Northwestern UniversityHigher Education

Findings and Questioned Costs Relating to Federal Awards: Finding 2025 001 Timeliness of Subrecipient Monitoring Federal Agency: National Science Foundation U.S. Department of Defense U.S. Department of Health and Human Services Program Name: Research and Development (R&D) Cluster ALN #: 12.910/47.041/47.049/93.213/93.286/93.399/93.837/93.838/93.865 Federal Award Numbers: FA8650 21 2 7119 P00014/EEC 2330040 001/CHE 2221346/ 5R01AT010413 04/5U54EB027049 08/5UG1CA242643 06/ 5UH3HL165065 04/5U01HL146240 07 Revised/ 5U01HL146408 06 Revised Federal Award Year: September 1, 2024 – August 31, 2025 Compliance Requirement: Subrecipient Monitoring Criteria According to 2 CFR 200.332(d), a pass through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subawards, and that the subaward performance goals are achieved. According to 2 CFR 200.332(d)(3) and 2 CFR 200.521, a pass through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure subrecipient single audit reports are reviewed and completed in a timely manner and management decisions are issued within required timeframes. Condition Found The University is required to review the single audit reports received from its subrecipients and issue management decision letters (MDL) within six months of the date of acceptance of the single audit report by the Federal Audit Clearinghouse (FAC). During our testwork over 40 subrecipients, we noted the following: For 3 subrecipients, the University did not issue an MDL in a timely manner. The delay in issuing this MDL was 42 to 167 days beyond the required timeframe. For 11 subrecipients, while the University did review the subrecipient’s single audit report, the review did not occur within the prescribed six month timeframe. The delay in reviewing the subrecipient's single audit reports was 2 to 140 days beyond the required timeframe. Cause The management review controls implemented by the University were not operating at a level of precision to ensure the University completed and documented the monitoring procedures timely primarily due to turnover. The delay occurred during the University’s corrective action period related to a similar finding from the previous year. Possible Asserted Effect Failure to complete and perform reviews of subrecipient single audit reports and issue MDLs in a timely manner may result in subrecipients not administering the federal programs in accordance with laws, regulations, and the grant agreement. Questioned Costs None Repeat Finding A similar finding was reported in the prior year audit as finding 2024 001. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University establish procedures to ensure subrecipient single audit report reviews are completed and documented in a timely manner. Views of University Officials The University agrees with this finding. Delays occurred during the corrective action period associated with the prior year findings. The University has implemented additional monitoring and tracking procedures indented to strengthen the timeliness of subrecipient reviews and management decision issuance going forward

Finding 2025 002 Expenditure Charged Outside of the Period of Performance Federal Agency: U.S. Department of Health and Human Services Program Name: Research and Development (R&D) Cluster ALN #: 93.310 Federal Award Numbers: 5U54CA272163 03 Federal Award Year: September 1, 2024 – August 31, 2025 Compliance Requirement: Equipment Criteria According to 2 CFR § 200.1, the period of performance is the time during which the non Federal entity may incur new obligations to carry out the work authorized under the Federal award. For a cost to be allowable, it must be incurred during the approved budget period, as stated in the terms and conditions of the award. During fiscal year 2025, certain grants were terminated resulting in a shorter period of performance than the grant agreement originally stated. 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that expenditures charged to a federal award were incurred within that award’s specified period of performance. Condition Found During our testing of 25 expenditures totaling $277,862 charged to federal awards with performance period ending dates during the audit period, we identified one expenditure and its related indirect cost charge that were not incurred within the grant's shortened period of performance. That period of performance had been shortened by an early termination notice. Additionally, we noted that controls were not operating effectively to prevent or detect the charging of expenditures to a federal award after the period of performance had concluded. Cause While adjustments were made to the University’s controls to respond to the shortened timeframe related to terminated grants, the control did not operate at a level of precision to identify that the expenditure in question was outside of the termination period. Possible Asserted Effect Charging expenditures outside of the authorized period of performance results in non compliance with federal regulations and the terms of the grant agreement. Questioned Costs $1,994 Repeat Finding A similar finding was not reported in the prior year audit. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures to ensure that all expenditures are reviewed for allowability and are incurred within the active period of performance before being charged to a federal award. Views of University Officials The University agrees with the finding and will implement corrective actions related to awards subject to shortened periods of performance. The university will continue to assess and strengthen its controls and review procedures to reduce the likelihood of similar occurrences in the future.

Finding 2024 001 Inadequate Subrecipient Monitoring of Subrecipients Federal Agency: National Science Foundation U.S. Department of Defense U.S. Department of Health and Human Services Program Name: Research and Development (R&D) Cluster Teaching Health Center Graduate Medical Education Payment (THCGMEP) ALN #: 12.910/47.084/93.307/93.310/93.855/93.865/93.866 93.530 Federal Award Numbers: N660012324041 P00003/W911NF2320039 P00006/ ITE-2345174/5R01MD017622-03/3OT2OD026557-01S5/ 5U24OD023319-05/5U24OD023319-07S1/5U01AI163081-04/ 5UH3HD096920-05/5R01AG077444-17 5 T91HP21542-12-00/4 T9CHP42255-03-01 Federal Award Year: September 1, 2023 – August 31, 2024 Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Criteria According to 2 CFR 200.332(d), a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations and the terms and conditions of the subawards, and that the subaward performance goals are achieved, According to 2 CFR 200.332(b), a pass-through entity must evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. Additionally, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on federal awards audit findings within six months of the acceptance of the report by the Federal Audit Clearinghouse and ensure the subrecipient takes timely and appropriate corrective action on all audit findings. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure subrecipient monitoring procedures are performed and adequate documentation is maintained, single audit reports are reviewed and completed in a timely manner, and management decisions are issued within required timeframes. Condition Found To monitor R&D and THCGMEP program activities performed by subrecipients, the University has established monitoring procedures which are applied to each subrecipient depending upon the risk level determined by the University. Subrecipients determined to be at an elevated risk level require the performance of further review procedures including analyzing the audit report, and communication and discussion with the department or subrecipient as needed. Additionally, University policy requires review of the single audit reports received from its subrecipients within six months of the date of acceptance of the single audit report by the Federal Audit Clearinghouse (FAC). While the University did perform certain monitoring procedures including review of invoices, not all subrecipient monitoring procedures required by the University’s policies were performed. Specifically, 7 of 40 samples selected for the R&D program did not have documentation of review of single audit reports or alternative procedures for entities which do not require an audit under Uniform Guidance. Further, the University did not perform the defined additional procedures required for six subrecipients assessed at an elevated level for the R&D program. Additionally, for the one subrecipient under the THCGMEP program, we also noted the subrecipient was assessed at an elevated level and the University did not perform the defined additional procedures required. Cause The management review controls implemented by the University were not operating at a level of precision to ensure the University completed and documented the monitoring procedures primarily due to turnover. Possible Asserted Effect Failure to complete and document reviews of subrecipient single audit reports and subrecipient monitoring procedures in a timely manner may result in subrecipients not administering the federal programs in accordance with laws, regulations, and the grant agreement. Repeat Finding This is not a repeat finding. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University establish procedures to ensure subrecipient single audit report reviews and subrecipient monitoring procedures are completed and documented in a timely manner. Views of University Officials University officials agree with the recommendation and will implement procedures to strengthen oversight of subrecipient monitoring to ensure tasks are completed and documented in a timely manner.

Finding 2024 002 Inadequate Review of Timesheets Federal Agency: U.S. Department of Health and Human Services Program Name: Research and Development (R&D) Cluster ALN # and Program Expenditures: 93.172/93.279/93.393/93.855/93.866 Federal Award Numbers: 5UM1HG012649-03/5U01DA036939-10/5R01CA261898-04/ 5U01AI156874-04/5R01AG070212-04 Federal Award Year: September 1, 2023 – August 31, 2024 Questioned Costs: None Compliance Requirement: Allowable Costs/Cost Principles Criteria 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition Found University policy states hourly employees must report hours worked on a biweekly basis. Submitted timesheets are to be reviewed and approved by the employee’s supervisor. During our review of 25 biweekly payroll expenditures, we noted that while the charges were allowable, the timesheets for 7 payroll expenditures were not reviewed and approved by the employee’s supervisor. Cause In discussing these conditions with University management, they stated that existing protocols for reviewing and approving timesheets are adequate; however, additional oversight is needed to ensure users comply with University guidelines for review and approval. Possible Asserted Effect Failure to review timesheets could result in inappropriate payroll expenditures charged to federal grants, resulting in unallowable costs. Repeat Finding This is not a repeat finding. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University strengthen procedures to ensure timesheets are reviewed and approved in accordance with University policy. Views of University Officials University officials agree with the recommendation and will revise procedures to ensure employee time sheets are reviewed and approved in accordance with the University policy.

Finding 2023 001: Inaccurate Enrollment Reporting Federal Agency: U.S. Department of Education (USDE) Program Name: Student Financial Assistance Cluster ALN # and Program Expenditures: 84.063 ($9,402,496) 84.268 ($198,862,889) Federal Award Numbers: P063P211371, P063P221371 P268K221371, P268K231371, P268K241371 Federal Award Year: September 1, 2022 to August 31, 2023 Questioned Costs: None Compliance Requirement: Enrollment Reporting Criteria According to 34 CFR Sections 690.83(b)(2) and 685.309, under the Pell grant and Federal Direct loan (FDL) programs, institutions must complete and return the Enrollment Reporting Roster File via the National Student Loan Data System (NSLDS) within 15 days of receipt. Institutions must review, update, and verify student enrollment statuses, program information, and effective dates that appear on the Enrollment Reporting Roster File. Unless an institution expects to submit its next updated enrollment report to the USDE within the next 60 days, an institution must notify NSLDS within 30 days after the date that the institution discovers that (1) a Direct loan was made to or on behalf of a student who was enrolled or accepted for enrollment at the institution, and the student has ceased to be enrolled on at least a half time basis or failed to enroll on at least a half time basis for the period for which the loan was intended; or (2) a student who is enrolled at the institution and who received a loan under Title IV has changed his or her permanent address. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include establishing procedures to ensure student campus and program level enrollment status changes are accurately reported to the NSLDS. Condition Found The University did not accurately report student enrollment status change at both the campus level and program level to the NSLDS. USDE uses enrollment data reported by the University to determine: (1) eligibility for interest subsidies, (2) loan repayment start dates, and (3) in school loan deferments. The enrollment information is also used by USDE to measure program completion data to evaluate the effectiveness of financial aid programs. During our testing of 25 borrowers under the FDL program and/or Pell Grant recipients that had a reduction or increase in attendance levels, graduated, withdrew, dropped out, or enrolled but never attended during the fiscal year, we noted the status change for one graduated student was reported incorrectly to the NSLDS as a Withdrawal (W) status rather than Graduated (G) status. Upon further review, management evaluated and identified an additional 38 graduates who had the same reporting errors. We further noted management review controls implemented by the University were not designed at a level of precision to ensure University enrollment and student data submitted to NSLDS was accurate. The University disbursed FDL loans to 1,411 students during the required reporting period from March 1, 2023 through the year ended August 31, 2023 for which enrollment reporting requirements applied. Cause In discussing these conditions with University officials, they stated University records maintained students’ statuses within a certain business program as active after graduating from the program inaccurately in anticipation of potential future enrollment in classes. Possible Asserted Effect Inaccurate submission of student enrollment status and student information affects the determinations that lenders and servicers of student loans make related to in school deferments, grace periods, and repayment schedules. Repeat Finding This is not a repeat finding. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures to ensure accurate reporting of student information and enrollment status information to the NSLDS. Views of University Officials The University agrees with this finding. The University will revisit management review controls and procedures to ensure a level of precision for submitting accurate graduate student data to the NSLDS.

Findings and Questioned Costs Relating to Federal Awards Finding 2020-001 Inaccurate Enrollment Reporting Federal Agency: U.S. Department of Education (USDE) Program Name: Student Financial Assistance Cluster ? Federal Pell Grant Program and Federal Direct Loan Program CFDA # and Program Expenditures: 84.063 ($7,816,222) 84.268 ($191,134,510) Federal Award Numbers: P063P181371 P063P191371 P268K191371 P268K201371 P268K211371 Federal Award Year: July 1, 2019 to June 30, 2020 July 1, 2020 to June 30, 2021 Questioned Costs: None Condition Found The University?s internal controls over compliance did not prevent or identify errors reported to the National Student Loan Data System (NSLDS) with respect the Published Program Length of an academic program. The U.S. Department of Education (USDE) uses enrollment data reported by the University to determine: (1) eligibility for interest subsidies, (2) loan repayment start dates, and (3) in-school loan deferments. The enrollment information is also used by USDE to measure program completion data to evaluate the effectiveness of financial aid programs. During our testing of 40 borrowers under the Direct Loan program and/or Pell Grant recipients that had a reduction or increase in attendance levels, graduated, withdrew, dropped out, or enrolled but never attended during the fiscal year, we noted the published program length for one academic program was inaccurately reported. Specifically, the Published Program Length for the Speech-Language Pathology program was reported as four years, when the Published Program Length reported should have been seven quarters. As a result, there were 45 students in this academic program whose Published Program Length was inaccurately reported to the NSLDS. The program information in the University?s academic records was not subject to a management review at a level of precision that would identify an error in the program length. The number of students reported on the University?s Roster files ranged from 7,701 to 9,803 students during fiscal year 2020. The University has 730 academic programs. Criteria The Uniform Guidance (2 CFR 200.303) requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include establishing procedures to ensure student Program-Level enrollment information is accurately reported to the NSLDS. Cause In discussing these conditions with University officials, they stated the published program length of 1 of the 730 programs was reported incorrectly as a result of a data entry error. Possible Asserted Effect Inaccurate submission of student enrollment information, specifically the published program-length, inhibits the USDE?s ability to measure program completion data to evaluate the effectiveness of financial aid programs. Repeat Finding A similar finding was not reported in the prior year audit. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures to ensure student enrollment information is accurately reported to the NSLDS. Views of University Officials The University agrees with the finding. Northwestern University offers 730 individual programs whose lengths and myriad other details are carefully maintained. In this case, the program length of 1 of those 730 programs was recorded incorrectly, as a result of a data entry error, leading to a 0.13% error in the program data, and a 0.3% error in enrollment reporting for academic year `19-20. Northwestern immediately corrected the program and related enrollment reports, confirmed the accuracy of all other program lengths and created an annual quality assurance process for program data. The program length component of enrollment reporting is included solely to enforce loan limitations for undergraduate students under the federal Subsidized Usage Limit Applies (SULA) program. Since this error involved a graduate program, there were no financial risks. Northwestern believes this was an isolated incident and expect the elimination of reporting mandates for academic program lengths with the repeal of SULA requirements under the Consolidated Appropriations Act 2021 signed into law on December 27, 2020.

Findings and Questioned Costs Relating to Federal Awards: Finding 2019 001 Inadequate Process for Updating Property Management Records Federal Agency: Corporation for National and Community Service (CNCS) U.S. Agency for International Development (USAID) U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Homeland Security (USDHS) U.S. Department of Justice (USDOJ) U.S. Department of Labor (USDOL) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Department of Veterans Affairs (USDVA) U.S. Environmental Protection Agency (USEPA) U.S. Social Security Administration (USSSA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) Nuclear Regulatory Commission (NRC) Institute of Museum and Library Services All Pass Through Entities Program Name: Research and Development Cluster CFDA # and Program Expenditures: Various ($507,477,048) Federal Award Numbers: Various ? See schedule of award numbers Federal Award Year: Various ? See schedule of award numbers Questioned Costs: None Condition Found The University did not consistently follow property management regulations relative to equipment purchased with federal funding from the Research and Development (R&D) Cluster program. The University conducts research and development activities in multiple locations on its Chicago and Evanston campuses. Equipment items purchased with federal funds are utilized at both of these locations. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. During our physical observation of 45 pieces of equipment purchased with R&D Cluster funds, we noted the following: ? One item included on the R&D Cluster inventory list (with a cost value of $209,647 and a net book value of $146,753) could not be located for observation. It was determined that this item had been disposed of previously; however, the property records had not been updated to reflect the disposal. ? Two equipment items (with a cost value of $384,901 and a net book value of $184,950) were not properly tagged by the University as of the date of our equipment observation. ? Two equipment items (with a cost value of $38,824 and a net book value of $980) were incorrectly entered into the asset management system twice, resulting in the duplication of three assets in the fixed asset listing. While the University has documented policies and procedures which have been communicated and are available to University staff and the University?s control procedures include performing a biennial inventory, monitoring procedures to verify equipment records are accurate are not operating at a sufficient level of precision to identify all disposals that have not been reported by decentralized units in a timely manner. In addition, monitoring procedures are not operating at a sufficient level of precision to verify all equipment items are tagged correctly and entered into the asset management system accurately. As of August 31, 2019, the cost value of equipment purchased with R&D Cluster funds was $117,347,170 (with a net book value of $30,464,082). Criteria According to 2 CFR 200.313(c), equipment must be used in the program which acquired it or, when appropriate, other federal programs. 2 CFR 200.313(d) requires a non Federal entity to establish a control system to safeguard equipment and to ensure equipment is adequately maintained. 2 CFR 200.313(e) also requires the non federal entity to request disposition instructions from the Federal awarding agency, if required by the terms and conditions of the Federal award, when equipment is no longer needed. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include establishing procedures to ensure equipment inventory records are accurate and updated for disposals in a timely manner. Cause In discussing these conditions with University officials, they stated the property records were not updated for disposals or tag updates due to the departments not communicating these updates in a timely manner. In addition, the duplication of two equipment items was due to a gap in the equipment additions review process until detective and preventative controls were implemented in fiscal years 2014 and 2018, respectively. Possible Asserted Effect Failure to maintain accurate property results in noncompliance with federal requirements and may result in federal approvals not being obtained when required and federal programs not receiving the appropriate share of proceeds from disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2018 001. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University implement procedures to ensure property records are updated in a timely manner, including updated asset tag numbers and equipment disposals. Views of University Officials Management agrees. In fiscal year 2020, Accounting Services shall reiterate proper procedures to department Unit Representatives regarding the disposition of equipment, including timely submission of disposal requests and procedures for replacement of equipment under warranty. Accounting Services will also continue to perform its own audit of the re-inventories prepared by Unit Representatives as well, gearing its sampling towards higher risk items. Accounting Services shall also stress the importance of affixing property tags on all capital equipment, ensuring the tag numbers match property records, and the process for requesting tag replacements when necessary. With regards to the 2 equipment items entered into the property records twice, Management performed an analysis of the University?s entire equipment inventory and the related control environment. No duplicates were identified after fiscal year 2014 (detective and preventative controls implemented in fiscal years 2014 and 2018, respectively). The financial statement impact is not material from an annual or cumulative impact perspective.

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