CENTER OF EXCELLENCE FOR EDUCATOR PREPARATION & INNOVATION, INC.Non-Profit

We identified a significant deficiency in internal control over compliance related to procurement requirements due to missing federal contract clauses and certifications for the REAP program. Criteria: Federal regulations require nonfederal entities to include specific contract provisions in all contracts made under federal awards, as described in 2 CFR 200.327 and Appendix II to 2 CFR part 200, as applicable to the type and dollar amount of the procurement. In addition, the Center must ensure that it does not enter into a covered transaction with a party that is suspended or debarred by verifying the Center’s status in SAM.gov, collecting a certification, or including appropriate contract clauses (2 CFR 200.214 and 2 CFR part 180). Condition: The Center’s contracts did not include the required clauses, certifications, and/or language to meet the conditions listed in 2 CFR 200 Appendix II to Part 200. We selected 9 budgeted contracts totaling $1,633,265 under the REAP program. Seven of the nine included a required termination clause. None of the contracts tested contained the other required federal provisions from Appendix II to 2 CFR part 200. In addition, the Center did not perform or document alternative suspension and debarment procedures (such as SAM.gov checks, certifications, or contract clauses) at the time of contract execution. These conditions evidence a significant deficiency in internal control over compliance with procurement requirements for this major program. Cause: Management had not finalized and implemented procurement policies and procedures designed to ensure contracts executed under federal awards included required federal provisions and documented suspension and debarment checks. There was no standard contract template or addendum incorporating required federal clauses, and no control requiring review of contracts for compliance with 2 CFR 200.327 and Appendix II before execution. As a result, contractors were permitted to use their own templates without inclusion of required federal provisions.Potential Effect: Absent required contract provisions and documented suspension and debarment procedures, there is an increased risk that the Center could enter into agreements with entities that are ineligible or fail to comply with other federal requirements. If this were to occur, related expenditures could be determined to be unallowable, resulting in disallowed costs, potential repayment, and possible impact on future awards. Questioned Costs: $-0-. We performed alternative procedures by searching SAM.gov for each contractor to determine whether they were excluded or debarred; none were listed. Accordingly, we did not identify any known questioned costs related to this finding. Recommendation: Management should (1) develop and require the use of a standard contract addendum for all contractors under federal awards that includes all required clauses, certifications, and language required by Appendix II to 2 CFR part 200, as applicable to each contract; (2) implement written procurement policies and procedures that incorporate these requirements and require documented suspension and debarment checks (e.g., SAM.gov verification or certifications) before execution; and (3) establish a review control to verify that required provisions and documentation are present before contracts are approved. Based on the nature and dollar value of the contracts, we recommend that the addendum address applicable paragraphs (e.g., Sections A, B, G, H, I, J, K, and L) of Appendix II. To further correct this finding, management should develop and send each contractor an addendum to execute for the original contract that includes all required clauses, certifications, and/or language to meet the conditions listed in 2 CFR 200 Appendix II to Part 200 paragraphs where applicable. Views of Responsible Officials: Management agreed that the clauses, certifications, and/or language was missing from the original contracts and that addendums to the originals will be done to address the finding.

We identified a significant deficiency in internal control over compliance related to matching requirements related insufficient internal controls to verify non-federal funding source match and the lack of documented personnel support costs and related effort for the REAP program. Criteria: Under the Uniform Guidance, the auditee is responsible for ensuring that required matching or cost-sharing contributions are from allowable sources and meet all applicable federal program requirements, including any supplement-not-supplant provisions. Matching contributions must be properly documented and verifiable, and internal controls should be designed and implemented to provide reasonable assurance that: • Reported match is accurate and supported; and • Matching contributions are not funded with unallowable sources (such as other federal awards), nor used to meet matching or cost-sharing requirements of other federal programs, particularly where strict supplement-not-supplant language applies. Condition: The auditee entered into memoranda of understanding (MOUs) with participating school districts under which the districts agreed to contribute salary costs as part of the required 50 percent match for the program. The MOUs stated that the auditee would develop and provide a template for the districts to complete and submit, capturing certain data or confirming that: • Capturing time spent (e.g. hours for each participant) on the program to justify the 25% amount of the salary match with the corresponding paid fringe benefits; • The salary amounts were equal to or less than published agency information if actual salaries are not being used; and • The salary amounts reported as match were not funded by other federal awards or otherwise paid with federal dollars, consistent with the program’s strict supplement-not-supplant requirements.The auditee did not develop or implement the contemplated template or an alternative formal mechanism to obtain written confirmation from the districts that the salary match they provided: • Was not funded by federal sources; and • Was not simultaneously used to meet requirements of other federal awards. The auditee did obtain and use published salary rate information from the school districts to calculate the amount of salary match (25 percent of the annual salary for participating job roles); however, no documented certifications or equivalent evidence were obtained from the districts addressing the funding source of the salaries or compliance with the strict supplement-not-supplant requirement. Cause: Although management conceptually designed a control (district certifications via an auditee-provided template) and incorporated this concept into the MOUs with the school districts, management did not follow through to develop, implement, and operate that control. As a result, management relied on salary rate information and informal understanding of the districts’ participation, without implementing a formal control to obtain and retain documentation from the districts regarding the funding source of the salaries used as match and compliance with the program’s strict supplement-not-supplant provisions. Effect/Risk: In the year under audit, salary and related fringe benefit match contributed by the school districts and the Center’s support cost to Voorhees University totaled approximately $4,224,800, representing about 67 percent of the total reported match. However, in the absence of a designed and implemented control to obtain written confirmations or other equivalent documentation from the districts regarding the funding source of these salary costs and compliance with strict supplement-not-supplant requirements: • There is an increased risk that some or all of the reported salary match could be funded, directly or indirectly, by federal sources or used to support other federal awards; and • The auditee may not be able to demonstrate that the required 50 percent match was fully met with allowable, non-supplanting sources if questioned by the federal awarding agency or auditors.This deficiency in internal control over compliance creates a future risk of noncompliance with matching and supplement-not-supplant requirements and could result in questioned costs related to the salary and fringe benefit match and support costs to Voorhees University, and, more broadly, to the required match for the award. Recommendation: We recommend that the auditee design and implement formal controls over the documentation of partner-provided matching contributions, including: 1. Developing and using a standardized certification form (consistent with the MOUs) to be completed and signed by an appropriate official at each participating school district, attesting that: • The salary amounts reported as match are accurate and supported by underlying records (e.g., schedules of participating staff and time spent on the program with support documents from the district of current salary by position). • If using published district rates from credible sources, request the school district HR personnel to highlight comparable salary of each participant being used for the match. • The salaries used as match are not funded by federal awards and are not also being used to meet the matching or cost-sharing requirements of other federal programs, in accordance with the program’s strict supplement-not-supplant requirements. 2. Establishing procedures to obtain, review, and retain these certifications and any supporting documentation on at least an annual basis, and to follow up on missing, incomplete, or inconsistent information. 3. Periodically reassessing the design of match-related controls to ensure they continue to address the specific risks associated with strict supplement-not-supplant language in the federal program’s terms and conditions. Views of Responsible Officials: Management agreed that the templates described above were not implemented per the MOUs. Management will develop recommended templates as described above that will support that the match was achieved and document the certifications with federal award records.

We identified a material weakness in internal control over compliance related to allowable / unallowable cost requirements for excess drawdowns beyond 8% rate for the REAP program. Criteria: Under 2 CFR 200.414, indirect costs are recovered by applying an approved indirect cost rate to the appropriate base, generally modified total direct costs (MTDC), rather than by drawing the budgeted indirect cost amount. Nonfederal entities must maintain effective control over and accountability for all funds and ensure they are used solely for authorized purposes (2 CFR 200.302). Federal funds are to be drawn only as needed to meet immediate cash requirements for the federal award, minimizing the time between transfer from the U.S. Treasury and disbursement by the Center (2 CFR 200.305). In addition, the Center’s written Indirect Cost Rate Policy requires that indirect costs be applied as a percentage of MTDC, defines the MTDC base (including and excluding specific cost categories), and assigns responsibilities to finance and compliance personnel for ensuring proper calculation, monitoring, documentation, and reporting of indirect costs on federal awards. The policy also requires ongoing monitoring of the correct application of the indirect cost rate to MTDC and retention of supporting documentation for audit and review. Condition: For the Year 1 period of performance under the REAP award, the Center drew down the entire indirect cost budget of $625,013 included in the $8,437,681 Grant Award Notification (GAN), rather than limiting indirect cost draws to the amount calculated by applying the approved 8 percent indirect cost rate to the actual MTDC base. Total expenditures drawn for the period were $6,489,490, which included the full $625,013 of indirect costs. Some drawdowns applied the 8 percent rate to the MTDC base, while other drawdowns exceeded the amount supportable by the rate in order to reach the full budgeted indirect cost. Although the Center has an Indirect Cost Rate Policy that describes how the indirect cost rate is to be applied to MTDC and requires monitoring of the correct application of the rate, the procedures described in that policy were not effectively implemented or followed for this award.There is also an element in which training stipends need to be removed before calculating the allowable indirect cost amount. The Center has stipends that could related to the MTDC based on a template provided by the US Department of Education. Because of the clarity of how these stipends are undefined, this could further impact the calculation. Based on our recalculation, this resulted in approximately $155,875 of indirect costs drawn in excess of the allowable amount under the approved rate and MTDC base. This constitutes noncompliance with the award terms and the Uniform Guidance requirements for charging indirect costs and drawing federal funds based on actual allowable costs incurred. Cause: This was the Center’s first federal award. Management inadvertently misunderstood how to apply the approved indirect cost rate and believed it was appropriate to draw the full indirect cost amount budgeted in the GAN, rather than calculating indirect costs by applying the 8 percent rate to the actual MTDC base. While the Center has an established written Indirect Cost Rate Policy that is consistent with federal requirements and clearly describes the application of the rate to MTDC, the policy was not fully operationalized for this award. Specifically, staff responsible for drawdowns did not consistently follow the policy’s procedures for calculating indirect cost based on MTDC, monitoring the correct application of the rate, and retaining calculation worksheets; and there was no documented supervisory review to ensure compliance with both the policy and the Uniform Guidance prior to submitting drawdown requests. Also, the US Department of Education’s template that demonstrated for training stipend costs as a reduction has not been considered fully based on the definition of those costs. Effect or Potential Effect: By drawing down approximately $155,875 more than the allowable indirect costs for the period, the Center used federal funds in excess of what was permitted under the approved indirect cost rate and MTDC base. These excess draws represent costs that may be disallowed by the U.S. Department of Education and may require repayment. Continued reliance on budgeted indirect amounts, rather than applying the rate to the MTDC base in accordance with both the Uniform Guidance and the Center’s Indirect Cost Rate Policy, increases the risk of further over- or under-recovery of indirect costs and noncompliance with cash management requirements.Questioned Costs: We calculated questioned costs of $155,875 representing the excess of indirect costs drawn over the amount that would have been allowable had the approved 8 percent indirect cost rate been applied to the actual MTDC base for the period. This does not include the potential impact of training stipend costs being excluded in arriving at the allowable indirect cost. Because the questioned costs exceed $25,000, they are required to be reported in the Schedule of Findings and Questioned Costs. At the time of our audit, no portion of the $155,875 had been repaid, and the federal agency had not yet issued a determination regarding the resolution of these questioned costs. Perspective: The total Year 1 GAN amount was $8,437,681, including $625,013 of budgeted indirect costs. During the audit period, the Center drew down $6,489,490 in total, including the full $625,013 of indirect costs. The issue affected multiple drawdowns during the period; some draws were calculated at the approved 8 percent rate, while others either did not exceeded the amount supported by the rate to enable drawing the full budgeted indirect costs. The existence of a written Indirect Cost Rate Policy that was not consistently followed, combined with the pattern of excess indirect draws, indicates a systemic implementation and monitoring issue rather than an isolated error. Recommendation: We recommend that management: 1. Recalculate allowable indirect costs for the period by applying the approved 8 percent indirect cost rate to the actual MTDC base and work with the U.S. Department of Education to resolve the $155,875 in questioned costs, including returning any unallowable amounts as required. This includes ascertaining that training stipends, if applicable by definition, are excluded from total direct cost before the 8% multiplier is applied. 2. Fully implement and operationalize the existing Indirect Cost Rate Policy by: • Ensuring that the MTDC base is correctly determined for this and future awards and that the approved indirect cost rate is applied only to that base; • Requiring preparation and retention of indirect cost calculation worksheets that tie to MTDC and support each drawdown; and • Establishing a documented supervisory review to verify that indirect costs are calculated and drawn in accordance with the Indirect Cost Rate Policy, the GAN, and the Uniform Guidance prior to submission of drawdown requests.Provide targeted training to finance and program staff on the Indirect Cost Rate Policy, including the definition of MTDC, the appropriate application of the indirect cost rate, and the monitoring and documentation requirements described in the policy, to reinforce the otherwise sound policy framework already in place. Views of Responsible Officials: Management agrees with the finding. As this was the Center’s first federal award, management misunderstood the proper application of the approved indirect cost rate for this program and drew the full budgeted indirect cost amount instead of applying the rate to the MTDC base. Management notes that it has adopted an Indirect Cost Rate Policy that is intended to ensure consistent, compliant application and monitoring of indirect costs across federal awards; however, this policy was not consistently followed for the REAP award. Management plans to recalculate allowable indirect costs, consult with the U.S. Department of Education regarding resolution of the $155,875 in questioned costs, and strengthen implementation of its Indirect Cost Rate Policy through enhanced procedures, documentation, supervisory review, and staff training to ensure that future indirect cost calculations and drawdowns comply with both the policy and the Uniform Guidance.