FOUNDATION FOR APPLIED MOLECULAR EVOLUTION, INC.

Finding 2024-002 – Significant Deficiency over Internal Controls Related to Activities Allowed and Allowable Costs Compliance – Mathematical and Physical Sciences - Diverse Evolutionary Power of Nucleic Acid Libraries Carrying Different Information Content – 47.049 Criteria: The Foundation is responsible for establishing and properly implementing controls over compliance with the grant requirements regarding activities allowed and allowable costs to ensure that payroll costs are appropriately charged to grants. Condition: During our testing, we noted one instance where payroll costs for a particular employee were not appropriately allocated across the grants that employee worked on. Cause: The Foundation’s secondary review process of grant justifications did not include procedures for reviewing the allocation of payroll costs across grants. Effect: The Foundation misallocated payroll costs. Recommendation: The Foundation should strengthen its controls related to the grant justification review process to include procedures for reviewing the allocation of payroll costs across grants. Management’s Response: We agree with the finding and will implement procedures to ensure internal controls and processes over grant justifications are updated to include review of payroll cost allocations.

Finding 2023-002 – Noncompliance with Cash Management Requirement – Human Genome Research - Enzyme Synthesis of RNA – 93.172 Criteria: Reimbursement requests and related draws should be made for allocable, allowable and reasonable costs that have already been incurred or paid. Condition: During the audit, we noted an instance of grant funding being drawn in excess of allocable, allowable expenditures incurred to the date of the draw. Such allocable, allowable costs were incurred and paid over the subsequent three months which was within the grant term and the fiscal year ended December 31, 2023. Cause: The former grant administrator was anticipating additional allocable, allowable expenditures in the coming month(s). Effect: Financial statements could be materially incorrect. Recommendation: The Foundation should ensure that grant funding only be submitted for reimbursement and cash draws once an expenditure has been made, regardless of anticipated expenditures. Management’s Response: We agree with the finding and will implement procedures to ensure grant funding is drawn based on allocable, allowable expenditures incurred to date.

Finding 2023-003 – Significant Deficiency over Internal Controls Related to Cash Management Compliance - Human Genome Research - Enzyme Synthesis of RNA – 93.172 Criteria: The Foundation is responsible for establishing and properly implementing controls over compliance with the grant requirements regarding cash management to ensure that reimbursement requests and related draws are made for allocable, allowable and reasonable costs that have already been incurred or paid. Condition: During the audit, we noted insufficient evidence of the performance of controls related to the timing of draws in relation to the costs incurred to date. Cause: The former grant administrator was responsible for all aspects of grant management, without review by another member of management. Effect: The Foundation was not able to ensure that internal controls were implemented or operating effectively. Recommendation: The Foundation should strengthen its controls related to the cash draw processes to ensure that grant funding only be submitted for reimbursement and cash draws once an expenditure has been made, regardless of anticipated expenditures. Management’s Response: We agree with the finding and will implement procedures to ensure internal controls over grant funding draws is based on allocable, allowable expenditures incurred to date.

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