The Urban InstituteNon-Profit

Significant Deficiency in Compliance and Internal Control over Compliance with Reporting (Preparation of the Schedule of Expenditures of Federal Awards). Criteria: CFR Section §200.510(b) states in part: “The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section §200.502 Basis for determining Federal awards expended.” For a cluster of programs, the schedule must provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For a cluster of programs, the total for the cluster must also be provided. Condition: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. BDO identified the following matters during our testing of the SEFA: During our testing of management’s preparation of the Schedule of Expenditures of Federal Awards (the SEFA), BDO identified 22 awards that were incorrectly classified as research and development. In each case, the federal awarding agency or pass-through entity noted in the award agreement the award was not classified or considered as research and development. Management subsequently updated the classifications on the SEFA and corrected the presentation of various programs presented as both clusters and nonclusters on the SEFA. The SEFA, as presented, includes the corrections made by management. Questioned Costs: None. Context: The nature of these findings is detailed in the condition section above. Any samples selected as part of the overall SEFA review were performed using a non-statistical method. Cause: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not fully operate as designed. Urban prepares the SEFA once per year in conjunction with the annual audit and did not include a procedure to properly identify research and development classification. Effect: The SEFA provided to BDO required several awards to be removed from the research and development cluster. Failure to present the SEFA correctly would have resulted in incorrect major program selection and an incorrect presentation of the overall SEFA. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management continue to focus on training for both preparer and reviewers of the SEFA to ensure the identification of research and development classification from federal awarding agencies or pass-through entities is properly captured on the schedule. We suggest this review process begin before the Institute signs an award agreement to determine whether the agreement states whether it is considered to be research and development. The Institute would then be aware of the classification prior to committing to the terms of the award. This will ensure that the SEFA presents all relevant information as prescribed to ensure proper reporting on the SEFA and major program determination. Views of Responsible Officials: Management of the Institute agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.

Section II - Financial Statement Findings During the audit for the year ended December 31, 2021, there were no findings related to the financial statements which are required to the reported in accordance with generally accepted government auditing standards (GAGAS). Section III - Federal Award Findings and Questioned Costs 2021-001 Subrecipient Monitoring Information on the Major Federal Program - Federal Agency: Various Program Name: Research and Development Cluster Assistance Listing Number: Various Award Number: Various Award Period: Various Criteria - In accordance with the requirements of 2 Code of Federal Regulations (CFR) ?1402.300, a non-Federal entity is responsible for complying with all requirements of the Federal award. For all Federal awards, this includes the provisions of the Federal Funding and Accountability Act (FFATA), which includes requirements on executive compensation, and also requirements implementing the Act for the non-Federal entity at 2 CFR part 25, Financial Assistance Use of Universal Identifier and System for Award Management and 2 CFR part 170, Reporting Subaward and Executive Compensation Information. In accordance with 2 CFR Part 170, Appendix A, under FFATA, the Institute is required to collect and report information on each subaward or amendment of $30,000 or more in federal funds in the FFATA Subaward Reporting System. Condition - During our testing of subrecipient monitoring, we selected seven subawards. For one sample tested, there were no actions taken to perform the mandatory FFATA requirements. "See Schedule of Findings and Questioned Costs for chart/table" Cause - The Institute did not adhere to its existing policies and procedures to ensure compliance with the requirements regarding subrecipient monitoring. The Urban Institute Schedule of Findings and Questioned Costs Year Ended December 31, 2021 48 Effect or Potential Effect - Failure to comply with the subrecipient monitoring requirements of the Uniform Guidance could result in the awarding agency taking action such as reducing future funding. Questioned costs - None. Context - This is a condition identified based upon our review of the Institute?s compliance with specified requirements. The sample was selected based on a non-statistical basis. The prevalence of this finding is detailed in the condition section above. Repeat Finding - This is not a repeat finding. Recommendation - BDO recommends that the Institute strictly adhere to its policies and procedures to ensure that the required information is collected and reported in the FFATA Subaward Reporting System. Views of Responsible Officials ? Urban acknowledges and agrees with this recommendation. While we believe this to be an isolated incident, we are taking steps to address the issue.

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