Results of NSF Data Analytics and Other Audits

1. Results of NSF Data Analytics and Other Audits Carol Malkemus, Director of Sponsored Projects Accounting March 27, 2019

2. NSF Data Analytics Audit • UT received notification from NSF Office of Inspector General on July 27, 2016 • Audit finalized and published as of March 13, 2019 • 959 days! • https://www.nsf.gov/oig/_pdf/19-1-005_University_of_Tennessee_Knoxville.pdf

3. NSF Data Analytics Audit - Statistics • Compiled and submitted three years of financial and human resources data for the time period of July 1, 2013 through June 30, 2016 • Over 117K financial transactions • Nearly 119K payroll data • Period of review contained • 63 letters of credit draws • 283 awards that included nearly 570 WBS elements • Expenditures totaled $102M

4. NSF Data Analytics Audit - Timeline • Submitted Data in September 2016 • October/November 2017 – received requests for 250 documents • 200 financial documents • 50 payroll documents • November 28, 2017 through December 1, 2017 – site visit from NSF and Moss Adams • Discovered the 250 documents were considered outliers thus requiring further support for the justification for the expenditures

5. NSF Data Analytics Audit – Types of Transactions Questioned • Payroll Transactions: • Service awards • Salaries that appeared to exceed budget • Terminal leave • Moving allowance • Additional Pay

6. NSF Data Analytics Audit – Types of Transactions Questioned • Financial Transactions: • End of award expenditures • Conference related expenditures • Subaward cost posting after award ended • Participant support costs • Equipment costs

7. NSF Data Analytics Audit – The Results • December 20, 2018 – UT received draft audit report • 4 Audit Findings • 7 expenditure disallowances • One “Other Matter” • Total amount to be returned - $34,094

8. NSF Data Analytics Audit – The Results, Finding #1 Charges Not Fully Supporting the Award During the Award Period • Expenditure: an annual maintenance agreement in which the period of performance ended after four months into the maintenance agreement • NSF Response: • Office of Management and Budget (OMB) Circular A-21, Section C.4.a states, “A cost is allocable to a particular cost objective ... if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship.” As approximately 8 months of the maintenance contract occurred outside the award period, it is not considered to be allowable to the award. • UT to return $14,282

9. NSF Data Analytics Audit – The Results, Finding #2 Unallowable Costs and Service Awards • This finding involved 4 separate transactions all payroll related • Service awards • Moving allowance • NSF Responses • OMB Circular A-21, Section C.4.a., states, “A cost is allocable to a particular cost objective … if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship.” As such, each of the service awards mentioned above have been deemed unallowable. • Pursuant to NSF’s 2013 Proposal and Award Policies and Procedures Guide, Chapter V subsection C, Part 4, relocation costs are allowable if the proposal indicates that the grantee intends to hire a named individual who is essential to the project on a full-time basis for a continuous period of 12 months. As there was no indication in the proposal that the University intended to hire anyone, the cost is unallowable. • UT to return $11,528

10. NSF Data Analytics Audit – The Results, Finding #3 Late Charges to the Award • Expenditure: Lab supply that was not received until 10 days before the end of the period of performance • NSF Response: • Allocabilityis a key factor when determining whether a cost should be charged to a sponsored agreement. OMB Circular A-21, Section C.4.a., states, “A cost is allocable to a particular cost objective … if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship.” We question this $6,675 claim that provided no benefit to the award to which it was charged. • UT to return $6,675

11. NSF Data Analytics Audit – The Results, Finding #4 Unallowable Cost Transfer • Expenditure: Lab supply purchased on asponsored project and transferred to the NSF award after the award ended. This purchase was to replace a lab supply that was borrowed from another project. • NSF Response: • OMB Circular A-21, Section C.4.a., states, “A cost is allocable to a particular cost objective … if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship.” Since the in question did not benefit the award to which they were charged, we question $1,609 of direct and associated indirect costs. • UT to return $1,609

12. NSF Data Analytics Audit – The Results, Other Matter Late Effort Certification • This was not considered a questioned cost, but a deficiency in our internal controls, thus was not considered an audit finding. • NSF Recommendation: • Strengthen our controls to ensure adherence to UT’s internal fiscal policy.

13. NSF Data Analytics Audit – UT’s Response to the Audit Findings • Enhance our training program to include these situations as case studies and providing guidance on best practices. • Service awards – SPA is now part of the workflow approval process for all requests for services awards to be charged to a sponsored project WBS element. • Moving allowance - SPA is now part of the workflow approval process for all requests for services awards to be charged to a sponsored project WBS element. • Review our fiscal policies to address our weakness of internal control for effort certification.

14. State of Tennessee – Uniform Guidance Single Audit Audit Finding: • Equipment purchase did not have prior approval from Sponsor as per Uniform Guidance • Purchase of computer did not have prior approval as per UT’s Fiscal Policy – FI0206 Sponsored Projects – Distinguishing Direct vs Indirect Costs • UT did receive after-the-fact approval, but because the expenditures originally posted without prior approvals, a finding was issued. • UT Response: • Equipment Purchases – (coming soon) procedures requiring that prior to posting equipment expense to a sponsored project WBS element, the sponsor approval/budget justification must be attached in IRIS • Computer Purchases – review fiscal policy FI0206 Sponsored Project – Distinguishing Direct vs Indirect Costs

15. State of Tennessee – Annual R&D Other Noted Item: • Expenditures posting more than 60 days outside of period of performance as noted in fiscal policy FI0205 Sponsored Projects • Expenditure noted for UTK was for subrecipient payments • UT Response: • UT will review fiscal policy FI0205 Sponsored Projects • This will become a future audit finding

16. Other Sponsor Audits/Program REviews Site visit from Federal Agency, March 2019 • No official report yet received, but noted the potential issues: • Late technical reports • Special award conditions were missed Internal Audit • Conducting data analytics audits – reviewed equipment purchases within 90 days at the end of the period of performance. • Expect to see more reviews.

17. Questions & Comments