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A Report on State of Texas Compliance with Federal Requirements for the Research and Development Cluster of Federal Programs for the Fiscal Year Ended August 31, 2012

February 2013

Report Number 13-020

Overall Conclusion

The State of Texas complied in all material respects with the federal requirements for the Research and Development Cluster of federal programs in fiscal year 2012.

As a condition of receiving federal funding, U.S. Office of Management and Budget (OMB) Circular A-133 requires non-federal entities that expend at least $500,000 in federal awards in a fiscal year to obtain annual Single Audits. Those audits test compliance with federal requirements in up to 14 areas that may have a material effect on a federal program at those non-federal entities. Examples of the types of compliance areas include allowable costs, procurement, reporting, and monitoring of non-state entities to which the State passes federal funds. The requirements for 1 of those 14 areas vary by federal program and outline special tests that auditors are required to perform, such as requirements related to identification of key personnel who work on each federal award. The Single Audit for the State of Texas included (1) all high-risk federal programs for which the State expended more than $75,562,558 in federal funds during fiscal year 2012 and (2) other selected federal programs.

From September 1, 2011, through August 31, 2012, the State of Texas expended $50.2 billion in federal funds for federal programs and clusters of federal programs. The State Auditor's Office audited compliance with requirements for the Research and Development Cluster of federal programs at seven higher education institutions. Those entities spent $888,043,799 in federal Research and Development Cluster funds during fiscal year 2012.

Auditors identified 21 findings for the Research and Development Cluster of federal programs, including 15 findings classified as significant deficiencies and non-compliance and 6 findings classified as significant deficiencies. Auditors did not identify any Research and Development Cluster findings classified as a material weakness or material non-compliance.

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