Finding Text
Research and Development Cluster
Classified Government Agencies - 99.RD
Criteria or Specific Requirement – Management is responsible for compliance with federal statutes, regulations, contracts and the terms and conditions of its federal awards applicable to the Research and Development Cluster.
Condition – MRIGlobal Group has classified contracts which only specified parties have clearance to access the contracts and review work performed under the contracts.
Questioned Costs – Not applicable
Context – Classified contract expenditures total $4,231,084, which represents approximately 6% of the total schedule of expenditures of federal awards.
Effect – Due to the security requirements related to the classified contracts, we were not permitted to obtain sufficient appropriate audit evidence supporting the compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Research and Development Cluster as it relates to these classified contracts.
Cause – The federal funding agency has categorized the Statement of Work for certain contracts as classified; therefore, we were unable to obtain and review related contracts in order to test compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Research and Development Cluster as it relates to these classified contracts.
Identification as a Repeat Finding – Yes (2023-001 and 2022-001)
Recommendation – If possible, MRIGlobal should work with the funding agencies and their cognizant agency to resolve the access matter.
View of Responsible Official and Planned Corrective Actions – Due to the classified nature of these contracts, no corrective action can take place because of the restrictions enforced by the sponsor's security requirements. While examination of financial mechanics related to these contracts could be performed, there is no ability, due to the classified nature of the work, for the auditors to examine the terms of the contract, specification of deliverables, required reports and equipment, explicitly unallowable costs or other special contract limits.
In the Report on Compliance for the Major Federal Program and Report on Internal Control Over Compliance, the Independent Auditor's Report notes that MRIGlobal complied, in all material respects, with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on its major federal program for the year ended September 30, 2024, for the non-classified contracts that were subject to audit. MRIGlobal applies the same level of internal controls and discipline over compliance for its classified contracts as it does for all other contracts and is confident that the compliance noted in the audit of the non-classified contracts extends to the classified contracts. It should also be noted that the classified contracts are subject to audit by the sponsor.