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A Report on State of Texas Compliance with Federal Requirements for the Research and Development Cluster for the Fiscal Year Ended August 31, 2013

February 2014

Report Number 14-022

Overall Conclusion

With the exception of certain non-compliance detailed in this report, 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 2013.

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 (subrecipients) 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 the identification of key personnel who work on each federal award. The compliance areas determined to be direct and material may vary significantly among audited entities. Therefore, a comparison of the number of reported findings among entities included in this report may not be an accurate indicator of performance. The Single Audit for the State of Texas included (1) all high-risk federal programs for which the State expended more than $73,222,469 in federal funds during fiscal year 2013 and (2) other selected federal programs.

From September 1, 2012, through August 31, 2013, the State of Texas expended $48.6 billion in federal funds. The State Auditor's Office audited compliance with requirements for the Research and Development Cluster at six higher education institutions and one agency (see text box). Those entities spent $952 million in federal Research and Development Cluster funds during fiscal year 2013.

Auditors identified 22 findings for the Research and Development Cluster, including:

- Two findings classified as material weaknesses and material non-compliance.

- Two findings classified as material weaknesses and non-compliance.

- Eighteen findings classified as significant deficiencies and non-compliance.

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