Underwriters Laboratories Inc.Non-Profit

2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.

2022-003: Procurement/Full and open competition Cluster Name: Research and development Award Name: 2019 Fire Prevention and Safety (FP&S) Assistance Listing Number: 97.044 Award Number: EMW-2019-FP-00770 Agency: Department of Homeland Security Award Year: 2019 Criteria: Underwriters Laboratories Inc. has a policy whereby purchases shall comply with Uniform Guidance for Grants and Cooperative agreements, as established in 2 CFR 200.320 Methods of Procurement and they have adopted $10,000 as their micro-purchase threshold. 2 CFR 200.318 requires that documentation of the history of the procurement, the procurement method and rationale for the method selected, selection of contract type, basis for contractor selection, and basis for the contract price to be included in the procurement file. Condition: There were two transactions over the $10,000 threshold and both were selected for testing. For one transaction in August 2022 totaling $69,239 out of the two transactions tested totaling $123,408, excluding transactions with subrecipients, management provided us with the Underwriters Laboratories, Inc. Vendor Selection Form noting multiple vendors were identified for the project at hand. However, management received two responses (one being a decline of services), of four vendors identified, and did not provide rationale for why the selected vendor was sufficient (both from a capabilities and cost side) within the Vendor Selection Form section ?Why did you choose the selected vendor?? prior to the purchase being made. Note, as of September 2022 a corrective action plan around procurement/full and open competition was created by management related to finding 2021-002 from FY21. As such, this had not been implemented at the time of vendor selection in August 2022. There were no exceptions noted for the other selection. Cause: At this point in time (August 2022) there was no formal review to ensure all federal documentation requirements related to purchases above the micro-purchase threshold had been included in the procurement files (i.e., Vendor Selection Form). Effect: The lack of a formal process for review of the Vendor Selection Form could result in inadequate bids and competition. Questioned Costs: There are no questioned costs associated with this finding. Recommendation: We recommend Underwriters Laboratories Inc. formalize the documentation and review required for procurements over the micro-purchase threshold, including instances where requests for bids from multiple vendors are not received to ensure the vendor selection process is adequately communicated prior to the purchase being made. Management?s View and Corrective Action Plan: Management?s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.

2021-001: Cash Management Award Name: 2019 Fire Prevention and Safety (FP&S) Assistance Listing Number: 97.044 Award Number: EMW-2019-FP-00770 Agency: Department of Homeland Security Award Year: 2019 Criteria: In accordance with 2 CFR 200.305 (b), for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Reimbursement is the preferred method when the requirements in paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per 2 CFR 200.208, or when the non-Federal entity requests payment by reimbursement. Per the OMB Compliance Supplement, the non-Federal entity must disburse funds for program purposes before requesting payment from the Federal awarding agency or pass-through entity. Condition: In testing compliance with the cash management compliance requirement in accordance with the OMB Compliance Supplement, specifically the reimbursement method, 25 individual expenditures across all grants were tested to compare the date Underwriters Laboratories Inc. paid the vendor to the date Underwriters Laboratories Inc. requested reimbursement. We noted 1 instance out of 25 totaling $233,818, across all grants, in which reimbursement was requested before Underwriters Laboratories Inc. paid the vendor. Additionally, the request for reimbursement in the amount of $233,818 was incorrect. The reimbursement should have instead been in the amount of $223,818, resulting in a $10,000 questioned cost. Cause: Management?s current process when requesting reimbursement from sponsors is to ensure the expenditures are incurred rather than to ensure payments have been made. Further, a billing error that was not detected resulted in the $10,000 reimbursement request error resulting in an amount in excess of the invoice being requested and reimbursed by the federal government. Effect: Underwriters Laboratories Inc. requested and received Federal reimbursement prior to paying vendors for the selected expenses and the requested reimbursement was overstated by $10,000. Questioned Costs: $10,000 Recommendation: Underwriters Laboratories Inc. should consider existing internal control procedures to ensure expenditures are paid in compliance with Federal reimbursement requirements and that requests for reimbursement are reviewed and validated against supporting documentation to identify any discrepancies prior to requesting reimbursement. Management?s View and Corrective Action Plan: Management?s views and corrective action plan are included at the end of this report after the summary of status of prior audit findings.

2021-002: Procurement/Full and open competition Award Name: 2019 Fire Prevention and Safety (FP&S) Assistance Listing Number: 97.044 Award Number: EMW-2019-FP-00770 Agency: Department of Homeland Security Award Year: 2019 Criteria: Underwriters Laboratories Inc. has a policy whereby purchases shall comply with Uniform Guidance for Grants and Cooperative agreements, as established in 2 CFR 200.320 Methods of Procurement to be followed and they have adopted $10,000 as their micro-purchase threshold. 2 CFR 200.318 requires that documentation of the history of the procurement, the procurement method and rationale for the method selected, selection of contract type, basis for contractor selection, and basis for the contract price to be included in the procurement file. Condition: There was 1 transaction totaling $233,818 out of 1 transaction tested totaling $233,818, excluding transactions with subrecipients, over the $10,000 threshold and this transaction was selected for testing. Management provided us with the Underwriters Laboratories, Inc. Vendor Selection Form noting multiple vendors were identified for the project at hand. However, management received one response, of three vendors identified, and did not provide rationale for why the selected vendor was sufficient (both from a capabilities and cost side) within the Vendor Selection Form prior to the purchase being made. Cause: There is no formal review to ensure all federal documentation requirements related to purchases above the micro-purchase threshold have been included in the procurement files (i.e., Vendor Selection Form). Effect: The lack of a formal process for review of the Vendor Selection Form could result in inadequate bids and competition. Questioned Costs: There are no questioned costs associated with this finding, however, see finding 2021-001 for additional context, as the item selected for testing above, was the same as that selection. Recommendation: We recommend Underwriters Laboratories Inc. formalize the documentation and review required for procurements over the micro-purchase threshold, including instances where requests for bids from multiple vendors are not received to ensure the vendor selection process is adequately communicated prior to the purchase being made. Management?s View and Corrective Action Plan: Management?s views and corrective action plan are included at the end of this report after the summary of status of prior audit findings.

2019-001: Procurement/sole source justification Award Name: 2017 DHS Assistance to Firefighters Grant CFDA: 97.044 Award Number: EMW-2017-FP-00628 Agency: Department of Homeland Security Grantor/Pass-through Entity: University of Illinois Pass-through Award Number: 7102001194 Award Year: 2017 Criteria: Underwriters Laboratories Inc. has a policy whereby purchases shall comply with Uniform Guidance for Grants and Cooperative agreements, as established in 2 CFR 200 Sub Part D 2 Procurement standards and they have adopted $10,000 as their micro-purchase threshold consistent with the guidance in the National Defense Authorization Act of 2018. 2 CFR 200.318 requires that documentation of the history of the procurement, the procurement method and rationale for the method selected, selection of contract type, basis for contractor selection, and basis for the contract price to be included in the procurement file. Condition: There were 3 transactions totaling $89,393, excluding transactions with subrecipients, over the $10,000 threshold and we selected 1 totaling $42,586 for testing. Management provided us with an understanding of why the vendor was selected as a sole source vendor. However, the rationale for vendor selection and sole source justification was not evident in the procurement files prior to the purchase being made. Cause: There is no standardized form required to be completed or formal review to ensure that all federal documentation requirements related to purchases above the micro-purchase threshold, including sole source justification, have been included in the procurement files. Effect: The lack of a formal process for documenting the rationale for vendor selection and sole source justification could result in competition being inappropriately limited. Questioned Costs: There are no questioned costs associated with this finding. Recommendation: We recommend Underwriters Laboratories Inc. formalize the documentation required for procurements over the micro-purchase threshold, including instances when sole source purchases are made and ensure all changes are communicated to the appropriate parties within the organization. Management?s View and Corrective Action Plan: Management?s views and corrective action plan are included at the end of this report after the summary of status of prior audit findings.

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