, and sustainable across the institution. As part of this review, the University is assessing faculty contract and workload structures for faculty who also manage or perform work on sponsored programs to ensure instructional, administrative, and grant-funded responsibilities are appropriately identified and supported. This assessment will include collaboration among Academic Affairs, Sponsored Programs, Human Resources, Payroll, and the Business Office to better align faculty workload, contractual responsibilities, and grant-funded activity. The recently established Office of Sponsored Programs provides additional capacity and centralized oversight for this work. The Director of Sponsored Programs, Compliance & Strategic Initiatives, in collaboration with the Business Office and other affected departments, will lead the development and documentation of these procedures, provide training and guidance to responsible employees, and establish ongoing monitoring practices to assess compliance. Final procedures, responsibilities, review frequencies, and documentation requirements will be established as the University completes its review of current processes and applicable federal requirements. Name of Responsible Party: Dr. Yesenia Rodriguez, Rachel Castilleja Anticipated completion date: In Progress