Finding Text
Finding 2023-005 – Activities Allowed or Unallowed and Allowable Costs/Cost PrinciplesIdentification of the federal program:Federal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.172, Human Genome ResearchPass-Through Grantor: University of ChicagoFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.242, Mental Health Research GrantsPass-Through Grantors: Rutgers State University, University of Chicago, Johns Hopkins UniversityFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.307, Minority Health and Health Disparities ResearchPass-Through Grantor: Northwestern UniversityFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.350, National Center for Advancing Translational SciencesPass-Through Grantors: University of Chicago, Duke UniversityFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.361, Nursing ResearchPass-Through Grantor: Northwestern UniversityFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.395, Cancer Treatment ResearchFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.847, Diabetes, Digestive, and Kidney Diseases Extramural ResearchPass-Through Grantors: Northwestern University, Duke University, University of Washington, The Regents of the University of MichiganFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.855, Allergy, Immunology and Transplantation ResearchPass-Through Grantor: Northwestern UniversityFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.865, Child Health and Human Development Extramural ResearchPass-Through Grantor: University of ChicagoFederal Grantor: United States Department of Health and Human Services (HHS)Assistance Listing No.: 93.946, Cooperative Agreements to Support State-Based Safe Motherhood and Infant Health Initiative ProgramsPass-Through Grantor: Northwestern UniversityCriteria or specific requirement (including statutory, regulatory or other citation):Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: (a) 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”Condition:Management develops a fringe benefit rate annually that is used to allocate fringe benefits to the research and development programs from January 1, 2023 to December 31, 2023. Management did not have internal controls to review the appropriateness of the journal entries for fringe benefit rates.Cause:Management does not have internal controls and policies and procedures to require an appropriate review of fringe benefit journal entries.Effect or potential effect:Unallowable expenses may be inappropriately applied to research and development grants.Questioned costs:None.Context:We tested a sample of 16 fringe benefit journal entries to review. Based on the procedures performed, we identified that the fringe benefit costs were not reviewed timely by the appropriate individual. The Company incurred $673,983 of fringe benefits in 2023 related to Research and Development grants that are included on the Schedule of Expenditures of Federal Awards. Total federal expenditures related to the research and development cluster were $13,409,825 for the year ended December 31, 2023.Identification as a repeat finding, if applicable:This finding is not a repeat finding from the prior year.Recommendation:Management should revise its internal controls and policies to require the appropriate review and approval of fringe benefit journal entries.Views of responsible officials:Management will document a policy to review the updated fringe rate on an annual basis and ensure the fringe expense charged to the grants is in line with the policy and the calculated rate.