oversight

19-36. Audit of Grant PW-18690 Awarded to Marshall University Research Corporation

Published by the Appalachian Regional Commission, Office of Inspector General on 2020-01-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

APPALACHIAN REGIONAL COMMISSION
  OFFICE OF INSPECTOR GENERAL
       AUDIT OF GRANT AWARD
  Marshall University Research Corporation
         Huntington, West Virginia




        Final Report Number: 19-36
         Grant Number: PW-18690


              September 2019




               Prepared by:

        Leon Snead & Company, P.C.
                                                   TABLE OF CONTENTS



                                                                                                                                          Page


Background ......................................................................................................................................1

Objective, Scope, and Methodology ................................................................................................1

Summary of Audit Results ...............................................................................................................2

Finding and Recommendation .........................................................................................................3

     A. Performance Reporting .........................................................................................................3

Appendix - Grantee Response
Background

Leon Snead & Company, P.C. completed an audit of grant number PW-18690 awarded by the
Appalachian Regional Commission (ARC) to the Marshall University Research Corporation
(the Corporation). The Corporation is a nonprofit state entity created by the West Virginia
Legislature to further research and economic development within the State of West Virginia.
The Corporation is a component of Marshall University. The audit was conducted at the request
of the ARC Office of Inspector General to assist the office in its oversight of ARC grant funds.

ARC awarded a total of $1,502,939 to the Corporation for grant PW-18690 and required a
matching contribution totaling of $758,937. The total estimated project cost was $2,261,876.
The period of performance for the grant was October 1, 2016 through September 30, 2019. The
final percentage funding break-out for the overall project was 66% ARC and 34% local. The
project has not yet been fully completed.

The purpose of the grant was to provide support to the corporation in its development and
implementation of a comprehensive program entitled "Sprouting Farms." Sprouting Farms is an
agriculture-based program founded on the belief that farms and food systems can provide new
career and employment opportunities, and, in turn, enhance and rebuild communities of
Southeastern West Virginia. Grant funding will be used to: (1) implement workforce and farm
business accelerator training programs; (2) secure and upgrade the project site and facilities
which will be located in Summers County; (3) amplify marketing and distribution partnerships
through additional production and staff support; (4) expand production resources sharing
offerings, and (5) provide direct business support and employment to new agricultural businesses
and program graduates.

Objectives, Scope, and Methodology

The audit objectives were to determine whether: (1) program funds were managed in accordance
with the ARC and Federal grant requirements; (2) grant funds were expended as provided for in
the approved grant budget; (3) internal grant guidelines, including program (internal) controls,
were adequate and operating effectively; (4) accounting and reporting requirements were
implemented in accordance with generally accepted accounting principles (or other applicable
accounting and reporting requirements); and (5) the matching requirements and (6) the
established performance measures were met.

ARC funding of $1,346,481 had been expended under grant PW-18690. We reviewed $730,258
of these charges to determine whether they were properly supported and allowable. The total
matching contribution charged to the project as May 31, 2019 was $903,735. We reviewed
$507,116 of these charges to determine whether they were properly supported and allowable.

We reviewed documentation provided by the Corporation and interviewed personnel to obtain an
overall understanding of the grant activities, the accounting system, and general operating
procedures and controls. We reviewed written policies and administrative procedures to
determine if they complied with federal requirements and were adequate to administer the grant.
We reviewed financial and project performance reports to determine if they were submitted in



Leon Snead & Company, P.C.                     1
accordance with requirements. We evaluated grant results discussed in the project performance
reports to determine if the planned performance goals and objectives were met.

The on-site fieldwork was performed at the Corporation’s office in Huntington, West Virginia
during the period of July 15 through July 19, 2019. The audit results were discussed with
Corporation officials at the conclusion of the on-site visit.

The primary criteria used in performing the audit were 2 CFR 200, the ARC Code and the grant
agreement. The audit was performed in accordance with the Government Auditing Standards.

Summary of Audit Results

The Corporation’s administrative policies, procedures, and related internal controls were
adequate to manage the funds provided under the ARC grant. The costs tested for the grant
were properly supported and allowable. The Corporation’s matching contribution exceeded the
required match. Financial reports and project performance reports were submitted to ARC
timely and accurately. The Corporation had an adequate process in place for obtaining and
recording data related to the overall goals of the grant and appeared on track to meet the planned
outcomes and outputs.

The Corporation is a nonprofit state entity created by the West Virginia Legislature to further
research and economic development within the State of West Virginia. The Corporation is a
component of Marshall University.

We identified one area that requires management attention. We determined that the Corporation
had made significant progress towards meeting the planned performance outputs and outcomes.
However, the Corporation’s most current project performance report did not directly address and
describe the performance outputs and outcomes in relation to planned outputs and outcomes for
the project. This matter and the corresponding recommended corrective action is discussed in
the Finding and Recommendation section of this report.




Leon Snead & Company, P.C.                      2
Finding and Recommendation

A. Performance Reporting

The Corporation’s most current project performance report did not directly address and describe
the actual outputs and outcomes in relation to the planned outputs and outcomes for the project.
The final project performance report should be prepared in accordance with ARC requirements
and address the actual achievements made for each of the planned performance outputs and
outcomes for the project.

The ARC Grant Administration Manual, page 5, states that the final project performance report
must review and highlight all activities that occurred during the performance of the project,
including an assessment of all performance measures that were proposed in the project
application. Final reports must also include the performance measures achieved to date. Page 13
of the Manual further states that the final performance report must include an assessment of how
the project impacted the problems it was intended to solve, and include a summary table of the
outputs and outcomes achieved to date.

The planned performance outputs and outcomes for the grant were as follows:

         Performance Outputs                            Performance Outcomes
 20 Communities Served                    10 Communities Improved
 100 Businesses Served                    50 Businesses Improved & 20 Businesses Created
 72 Participants Served                   52 Participants Improved
 6 Plans/Reports Produced                 33 Jobs Retained
                                          $961,475 Leveraged Private Investments

Grantee officials informed us that the May 31, 2019, project performance report included the
most current performance outputs and outcomes for the ARC grant. Our review of this report
determined that the performance outputs and outcomes were as follows:

   1. Sprouting Farm supports two full-time employees and an average of five to six farm
      workers/apprentices as part-time employees. Five current employees will remain in their
      current positions and one will be promoted to Assistant Production Manager. Two new
      hires and any future hires will begin as paid interns.
   2. Seven tenant farmers are operating with leasing agreements with Sprouting Farms.
   3. Several local farmers have rented 11 acres of land and 7 high tunnels for use.
   4. Products from 109 farming and food operations are being sold through the Sprouting
      Farms/Turnrow Appalachian Collective.
   5. Sprouting Farms integrated Turnrow into its ecosystem of local food development
      enterprises. Turnrow offers an online retail market, a farm share program, niche
      wholesale to restaurants, and traditional wholesale to schools and wholesale markets.
   6. Food Hub continues to grow its partnership with Crook Brothers, a commercial scale
      produce distributor with markets expanding across the east coast.
   7. Forty regular wholesale customers are receiving Sprouting Farms/Turnrow products.
   8. Sprouting Farms had 14 interns onsite during the spring. Many interns expressed interest
      in returning to the farm as interns, apprentices or employees.


Leon Snead & Company, P.C.                     3
   9. Sprouting Farms hosts school visits to help youth understand farming and agriculture as
       an economic benefit. Thirty-five community members participated in a "pot luck" dinner
       which was sourced from Greenbrier Valley Grown produce and meats, including produce
       from Sprouting Farms and its lease farmers. Sprouting Farms also has offered cooking
       classes. Sixty-one community members attended the spring classes.
   10. Thirty-seven individuals attended a three-day intensive farmer training class for growing
       for wholesale, food safety and the "cold chain."
   11. Eighty-two individuals attended six training classes on various aspects of farming and
       farm-related activities.
   12. $317,425 of investment funds had been leveraged.

The project performance report for the period ending May 31, 2019 showed that the Corporation
has made significant progress towards meeting the planned outputs and outcomes. However, the
actions accomplished are not presented clear enough to show how they reconciled with the goals
established for the project. For example, the information listed above indicates that businesses
were served and improved but these accomplishments cannot be reconciled with the projections
of 100 businesses served, 50 businesses improved, and 20 created.

Recommendation
The Corporation’s final project performance report should be prepared in accordance with the
ARC Grant Administration Manual, which will tie the project’s accomplishments more closely
with its objectives.

Grantee’s Response
The grantee stated they concur with the recommendation in the report. To address this issue, the
staff at Sprouting Farms (Talcott, WV location) were provided with a copy of the direct language
from the grant submission to ensure that language used to document the impact of their work is
clearly in line with the presentation of the impact planning in the submission. Each of the
principal employees and sub-grantees are aware of this situation and the final report will be
written in a manner that clearly demonstrates responsiveness to this audit finding.
Auditor’s Comments
ARC will determine whether the information provided in the grantee’s response is adequate to
resolve the finding and close the recommendation.




Leon Snead & Company, P.C.                     4
Appendix
Appendix