jurisdiction: US

text: b" NATIONAL SCIENCE FOUNDATION\n 4201 Wilson Boulevard\n ARLINGTON, VIRGINIA 22230\n\n\n\n\n OFFICE OF\nINSPECTOR GENERAL\n\n\n\nMEMORANDUM\n\nDate: March 31, 2011\n\nTo: Mary F. Santonastasso, Director\n Division of Institution and Award Support\n\n Karen Tiplady, Director\n Division of Grants and Agreements\n\nFrom: Dr. Brett M. Baker /s/\n Assistant Inspector General for Audit\n\nSubject: Audit Report No. OIG-11-1-013\n Louisiana Board of Regents\n\n\n\nAttached is the final audit report, prepared by Foxx & Company, an independent public\naccounting firm, on the audit of NSF Award Numbers\n awarded to the Louisiana Board of Regents (LBR). The audit covers\ncosts claimed for the four awards from May 15, 2004 to September 30, 2009, totaling\napproximately $18.6 million in NSF funded costs claimed and $8.1 million in claimed cost share.\n\nLBR was selected for an audit because of the high dollar value and number of NSF awards, the\ncollaborative nature of many of the awards, the significant issues identified in the results of NSF\nOIG\xe2\x80\x99s audit of LBR in 1998 and NSF\xe2\x80\x99s monitoring site visit at LBR in 2004, and the material\ninternal control deficiencies reported in past Office of Management and Budget (OMB) Circular\nA-133 audits.\n\nExcept for $1,884,950 (10% of total claimed costs) in questioned labor and fringe benefits,\nsubcontracts costs, material and supplies, and questioned cost sharing costs of $152,182, the\nauditors determined that the costs claimed by LBR under NSF Award Numbers\n appear fairly stated and are allowable, allocable\nand reasonable for the NSF awards. The auditor\xe2\x80\x99s review of the previously identified audit\nrecommendations in the prior OIG\xe2\x80\x99s audit of LBR, NSF\xe2\x80\x99s monitoring site visit, and A-133 audits\nrevealed that most were adequately addressed. The auditors also noted three compliance and\ninternal control deficiencies in LBR\xe2\x80\x99s, and two of LBR\xe2\x80\x99s subawardees, (Louisiana State\n\x0cUniversity and Southern University) financial management practices that contributed to these\nquestioned costs and if not corrected, could impact current and future NSF awards. Specifically:\n\n \xe2\x80\xa2 Labor and related fringe benefits charged to NSF awards were not equitably allocated or\n adequately supported. Salaries and related fringe benefits claimed under NSF EPSCoR\n Award Nos. did not reflect the actual work performed\n on these awards. The individuals that were charging the majority of their time to the\n EPSCoR awards were also working on other federal and state projects. Labor and related\n fringe benefits charged to NSF were based on the award budgets rather than actual effort\n expended. Furthermore, salaries and related fringe benefits were not charged to the two\n other on-going NSF Awards even though 3 of the 6\n of the LBR employees were working on those two awards. In addition, LBR did not use\n the correct form of timekeeping documentation required by federal regulations for a state\n agency. This condition occurred because LBR\xe2\x80\x99s effort and reporting system was\n erroneously based on guidance applicable to educational organizations rather than\n guidance applicable to state governments. As a result, there is no assurance that the LBR\n effort reporting system reliably reported actual effort expended on the NSF awards.\n Therefore, the auditors have questioned $1,305,283 of inequitably allocated or\n unsupported salaries and fringe benefits charged to NSF Award Nos.\n ($712,676) and ($592,607).\n \xe2\x80\xa2 Improvements are needed to LBR\xe2\x80\x99s subaward monitoring program for NSF funded\n subawards to better represent the different LBR subawardee organizations. The four NSF\n awards in the scope of this audit had 60 first tier subawards to 36 different subawardee\n institutions that claimed $15 million of the $18 million in total costs charged to the\n awards. LBR\xe2\x80\x99s subaward monitoring of NSF funded subawards concentrated on the\n largest dollars which were subawarded to LSU. Accordingly, there were a number of first\n tier NSF funded subawardees that never received an on-site monitoring visit by LBR\xe2\x80\x99s\n Audit Division. As a result, problems could exist in the internal controls at other\n subawardees and could go unnoticed by LBR. The auditor\xe2\x80\x99s tests revealed problems at\n Southern University which is one of LBR\xe2\x80\x99s subawardees. The auditors also, noted an\n instance where a LSU/LBR second tier subawardee exceeded the budget without\n approval, although LBR\xe2\x80\x99s monitoring review at LSU revealed no findings. Additional\n subawardee monitoring site visits would result in greater assurance that subaward costs\n claimed are allowable, reasonable and allocable to LBR\xe2\x80\x99s current and future NSF awards.\n \xe2\x80\xa2 Southern University (SU) could not support a material amount of costs claimed under the\n LBR first tier subcontract under NSF Award No. SU could not provide\n adequate documentation supporting personnel costs, related fringe benefits, participant\n costs, and cost sharing claimed under the NSF award. Although SU had detailed\n procedures for maintaining records supporting costs incurred on sponsored programs, SU\n could not readily provide accounting documentation to support costs claimed. As a\n\n\n\n 2\n\x0c result, $547,741 of direct and indirect costs and $152,182 of cost sharing has been\n questioned.\n\nTo address these compliance and internal control deficiencies, the auditors recommend that the\nDirector of NSF\xe2\x80\x99s Division of Institution and Award Support (DIAS) address and resolve the\nfollowing recommendations made to LBR: (1) require the LBR to determine the labor charges\nand related benefits charged to the NSF awards to reflect the actual costs in accordance with state\nagency provisions, recover all personnel costs not applicable to NSF Award Nos.\nand 1, and, review LBR\xe2\x80\x99s revised effort reporting system to ensure that it complies\nwith the provisions of state agencies and will result in equitably distributed salaries and related\nbenefits; (2) consider performing on site monitoring visits of other NSF funded subawardees in\naddition to LSU and, submit to the NSF the $17,696 of costs recovered from the University of\nIllinois by LSU; and, (3) require Southern University to comply with its existing policies and\nprocedures to ensure that all claimed costs including cost sharing are supported with adequate\nand sufficient supporting documentation; or, recover the $547,741 of questioned direct and\nindirect costs claimed and return it to NSF. An additional recommendation was made to address\nthe additional unallowable costs identified during the audit. The auditors recommend that LBR\nrefund the $11,953 mistakenly charged to the NSF award, and determine and document a use for\nthe unused equipment that is consistent with the objectives of the EPSCoR award, or refund the\n$2,277 to NSF.\n\nDuring the course of the audit the auditor noted two issues that are not considered findings but\nneed to be addressed by LBR and NSF. The auditors determined that there was an excessive\nslow burn rate under Award No. through September 30, 2009, the end of the\nauditor\xe2\x80\x99s audit period; and, LBR received $2,987 in advance more than the net award costs for\nAward No.\n\nLBR generally concurred with the recommendations and indicated it was taking corrective\nactions to develop a time keeping system that is compliant with 2 CFR 225, expand their\nsubawardee monitoring program to include all NSF subawardees, and, provide a refund or credit\nto NSF for funds inappropriately charged to NSF awards. Also, LBR agreed with some of the\nquestioned labor charges on the two NSF EPSCOR awards but did not agree with the questioned\ncosts from its 1st tier subawardee, Southern University. LBR\xe2\x80\x99s response is included in its\nentirely in Attachment A.\n\nPlease coordinate with our office during the six month resolution period, as specified by OMB\nCircular A-50, to develop a mutually agreeable resolution of the audit findings. Also, the\nfindings should not be closed until NSF determines that all recommendations have been\nadequately addressed and the proposed corrective actions have been satisfactorily implemented.\n\nWe are providing copies of this memorandum to the Division Director of Human Resource\nDevelopment (HRD) and the Directorate for Education & Human Resources (EHR) within the\nOffice of the Assistant Director. The responsibility for audit resolution rests with the Division of\nInstitution and Award Support, Cost Analysis and Audit Resolution Branch (CAAR).\nAccordingly, we ask that no action be taken concerning the report\xe2\x80\x99s findings without first\nconsulting CAAR at 703-292-8244.\n\n\n\n 3\n\x0cOIG Oversight of Audit\n\nTo fulfill our responsibilities under Government Auditing Standards, the Office of Inspector\nGeneral:\n\n \xe2\x80\xa2 Reviewed Foxx & Company\xe2\x80\x99s approach and planning of the audit;\n \xe2\x80\xa2 Evaluated the qualifications and independence of the auditors;\n \xe2\x80\xa2 Monitored the progress of the audit at key points;\n \xe2\x80\xa2 Coordinated periodic meetings with Foxx & Company and NSF officials, as necessary, to\n discuss audit progress, findings, and recommendations;\n \xe2\x80\xa2 Reviewed the audit report, prepared by Foxx & Company to ensure compliance with\n Government Auditing Standards; and\n \xe2\x80\xa2 Coordinated issuance of the audit report.\n\nFoxx & Company is responsible for the attached auditor\xe2\x80\x99s report on LBR and the conclusions\nexpressed in the report. We do not express any opinion on the Schedules of Award Costs,\ninternal control, or conclusions on compliance with laws and regulations.\n\nWe thank your staff for the assistance that was extended to our auditors during this audit. If you\nhave any questions regarding this report, please contact Jannifer Jenkins at 703-292-4996.\n\nAttachment\n\ncc: James H. Lightbourne, Division Director, EHR/HRD\n Joan Ferrini-Mundy, Assistant Director, EHR/OAD\n\n\n\n\n 4\n\x0c State of Louisiana Board of Regents\n\n Baton Rouge, Louisiana 70802\n\n NATIONAL SCIENCE FOUNDATION\n AWARD NUMBERS\n\n\nFINANCIAL AUDIT OF FINANCIAL SCHEDULES\n and\n INDEPENDENT AUDITORS\xe2\x80\x99 REPORT\n from\n May 15, 2004 to September 30, 2009\n\n\n\n\n Foxx & Company\n Certified Public Accountants\n 324 West Ninth Street, Suite 700\n Cincinnati, Ohio 45202\n\x0cEXECUTIVE SUMMARY\n\nThe National Science Foundation (NSF) Office of Inspector General (OIG) engaged Foxx and\nCompany to perform an audit on $18,597,179 in costs claimed and $8,163,470 in cost sharing\nclaimed as reported on the September 30, 2009 Federal Financial Report (FFR) and cost sharing\nreports submitted to NSF by the Louisiana Board of Regents (LBR) for NSF Award Numbers\n The Louisiana Board of\nRegents (LBR) is a state agency located in Baton Rouge, Louisiana. The LBR is the governing\nbody charged with the coordination and governance of state-wide education and research\ndevelopment of all State public colleges and universities in Louisiana including 19 public\ncolleges, universities, and professional schools. As of March 2009, LBR had six awards from\nNSF totaling over $23.7 million.\n\nLBR was selected for an audit because of the high dollar value and number of NSF awards, the\ncollaborative nature of many of the awards, the significant issues identified in the results of NSF\nOIG\xe2\x80\x99s audit of LBR in 1998 and NSF\xe2\x80\x99s monitoring site visit at LBR in 2004, and the material\ninternal control deficiencies reported in past Office of Management and Budget (OMB) Circular\nA-133 audits.\n\nThe purpose of this audit was to determine whether the costs and cost share claimed by LBR and\nits subawardees for these NSF awards appear fairly stated in the Schedules of Award Costs and\nto identify weaknesses in LBR\xe2\x80\x99s internal control over financial reporting that could have a direct\nand material effect on LBR\xe2\x80\x99s ability to properly administer, account for, and monitor its NSF\nawards. In addition, we were to determine whether LBR adequately monitors its subawardees\nand ensures that previously identified audit recommendations have been satisfactorily addressed\nand implemented.\n\nExcept for $1,884,950 (10% of total claimed costs) in questioned labor and fringe benefits,\nsubcontracts costs, material and supplies, and questioned cost sharing costs of $152,182, we\ndetermined that the costs claimed by LBR under NSF Award Numbers\n appear fairly stated and are allowable, allocable and\nreasonable for the NSF awards. Specifically, we questioned labor and fringe benefit costs of\n$1,305,283 claimed by LBR under the two EPSCoR Awards, (Award Nos. for\n$712,676 and for $592,607) because the individuals that were charging the\nmajority of their time to the EPSCoR awards were working on other federal and state projects\nand because LBR did not maintain the proper documentation to support salaries and related\nbenefits charged for staff working on multiple projects, as required. We also questioned $14,230\nclaimed by LBR for salary costs charged ($11,953) that were not related to the NSF awards and\nequipment purchased ($2,277) under a NSF award but not used. In addition, we questioned\nsubaward costs of $547,741 and cost sharing of $152,182 claimed by Southern University (SU)\nunder Award No. because these costs and the cost share were not supported by\nadequate documentation. Finally, we questioned $17,696 for a refund that LSU received from\nthe University of Illinois under Award No after we informed LSU, during the\nsurvey phase of the audit, that the University of Illinois exceeded their labor budget by more than\n20 percent without receiving the required written authorization.\n\n\n\n\n i\n\x0cWe also noted three compliance and internal control deficiencies in LBR\xe2\x80\x99s, and two of LBR\xe2\x80\x99s\nsubawardees, (Louisiana State University and Southern University) financial management\npractices that contributed to these questioned costs and if not corrected, could impact current and\nfuture NSF awards. Specifically:\n\n \xe2\x80\xa2 Labor and related fringe benefits charged to NSF awards were not equitably allocated or\n adequately supported. Salaries and related fringe benefits claimed under NSF EPSCoR\n Award Nos. did not reflect the actual work performed\n on these awards. The individuals that were charging the majority of their time to the\n EPSCoR awards were also working on other federal and state projects. Labor and related\n fringe benefits charged to NSF were based on the award budgets rather than actual effort\n expended. Furthermore, salaries and related fringe benefits were not charged to the two\n other on-going NSF Awards ( ), even though 3 of the 6\n of the LBR employees were working on those two awards. In addition, LBR did not use\n the correct form of timekeeping documentation required by federal regulations for a state\n agency. This condition occurred because LBR\xe2\x80\x99s effort and reporting system was\n erroneously based on guidance applicable to educational organizations rather than\n guidance applicable to state governments. As a result, there is no assurance that the LBR\n effort reporting system reliably reported actual effort expended on the NSF awards.\n Therefore, we have questioned $1,305,283 of unequitably allocated or unsupported\n salaries and fringe benefits charged to NSF Award Nos. 1 ($712,676) and\n 1 ($592,607).\n \xe2\x80\xa2 Improvements are needed to LBR\xe2\x80\x99s subaward monitoring program for NSF funded\n subawards to better represent the different LBR subawardee organizations. The four NSF\n awards in the scope of this audit had 60 first tier subawards to 36 different subawardee\n institutions that claimed $15 million of the $18 million in total costs charged to the\n awards. LBR\xe2\x80\x99s subaward monitoring of NSF funded subawards concentrated on the\n largest dollars which were subawarded to LSU. Accordingly, there were a number of first\n tier NSF funded subawardees that never received an on-site monitoring visit by LBR\xe2\x80\x99s\n Audit Division. As a result, problems could exist in the internal controls at other\n subawardees and could go unnoticed by LBR. Our tests revealed problems at Southern\n University which is one of LBR\xe2\x80\x99s subawardees. We also, noted an instance where a\n LSU/LBR second tier subawardee exceeded the budget without approval, although\n LBR\xe2\x80\x99s monitoring review at LSU revealed no findings. Additional subawardee\n monitoring site visits would result in greater assurance that subaward costs claimed are\n allowable, reasonable and allocable to LBR\xe2\x80\x99s current and future NSF awards.\n \xe2\x80\xa2 Southern University (SU) could not support a material amount of costs claimed under the\n LBR first tier subcontract under NSF Award No. SU could not provide\n adequate documentation supporting personnel costs, related fringe benefits, participant\n costs, and cost sharing claimed under the NSF award. Although SU had detailed\n procedures for maintaining records supporting costs incurred on sponsored programs, SU\n could not readily provide accounting documentation to support costs claimed. As a\n\n\n ii\n\x0c result, $547,741 of direct and indirect costs and $152,182 of cost sharing has been\n questioned.\n\nTo address these compliance and internal control deficiencies, we recommend that the Director\nof NSF\xe2\x80\x99s Division of Institution and Award Support (DIAS) address and resolve the following\nrecommendations made to LBR: (1) require the LBR to determine the labor charges and related\nbenefits charged to the NSF awards to reflect the actual costs in accordance with state agency\nprovisions, recover all personnel costs not applicable to NSF Award Nos. and\n and, review LBR\xe2\x80\x99s revised effort reporting system to ensure that it complies with\nthe provisions of state agencies and will result in equitably distributed salaries and related\nbenefits; (2) consider performing on site monitoring visits of other NSF funded subawardees in\naddition to LSU and, submit to the NSF the $17,696 of costs recovered from the University of\nIllinois by LSU; and, (3) require Southern University to comply with its existing policies and\nprocedures to ensure that all claimed costs including cost sharing are supported with adequate\nand sufficient supporting documentation; or recover the $547,741 of questioned direct and\nindirect costs claimed and return it to NSF.\n\nAn additional recommendation was made to address the additional unallowable costs identified\nduring the audit. We recommended that LBR refund the $11,953 mistakenly charged to the NSF\naward, and determine and document a use for the unused equipment that is consistent with the\nobjectives of the EPSCoR award, or refund the $2,277 to NSF.\n\nLBR generally concurred with the recommendations and indicated it was taking corrective\nactions to develop a time keeping system that is compliant with 2 CFR 225, expand their\nsubawardee monitoring program to include all NSF subawardees, and provide a refund or credit\nto NSF for funds inappropriately charged to NSF awards. Also, LBR agreed with some of the\nquestioned labor charges on the two NSF EPSCOR awards but did not agree with the questioned\ncosts from it\xe2\x80\x99s 1st tier subawardee, Southern University. LBR\xe2\x80\x99s response is included in its\nentirely in Attachment A. LBR\xe2\x80\x99s response to each finding is summarized in the text of the report\nfollowing the auditors\xe2\x80\x99 recommendations. Our comments on LBR\xe2\x80\x99s responses follow each of\ntheir responses. LBR\xe2\x80\x99s response is also presented in its entirety in Attachment A of this report.\n\nOur review of the previously identified audit recommendations revealed that most were\nadequately addressed. See Attachment B to this report for details.\n\nThe findings in this report should not be closed until NSF has determined that all the\nrecommendations have been adequately addressed and the proposed corrective actions have been\nsatisfactorily implemented.\n\nFor a complete discussion of audit findings, refer to the Report on Internal Control Over\nFinancial Reporting and on Compliance and Other Matters Based on an Audit of Financial\nSchedules Performed in Accordance with Government Auditing Standards.\n\n\n\n\n iii\n\x0c Louisiana Board of Regents\n\n\n TABLE OF CONTENTS\n\n Page\n\nExecutive Summary: i\n\nTable of Contents: iv\n\nIntroduction:\n Background ...................................................................................................................................... 1\n Audit Objectives, Scope and Methodology ..................................................................................... 3\n\nIndependent Auditors\xe2\x80\x99 Report on Financial Schedules ................................................................ 5\n\nInternal Controls and Compliance:\n Report on Internal Control over Financial Reporting and on Compliance\n and Other Matters Based on an Audit of Financial Schedules Performed\n in Accordance with Government Auditing Standards .................................................................. 7\n\nFinancial Schedules and Supplemental Information:\n\n Schedule A-1 - Schedule of Award Costs (Award No. ........................................... 25\n Schedule A-2 - Schedule of Award Costs (Award No. .......................................... 26\n Schedule A-3 - Schedule of Award Costs (Award No. ........................................... 27\n Schedule A-4 - Schedule of Award Costs (Award No. ) ........................................... 28\n Schedule B-1 Schedule of Questioned Costs .................................................................................. 29\n Schedule C-1 Schedule of Costs Claimed by Southern University under\n NSF Award No. ....................................................................................................... 33\n Schedule D-1 Notes to Schedule C-1 .............................................................................................. 34\n Schedule E-1 Summary Schedules of Awards Audited and Audit Results ..................................... 36\n Notes to Financial Schedules .......................................................................................................... 38\n\nAppendices\n Attachment A \xe2\x80\x93 Awardee\xe2\x80\x99s Comments to Report............................................................................ 40\n\n Attachment B \xe2\x80\x93 Status of Prior Review Findings ........................................................................... 64\n\n Attachment C \xe2\x80\x93 Exit Conference .................................................................................................... 66\n\n\n\n\n iv\n\x0cINTRODUCTION\n\x0cBACKGROUND\n\nThe National Science Foundation, Office of Inspector General (NSF-OIG) contracted with Foxx\n& Company to perform an audit of four NSF awards to the Louisiana Board of Regents (LBR).\nIn addition to conducting internal control and substantive testing at LBR, Foxx & Company also\nconducted internal control and substantive testing at the Louisiana State University (LSU), and\nSouthern University, both first tier sub recipients. Foxx & Company also conducted substantive\ntesting for costs claimed by the University of Illinois, LSU\xe2\x80\x99s second tier sub recipient under NSF\nAward No.\n\nThe LBR is a state Agency established in 1975. The LBR is the governing body charged with\nthe coordination and governance of state-wide education and research development of all State\npublic colleges and universities in Louisiana including 19 public colleges, universities, and\nprofessional schools. As of March 2009, LBR had six awards from NSF totaling over $23.7\nmillion. Because LBR is a state agency, it is required to follow the administrative and cost\nprinciples specified in the Common Rule (formerly OMB Circular A-102), codified by NSF at\n45 CFR Part 602, and 2 CFR 225 (formerly OMB Circular A-87), respectively. The majority of\nthe NSF funds included in the scope of our audit were sub-awarded by LBR to educational\ninstitutions which are required to follow the administrative and cost principles of 2 CFR Part 215\n(formerly OMB Circular A-110) and 2 CFR Part 220 (formerly OMB Circular A-21),\nrespectively.\n\nCost categories, approved budget, and claimed costs for the four NSF awards under audit were as\nfollows:\n\n Grant Nos.\n\n Total Budgeted Costs\n Cost Categories Budget\nSalaries and Wages $2,003,618 $1,152,173 $0 $851,445 0\nFringe Benefits $375,238 197,948 0 $177,290 0\nEquipment $31,130 31,130 0 0 0\nTravel $102,000 58,000 12,000 32,000 0\nMaterials and Supplies $77,464 43,000 0 34,464 0\nConsultant Services $247,000 125,000 0 122,000 0\nSub awards $18,363,330 7,310,113 5,135,000 3,324,261 2,593,956\nOther Direct Costs $1,741,176 282,636 0 1,458,540 0\n Total $22,940,956 $9,200,000 5,147,000 $6,000,000 $2,593,956\n Cost Sharing $6,500,000 $4,500,000 $2,000,000 $0 $0\n\n Claimed Costs through 9/30/2009\n Cost Categories Total Claimed\nSalaries and Wages $1,722,978 $983,319 $0 $739,659 $0\nFringe Benefits 458,904 262,540 0 196,364 0\nEquipment 373,245 373,245 0 0 0\nTravel 254,078 206,206 0 47,872 0\nMaterials and Supplies 48,977 37,917 0 11,060 0\nConsultant Services 190,425 91,994 0 98,431 0\nSub awards 15,486,684 6,947,169 $4,347,534 3,276,193 915,788\nOther Direct Costs 64,875 28,883 0 35,992 0\n Subtotal $18,600,166 $8,931,273 $4,347,534 $4,405,571 $915,788\n Costs incurred in Excess of\n claimed costs to NSF $(2,987) $(2,987) $0 $0 $0\n Total Costs $18,597,179 $8,928,286 $4,347,534 $4,405,571 $915,788\n Cost Sharing $8,163,470 $4,719,031 $3,444,439 $0 $0\n\n\n\n\n 1\n\x0cGrant Award was for Louisiana\xe2\x80\x99s Strategic Infrastructure Improvements. The\nLBR was awarded $9.2 million for a project entitled The Experimental Program to Stimulate\nCompetitive Research (EPSCoR). The purpose of the award was to support research and\neducational activities to enhance Louisiana\xe2\x80\x99s R&D competitiveness; build partnerships among\nLouisiana universities, national laboratories, and the private sector; and to recruit students\nespecially from underrepresented groups into science and engineering fields. The grant budget\nperiod was from May 15, 2004 through March 31, 2008. The award included $1.35 million in\nsalaries, wages and fringe benefits for LBR; and $7.3 million in sub awards of which over $7\nmillion went to LSU. This award also required $4.5 million in cost sharing. The cumulative\ndisbursements for Award No. reported to NSF through September 30, 2009 were\n$8,928,286. Cost share claimed through September 30, 2009 was $4,719,031.\n\nCooperative Agreement was a continuing cooperative agreement for The Louis\nStokes Louisiana Alliance for Minority Participation (LS-LAMP). The purpose of the award\nwas to develop a statewide, comprehensive systemic mentoring program aimed at rapidly\nincreasing the number and quality of minority students earning baccalaureate degrees in science,\ntechnology, engineering, and mathematics (STEM) disciplines and actively promoting their\ntransition to STEM graduate schools for the pursuit of terminal degrees (PHD). The LBR was\nawarded over $5.1 million for the project. The cooperative agreement budget period was from\nNovember 1, 2005 through October 31, 2010. The award included over $5.1 million in sub-\nawards of which over $3.3 million was awarded to LSU and $1.8 million to Southern University.\nThe cost sharing requirement under this cooperative agreement was $2 million dollars. The\ncumulative disbursements for Award No reported to NSF through September 30,\n2009 was $4,347,534. Cost share claimed through September 30, 2009 was $3,444,439.\n\nGrant Agreement was a continuing grant agreement for Louisiana\xe2\x80\x99s Research\nInfrastructure Improvement Strategy. The grant was awarded under NSF\xe2\x80\x99s Experimental\nProgram to Stimulate Competitive Research (EPSCoR). The purpose of the award was to\nadvance interdisciplinary research across the State\xe2\x80\x99s institutions of higher education by\nestablishing a statewide research and information technology infrastructure that integrates\nselected areas of scientific strength with development of cyber infrastructure tools. The LBR\nwas awarded $6 million for the project. The grant budget period was from October 1, 2007\nthrough September 30, 2010. The award included over $1 million in salary, wages and fringe\nbenefits and over $1.6 million in other direct costs for LBR. The award also included about $3.3\nin sub-awards of which about $2.7 million went to LSU. No cost sharing was required under\nthis award. The cumulative disbursements for Award No. reported to NSF\nthrough September 30, 2009 was $4,405,571.\n\nCooperative Agreement was a continuing cooperative agreement for High\nPerformance Computing for Science and Engineering Research and Education Operations\n(HPCOPS): The LONI Grid \xe2\x80\x93 Leveraging HPC Resources of the Louisiana Optical Network\nInitiative for Science and Engineering Research and Education. The purpose of the award was to\nenhance and expand the TeraGrid by contributing major new computational resources from the\nLouisiana Optical Network Initiative; to provide new cyber infrastructure, services, research, and\ndevelopmental projects that will benefit the national community; and to bring additional user\ncommunities from underrepresented scientific application domains and geographic regions of the\nUS by working with communities from the LONI with TeraGrid. The LBR was awarded almost\n$2.6 million for the project. The cooperative agreement budget period was from October 1, 2007\nthrough March 31, 2010. The entire award was for sub-awards to LSU. No cost sharing was\n 2\n\x0crequired under this award. The cumulative disbursements for Award No reported\nto NSF through September 30, 2009 was $915,788.\n\nAUDIT OBJECTIVES, SCOPE AND METHODOLOGY\n\nAUDIT OBJECTIVE\n\nThe audit objectives include determining whether: (1) the LBR\xe2\x80\x99s system of internal control is\nadequate to account for and safeguard NSF funds, (2) the LBR\xe2\x80\x99s costs claimed are allowable and\nin conformity with the terms and conditions of the NSF awards and Federal requirements, and\n(3) the LBR, LSU, and Southern University complied with applicable laws, regulations, and\naward terms and conditions.\n\nSpecific objectives of the audit were to:\n\n 1. Determine whether the LBR, LSU and Southern have an adequate system of internal\n controls over administrating its NSF funds to account for and ensure compliance with\n applicable federal and NSF award provisions.\n\n 2. Identify and report instances of noncompliance with laws, regulations, and the provisions\n of the award agreements and weaknesses in the LBR\xe2\x80\x99s, LSU\xe2\x80\x99s, and Southern University\xe2\x80\x99s\n internal controls over compliance and financial reporting that could have a direct and\n material effect on the Schedule of Award Costs. In addition, LBR\xe2\x80\x99s ability to properly\n administer, account for, and manage its NSF awards would be evaluated.\n\n 3. Determine and report on whether LBR and LSU adequately monitor their sub-awards.\n\n 4. Follow-up on recommendations identified in OIG\xe2\x80\x99s 1998 audit, NSF\xe2\x80\x99s 2004 financial\n administrative site visit, and the LBR 2007 OMB Circular A-133 audit to determine if\n the issues raised were satisfactorily addressed and recommendations implemented. (The\n Single Audit for the Year ended June 30, 2008 was issued in March 2009. We have\n followed up on the findings in that report.)\n\n 5. Determine and report on whether the Schedules of Award Costs of the LBR present\n fairly, in all material respects, the costs claimed on the Federal Cash Transaction\n Reports/Federal Financial Reports and cost sharing in conformity with NSF-OIG\n Financial Audit Guide and the terms and conditions of the NSF award.\n\nSCOPE AND METHODOLOGY\n\nWe performed inquiries and walkthroughs of the expenditure, revenue, payroll, and\nreporting/drawdown cycles. The purpose of our inquiries and walkthroughs was to obtain an\nunderstanding of the internal controls over these cycles and to assess the control strengths and\nweaknesses which were in place, and to devise and execute tests of the controls. Our tests were\ndesigned not only to address the controls in place but also to address the audit objectives. In\nconducting the survey and internal control assessments, we interviewed key personnel of each\norganization related to the operations for specific audit areas as deemed necessary. We reviewed\nand documented the organizations procedures and policies, and tested significant controls.\n\n 3\n\x0cWe conducted our audit in accordance with auditing standards generally accepted in the United\nStates of America, the standards applicable to financial audits contained in Government Auditing\nStandards (2007 Revision) issued by the Comptroller General of the United States, and the\nguidance provided in the National Science Foundation OIG Audit Guide (August 2007), as\napplicable. Foxx & Company also complied with the most current AICPA financial audit\nstandards, including the Statements on Auditing Standards (SAS) 62, 99, and 102 through 117.\n\nThese standards and the NSF OIG Audit Guide require that we plan and perform the audit to\nobtain reasonable assurance about whether amounts claimed to NSF as presented in the\nSchedules of Award Costs, (Schedules A-1 through A-4) are free of material misstatements. An\naudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the\nSchedules of Award Costs. An audit also includes assessing the accounting principles used and\nthe significant estimates made by the LBR, as well as evaluating the overall financial schedule\npresentation. We believe that our audit provides a reasonable basis for our opinion.\n\n\n\n\n 4\n\x0cAUDIT REPORT ON FINANCIAL SCHEDULES\n AND\n SUPPLEMENTAL INFORMATION\n\x0cNational Science Foundation\nOffice of Inspector General\n4201 Wilson Boulevard\nArlington, Virginia 22230\n\n INDEPENDENT AUDITORS\xe2\x80\x99 REPORT ON FINANCIAL SCHEDULES\n\nWe have audited the costs claimed by State of Louisiana, Board of Regents to the National\nScience Foundation (NSF) on the Federal Financial Reports (FFRs) for the NSF awards listed\nbelow. In addition, we audited the amount of cost share claimed on the NSF awards, as\napplicable. The FFRs, as presented in the Schedules of Award Costs (Schedules A-1 through A-\n4), are the responsibility of LBR\xe2\x80\x99s management. Our responsibility is to express an opinion on\nthe Schedules of Award Costs (Schedules A-1 through A-4) based on our audit.\n\n Award Number Award Period Audit Period\n\n 05/15/04 - 03/31/08 05/15/04 - 03/31/08\n 11/01/05 - 10/31/10 11/01/05 - 09/30/09\n 10/01/07 - 09/30/10 10/01/07 - 09/30/09\n 10/01/07 - 03/31/10 10/01/07 - 09/30/09\n\nWe conducted our audit in accordance with auditing standards generally accepted in the United\nStates of America, the standards applicable to financial audits contained in Government Auditing\nStandards, issued by the Comptroller General of the United States (2007 revision), and the\nguidance provided in the National Science Foundation OIG Audit Guide (August 2007), as\napplicable. Those standards and the National Science Foundation OIG Audit Guide, require that\nwe plan and perform the audit to obtain reasonable assurance about whether the amounts claimed\nto NSF as presented in the Schedules of Award Costs (Schedules A-1 to A-4) are free of material\nmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts\nand disclosures in the Schedules of Award Costs (Schedules A-1 through A-4). An audit also\nincludes assessing the accounting principles used and the significant estimates made by LBR\xe2\x80\x99s\nmanagement, as well as evaluating the overall financial schedule presentation. We believe our\naudit provides a reasonable basis for our opinion.\n\nThe Schedule of Questioned Costs (Schedule B) explains the $1,884,950 (10%) of total claimed\ncosts that we questioned as to their allowability under the NSF award agreements. These\nquestioned costs include inadequately supported, unallowable, or unapproved labor, fringe\nbenefit, equipment, and subaward costs. The Schedule of Subaward Costs (Schedule C-1)\nexplains the $152,182 of questioned unsupported cost sharing claimed by a subawardee.\nQuestioned costs are (1) costs for which there is documentation that the recorded costs were\n\n 5\n\x0cexpended in violation of the laws, regulations or specific award conditions, (2) costs that require\nadditional support by the awardee, or (3) costs that require interpretation of allowability by\nNSF\xe2\x80\x99s Division of Institution and Award Support. The final determination as to whether such\ncosts are allowable will be made by NSF. The ultimate outcome of this determination cannot\npresently be determined. Accordingly, no adjustment has been made to costs claimed for any\npotential disallowance by NSF.\n\nIn our opinion, except for the $1,884,950 of questioned NSF-funded cost and the $152,182 of\nquestioned cost share, the Schedules of Award Costs (Schedules A-1 through A-4) referred to\nabove present fairly, in all material respects, the costs claimed on the FFRs and cost sharing\nclaimed for the period of May 15, 2004 through September 30, 2009, in conformity with the\nprovisions of the National Science Foundation, Office of Inspector General Audit Guide,\nNational Science Foundation Grant Policy Manual, terms and conditions of the NSF awards\nand on the basis of accounting described in the Notes to the Financial Schedules, which is a\ncomprehensive basis of accounting other than generally accepted accounting principles. These\nschedules are not intended to be a complete presentation of financial position of LBR in\nconformity with accounting principles generally accepted in the United States of America.\n\nIn accordance with Government Auditing Standards, and guidance provided in the National\nScience Foundation OIG Audit Guide, we have also issued a report dated January 19, 2011, on\nour consideration of LBR\xe2\x80\x99s internal control over financial reporting and our tests of LBR\xe2\x80\x99s\ncompliance with certain provisions of laws, regulations, grant agreements, and NSF award terms\nand conditions and other matters. The purpose of that report is to describe the scope of our\ntesting of internal control over financial reporting and compliance and the results of that testing,\nand not to provide an opinion on the internal control over financial reporting or on compliance.\nThat report is an integral part of an audit performed in accordance with Government Auditing\nStandards and should be considered in assessing the results of our audit.\n\nOur audit was conducted for the purpose of forming an opinion on the Schedules of Award Costs\n(Schedules A-1 to A-4). The accompanying schedules B-1, C-1, D-1, and E-1 are presented for\npurposes of additional analysis, as required by the National Science Foundation OIG Audit\nGuide. Such information has been subjected to the auditing procedures applied in the audit of the\nSchedules of Award Costs and, in our opinion, except for the $1,884,950 of questioned NSF\nfunded costs and the $152,182 of questioned cost sharing, is fairly stated, in all material respects,\nin relation to the Schedules of Award Costs.\n\nThis report is intended solely for the information and use of Louisiana Board of Regents\xe2\x80\x99\nManagement, the National Science Foundation, the Louisiana Board of Regents\xe2\x80\x99 cognizant\nfederal audit agency, the Office of Management and Budget, and the Congress of the United\nStates and is not intended to be, and should not be used, by anyone other than these specified\nparties.\n\nFoxx & Company\nCincinnati, Ohio\nJanuary 19, 2011\n\n 6\n\x0cINTERNAL CONTROLS AND\n COMPLIANCE\n\x0cNational Science Foundation\nOffice of Inspector General\n4201 Wilson Boulevard\nArlington, Virginia 22230\n\n\n REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON\n COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL\n SCHEDULES PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING\n STANDARDS\n\nWe have audited the costs claimed as presented in the Schedules of Award Costs (Schedules A-1\nthrough A-4), which summarize financial reports submitted by Louisiana\xe2\x80\x99s Board of Regents\n(LBR) to the National Science Foundation (NSF) and claimed cost share, as applicable for the\nawards and periods listed below and have issued our report thereon dated January 19, 2011.\n\n Award Number Award Period Audit Period\n\n 05/15/04 - 03/31/08 05/15/04 - 03/31/08\n 11/01/05 - 10/31/10 11/01/05 - 09/30/09\n 10/01/07 - 09/30/10 10/01/07 - 09/30/09\n 10/01/07 - 03/31/10 10/01/07 - 09/30/09\n\nWe conducted our audit of the Schedules of Award Costs as presented in Schedules A-1 through\nA-4 in accordance with auditing standards generally accepted in the United States of America,\nthe standards applicable to financial audits contained in Government Auditing Standards, issued\nby the Comptroller General of the United States (2007 revision), and the guidance provided in\nthe National Science Foundation Audit Guide (August 2007), as applicable.\n\nINTERNAL CONTROL OVER FINANCIAL REPORTING\n\nIn planning and performing our audit of the Schedules of Award Costs (Schedules A-1 through\nA-4) for the period May 15, 2004 to September 30, 2009, we considered LBR\xe2\x80\x99s internal control\nover financial reporting as a basis for designing our auditing procedures for the purpose of\nexpressing our opinion on the financial schedules, but not for the purpose of expressing an\nopinion on the effectiveness of LBR\xe2\x80\x99s internal control over financial reporting. Accordingly,\nwe do not express an opinion on the effectiveness of LBR\xe2\x80\x99s internal control over financial\nreporting.\n\nOur consideration of internal control over financial reporting was for the limited purpose\ndescribed in the preceding paragraph and was not designed to identify all deficiencies in internal\n\n\n 7\n\x0ccontrol over financial reporting that might be significant deficiencies or material weaknesses and\ntherefore, there can be no assurance that all deficiencies, significant deficiencies, or material\nweaknesses have been identified. However, as described below in the Findings and\nRecommendations, we identified certain deficiencies in internal control over financial reporting\nthat we consider to be material weaknesses and other deficiencies that we consider to be\nsignificant deficiencies.\n\nA deficiency in internal control exists when the design or operation of a control does not allow\nmanagement or employees, in the normal course of performing their assigned functions, to\nprevent, or detect and correct misstatements on a timely basis. A material weakness is a\ndeficiency, or a combination of deficiencies, in internal control such that there is a reasonable\npossibility that a material misstatement of LBR\xe2\x80\x99s financial schedules will not be prevented, or\ndetected and corrected on a timely basis. We consider the deficiencies described in Finding Nos.\n1 and 3 to be material weaknesses. A significant deficiency is a deficiency, or a combination of\ndeficiencies, in internal control that is less severe than a material weakness, yet important enough\nto merit attention by those charged with governance. We consider the deficiencies described in\nFinding Nos. 2 and 4 to be significant deficiencies.\n\nCOMPLIANCE AND OTHER MATTERS\n\nAs part of obtaining reasonable assurance about whether LBR\xe2\x80\x99s financial schedules are free of\nmaterial misstatement, we performed tests of LBR\xe2\x80\x99s compliance with certain provisions of\napplicable laws, regulations, and NSF award terms and conditions, noncompliance with which\ncould have a direct and material effect on the determination of financial schedule amounts.\nHowever, providing an opinion on compliance with those provisions was not an objective of our\naudit, and accordingly, we do not express such an opinion. The results of our tests of compliance\ndisclosed four instances of noncompliance that are required to be reported under Government\nAuditing Standards and the National Science Foundation OIG Audit Guide and are described in\nFinding Nos. 1 through 4 in the Findings and Recommendations below.\n\nLBR\xe2\x80\x99s response to the findings identified in our audit is described below after each\nrecommendation and is included in its entirety in Attachment A. We did not audit LBR\xe2\x80\x99s\nresponse and accordingly, we express no opinion on it.\n\n\n\n\n 8\n\x0cFINDINGS AND RECOMMENDATIONS\n\nFinding 1. Improvements to the Internal Controls Over Labor Reporting Effort Are\nNeeded\n\nLabor and related fringe benefits charged to NSF awards were not equitably allocated or\nadequately supported. Our review of the LBR effort reporting system disclosed that salaries and\nrelated fringe benefits claimed under the two NSF EPSCOR Award Nos. and\n did not reflect the actual work performed on these awards. Four individuals that were\ncharging the majority of their time to the EPSCoR awards were also working on other federal\nand state projects. Labor and related fringe benefits charged to NSF were based on the award\nbudgets rather than actual effort expended. Furthermore, the two other NSF Awards (\n had no salaries and related fringe benefits charged to either award.\nIn addition, LBR did not use the correct form of timekeeping documentation required by federal\nregulations for a state agency. This condition occurred because LBR\xe2\x80\x99s effort and reporting\nsystem was based on provisions of guidance applicable to educational organizations rather than\nguidance applicable to state governments. LBR mistakenly believed it could use effort reporting\napplicable to universities.\n\nAs a result, because of the inaccurate allocation of salaries and related fringe benefit costs and\nthe improper documentation to support labor charges for staff working on more than one project,\nthere is no assurance that the LBR effort reporting system reliably reported actual effort\nexpended on the NSF awards. Therefore, we questioned $1,305,283 of the salaries and fringe\nbenefits charged to NSF Award Nos. ($712,676) and ($592,607) for\nstaff working on more than one project. We affirmed, through interviews and written testimony\nthat all effort charged was not actually expended on these NSF projects. However, we could not\ndetermine how much of that effort was actually expended on the two NSF projects charged\nthroughout the award period.\n\nAccording to LBR\xe2\x80\x99s \xe2\x80\x9cPolicy on Time and Effort reporting for Federally-Sponsored Projects\xe2\x80\x9d the\nPlan Confirmation method for payroll distribution as described under 2 CFR 220 (formerly OMB\nCircular A-21) Item J.8c(1) is used to account for time charged to the NSF awards. However,\nsince LBR is an instrumentality of the State of Louisiana the provisions of 2 CFR 220 do not\napply but 2 CFR Part 225 (formerly OMB Circular A-87) applied. This regulation requires time\nand effort reporting for employees working on more than one project.\n\nUnder the Plan Confirmation method for universities, the distribution of salaries and wages of\nprofessorial and professional staff applicable to sponsored agreements is based on budgeted,\nplanned or assigned work activity, updated to reflect any significant changes in work\ndistribution. This work can be performed for one or more sponsored projects. If any significant\nchange occurs, the change will be timely documented over the signature of a responsible official\nand entered into the payroll system. At least annually, however a statement should be signed by\nthe employee, principal investigator, or responsible official with knowledge that the work was\nperformed as charged.\n\nUnder the cost principles for state agencies, 2 CFR Part 225, where employees are expected to\nwork solely on a single Federal award or cost objective, charges for their salaries should be\nsupported by periodic or at least semiannual certifications that the employees worked solely on\nthat program. The certifications should be signed by the employee or supervisory official having\n\n 9\n\x0cfirst hand knowledge of the work performed by the employee. Therefore, the rules for awardees\nin universities and states are very similar for employees who work solely on a single Federal\naward or cost objective. However, for states, where employees work on multiple activities or\ncost objectives, a distribution of their salaries or wages should be supported by personnel activity\nreports or the equivalent documentation that must meet the following standards:\n\n a. reflect an after-the-fact distribution of the actual activity of each employee;\n b. account for the total activity for which each employee is compensated;\n c. be prepared at least monthly and must coincide with one or more pay periods; and\n d. be signed by the employee.\n\nBudgeted estimates or other distribution percentages determined before the services are\nperformed do not qualify as support for charges to Federal awards unless other guidelines in 2\nCFR 225 are followed, which are not in place at LBR. In addition, the cost principles for both\neducational institutions and state agencies require that the salaries, wages, and fringe costs\ncharged to the sponsored project accurately reflect the amount of effort that was actually\nexpended on the project.\n\nWe found that five of the six employees at LBR were charging time to the NSF awards and were\ncompleting effort reports in accordance with the educational institutional requirements, 2 CFR\n220. The five employees were preparing semi-annual certifications that listed the percentages\ncharged to each program. The sixth employee, the computer programmer, was charging time to\nthe NSF awards but was not preparing any form of time certification or effort reporting.\nHowever, only two of the six employees were working solely on one NSF project. In addition,\nour review of the LBR effort reporting system disclosed that salaries and related fringe benefits\nclaimed under NSF Award Nos. and did not reflect the actual work\nperformed on these awards, even though the salaries were certified by the employees. Much of\nthe charges made to these awards were for work performed on other NSF, federal and non-\nfederal projects. Furthermore, the two other NSF Awards\nhad no salaries and related fringe benefits charged to either award, even though the LBR\nemployees admitted to spending some time on those two awards, as well as other projects. We\nfound no exceptions for salaries and related fringe benefits for the two employees working 100\npercent of their time on an NSF award and accepted the salaries and related fringe benefits\ncharged to the two EPSCoR awards. However, we questioned the remaining $1,305,283 of\nsalaries and related benefit costs claimed under two NSF awards for the four staff who were\nworking on multiple projects, because those costs were either not accurately allocated to the NSF\nawards or the costs were not adequately supported in accordance with 2 CFR 225.\n\nSpecifically, because time was charged only to NSF EPSCoR Award Nos. and\n the remaining two NSF grants, other federal grants, and state projects did not\nreceive an equitable allocation of direct labor costs. LBR did not have available documentation\nsupporting and identifying the benefits that were provided by the employees who were working\non multiple projects but charging their time to the two NSF EPSCoR awards. Accordingly, we\ninterviewed the six LBR employees charging time to the two NSF awards and had each\nemployee complete a questionnaire outlining their duties.\n\nDuring our interviews and tests, we noted that even though the employees were actually working\non other projects, all time was being charged to the two NSF EPSCoR Award Nos.\nand which are the initial and continuing grant awards for the Louisiana Strategic\n\n 10\n\x0cInfrastructure Improvement Program, respectively. The following table shows the percentage of\ntime charged to NSF Award Nos. through September 30, 2009\nbased on written statements from the staff and verified by interviews in comparison to the\npercentages of time actually charged to the NSF awards.\n\n Amount\n Per Written\n charged to\n Statement\n Individual Period awards\n NSF*\n NSF* Other Other\n Award\n No. 1 5/04-3/08 35% 65% 50% 50%\n No.1 4/08-9/09 30% 70% 100% 0%\n No. 2 5/04-3/08 31.25% 68.75% 100% 0%\n No. 2 10/07-9/09 30% 70% 100% 0%\n No. 3 5/04-9/09 50% 50% 50% 50%\n No. 4 5/04-9/09 100% 0 100% 0%\n No. 5 4/08-9/09 100% 0 100% 0%\n No. 6 5/04-09/09 80% 20% 100% 0%\n\n * NSF Award: Either\n Note: all employees certified to the amount charged to the awards except employee No. 3.\n\nThe above schedule shows that charges on the certifications for three of the six employees were\nnot accurate, even though the charges were certified by the employees. (The fourth employee\n(No. 3) did not prepare any form of certification but charged 50 % of his time to the EPSCoR\nawards.) For example for Employee No. 1, the who was\nresponsible for ensuring that costs for NSF, Department of Energy (DOE), National Aeronautics\nand Space Administration (NASA) and LBR (state) supported projects were charged to the\nappropriate awards, charged 50 percent of his time to the but the written statement\nestimated that only 35% of the individual\xe2\x80\x99s time was applicable to the EPSCoR award. For\nAward No. , 100 percent of the person\xe2\x80\x99s time was charged to the EPSCoR grant,\nbut the written statement estimated that only 30 percent of the individual\xe2\x80\x99s time was applicable\nto NSF Award Nos. for the period April 2008 through September 30, 2009.\nBecause of the significant differences between the information provided during the audit by the\nindividual and the amounts claimed, and the lack of sufficient evidence in the form of an\nacceptable time and effort reporting, we could not determine what amounts should have been\ncharged to each of the NSF awards. As a result, we have questioned all salary and related benefit\ncosts claimed for lack of adequate support.\n\nEmployee No. 2 was a involved in all LBR contracts and awards but\ncharging 100% of the time to the EPSCoR awards. The contracts included the other federal\nprojects (EPSCOR projects from NASA and the Department of Energy and non EPSCoR NSF\nawards) and state projects. According to the written statement the individual estimated that only\nabout 30% of the time was spent on NSF Award Nos. while\n100% of the individual\xe2\x80\x99s time was charged to two awards. Because of the significant differences\nbetween what was charged to the NSF awards, what was provided to us as written estimates,\ncoupled with the lack of a proper time keeping system we have questioned all salaries and related\nfringes for this position.\n\n\n 11\n\x0cEmployee No. 3, the responsible for operating and maintaining the\n ), was charging 50% of his time direct to\nNSF Grant No. However, he was not completing certifications or any other form\neffort reporting. The used for all LBR grants, non-NSF\nfederal grants and state projects for: (1) submitting research grant proposals to the LBR, (2)\ncompleting annual or financial progress reports, and (3) submitting expenditure reports.\nTherefore, the system benefits all LBR projects and not just the NSF EPSCoR grant.\nAccordingly, if 50% of this individual\xe2\x80\x99s time was for working on the system, all of the\n50% should not be charged to the NSF EPSCoR award because the system benefits all\nfederal and state projects. Also, because the programmer did not complete any form of effort\nreporting, there was not adequate support for the actual time charged to the NSF awards, the\nentire amount claimed for this position was questioned.\n\nEmployee No. 6 was the responsible for EPSCoR communications and\nother activities. Although this person estimated that she worked 80% on LBR EPSCoR, 100 %\nof the time was charged to Award Nos. . Also, based on our\nreview of the duties described for this position, this individual may have been working on non\nNSF funded EPSCoR projects. Because the individual did not prepare time and effort reporting\nsupporting the time charged to the NSF awards, the likelihood that a significant portion of effort\ncould have been expended on other than the NSF funded EPSCoR awards, and the estimated\ndifference between what was charged (100%) and what was estimated (80%), the costs for this\nindividual are questioned.\n\nEmployee Nos. 4 and 5 provided appropriate documentation to support their charges to the NSF\nEPSCoR awards. Accordingly, we accepted those charges.\n\nDisparities between the time charged and the actual time worked on the NSF awards existed for\nseveral reasons: (1) employees working on more than one project were not completing effort\nreports that accurately showed their actual time, (2) the employees were charging time as\nbudgeted not as incurred, and (3) the other two NSF awards did not have salaries and fringe\nbenefit cost categories budgeted in the awards.\n\nLBR officials told us that the incorrect use of the educational requirements occurred because a\nprevious LBR commissioner had determined that because LBR dealt with state universities it\nshould use the provisions of 2 CFR 220 (formerly A-21). This position was reinforced by a NSF\nGrants Division review in 2004 that, in error, recommended that LBR start using effort reporting\nin accordance with 2 CFR 220. We verified with NSF that because LBR is a state agency, it is\nrequired to comply with the provisions of 2 CFR 225.\n\nLBR did take actions to improve the effort reporting process to comply with 2 CFR 225\nrequirements during our audit; however, improvements are still needed. After we notified LBR\nin January 2010 that the effort reporting system they were using did not comply with\nrequirements for a state agency, LBR developed new time keeping procedures to comply. The\nnew procedures require any employee working on more than one project to prepare weekly time\nsheets. Employees working entirely on one project were required to complete semi-annual\ncertifications. According to LBR officials the weekly time sheets were prepared on a pilot basis\nbeginning with the week ended April 23, 2010. Starting July 1, 2010, the budget percentages\nused to charge time to the various grants were changed based on the time charges from the\n\n 12\n\x0cweekly time sheets. However, we did not review time charges under the new system because it\nwas outside the scope of our audit (after September 30, 2009). If the revised effort reporting\nprocedures are not accurate, complete, and properly implemented, inaccurate charges to the NSF\nawards will continue on current and future NSF awards.\n\nIn summary, because there were no records documenting actual time, it was necessary to\ninterview employees charging time to the NSF awards to obtain a description of their duties and\nto have them provide a written estimate of time spent on all projects. However, the information\nobtained from the interviews and written statements was based on recollections of up to five\nyears. For four of the six employees charging time to the NSF EPSCoR awards, the written\nestimates did not match what was charged to the EPSCoR awards during the five year audit\nperiod. As a result, NSF does not have assurance that the LBR effort reporting system reliably\nreported actual effort expended on NSF awards. Except for the two employees (Employees 4 and\n5) working 100% on the NSF awards, none of the other employees completed adequate effort\nreports in accordance with 2 CFR 225 during the audit period. Therefore, the lack of an effort\nreporting system in compliance with 2 CFR 225 and the multiple programs worked on by some\nof the employees that were not allocating an equitable portion of their salaries has resulted in\n$1,305,283 being questioned.\n\nRecommendation No. 1:\n\nWe recommend that NSF\xe2\x80\x99s Director of the Division of Institution and Award Support address\nand resolve the following recommendations made to LBR:\n\n a) Require LBR to determine the salaries, wages, and related benefits charged to the NSF\n awards to reflect the actual costs incurred for each of the NSF awards prior to the\n establishment of the new time and effort reporting system in accordance with federal\n requirements,\n\n b) Recover all personnel costs not applicable to the two NSF awards ( and\n , and\n\n c) Review LBR\xe2\x80\x99s revised Effort Reporting System to ensure that it complies with the\n provisions for state agencies (2 CFR Part 225) and that it will result in equitably\n distributed salaries and related benefits. LBR may require supervisory review and\n approval of the timesheets and semiannual certifications for all staff that work on NSF\n awards to ensure that salary charges are accurately allocated, although the federal\n regulations only require the employee\xe2\x80\x99s approval.\n\n Awardee Comments\n\n LBR stated that: \xe2\x80\x9cThe key issue of this finding, i.e., that labor and related fringe benefits\n charged to NSF awards were not equitably allocated or adequately supported, was mainly\n due to the situation described below in the response to Recommendation 1.c. namely, that\n the LBR was advised by NSF in 2004 to use an effort and reporting system under the\n provisions of 2 CFR 220 (formerly OMB Circular A-21).\xe2\x80\x9d LBR continues to explain that\n\n\n 13\n\x0cthe Experimental program to Stimulate Competitive Research (EPSCoR) is an atypical\nNSF program which requires a high level of coordination among programs to achieve its\ngoal. The LBR EPSCoR office served as a coordinating function to help achieve this\ngoal, ensuring that both federal and state programs were operating in concert to increase\nthe effectiveness for the State\xe2\x80\x99s science, technology, and education endeavors.\n\nIn response to Recommendation 1.a., the questioned labor and associated fringe benefits\nat LBR, the response recalculates the percentages that the employees whose salaries were\nquestioned in the draft audit report were working on either\n . In addition, LBR continues to explain that an indirect cost rate was not claimed\nfor these NSF awards plus there were other individuals that worked toward the success of\nthe EPSCoR program that were not budgeted or charged to the two awards. For\nRecommendation 1.b. LBR uses recalculated percentages to arrive at the amounts\napplicable to the NSF awards and the differences of $110,730 charged to Award No.\n and $115,555 for Award No. In response to\nRecommendation No. 1.c. LBR stated that it had used the Plan Conformation method of\nPayroll Distribution at the direction of NSF in 2004. However, as a result of the audit it\nhas instituted a time keeping system starting in July 2010 that is compliant with 2 CFR\n225.\n\nAuditor\xe2\x80\x99s Response\n\nLBR\xe2\x80\x99s use of provisions of 2 CFR 220, which was mistakenly recommended by NSF, did\nnot cause LBR\xe2\x80\x99s inequitably allocated or inadequately supported labor costs. Proper\napplication of the incorrect provision would still result in accurate labor costs charged to\nNSF awards. Other comments made by LBR are responsive to the recommendations,\nhowever, we cannot verify the questioned salaries and related fringe benefits contained\nin LBR\xe2\x80\x99s response to the draft report for the following reasons:\n\na. As stated in Finding No. 1 because of the differences in the time percentages\n between what was originally charged to the two EPSCoR awards\n using the Planned Confirmation method, the written\n statements of the individuals that were still employed at LBR during the audit\n fieldwork, the percentages from interviews with employees and the revised\n percentages in the response to the draft report, we cannot determine what actual\n effort was expended on the EPSCoR awards.\nb. Several of the employees that had charged time to the awards that no longer work\n for LBR were not available for us to interview or obtain written statements of\n their efforts. Therefore, we do not have any documentation to make a decision on\n the amount of effort charged to the EPSCoR awards.\nc. We assume that the differences shown in response to Recommendation No. 1.b. in\n the amounts of $110,730 and $115,555 shown as differences are amounts that\n LBR agrees should not have been charged to the EPSCoR awards.\n\nThe implementation of a time keeping system in accordance with 2 CFR 225 is a very\npositive step; and if implemented properly will result in recommendation No. 1 c being\nresolved. However, we did not review the new time keeping system during the audit\nfield work because the system was implemented outside the scope of our audit.\nAccordingly, we cannot comment on its adequacy.\n\n 14\n\x0c Based on LBR\xe2\x80\x99s response to Recommendations 1a and 1b we recommend that the NSF\xe2\x80\x99s\n Director of the Division of Institution and Award Support perform a technical review of\n the efforts performed by LBR on Award Nos. to\n determine the amount of salaries and related benefits eligible for reimbursement in\n accordance with federal regulations; and recover the appropriate amount of questioned\n costs. In regard to Recommendation No. 1c, we recommend that NSF review the time\n and effort reporting system to ensure that it is working as intended and in accordance\n with 2 CFR 225.\n\n This report finding should not be closed until NSF determines that corrective actions\n have been satisfactorily implemented by LBR.\n\nFinding No. 2 - Monitoring of Subawards Needs Improvements\n\nImprovements are needed to LBR\xe2\x80\x99s NSF funded subaward monitoring program to better\nrepresent its different NSF funded subawardee organizations. The four NSF awards in the scope\nof this audit had 60 first tier subawards to 36 different subawardee institutions that charged $15\nmillion of the $18 million in total costs charged to the awards. LBR\xe2\x80\x99s subaward monitoring of\nNSF funded subawards concentrated on the largest dollars which were subawarded to LSU.\nTherefore, there were a number of first tier NSF funded subawardees that never received an on-\nsite monitoring visit by LBR\xe2\x80\x99s Audit Division. As a result, problems could exist in the internal\ncontrols at other subawardees and could go unnoticed by LBR. Our tests revealed problems at\nSouthern University which is one of LBR\xe2\x80\x99s subawardees. We also, noted an instance where a\nLSU/LBR second tier subawardee exceeded the budget without approval, although LBR\xe2\x80\x99s\nmonitoring review at LSU revealed no findings. Additional subawardee monitoring site visits\nwould result in greater assurance that subaward costs claimed are allowable, reasonable and\nallocable to its current and future NSF awards.\n\nThe monitoring of subawards is required by 45 CFR 602.40 (Common rule codified by NSF) and\nOMB Circular A-133. According to 45 CFR 602.40 grantees are responsible for managing the\nday-to-day operations of grant and subgrant supported activities. Grantees must monitor grant\nand subgrant supported activities to assure compliance with applicable Federal requirements and\nthat performance goals are being achieved. OMB Circular A-133, Section .400(d)(3) requires\nstates to monitor the activities of subawardees as necessary to ensure that Federal awards are\nused for authorized purposes in compliance with laws, regulations, and the provisions of\ncontracts or grant agreements and that performance goals are achieved.\n\nOur review of LBR\xe2\x80\x99s subawardee monitoring revealed that the LBR Audit Division was\nresponsible for monitoring subawardees for compliance with federal fiscal requirements. The\nLBR Audit Division performed site visits using written procedures which included a detailed\naudit program and work papers supporting the work performed during the visit. For the\nsubawardees that did not receive a site visit the Audit Division requested the annual Single Audit\nreports from the subawardees. The LBR\xe2\x80\x99s Audit Division reviewed the Single Audit reports and\naudited financial statements, and followed up with the subawardees to ensure that any material\nweaknesses, instance of non-compliance for findings related to LBR\xe2\x80\x99s subawards had been\nproperly and timely resolved. In addition, LBR\xe2\x80\x99s Sponsored Program Section reviews technical\nand expenditure reports submitted by subawardees through the Louisiana Online Grant\nAutomation Network (LOGAN) system, an internet based system. These reports are reviewed by\n\n 15\n\x0cthe staff to ensure that invoices support expenditures and that expenditures are in accordance\nwith subaward budgets.\n\nWe reviewed the monitoring documentation and audit review programs used by the internal\nauditor and found that the written monitoring programs would, in general, meet the federal\nrequirement for monitoring fiscal requirements of the subawardees, if conducted properly. We\nalso reviewed the four audit reports that the LBR Audit Division issued on the LSU subawards\nreviewed under NSF Award Nos.\n However, the reports did not identify the dollars amounts of expenditures reviewed.\nThe reports were for costs incurred for various periods anywhere from 3 months to one year.\nThe conclusion in each of the four reports was that \xe2\x80\x9cLSU maintained an adequate financial\nmanagement system and supporting documentation for funds received from the Board of Regents\nto provide reasonable assurance of compliance with all applicable laws and regulations, as well\nas the terms of the sub-grant document.\xe2\x80\x9d However, we noted that the LBR Audit Division had\nonly reviewed NSF funded subawards at the Louisiana State University (LSU). Because the\nAudit Division was using a risk based approach to select subawardees based on subaward dollar\namounts, in the case of the NSF awards, LSU overwhelmingly received the largest portion of\nsubaward dollars. Therefore, the other LBR subawards received either limited or no fiscal\nsubaward monitoring to ensure compliance with Federal laws and regulations, other than A-133\nreviews. We believe that LBR\xe2\x80\x99s subawardee monitoring could be improved by performing steps\nbeyond a review of the OMB Circular A-133 audit report results, such as performing desk\nreviews, site visits, and sampling of support documentation using a risk-based method for non-\nLSU subawardees.\n\nWe performed additional procedures at three subawardees to satisfy ourselves that the subaward\ncosts charged by LBR to the NSF grants are accurate, allowable and allocable. These three\nsubawardees included LSU, Southern University (SU), and University of Illinois (U of I). Total\namount of subaward costs claimed by LBR for these three subawardees as of September 30,\n2009 is about $14.5 million or 90 percent of total subaward costs claimed. The following is a\ndescription of the exceptions we noted during our review for the University of Illinois and\nSouthern University.\n\nUniversity of Illinois\n\nWe found that the University of Illinois (U of I) billed labor costs in excess of the budget without\nprior approval under a NSF funded LBR second tier subaward under Award No. .\nOur review noted that the University of Illinois invoiced LSU $173,287 for subcontract services\nrendered from October 1, 2007 through January 31, 2009. However, the portion of the invoice\nfor salary and fringe benefits exceeded 20 percent of the total budgeted salary line items.\nAccording to the subaward prior written approval from LSU\xe2\x80\x99s Principle Investigator or another\nauthorized official was required when a budget line item was exceeded by 20 percent. We found\nno indication that the prior written approval was obtained. We subsequently notified LSU of the\nabove issue, and LSU\xe2\x80\x99s responded in a September 14, 2010 email and agreed that the U of I\nexceeded the budget categories for salaries and fringe benefits. Consequently, LSU notified the\nU of I of this situation and the U of I issued a refund check for $17,696 to LSU. Based on the\nabove, we have questioned the $17,696 amount as unauthorized costs in excess of 20 percent of\nthe subcontract budget. Apparently, the LBR Audit Division was unaware of this issue because\nits report dated May 14, 2010, did not disclose this issue, even though the NSF funded subaward\n\n\n 16\n\x0cwas within the scope of its on-site review. However, because of the numerous subawards at LSU\nand the limited LBR Audit Division staff, the U of I budget issue may have gone unnoticed.\n\nSouthern University\n\nWe determined that Southern University could not support costs claimed under the LBR first tier\nsubcontract under NSF Award No. . As noted in Finding No. 3, documentation\nsupporting the costs claimed by Southern University was inadequate for a significant amount of\nthe costs claimed. As a result, $547,741 of direct and indirect costs and $152,182 of cost sharing\nhas been questioned.\n\nThe LBR Audit Division\xe2\x80\x99s concentration on NSF funded subawards at LSU has not provided\nLBR with assurance that other subawards were complying with federal and state subawards\nrequirements. Therefore, LBR\xe2\x80\x99s current practice of only reviewing LSU subawards funded by\nNSF increases the risk that some of the subawardee costs claimed by other LBR subawardees\nmay be unallowable, unreasonable or not allocable to the NSF awards.\n\nRecommendation No. 2\n\nWe recommend that NSF\xe2\x80\x99s Director of the Division of Institution and Award Support address\nand resolve the following recommendations made to LBR:\n\n a) Consider expanding fiscal subawardee monitoring policies and procedures to include\n subawardees other than LSU using a risk-based approach and require that all reports\n identify the amounts of expenditures reviewed, and\n\n b) Submit to NSF the $17,696 of costs recovered from the University of Illinois by LSU.\n\nAwardee Comments\n\nLBR agreed with the Recommendation 2 a. and listed the procedures that the LBR Audit\nSections utilizes when determining which subawardees to audit. Also, LBR stated that starting\nwith the 6/30/2011 Fiscal Year (FY), the Audit Director will expand his selection for testing to\ninclude all NSF subawardees that have not been audited in the last 5 years. Starting in FY 2012\nthe Audit Director will select for audit the next two auditees which receive the most funding on a\npercentage basis that have not received an audit. Starting in FY 2011 all narratives and audit\nreports will also list by CFDA number the funds passed through to the entity for the FY under\naudit, as well as the percentage of funding. In addition, the Audit Director will perform a risk\nanalysis of all subawardees.\n\nFor Recommendation No. 2 b., Louisiana State University stated that it concurred with the\nquestioned cost at the University of Illinois. The University of Illinois issued a check to LSU on\nSeptember 16, 2010 in the amount of $17,695.92. LSU included a credit on a September 2010\ninvoice to LBR.\n\nAuditor\xe2\x80\x99s Response\n\nLBR\xe2\x80\x99s comments are responsive to the recommendations. The actions contemplated by the LBR\ninternal auditor should address Recommendation No. 2a. The credit for the questioned cost on\n\n 17\n\x0cthe University of Illinois subcontract, once verified by NSF, should address Recommendation\n2b. However, this report finding should not be closed until NSF determines that corrective\nactions have been satisfactorily implemented by LBR.\n\nFinding No. 3 \xe2\x80\x93 Lack of Documentation of Incurred Costs at Southern University\n\nSouthern University could not support a material amount of costs claimed under the LBR first\ntier subcontract under NSF Award No. We found that Southern University could\nnot provide adequate documentation supporting personnel costs, related fringe benefits,\nparticipant support costs, and cost sharing claimed under the NSF award. Although Southern\nUniversity had detailed procedures for maintaining records supporting costs incurred on\nsponsored programs, Southern University could not readily provide accounting documentation to\nsupport costs claimed. As a result, $547,741 of direct and indirect costs and $152,182 of cost\nsharing has been questioned.\n\nAccording to 2 CFR 220 (formerly OMB Circular A-21) personnel costs charged to federal\nprograms must be supported by payrolls documented in accordance with the generally accepted\npractices of colleges and universities. The apportionment of employees\xe2\x80\x99 salaries and wages\nwhich are chargeable to more than one sponsored agreement or other cost objective will be\naccomplished by methods which will produce an equitable distribution of charges for employees\nactivities. The system will provide for independent internal evaluations to ensure the system\xe2\x80\x99s\neffectiveness and compliance. Examples of acceptable methods for payroll distribution include:\nplan confirmation, after-the-fact activity and multiple confirmation records. In addition,\naccording to 2 CFR 215.21 (formerly OMB Circular A-110), recipients\xe2\x80\x99 financial management\nsystems shall provide for: (1) accurate, current and complete disclosure of the financial results of\neach federally-sponsored project, (2) records that identify adequately the source and application\nof funds including records containing information pertaining to Federal awards, authorizations,\nobligations, unobligated balances, asset, outlays income and interest, and, (3) effective control\nover and accountability for all funds. Finally, NSF Grant Administration Regulations require\nNSF awardees to maintain records, supporting documents, statistical records and other records\npertinent to a grant for at least three years from submission of the final project report.\n\nSouthern University could not provide supporting documentation such as time certifications for\npersonnel costs and related fringe benefits, cancelled checks, invoices, purchase orders or other\ndocumentation for participant support costs, consultant costs, and cost sharing. According to\nSouthern University officials the supporting documentation was located at various locations\nthroughout the university and was not readily accessible. However, we requested this\ninformation several weeks before our field work, while we were on site at Southern University,\nand after conclusion of the field work we allowed Southern several weeks to send us the\nsupporting information. However, information provided did not satisfy the documentation\nrequirements of 2 CFR 220 or the NSF Grant regulations. Following is an explanation of the\nquestioned cost by cost category:\n\n Salaries\n The $258,047 of salaries questioned represents salaries and wages not supported by effort\n reports or other supporting documentation. According to 2 CFR 220 Section J (8) (b) personnel\n charges must be supported by documentation that supports the charges to the program.\n Examples of acceptable methods for charging personnel costs to federal awards are plan-\n confirmations, after-the fact activity reports or multiple confirmation records. Although\n\n 18\n\x0c requested, Southern University officials could not provide documentation to support a material\n portion of cost claimed under the NSF funded subaward with LBR. As a result, we questioned\n the $258,047 claimed under the subcontract, as follows:\n\n General Amount Amount Reason for\n Category Description\n Ledger # Claimed Questioned Questioning Cost\n Personnel cost Lack of supporting\n Personnel Cost 27248 (Salaries and wages) Documentation or adequate\n $25,093 $13,275 time and effort records.\n Personnel cost Lack of supporting\n Personnel Cost 27249 (Salaries and wages) Documentation or adequate\n $476,300 $244,772 time and effort records.\n Total $501,393 $258,047\n\nFringe Benefits\nThe $101,383 questioned represents fringe benefits not supported by adequate documentation as\nfollows:\n\n General Amount Amount Reason for\n Category Description\n Ledger # Claimed Questioned Questioning Cost\n Fringe Amount not verifiable to\n Fringe Benefits 27248 Benefits per approved rate per invoice.\n proposed rate $3,528 $3,528 No explanation provided\n Fringe Amount not verifiable to\n Fringe Benefits 27249 Benefits per approved rate per invoice.\n proposed rate $97,855 $97,855 No explanation provided\n Total $101,383 $101,383\n\nParticipant Support Costs\nThe $127,412 questioned represents claimed participant support costs for which Southern\nUniversity could not provide adequate support. For $127,412 of the $266,032 claimed Southern\nUniversity could not provide any type of support. According to 2 CFR 225, C, to be allowable\nfor a federal grant a cost must be allocable to the federal award and be necessary and reasonable\nfor the administration and performance of the award.\n\nAccording to 2 CFR 220 costs incurred and claimed under federal awards must be adequately\nsupported. Because Southern University officials could not provide us such documentation the\ncosts were questioned. Following is a summary of the claimed and questioned cost:\n\n General Amount Amount Reason for questioning\n Category Description\n Ledger # Claimed Questioned cost\n Participant Stipends and Lack of documentation\n 27248\n Support Costs conferences $87,412 $87,412\n Participant Stipends Lack of documentation\n 27271\n Support Costs $40,000 $40,000\n Total $127,412 $127,412\n\nIndirect Costs\nThe questioned indirect costs of consists of and\n represent the claimed indirect costs applicable to the questioned labor costs\nclaimed for on General Ledger No. 27249 and 27248. Because the salaries were questioned in\nNote 1 above, the corresponding indirect cost is also questioned.\n\n\n 19\n\x0c General Amount Reason for\n Category Description\n Ledger # Questioned Questioning Cost\n Indirect Cost 27249 Indirect cost per Indirect cost rate applied\n (Object 9010) proposed rate to applicable direct\n salaries questioned.\n Indirect cost 27248 Indirect cost per Indirect cost rate applied\n proposed rate to applicable direct\n salaries questioned\n Total\n\nCost Sharing\nThe $152,182 questioned represents cost sharing claimed not supported by adequate\ndocumentation. Southern University officials provided us with certifications that added up to\nover $1 million for cost sharing for the NSF award. However, the officials could not provide us\nwith a reconciliation of the $1 million with the $152,182 claimed. Furthermore, they could not\nprovide any supporting documentation for the certifications provided to indicate the costs were\nactually incurred and that the costs were allocable to the NSF award. The cost sharing consisted\nof 25% release time for teachers and Southern University\xe2\x80\x99s Institutional Cost sharing for the NSF\naward. Southern University provided us with a list of teachers for several years that represented\nthe 25 % release time which showed $15,000 per year being charged to the cost sharing.\nHowever, Southern University could not provide us support for how the 25% was determined or\nwhat these teachers had to do with the NSF award. Furthermore, Southern University provided\nus with Certifications for four years of the award that stated that various amounts of\n\xe2\x80\x9cdocumented and estimated\xe2\x80\x9d cost sharing ranging from $224,391 to $256,039 was applicable to\nthe NSF award as Institutional Cost Sharing. Southern University could not provide us any\ndocumentation supporting these amounts. Because Southern University could not provide\ndocumentation to support the cost sharing and could not reconcile the claimed cost sharing we\nhave questioned the costs in accordance with 2 CFR 220 costs incurred and claimed under\nfederal awards must be adequately supported and 2 CFR 215 which states that Cost Sharing must\nbe accounted for in the same manner as direct costs charged to an award.\n\nSouthern University had written standard operating procedures for accounting for sponsored\nprograms entitled \xe2\x80\x9cSouthern University System, Office of the Comptroller, Standard Operating\nProcedures, Unit of Sponsored Programs Accounting\xe2\x80\x9d. These procedures were quite detailed\nand included procedures that if correctly followed would have provided for adequate\ndocumentation to support the costs incurred under the NSF funded subaward. However, as\ndiscussed above Southern University officials could not provide us adequate documentation to\nsupport a significant amount of the costs claimed under the NSF funded subagreement. As a\nresult, we have questioned $547,741 of direct and indirect costs and Cost Sharing costs of\n$152,182 as follows:\n\n Amount\n Cost Category\n Questioned\n Personnel costs $258,047\n Fringe Benefits $101,383\n Participant Support Costs $127,412\n Indirect Costs\n Total Direct and Indirect Costs\n Cost Sharing $152,182\n Total Cost and Cost Sharing Questioned $699,923\n\n\n 20\n\x0cThe inability of Southern University to access documentation supporting a large portion of its\nNSF funded sub agreement with LBR represents a serious internal control weakness. All\nfederally funded grantees should have ready access to accounting documentation support for\ncosts claimed under federal awards. Had the extensive standard operating procedures been\nperformed by Southern University personnel the documentation requested should have been\navailable. Without such documentation there was no assurance that the amounts claimed under\nthe NSF funded subaward with LBR were reasonable, allowable, or actually incurred.\n\nSouthern University\xe2\x80\x99s inability to obtain and maintain adequate supporting documentation\naffects its ability to support and report claimed costs under the NSF award and increases the risk\nthat some of the costs claimed by Southern University may be unallowable, unreasonable, or not\nallocable to the NSF award. We questioned $547,741 of direct cost and indirect costs, and\n$152,182 of cost share claimed.\n\nRecommendation No. 3:\n\nWe recommend that NSF\xe2\x80\x99s Director of the Division of Institution and Award Support address\nand resolve the following recommendation made to LBR:\n\n a) Require Southern University to comply with its existing policies and procedures to ensure\n that all claimed costs including cost sharing, personnel costs, participant support, and\n consultant cost claimed are supported with adequate and sufficient documentation,\n\n b) Recover the $547,741 of questioned direct and indirect costs and return it to NSF, and\n\n c) Obtain adequate documentation supporting the $152,182 of costs share claimed or\n disallow it.\n\nAwardee Comments\n\nLBR and Southern University disagreed with the questioned costs. LBR stated that it had\nreviewed the financial information that Southern University maintains for this award. According\nto LBR it reviewed the financial information that Southern maintained and stated that it supports\nthe invoices that Southern University had submitted to the LBR for reimbursement from the NSF\nfunded subaward. The response states that LBR and Southern University will provide\ndocumentation at the time of audit resolution. According to LBR\xe2\x80\x99s response Southern University\nhad Personnel Action forms, time sheets and copies of the pay history record for the employees\nwhose salaries and related fringes were questioned. In addition, the LBR response cited a\npassage from Southern University\xe2\x80\x99s annual report submitted to the NSF FastLane system for the\nperiod 11/2005 to 11/2006. According to Southern and LBR this statement was support for the\nparticipant support and how the students participated and benefitted the NSF funded subaward.\n\n\n\n\n 21\n\x0cAuditor\xe2\x80\x99s Response\n\nSouthern University did not provide our audit team documentation that adequately supported the\nsalaries and related fringe benefits charged to the NSF funded subaward. Although requested in\nperson during the field work and after we returned to our home base we were never provided\nwith documentation such as time and effort reporting or similar information to support the\namounts claimed. Documentation was not available to trace the salaries and benefits to the\ninvoices submitted to LBR. Documentation for salaries only showed distributions to a\ndepartment not to the NSF funded subaward. In regard to the participant support costs we were\nprovided a list of names, supposedly students, with amounts that were paid to them. No where in\nthe information provided or in the accounting system was there support for what activities these\nindividuals performed that benefited the NSF funded subaward. It was much the same for the\nCost Sharing. The information provided did not adequately support the $152,152 in cost share\nclaimed. In regard to the questioned indirect costs, the questioned resulted from\napplying the claimed indirect cost rated to the questioned salaries. Accordingly, since we did not\nreceive any new information concerning the questioned cost at Southern with LBR\xe2\x80\x99s response,\nthe costs questioned in the draft report will remain questioned in the final report. We continue to\nrecommend that the NSF\xe2\x80\x99s Director of the Division of Institution and Award Support address\nand resolve the above recommendations. This report finding should not be closed until NSF\ndetermines that corrective actions have been satisfactorily implemented by LBR.\n\nFinding No. 4 \xe2\x80\x93 Unallowable Charges Claimed\n\nLBR charged $14,230 to the NSF Award No. for expenses not applicable to NSF\naward and expenses paid with grant funds for unused equipment. We found that LBR had\ncharged $11,953 to the NSF award that should have been paid with State funds. Also, $2,277\nwas paid for computer equipment that was not used during the grant period. As a result, the\n$14,230 has been questioned.\n\nAccording to 2 CFR 225, C, to be allowable for a federal grant a cost must be allocable to the\nfederal award and be necessary and reasonable for the administration and performance of the\naward.\n\nWe found that LBR claimed salary costs for expenses that should have been paid from State\nfunds. In reconciling LSU\xe2\x80\x99s claimed costs, LSU indicated that invoiced costs of $11,953 were\ninadvertently paid by the LBR under the Grant No. . LSU submitted two invoices\n(numbers ) to the LBR for the State portion of the EPSCoR\xe2\x80\x99s\nProject Director\xe2\x80\x99s salary. The contract between LSU and LBR provided that the EPSCoR\xe2\x80\x99s\nProject Director\xe2\x80\x99s salary and fringes were to be funded as follows: 50 percent NSF, 25 percent\nstate, and 25 percent LSU. LSU indicated on the invoices that the invoice should have been paid\nwith the state\xe2\x80\x99s 25 percent portion of funds. However, the invoices were inadvertently paid and\nclaimed under Award No. . Accordingly, we have questioned the erroneous\nclaimed costs of $11,953.\n\nIn addition, we noted that some equipment purchased under Award No was still in\noriginal boxes even though the NSF award had been completed since March 31, 2008. We found\n11 excess speakers at $129 per speaker totaling $1,419. In total, sixty duet microphone speakers\nwere purchased to be used with the video conferencing equipment that was approved by NSF via\namendment 6 on December 27, 2007. We also noted 12 excess Quick Cam Pro Web Cameras at\n\n 22\n\x0cstill in original boxes that cost $71.49 per unit totaling to approximately $858. The microphone\nspeakers plus the web cameras were needed as an integral part of the system. However, 11 of the\nspeakers were not given out to university researchers. At the time of the purchase, the LBR did\nnot know exactly how many speakers were needed. Consequently, only 49 of the speakers were\nhanded out to the universities that had video conferencing software and equipment. The LBR\ntold us that the 11 excess speakers will eventually be given out as new researcher start using the\nvideo conferencing. However, no documentation was provided supporting this statement. Any\nexcess materials, supplies, or equipment on hand more than 2 years after the grant period expired\nare in our view unnecessary for administrating the grant. As a result we questioned $2,277\n($1,419 + $858) expended on this unused equipment.\n\nRecommendation No 4:\n\nWe recommend the that Director of the Division of Institution and Award Support address and\nresolve the following recommendation made to LBR:\n\n\n a) Refund the $11,953 mistakenly charged to the NSF award, and\n\n b) Determine and document a use for the unused equipment that is consistent with the\n objectives of the EPSCoR award, or refund the $2,277 to NSF.\n\nAwardee Comments\n\nLBR stated that it mistakenly charged the $11,953 to NSF because of a typographical error.\nAccordingly, LBR agreed with Recommendation No. 4a and will refund the $11,953 to NSF.\n\nIn regard to the Recommendation No. 4b, LBR stated that it will distribute the remaining\nmicrophone/speakers to participants of the current NSF EPSCoR award, pending\naudit resolution.\n\nAuditor\xe2\x80\x99s Response\n\nLBR\xe2\x80\x99s comments are responsive to the recommendations. Since LBR agrees with\nRecommendation 4a, it will be addressed once LBR credits NSF for the $11,953. In regard to\nRecommendation 4b, it will remain and can\xe2\x80\x99t be resolved until the NSF program agrees that\nmicrophones/speakers are properly utilized. However, this report finding should not be closed\nuntil NSF determines that corrective actions have been satisfactorily implemented by LBR.\n\nOTHER OBSERVATIONS\n\nThe following two issues were noted during the audit that need to be addressed by LBR and\nNSF.\n\nExpenditures for Award No.\n\nDuring the course of the audit we noted that LBR had only expended $915,788 of the $2,593,956\nawarded under Award No. hrough September 30, 2009, the end of our audit\nperiod. Because the award period was through March 31, 2010, LBR was asked on several\n\n 23\n\x0coccasions the reason why over $1.6 million of the award had not been expended with so little\ntime left in the award budget period. In addition, we are aware that according to NSF\xe2\x80\x99s records,\nNSF increased the award by $26,303 to a total of $2,620,259 in 2010 and extended the end\naward period date to July 31, 2011. The amount expended on the award, according to NSF\xe2\x80\x99s\nFederal Financial Report from LBR, as of December 31, 2010 was $1,688,768.56. Since the\nentire award was subawarded to the Louisiana State University, LBR needs to determine if the\nprogrammatic objectives are being met in a timely manner; determine why there are differences\nin the amounts of claimed costs as of December 31, 2010 between its and NSF\xe2\x80\x99s records; and if\nthe unexpended portion of the award will be needed or if it can be returned to NSF. NSF should\nfollow up during audit resolution to determine if these issues are properly addressed.\n\nAwardee Response:\n\nAccording to LBR\xe2\x80\x99s response the Louisiana State University had difficulty hiring the very\nspecialized personnel for this project. In addition, because of the state budget crisis retaining and\npromoting the individuals needed for this project was difficult. LBR stated that through\nDecember 31, 2010, $1,723,478 of the $2,620,259 awarded or 66 percent has been expended.\n\nFinal Federal Financial Report for Award No.\n\nLBR only claimed a total of $8,928,286 through its final Federal Financial Report as the Federal\nShare of Net Disbursements as of the quarter ended March 31, 2008. However, according to\nLBR\xe2\x80\x99s accounting records, LBR actually incurred and received $8,931,273 from the NSF Fast\nLane system which was $2,987 less than the claimed amount. However, NSF closed out the\naward on March 24, 2008 by de-obligating $271,714 from the original award for a net award\namount of $8,928,286. As a result, LBR received $2,987 in advance more than the net award\ncosts. The difference of $2,987 needs to be resolved. Since the audit period had ended the\nauditor was not able to verify the response received from LBR. Documentation supporting\nLBR\xe2\x80\x99s explanation should be provided to NSF during its audit resolution period.\n\nAwardee Response:\n\nLBR stated that because of refunds received before and after the award period, LBR only\nclaimed $8,928,286 for Award No. on its final Federal Financial Report.\n\nThis report is intended solely for the information and use of LBR\xe2\x80\x99s management, and LSU and\nSouthern University officials selected by LBR, the National Science Foundation, LBR\xe2\x80\x99s\ncognizant federal agency and is not intended to be, and should not be used by anyone other than\nthese specified parties.\n\n\n\n\nFoxx & Company\nCincinnati, Ohio\nJanuary 19, 2011\n\n\n\n 24\n\x0c FINANCIAL SCHEDULES AND\nSUPPLEMENTAL INFORMATION\n\x0c SCHEDULE A-1\n Louisiana Board of Regents\n National Science Foundation Award Number\n Schedule of Award Costs\n May 15, 2004 to March 31, 2008\n Final\n\n Claimed\n Approved Claimed Reclassification Costs After Questioned Schedule\n Cost Category Budget Costs (A) Of Costs (B) Reclassification Costs Reference\nDirect costs:\n Salaries and wages $1,152,173 $ 83,319 $ (314,260) $ 669,059 $ 566,098 B-1, Note 1\n Fringe benefits 197,948 262,540 (94,723) 167,817 146,578 B-1, Note 1\n Equipment 31,130 373,245 - 373,245 -\n Travel 58,000 206,206 - 206,206 -\n\n Other direct costs:\n Material and supplies 43,000 37,917 - 37,917 2,277 B-1, Note 2\n Consultant services 125,000 91,994 - 91,994 -\n Subawards 7,310,113\n LSU 6,377,700 408,983 6,786,683 11,953 B-1, Note 3\n Others 569,469 - 569,469\n\n Other direct costs 282,636 28,883 - 28,883 -\n\n Total direct costs $9,200,000 $8,931,273 $ - $ 8,931,273 $ 726,906\n\nCosts incurred in excess\nof claimed costs - (2,987) - (2,987) -\n\n Total $9,200,000 $8,928,286 $ - $ 8,928,286 $ 726,906\n\nCost Sharing $4,500,000 $4,719,031 $ - $ 4,719,031 $ -\n\n\n(A) The total claimed costs agree with the total expenditures reported by the LBR on the Federal\n Financial Report - Federal Share of Net Disbursements as of the quarter ended March 31, 2008.\n LBR only claimed a total of $8,928,286 through its final FFR. However, according to LBR\xe2\x80\x99s\n accounting records, LBR actually incurred and received $8,931,273 from the NSF Fast Lane system\n which is $2,987 less than the claimed amount. Accordingly, we have adjusted the claim amount by\n the $2,987.\n\n(B) We have reclassified costs claimed in object classes 4910, 4920, and 4930 to subawards because the\n costs represent labor and fringe benefits for an employee on detail from the Louisiana State\n University (LSU) under a subaward to the LBR. The costs were included in LSU's claim.\n\nSee Accompanying Notes to Financial Schedules\n\n\n\n\n 25\n\x0c Schedule A-2\n\n\n Louisiana Board of Regents\n National Science Foundation Award Number\n Schedule of Award Costs\n November 1, 2005 to September 30, 2009\n Interim\n\n Approved Claimed Questioned Schedule\n Cost Category Budget Costs (A) Costs Reference\n\n Direct costs:\n Salaries and wages $ - - -\n Fringe benefits - -\n Equipment - -\n Travel 12,000 - -\n Participant support - -\n Other direct costs:\n Material and supplies - -\n Publication cost - -\n Consultant services -\n Subawards 5,135,000\n LSU 2,816,882 -\n Southern University 1,336,330 547,741 Schedule C-1\n Others 194,322 -\n\n Other direct costs - - -\n\n Total direct costs $ 5,147,000 $ 4,347,534 $ 547,741\n\n Total $ 5,147,000 $ 4,347,534 $ 547,741\n\n Cost Sharing $ 2,000,000 $ 3,444,439 $ 152,182 Schedule C-1\n\n\n\n\n(A) The total claimed costs agree with the total expenditures reported by the LBR on the Federal\n Financial Reports for the quarter ended September 30, 2009. Claimed costs reported above were\n taken directly from LBR's books of accounts.\n\nSee Accompanying Notes to Financial Schedules\n\n\n\n\n 26\n\x0c Schedule A-3\n\n Louisiana Board of Regents\n National Science Foundation Award Number\n Schedule of Award Costs\n October 1, 2007 to September 30, 2009\n Interim\n\n Claimed\n Approved\n Claimed Reclassification Costs After Questioned Schedule\n Budget\n Cost Category Costs (A) Of Costs (B) Reclassification Costs Reference\nDirect costs:\n Salaries and wages $851,445 $ 739,659 $ (157,387) $ 582,272 $ 472,947 B-1,Note 1\n Fringe benefits 177,290 196,364 (52,720) 143,644 119,660 B-1,Note 1\n Equipment - -\n Travel 32,000 47,872 - 47,872 -\n Participant support - -\n Other direct costs: - -\n Material and supplies 34,464 11,060 - 11,060 -\n Publications costs - -\n Consultant services 122,000 98,431 - 98,431 -\n Subawards 3,324,261\n LSU 2,435,552 210,107 2,645,659 -\n Others 840,641 - 840,641 -\n Other direct costs 1,458,540 35,992 - 35,992 -\n\n Total direct costs $ 6,000,000 $4,405,571 $ - $ 4,405,571 $ 592,607\n\nIndirect costs - - - - -\n\n Total $ 6,000,000 $4,405,571 $ - $ 4,405,571 $ 592,607\n\n\n (A) The total claimed costs agree with the total expenditures reported by the LBR on the Federal\n Financial Reports for the quarter ended September 30, 2009. Claimed costs reported above were\n taken directly from LBR's books of accounts.\n\n (B) We have reclassified costs claimed in object classes 4910, 4920, and 4930 to subawards because the\n costs represent labor and fringe benefits for an employee on detail from the Louisiana State\n University (LSU) under subaward to LBR. The costs have been included in LSU's claim.\n\n See Accompanying Notes to Financial Schedules\n\n\n\n\n 27\n\x0c SCHEDULE A-4\n Louisiana Board of Regents\n National Science Foundation Award Number\n Schedule of Award Costs\n October 1, 2007 to September 30, 2009\n Interim\n\n Approved Claimed Questioned Schedule\n Cost Category Budget Costs (A) Costs Reference\n\n Direct costs:\n Salaries and wages $ - $ - $ -\n Fringe benefits - -\n Equipment - -\n Travel - - -\n Participant support - -\n Other direct costs: -\n Material and supplies - -\n Publication cost - -\n Consultant services - -\n Subawards LSU $2,593,956 $915,788 $17,696 B-1, Note 4\n Other direct costs - - -\n\n Total direct costs $2,593,956 $915,788 $17,696\n\n Indirect cost $ - $ - -\n\n Total $2,593,956 $915,788 $17,696\n\n\n\n\n(A) The total claimed costs agree with the total expenditures reported by the LBR on the Federal\n Financial Reports for the quarter ended September 30, 2009. Claimed costs reported above were\n taken directly from LBR\xe2\x80\x99s books of accounts.\n\n\nSee Accompanying Notes to Financial Schedules.\n\n\n\n\n 28\n\x0c Schedule B-1\n LOUISIANA BOARD OF REGENTS\n BATON ROUGE, LOUISIANA\n AUDIT OF\n NATIONAL SCIENCE FOUNDATION\n AWARD NOs.\n Notes to the Schedules of Award Costs\n\nNote 1: We have questioned $1,305,283 of labor and related benefits claimed because of an\n inaccurate allocation of salaries and related fringe benefit costs and the improper\n documentation to support labor charges for staff working on more than one project, as\n discussed in Finding No. 1 of the internal control and compliance report. The claimed\n and questioned costs by grant are detailed as follows:\n\n Award No. Claimed Costs\n Salary Fringes Total Note\n $669,059 167,817 $836,876\n Less:\n Employee\xe2\x80\x99s 4 Salary and benefits (102,961) (21,239) (124,200) 1b\n Questioned $566,098 $146,578 $712,676 1a\n 582,272 143,644 725,916\n Less:\n Employee 4 salary and benefits (90,710) (18,715) (109,425) 1b\n Employee 5 salary and benefits (18,615) (5,269) (23,884) 1b\n Questioned $472,947 $119,660 $592,607 1a\n Total $1,039,045 $266,238 $1,305,283\n\n\n a. The $712,676 questioned on Award No. and the $592,607\n questioned on Award No. represent salaries and related fringe\n benefits claimed for individuals charging to the EPSCoR awards that worked on\n multiple projects besides EPSCoR for which LBR could not provide adequate\n support. According to 2 CFR 225 state and local governments are required to\n have a time and effort reporting system for individuals who work on multiple\n projects which adequately allocates the costs incurred to the projects being\n worked on. As discussed in Finding No. 1 included in the Internal Control and\n Compliance report, only two individuals charging time to the awards were\n working 100 percent on the EPSCoR awards. These two individuals completed\n semi-annual certifications verifying that they were working a 100 percent of their\n time on the NSF EPSCoR awards. As a result, we accepted the claimed costs for\n these two individuals, see 1b below. Following are the details of the questioned\n personnel and related fringe costs:\n\n\n\n\n 29\n\x0c Award No.\n Salaries and Note\n Fringes\n\n Employee No. 1 $125,307 $173,672\n Employee No. 2 $173,414 104,465\n Employee No. 3 $ 69,874 70,887\n Employee No. 6 $175,344 157,044\n Employees no\n longer at LBR\n Employee No. 7 $130,878 74,671 Not at LBR*\n Employee No. 8 $18,723 Not at LBR*\n Employee No. 9 $9,201 Not at LBR*\n Employee No. 10 $0 $13,323 Not at LBR*\n Employee No. 11 $ 2,634 1,851 Not at LBR*\n Misc. Employees $696 Not at LBR*\n Unexplained Amt. $6,605 (3,306)\n Total Questioned $712,676 $592,607 $1,305,283\n\n *These employees were not at LBR when we performed the substantive part of the audit, so we\n could not interview or request a listing of what projects they worked on. The amounts charged\n by these individuals are questioned because they did not prepare time and effort reporting in\n accordance with 2 CFR 225.\n\n\n LBR claimed $6,605 more than was on the payroll reports for the\n and claimed $3,306 less than was on the payroll reports for We\n only accepted the salaries and related fringe benefits for the two program\n associates discussed in (b) below. The remaining claimed costs of $1,305,283\n have been questioned.\n\nb. We interviewed two EPSCoR program associates and based on evidence provided\n the two worked only on the NSF EPSCoR grants. According to our interviews\n and their written statements they did not work on any other federal grant and have\n not prepared or assisted in preparing any grant proposals. Accordingly, all time\n charged by these two individuals to the two NSF EPSCoR grants is considered\n allowable. The labor and fringes claimed under the two grants for both\n employees of $257,509 has been accepted, is summarized as follows:\n\n Description Grant Salary Fringes Total\n Employee 4 $102,961 $21,239 $124,200\n Employee 4 90,710 18,715 109,425\n Employee 5 0 0 0\n Employee 5 18,615 5,269 23,884\n Total $212,286 $45,223 $257,509\n\n These amounts have been deducted from the amount claimed by LBR for salaries\n and related fringe benefits and are accepted.\n\n\n 30\n\x0cNote 2: Based on our transaction testing, we have questioned claimed materials and supplies\n costs of $2,277. The questioned costs are detailed as follows:\n\n Description Questioned Note\n Excess Microphone Speakers $1,419 a.\n Excess Quick Cam Pro Web Cameras 858 b.\n Total $2,277\n\n a. The questioned costs of $1,419 represent 11 excess speakers at $129 per speaker.\n Under the basic guideline of 2 CFR Part 225, to be allowable under Federal\n awards, costs must be necessary and reasonable for the proper and efficient\n performance and administration of Federal awards. The grant period for grant\n expired on March 31, 2008. Any excess materials, supplies, or\n equipment on hand more than two years after the grant period expired are in our\n view unnecessary for administrating the grant. In total, sixty duet microphone\n speakers were purchased for $7,740 ($129 per unit) to be used with the video\n conferencing equipment that was approved by NSF via amendment 6 on\n December 27, 2007. The microphone speakers plus the web cameras (discussed\n below in (b)) were needed as an integral part of the system. However, 11 of the\n speakers were not given out to university researchers. At the time of the\n purchase, the LBR did not know exactly how many speakers were needed.\n Consequently, only 49 of the speakers were handed out to the universities that had\n video conferencing software and equipment. The LBR told us that the 11 excess\n speakers will eventually be given out as new researcher start using the video\n conferencing. However, no documentation was provided supporting this\n statement.\n\n b. The questioned costs of $858 represent 12 excess Quick Cam Pro Web Camera at\n $71.49 per unit. Sixty cameras were purchased for $4,289.40 to be used with the\n video conferencing equipment as discussed in (a) above. However, 12 of the\n cameras were not handed out for the reasons discussed in (a) above. Accordingly,\n we questioned $857.88 rounded to $858 (12 x $71.49) for the 12 cameras for the\n reasons discussed above in (a).\n\nNote 3: In reconciling LSU\xe2\x80\x99s claimed costs, LSU indicated that invoiced salary costs of\n $11,953 were inadvertently paid by the LBR under the Grant No. LSU\n submitted two invoices (numbers ) to the LBR for\n the State portion of the EPSCoR\xe2\x80\x99s Project Director\xe2\x80\x99s salary. The contract between\n LSU and LBR provided that the EPSCoR\xe2\x80\x99s Project Director\xe2\x80\x99s salary and fringes were\n to be funded as follows: 50 percent NSF, 25 percent state, and 25 percent LSU. LSU\n indicated on the invoices that the invoice should have been paid with state\xe2\x80\x99s 25 percent\n portion of funds. However, the invoices were inadvertently paid and claimed under\n Award No. Accordingly, we have questioned the erroneous claimed\n costs of $11,953.\n\nNote 4: The University of Illinois (U of I) invoiced LSU $173,287 for subcontract services\n rendered from October 1, 2007 through January 31, 2009. However, the portion of the\n invoice for salary and fringe benefits exceeded 20 percent of the total budgeted salary\n\n 31\n\x0cline items. According to the subaward, prior written approval from LSU\xe2\x80\x99s Principle\nInvestigator and authorized official was required when a budget line item was\nexceeded by 20 percent. We found no indication that the prior written approval was\nobtained. We subsequently notified LSU of the above issue, and LSU\xe2\x80\x99s responded in\na September 14, 2010 email and agreed that the U of I exceeded the budget categories\nfor salaries and fringe benefits. Consequently, LSU notified the U of I of this situation\nand the U of I issued a refund check for $17,696 to LSU. Based on the above, we\nhave questioned the $17,696 amount as unauthorized costs in excess of 20 percent of\nthe subcontract budget.\n\n\n\n\n 32\n\x0c Schedule C-1\n\n Louisiana Board of Regents\n Baton Rouge, Louisiana\n National Science Foundation Award No.\n Southern University Subaward with LBR\n Schedule of SubAward Costs\n November 1, 2005 to September 30, 2009\n Interim\n\n\n\n Schedule\n Approved Claimed Questioned\n Cost Category Reference\n Budget Costs (A) Costs\n to D-1\nDirect costs:\n Salaries and wages $673,697 $501,393 $258,047 D-1,Note 1\n Fringe Benefits 190,552 101,383 101,383 D-1,Note 2\n Equipment - - -\n Travel 58,529 40,446 -\n Participant support 331,930 266,032 127,412 D-1,Note 3\n Other direct costs:\n Material and supplies 30,291 23,433 -\n Publication costs 39,992 29,401 -\n Consultant services 378,763 261,750 -\n Subawards - - -\n Other direct costs - 85 -\n\n Total direct costs $1,703,754 $1,223,923 $486,842\n\n Indirect costs $ $ 60,899 D-1,Note 4\n\n Total $547,741\n\nCost Sharing $ 152,182, $ 152,182 $152,182 D-1,Note 5\n\n\n\n\n 33\n\x0c Schedule D-1\n\n Louisiana Board of Regents\n Baton Rouge, Louisiana\n National Science Foundation Award No.\n Southern University Subaward with LBR\n Notes to Schedule C-1\n\n\n\nNote 1: The $258,047 questioned represents salaries and wages not supported by effort reports\n or other supporting documentation. According to 2 CFR 220 Section J (8) (b)\n personnel charges must be supported by documentation that supports the charges to the\n program. Examples of acceptable methods for charging personnel costs to federal\n awards are plan-confirmations, after-the fact activity reports or multiple confirmation\n records. Although requested, Southern University officials could not provide\n documentation to support a material portion of costs claimed under the NSF funded\n subaward with LBR. As a result, we questioned the $258,047 claimed under the\n subcontract.\n\n Category General Description Amount Amount Reason for questioning\n Ledger Claimed Questioned cost\n No.\n Personnel Cost 27248 Personnel $25,093 $13,275 Lack of supporting\n cost Documentation or effort\n (Salaries and reporting records.\n wages)\n Personnel Cost 27249 Personnel $476,300 $244,772 Lack of supporting\n cost Documentation or\n (Salaries and adequate effort reporting\n wages) records.\n Total $501,393 $258,047\n\nNote 2: The $101,383 of fringe benefits claimed was questioned because of a lack of supporting\n documentation.\n\n Category General Description Amount Amount Reason for questioning\n Ledger Claimed Questioned cost\n No.\n Fringe Benefits 27248 Fringe $3,528 $3,528 Amount not verifiable to\n Benefits per approved rate per\n proposed invoice. No explanation\n rate provided\n Fringe Benefits 27249 Fringe $97,855 $97,855 Amount not verifiable to\n Benefits per approved rate per\n proposed invoice. No explanation\n rate provided\n Total $101,383 $101,383\n\nNote 3: The $127,412 questioned represents claimed participant support for which Southern\n University could not provide adequate support. Southern University only provided us a\n spreadsheet with names of students and amounts paid. Documentation such as time and\n\n 34\n\x0c effort reports were not provided to show how the individuals benefited the NSF funded\n subaward. According to 2 CFR 215.21(b) (7). costs incurred and claimed under federal\n awards must be supported by accounting records supported by source documentation.\n Because Southern University officials could not provide us such documentation the\n costs were questioned. Following is a summary of the claimed and questioned cost:\n\n Category General Description Amount Amount Reason for questioning\n Ledger # Claimed Questioned cost\n Participant 27248 Stipends and $87,412 $87,412 Lack of documentation\n Support Costs conferences\n Participant 27271 Stipends $40,000 $40,000 Lack of documentation\n Support Costs\n Total $127,412 $127,412\n\n\n\nNote 4: The questioned indirect costs of consisting of\n and represent the claimed indirect costs applicable to the\n questioned labor costs claimed on General Ledger Nos. 27248 and 27249. Because the\n salaries were questioned in Note 1 above, the corresponding indirect cost is also\n questioned.\n\n Category General Description Amount Reason for questioning\n Ledger # Questioned cost\n Indirect Cost 27249 Indirect cost Indirect cost rate applied\n per proposed to applicable direct\n rate salaries questioned.\n Indirect Cost 27248 Indirect cost Indirect cost rate applied\n per proposed to applicable direct\n rate salaries questioned.\n Total\n\nNote 5: The $152,182 questioned represents cost sharing claimed not supported by adequate\n documentation. Southern University officials provided us with certifications that added\n up to over $1 million for cost sharing for the NSF award. However, the officials could\n not provide us with a reconciliation of the $1 million with the $152,182 claimed.\n Furthermore, they could not provide any supporting documentation for the\n certifications provided to indicated the costs were actually incurred and that the costs\n were allocable to the NSF award. The cost sharing consisted of 25 percent release time\n for teachers and Southern University\xe2\x80\x99s Institutional Cost sharing for the NSF award.\n Southern University provided us with a list of teachers for several years that\n represented the 25 % release time which showed $15,000 per year being charged to the\n cost sharing. However, Southern University could not provide us support for how the\n 25 % was determined or what these teachers had to do with the NSF award.\n Furthermore, Southern University provided us with Certifications for four years of the\n award that stated that various amounts of \xe2\x80\x9cdocumented and estimated\xe2\x80\x9d cost sharing\n ranging from $224,391 to $256,039 was applicable to the NSF award as Institutional\n Cost Sharing. Southern University could not provide us any documentation supporting\n these amounts. Because Southern University could not provide documentation to\n support the cost sharing and could not reconcile the claimed cost sharing we have\n questioned the costs in accordance with 2 CFR 215 which states that Cost Sharing must\n be accounted for in the same manner as direct costs charged to an award.\n\n 35\n\x0c Schedule E-1\n\n NATIONAL SCIENCE FOUNDATION AWARD NOS.\n\n SUMMARY SCHEDULES OF AWARDS AUDITED AND AUDIT RESULTS\n MAY 15, 2004 to SEPTEMBER 30, 2009\n\n Summary of Awards Audited\n\n Grant and Cooperative\n Agreement Audit Period Award Period\n 05/15/04 - 03/31/08 05/15/04 - 03/31/08\n 11/01/05 - 09/30/09 11/01/05 - 10/30/10\n 10/01/07 - 09/30/09 10/01/07 - 09/30/10\n 10/01/07 - 09/30/09 10/01/07 - 03/31/10\n\n\n\n Award Description\n Type of Award\n Louisiana\xe2\x80\x99s Research Infrastructure\n Research Grant Improvement Strategy \xe2\x80\x93 EPSCOR\n Experimental Program to Stimulate\n Competitive Research\n Louis Stokes Louisiana Alliance for\n Cooperative Agreement Minority Participation\n Louisiana\xe2\x80\x99s Research Infrastructure\n Research Grant Improvement Strategy _ EPSCOR\n (Continuation Award for\n High Performance Computing for Science\n Cooperative Agreement and Engineering Research and Education\n\n\n\n Summary of Questioned and Unsupported Costs by Award\n\n Cost Sharing\n NSF Award Unsupported Costs\n Number Award Budget Claimed Costs Questioned Costs Costs Questioned\n $9,200,000 $8,928,286 $726,906 $726,906 -\nCost share $4,500,000 $4,719,031 - -\n $5,147,000 $4,347,534 $547,741 $547,741\nCost share $2,000,000 $3,444,439 $152,182\n $6,000,000 $4,405,571 $592,607 $592,607\n $2,593,956 $915,788 $17,696\nTotals $1,884,950 $1,867,254 $152,182\n\n\n\n\n 36\n\x0cSummary of Questioned Cost by Explanation\n\n Internal\n Condition Questioned Control\n Cost Amount Weaknesses Non-Compliance\nIncorrect support for salary and fringes $1,305,283 X X\nLack of documentation for salary at a\nsubawardee $258,047 X X\nLack of documentation for fringe benefits\ntested at a subawardee $101,383 X X\nLack of documentation for Participant\nSupport at a subawardee $127,412 X X\nApplicable indirect costs to questioned\nsalary claimed by subawardee $60,899 X X\nAn ineligible state expenditure charged to\nthe NSF award by the awardee $11,953 X X\nUnused and unnecessary equipment charged\nto the NSF award by LBR $2,277 X X\nSubaward costs recovered from a\nsubawardee for exceeding a budget without\napproval $17,696 X X\nTotal Questioned Costs $1,884,950\ncost sharing charged to a subawardee not\nsupported by adequate documentation $152,182 X X\n\nSummary of Internal Control Weaknesses and Non-Compliance Issues\n\n Internal\n Material Amount of NSF\n Control or Significant\n Condition Weakness Claimed/ Incurred\n Non- Deficiency\n Costs Affected\n Compliance\nImprovements to the Internal\nInternal Controls Over Control and\nLabor Reporting Effort Non-\nAre Needed Compliance\n X $1,305,283\nMonitoring of Subawards Internal\nNeeds Improvement Control and\n Non-\n Compliance\n X $15,960,542\nLack of Documentation of Internal\nIncurred Costs at Southern Control and\nUniversity Non-\n Compliance X $1,336,330\nUnallowable Charges Internal\nClaimed Control and\n Non-\n Compliance X $17,696\n\n\n\n\n 37\n\x0c LOUISIANA BOARD OF REGENTS\n NOTES TO THE FINANCIAL SCHEDULES\n From May 15, 2004 to September 30, 2009\n\nNote 1: Summary of Significant Accounting Policies\n\n Accounting Basis\n The accompanying financial schedules have been prepared in conformity with National\n Science Foundation (NSF) instructions, which are based on a comprehensive basis of\n accounting other than generally accepted accounting principles. Schedules A-1 through\n A-4 have been prepared by LBR from the Federal Financial Reports (FFRs) submitted\n to NSF and LBR\xe2\x80\x99s accounting records. The basis of accounting utilized in preparation\n of these reports differs from generally accepted accounting principles. The following\n information summarizes these differences:\n\n A. Equity\n Under the terms of the awards, all funds not expended according to the award\n agreements and budgeted at the end of the award period are to be returned to NSF.\n Therefore, the awardee does not maintain any equity in the award and any excess\n cash received from NSF over final expenditures is due back to NSF.\n\n B. Inventory\n Minor materials and supplies are charged to expense during the period of\n purchase. As a result, no inventory is recognized for these items in the financial\n schedules.\n\n C. Equipment\n\n Equipment is charged to expense in the period during which it is purchased\n instead of being recognized as an asset and depreciated over its useful life. As a\n result, the expenses reflected in the Schedules of Award Costs include the cost of\n equipment purchased during the period rather than a provision for depreciation.\n\n Except for awards with nonstandard terms and conditions, title to equipment\n under NSF awards vests in the recipient, for use in the project or program for\n which it was acquired, as long as it is needed. The recipient may not encumber\n the property without approval of the federal awarding agency, but may use the\n equipment for its other federally sponsored activities, when it is no longer needed\n for the original project.\n\n D. Income Taxes\n\n LBR is a government agency and does not pay income taxes.\n\n\n\n\n 38\n\x0cNote 2: Indirect Cost Rates - The LBR has federally approved indirect cost rates but the LBR\n did not budget or request indirect costs under the NSF grants in the scope of the audit.\n\nNote 3: The departure from generally accepted accounting principles allows NSF to properly\n monitor and track actual expenditures incurred by LBR. The departure does not\n constitute a material weakness in internal controls.\n\n\n\n\n 39\n\x0cATTACHMENT A \xe2\x80\x93 AWARDEE\xe2\x80\x99S\n COMMENTS TO REPORT\n\x0c ATTACHMENT A\n\n\n\nSent: Wednesday, March 23, 2011 5:56 PM\n\n ;\n'bmccainj@nsf.gov'\nSubject: Response to Audit Report - Louisiana Board of Regents\n\nDear\n\nAttache port for NSF\nawards\n\nWe request that this report not be issued until we have the opportunity to\nhave a face-to-face meeting with Foxx and Company to discuss and provide\ndocumentation to support our response. It this is not a option under your\nprocess, we look forward to resolving the differences during audit\nresolution.\n\nThe response is in PDF format. If you need additional information, please\nlet me know.\n\nThanks,\n\n\n\n\n 40\n\x0c41\n\x0c42\n\x0c43\n\x0c44\n\x0c45\n\x0c46\n\x0c47\n\x0c48\n\x0c49\n\x0c50\n\x0c51\n\x0c52\n\x0c53\n\x0c54\n\x0c55\n\x0c56\n\x0c57\n\x0c58\n\x0c59\n\x0c60\n\x0c61\n\x0c62\n\x0c63\n\x0cATTACHMENT B \xe2\x80\x93 STATUS OF PRIOR\n REVIEW FINDINGS\n\x0c ATTACHMENT B\n\n\nSTATUS OF PRIOR REVIEW FINDINGS\n\nA previous OIG audit, a NSF 2004 Financial Administrative Site Visit, and an OMB Circular A-\n133 Audit identified concerns. We performed procedures to determine whether these issues had\nbeen resolved.\n\nOIG\xe2\x80\x99s 1998 Audit.\n\nThe OIG audit questioned the cost for equipment not authorized in the budget and over-\nallocation of indirect costs. It also disclosed internal control findings regarding the LBR\xe2\x80\x99s\nfinancial management system. LBR did not adequately record subcontract costs by NSF-\napproved budget line item; the financial management system did not adequately account for\nparticipant support at the subawardee level; and the payroll system did not adequately track\nperformance. The current NSF awards do not have indirect costs included in the grant budget\nand the equipment purchases are immaterial. According to NSF\xe2\x80\x99s resolution memorandum dated\nNovember 4, 1998, all issues were satisfactorily resolved. However, even though LBR revised\nits time keeping system, it adopted incorrect procedures. LBR adopted procedures which are for\nuniversities not state agencies. Because LBR is a state agency the provisions of 2 CFR Part 225\napply these regulations require the awardee to use time and effort reporting system for personnel\nworking more than one program. (See the finding on salary and wages at LBR under finding\nnumber 1 in the report on internal controls and compliance.)\n\nNSF\xe2\x80\x99s 2004 Financial Administrative Site Visit\n\nThe site visit determined that LBR was unable to present time and effort labor reports for its\nemployees. Therefore, LBR needed to develop written policies and procedures for timekeeping.\nAlso, the LBR did not have a system in place to review and verify the allowability of sub\nawardee cost sharing. Accordingly, the NSF recommended that the LBR develop written\npolicies and procedures for cost sharing and aggressively monitor the cost sharing progress of\nsubawardee universities to ensure that requirements are being met. In addition, LBR did not\nhave policies and procedures for subawardee monitoring and did not perform monitoring visits at\nany of its partnering institutions. Hence, the NSF recommended that LBR develop applicable\nwritten policies and procedures. LBR did strengthen its subawardee monitoring by establishing\npolicies and procedures on monitoring cost sharing and matching through the use of internal\nauditors. LBR uses the LBR internal auditor to periodically review costs incurred at\nsubawardees. However, for NSF funded subawardees only LSU subawards were reviewed on\nsite. See Finding No. 2. Also, LBR revised its time reporting in accordance with 2 CFR 220\n(OMB Circular A-21) as recommended by the NSF team. However, 2 CFR 220 (OMB Circular\nA-21) does not apply to LBR because it is a department of the State of Louisiana, therefore 2\nCFR 225 (OMB Circular A-87) applies. (See finding 1 in the report on internal controls and\ncompliance.)\n\nOMB Circular A-133 Audit\nThe FY 2007 OMB Circular A-133 audit report for the state of Louisiana included a finding that\nthe LBR did not adequately monitor sub awardees on a U.S. Department of Education grant\n\n 64\n\x0caward. However, according to the FY 2008 Single Audit this issue was resolved. In addition,\nthe FY 2008 Single Audit had a finding on the IT system for the State of Louisiana which affects\nLBR and LSU. The State\xe2\x80\x99s Division of Administration (DOA) had not performed internal audits\nto monitor, assess, and report on the effectiveness of the state\xe2\x80\x99s centralized information\ntechnology (IT) controls. This finding was resolved according to the FY 2009 Single Audit.\n\n\n\n\n 65\n\x0cATTACHMENT C \xe2\x80\x93 EXIT CONFERENCE\n\x0c ATTACHMENT C\n\n\nEXIT CONFERENCE\n\n\nWe conducted an exit conference on January 19, 2011 with LBR. We discussed preliminary\nfindings and recommendations noted during the audit. Representing LBR were:\n\n Name Title\n\n\n\n\nRepresenting the National Science Foundation \xe2\x80\x93 Office of Inspector General was:\n\n Name Title\n\n Billy McCain Audit Manager\n\n\nRepresenting Foxx & Company were:\n\n Name Title\n\n\n\n\n 66\n\x0c HOW TO CONTACT\nTHE OFFICE OF INSPECTOR GENERAL\n\n Internet\n www.oig.nsf.gov\n\n Email Hotline\n oig@nsf.gov\n\n Telephone\n 703-292-7100\n\n\n\n Toll-free\n 1-800-428-2189\n\n\n Fax\n 703-292-9158\n\n\n Mail\n Office of Inspector General\n National Science Foundation\n 4201 Wilson Blvd., Suite 1135\n Arlington, VA 22230\n\n\n\n\n 67\n\x0c"