The Land Institute

Information on the federal program: Research and Development Cluster, Multiple Federal Grantors, Multiple Award Periods Criteria or specific requirement: Allowable Costs/Cost Principles Federal regulations state that “charges to federal awards for salaries and wages, must be based on records that accurately reflect the work performed.” The regulations also state that “the records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and property allocated” and “budget estimates alone do not qualify as support for charges to federal awards” (2 CFR 200.430(i)). Condition: During our test work over the Research and Development cluster, we noted the Institute did not have time and activity records with sufficient detail per federal regulations to support its salary and fringe benefit expenses. Cause: Lack of understanding of the requirements of the time and activity reports. Effect of Potential Effect: Based on testing completed, the Institute did not have sufficient procedures to record and verify employees time and activity throughout fiscal year 2025. Questioned Costs: Total questioned costs are $556,632. This includes all salaries and benefits charged to the cluster which lacked documentation to support the charge and allocation to the grant. Assistance Listing Number & Questioned Costs 10.001 - $10,000 10.216 - $5,333 10.303 - $45,801 10.307 - $7,167 10.310 - $457,524 10.326 - $30,807 Context: We selected a sample of 25 salary and benefit charges to the Research and Development cluster. Within our sample we noted that that none of the selections had proper documentation to support the charge and allocation to the grant (e.g. , daily time and activity records, effort verification reports, etc.). These 25 selections had a value of $24,352. Per discussions with management and further review, the amounts charged to the grant were based on the approved budget for the position and the internal allocation performed each payroll period. Salaries and benefits charged to the grant in the audit period totaled $556,632 and represented 59% of the total grant expenditures for the period. The sample was not intended to be, and was not, a statistically valid sample. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend management utilize a time and activity tracking method that will meet the requirements of federal regulations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the stated finding and has implemented a corrective action plan.

Information on the federal program: Research and Development Cluster, Multiple Federal Grantors, Multiple Award Periods Criteria or specific requirement: Procurement and Suspension and Debarment In accordance with 2 CFR 200.219 and 200.220, non-Federal entities must conduct procurements in a manner providing full and open competition and maintain documentation supporting the procurement method and the basis for contractor selection. Noncompetitive (sole source) procurement is permitted only under specific circumstances and generally requires adequate written justification and applicable approvals prior to contract execution. In accordance with 2 CFR 200.214, non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. "Covered transactions" include contracts for goods and services awarded under a non-procurement transaction (e.g. , grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. Condition: During our testing of procurement transactions, we noted that the Institute entered into a contract with a vendor using a noncompetitive/sole source method. However, the sole source justification was not completed and approved prior to execution of the contract and expenditures were charged to the federal grant. In addition, suspension and debarment checks were not completed for vendor. Cause: Miscommunication between departments within the Institute. Effect of Potential Effect: Failure to complete sole source documentation and suspension and debarment checks prior to award of the contract results in noncompliance with federal requirements and increases the risk that costs could be considered unallowable and federal funds could be paid to entities that are suspended or debarred. Questioned Costs: None noted. Context: We selected a sample of one vendor out of a population of four for procurement testing. This vendor was also selected for suspension and debarment testing out of a population of three vendors and subrecipients. Total expenditures charged to Federal grants under this contract was $26,850. The noncompetitive/sole source documentation and vendor suspension and debarment check were not completed and approved prior to execution of the contract and expenditures were charged to the Federal grant. It was noted after subsequent check that the subrecipient was not suspended or debarred. This sample was not intended to be, and was not, a statistically valid sample Identification as a Repeat Finding: 2023-002 Recommendation: Noncompetitive/sole source procurement documentation and suspension and debarment checks should be prepared, reviewed and approved before executing contracts and before charging costs to Federal grants. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the stated finding and has implemented a corrective action plan.

Federal Assistance Number – Research and Development Cluster, Multiple Federal Grantors, Criteria or Specific Requirement – Procurement and Suspension and Debarment In accordance with 2 CFR Section 200.320, a non-federal entity must have and use documented procurement procedures consistent with the standards of Sections 200.317 - 200.320. These standards include a micro-purchase threshold of $10,000 and policies for formal procurement and non competitive procurement. Additionally, in accordance with 2 CFR Section 180.220, when a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition – The Institute's micro-purchase threshold of $25,000 included in the policy is in excess of 2 CFR Section 200.320, and the Institute is not eligible for the increase to the micro-purchase threshold. Formal procurement and non competitive procurement policies have been documented; however, formalized documentation supporting the Institute is in compliance with policies did not exist. Additionally, there was no suspension and debarment check completed prior to purchases made with federal funds. Questioned Costs – Total questioned costs of $45,000 were identified and represents value of equipment purchased for which the procurement process could not be supported in line with the Institute's policy and Uniform Guidance. Context – One purchase of $45,000 out of a total of three purchases totaling $152,986 subject to procurement requirements in 2023 was selected for testing. The Institute could not provide documentation supporting their purchase adhered to policies for formal procurement or non competitive procurement. Furthermore, a check of the vendor's suspension and debarment status prior to the purchase was not completed. The sample was not intended to be, and was not, a statistically valid sample. Effect – Federal funds could be used to make an unauthorized purchase including paying an entity that is suspended or debarred. Cause – The Institute's procurement policies are not in accordance with the Uniform Guidance, nor are there controls in place to ensure policies are followed, and lastly, there are no controls to ensure suspension and debarment checks are performed on vendors receiving federal funds. Identification as a Repeat Finding, if applicable – Not a repeat finding. Recommendation – Policies and procedures should be modified to ensure that procurement policies and suspension and debarment checks on vendors are performed prior to making purchases with federal funds and are in alignment with the Uniform Guidance requirements. Views of Responsible Official and Planned Corrective Actions – Management agrees with the stated finding and has implemented a corrective action plan.

Federal Assistance Number – Research and Development Cluster, Multiple Federal Grantors, Multiple Award Periods Criteria or Specific Requirement – Equipment and Real Property Management In accordance with 2 CFR Section 200.313, a non-federal entity must manage equipment that was procured through the use of federal funds by: maintaining property records, performing a physical inventory once every two years, controls must be implemented to safeguard against loss, and adequate maintenance procedures developed. Condition – During testing of equipment, a complete listing of all property and equipment purchased with federal funds with required information per 2 CFR 200.313(d)(1) was not maintained. A physical inventory of property and equipment was not completed in the past two years. Questioned Costs – None noted. Context – The Institute purchased two pieces of equipment totaling $142,986 during 2023. Both pieces of equipment were included in a detail listing of all equipment the Institute maintains. However, during further discussions with the Institute, they were unable to provide a complete listing of equipment purchased through the use of federal funds with all required information. Effect – Equipment purchased through the use of federal funds is not maintained or disposed of in accordance with the Uniform Guidance. Cause – The Institute's misunderstanding of the requirements. Identification as a Repeat Finding, if applicable – Not a repeat finding. Recommendation – Policies and procedures should be modified to ensure that management understands the equipment policies and procedures outlined by the Uniform Guidance and that the Institute is in compliance. Views of Responsible Official and Planned Corrective Actions – Management agrees with the stated finding and has implemented a corrective action plan.

Federal Assistance Number – Research and Development Cluster, Multiple Federal Grantors, Multiple Award Periods Criteria or Specific Requirement – Special Test - Key Personnel In accordance with 2 CFR Section 200.308(c)(2) and (3), for non-construction federal awards, recipients must request prior approvals from federal awarding agencies for the change in a key person specified in the application or the federal award or the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. Condition – During testing, we did not identify any requests for changes or disengagement of key personnel. Questioned Costs – None noted. Context – During testing of key personnel, three individuals were included in the project budget for grant 2020-68012-31934 (ALN # 10.310) and only two were noted to have participated in the project during the year. The Institute provided support for the disengagement of one key personnel that was reported to the grantor; however, the reporting occurred after the fact rather than receiving prior approval as required by the Uniform Guidance. Effect – The disengagement of a named key person may have occurred without prior approval. Cause – The Institute's misunderstanding of the requirements. Identification as a Repeat Finding, if applicable – Not a repeat finding. Recommendation – Policies and procedures should be modified to ensure that management understands the key personnel policies and procedures outlined by the Uniform Guidance and that the Institute is in compliance. Views of Responsible Official and Planned Corrective Actions – Management agrees with the stated finding and has implemented a corrective action plan.