Lieber Institute, Inc.

Section III ? Federal Award Findings and Questioned Costs 2019-001 ? Activities Allowed or Unallowed: Allowable Costs/Cost Principles Information on Federal Program ? U.S. Department of Health and Human Services, National Institutes of Health CFDA No. 93.242 Award #: R01MH112751 Award Year: April 1, 2018 - March 31, 2019 Program: Functional methylomics approaches for schizophrenia in the frontal cortex and hippocampus Criteria ? 2 CFR part 200, subpart E, states: Except where otherwise authorized by statute, cost must meet the following general criteria in order to be allowable under Federal awards: (1) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under the principles in 2 CFR part 200, subpart E. (2) Conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. (3) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. (4) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (5) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian tribes only, as otherwise provided for in 2 CFR part 200. (6) Not be included as a cost or used to meet cost-sharing or matching requirements of any other federally financed program in either the current or a prior period. (7) Be adequately documented. Condition - For 1 out of 40 payroll transactions tested, we noted during the manual input of activities, the incorrect employee ID was inputted, thereby resulting in the incorrect pay rates used to calculate the salary and indirect expenses for one employee who worked on the federal program. This resulted in undercharging the grant for salary and indirect expenses. Internal controls over review of payroll reports did not detect the error in employee ID. Questioned Costs ? None. The major program was undercharged due to the errors identified. Context ? We tested 40 items out of an overall population of 1,739 items. BDO noted the Institute had $1,345,647 in payroll costs for the major federal program. This is a condition based on testing of the Institute?s compliance with specific requirements. The sample was selected using a statistically valid sample. Effect or Potential Effect ? The Institute is not in compliance with the provisions of 2 CFR part 200, subpart E. Failure to properly review and approve payroll expenditures charged to the grant can result in unallowable costs being charged to the federal government. Cause ? The Institute?s control procedures for reviewing and approving payroll activity prior to charging the federal grant did not function as designed. Recommendation - We recommend that the Institute review the sufficiency of procedures to ensure payroll expenditures are properly reviewed and approved prior to charging federal awards. Views of Responsible Officials and Planned Corrective Actions ? The Institute concurs with this finding. The Institute?s corrective action is described in Management?s Corrective Action Plan included as Appendix A of the attached Management?s Section.

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