University of Dayton

Finding 2021-001 ? Advanced Billing Federal Program: Research and Development Cluster Federal Assistance Listing Number: 12.RD Federal Agency: Department of Air Force Award Year: 2018 Criteria: The University has certain contract requirements that do not allow for advance billing of contract costs yet to be incurred. These contracts require the University to be paid on a cost-reimbursement basis. Condition: During fiscal 2021, the University identified one contract that had two instances totaling approximately $2,700,000 in which the University advance billed for costs yet to be incurred when contract requirements did not allow for advance billing. Cause: The operation of the University?s controls failed in preventing and detecting on a timely basis the advance billing from occurring. It appears the deficiency in operation was isolated to one contract. Effect: During fiscal year 2019 and 2020, the University billed approximately $1.6 million and $1.1 million, respectively, in advance of incurring the associated costs. As noted above the amounts received were subsequently applied against qualifying expenditures resulting in a net advance billing of $265,000. The net affect of this deficiency resulted in the University having cash in advance of expenditures Questioned Costs: We noted that while the University advance billed under this contract, they subsequently applied the amounts received against future contract expenditures resulting in a net advance billing of $265,000 as of the date it was identified. The University subsequently reimbursed the funding agency for the amount of the net advance billing and self-reported the matter to the funding agency. Context: Isolated to a certain contract. Repeat Finding: No Recommendation: We recommend that the University evaluate its internal controls to strengthen its review process to ensure amounts billed are in accordance with contractual arrangements for costs incurred, as applicable. Views of responsible officials: Management agrees with the finding. See page 75 for Corrective Action Plan.

2. Corrective actions planned: Finding Number 2021-001 ? Advanced Billing Leadership concurs with the finding identified above. The University has taken several corrective actions that will ensure against a recurrence of any advance billing. The University recently re-implemented its research accounting system to strengthen internal controls, including the ability to enable timely reconciliation between recorded costs and invoiced amounts. These systematic controls prevent invoices from being submitted to sponsors for payment until discrepancies are resolved. Further the University has made personnel enhancements to the sponsored research billing team and implemented new monitoring procedures to allow better oversight of that team by more senior business personnel. Finally, additional training has and will continue to be provided to program managers as well as all members of the accounting and budgeting teams on the proper management of federal funds and proper procedures for obtaining approval for changes in contract terms. 3. Anticipated completion date: The strengthening of internal controls and the re-implementation of the research accounting system has been completed. Training related to this issue has occurred, and regular training as described above will be continuous and ongoing.