The Texas A&M University System Internal Audit Department
FOURTH QUARTER REPORT
FISCAL YEAR 2014
October 24, 2014
The Texas A&M University System Internal Audit Department
Fourth Quarter Report
Fiscal Year 2014
TABLE OF CONTENTS
REPORT
The Texas A&M University System
Review of Human Subject Research Compliance Outside of Brazos County
REPORT
Texas A&M University – Corpus Christi
Review of Financial Management Services
REPORT
The Texas A&M University System
Review of Trademark Licensing Programs
REPORT
Texas A&M Health Science Center
Review of the Center for Innovation in Advanced Development and
Manufacturing Contract Compliance
The Texas A&M University System Internal Audit Department
Fourth Quarter Report for Fiscal Year 2014
THE TEXAS A&M UNIVERSITY SYSTEM
Review of Human Subject Research
Compliance Outside of Brazos Valley
Catherine A. Smock, C.P.A.
Chief Auditor
Project #20140104
TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideof
BrazosCounty
Table of Contents
OverallConclusion
AdditionaloversightandguidanceisneededintheTexasA&MUniversitySystem
toensureA&MSystemmemberslocatedoutsideofBrazosCountyarein
compliancewithlawsandpoliciesgoverninghumansubjectresearch.The
oversightandguidanceneedstobeprovidedbyeach
HumanSubjectResearch
member’sleadershipstaffresponsibleforresearch
ComplianceAreasAudited
alongwithcontinuedsupportfromtheSystemChief
 ResearchProtocols
ResearchComplianceOfficer.Oursurveyoftheten
 Training
 IRBMembership
A&MSystemmemberslocatedoutsideBrazosCounty
 IRBMinutes
indicatedthatsignificantimprovementsneedtobe
 IRBProcedures
madeinseveralareastoensurethateachmember’s
processesandproceduresprovidereasonableassurancethataneffectivehuman
subjectresearchprogramisinplace.
OutofthetenA&MSystemmemberslocatedoutsideofBrazosCounty,onsiteaudit
workwasperformedatTarletonStateUniversity(TSU)andPrairieViewA&M
University(PVAMU).TSUwasdeterminedtobeoperatingforthemostpartwithout
ahumansubjectresearchprogram,thusoperatinginnoncompliancewithA&M
Systemrequirementsandfederalregulations.PVAMU’shumansubjectresearch
programrequiressignificantimprovementsintheareasofInstitutionalReview
Boardapprovalsandclearlydocumentedmeetingminutes,timelinessofhuman
subjectresearchtraining,accuracyofconflictofinterestdisclosurestatements,and
researchprotocolclassificationandprocessing.TSUandPVAMUreported79and44
activeresearchprotocols,respectively,infiscalyear2013.
SummaryofSignificantResults
A&MSystemHumanSubjectResearchProgramGuidance
ThesurveyresultsfromthetenA&MSystemmemberslocatedoutsideBrazos
Countyontheirhumansubjectresearchcomplianceprocessesandprocedures
indicatedthatadditionaloversightandguidanceisneeded.Wenotedthatsixof
thetenmembersdidnothaveanapproveduniversityrule,asrequired,tocarry
outA&MSystemrequirementsregardingtheuseofhumansubjectsinresearch.A
reviewofthetenmembers’InstitutionalReviewBoard(IRB)procedures
indicatedthatsevenofthetenweremissingoneormorerequiredelementsin
theirIRBproceduresaswellasadditionaloperationaldetailssuggestedbythe
federalOfficeofHumanResearchProtection.Withoutstronghumansubject
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TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideofBrazosCounty
researchcomplianceprograms,theA&MSystemmembers’riskofnoncompliance
withfederalandA&MSystemrequirementsareincreasedwhichmayresultin
reputationaldamage,penalties,fines,and/orlossofresearchfunding.
TarletonStateUniversity
TarletonStateUniversitydoesnothaveadequateprocessesandcontrolsinplaceto
ensurecompliancewithlawsandpoliciesgoverninghumansubjectresearch.A
reviewofexistinghumansubjectresearchprocessesidentifiedmultipleconditions
andinstancesofnoncompliancewithA&MSystemrequirements.AlthoughTSU's
IRBwasestablishedin2001tooverseehumansubjectresearch,theuniversitydoes
nothaveafunctioninghumansubjectresearchprograminplaceandestablished
proceduresarenotadequatelydocumentedanddonotmeetfederalandA&M
Systemrequirements.Withoutafullyfunctioningprogram,theuniversityisnotin
compliancewithfederalregulationsrelatedtofederallyfundedresearchinvolving
humansubjectswhichcouldleadtopenalties,lossofresearchfunding,and
reputationaldamagetotheuniversity.Theuniversityindicatedithasrecentlyput
forthsignificantefforttocreateandimplementprocedurestoimproveitsprogram
andIRBprocessesandbringthemincompliancewithA&MSystemandfederal
regulations.
PrairieViewA&MUniversity
SignificantimprovementsareneededinseveralareasofPrairieViewA&M
University’shumansubjectresearchprogramtoensurecompliancewithlawsand
policiesgoverninghumansubjectresearch.Higherrorrates(rangingfrom36%
to47%)werenotedinourtestingofcompliancewithresearchprotocolapproval
requirementsandIRBmeetingminuterequirements.Inaddition,humansubject
researchtrainingrequirementswerenotconsistentlymetforresearchers
involvedinhumansubjectresearch.Forfiveof29(17%)humansubjectresearch
protocolstested,researchpersonneldidnotfullyorproperlycompleteaconflict
ofintereststatementasrequired.Researchprotocolsarealsonotbeingproperly
classifiedbytheuniversitywhichcouldleadtoinefficiencieswithintheprotocol
approvalprocess.Asaresultofnoncompliancewithhumansubjectresearch
requirements,penalties,lossofresearchfunding,andreputationaldamagecould
occurtotheuniversity.Theuniversityindicatedithasrecentlyputforth
significantefforttoreviseandimplementprocedurestoimproveitshuman
subjectresearchprogramandIRBprocessesandbringthemincompliancewith
A&MSystemandfederalregulations.
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SummaryofManagement’sResponse
Managementagreeswiththerecommendationsinthereportandhastaken,orisin
theprocessoftakingstepstoimplementalltherecommendationsbytheendof
March2015.
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TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideofBrazosCounty
DetailedResults
1. A&MSystemHumanSubjectResearchProgramGuidance
ContinuedguidanceandoversightisneededtoensureA&MSystem
membersareincompliancewithlawsandpoliciesgoverninghumansubject
research.AsurveyofthetenA&MSystemmemberslocatedoutsideofBrazos
CountywasperformedinFebruary2014inconjunctionwiththeA&MSystem
OfficeofResearchCompliance(ORC).Basedontheresultsofthesurvey,detailed
reviewsofthehumansubjectresearchprogramsatTarletonStateUniversity
(TSU)andPrairieViewA&MUniversity(PVAMU)wereperformed.TSUwas
determinedtobeoperatingforthemostpartwithoutahumansubjectresearch
programandPVAMUhadmultipleinstancesofnoncompliancewithfederaland
A&MSystemrequirements(Seeauditobservation2and3forfurtherdetails).
ForthetenA&MSystemmemberssurveyed,wereviewedeachmember’s
requireduniversityruleandIRBprocedures.Thisreviewfocusedoncompliance
withA&MSystemrequirementsandtheDepartmentofHealthandHuman
ServicesregulationsatCodeofFederalRegulations(CFR)45,46.103(b)(4)and
(5).TheseregulationsrequireIRBprocedurestoaddresssevenspecificelements.
Wefurtherreviewedthemember’sIRBproceduresrelatedtoinitialand
continuingreviewsofresearchprotocols,thetwomostsignificantelements
required,forcertainoperationaldetailssuggestedintheDepartmentofHealth
andHumanServicesOfficeforHumanResearchProtection’s“GuidanceonWritten
IRBProcedures.”Basedonthisreview,sixofthetenmemberslocatedoutsideof
BrazosCountydidnothaveanapproveduniversityruleregardingtheuseof
humansubjectsinresearchasrequiredbyA&MSystemRegulation15.99.01,Use
ofHumanSubjectsinResearch,andsevenofthetenmembersweremissingone
ormorerequiredelementsintheirIRBprocedures.Detailedresultsforeach
memberareshowninthefollowingtable.
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PVAMU
TSU
√ √
√
RequiredIRBProcedures
(asofFebruary2014)
√ √ √ UniversityRuleisinplaceasrequiredbyA&MSystem
Regulation15.99.01
RequiredUniversityRule
(asofFebruary2014)
TAMU‐CC
TAMIU
TAMU‐SA
WTAMU
TAMU‐CT
TAMUK
TAMU‐C
TAMU‐T
TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideofBrazosCounty
Conductinginitialreview
√ √ √ √ √ √ Conductingcontinuingreview
√ √ √ √ √ √ √ √ √ Reportfindingsandactionstoinvestigator(s)and
institution
√ √ √ √ Determinewhichprojectsrequirereviewmoreoftenthan
annually
√ √ √ √ √ √
√
Determinewhichprojectsneedverificationfromsources
otherthantheinvestigatorsthatnomaterialchangeshave
occurredsincepreviousIRBreview
√ √ √ √
EnsurepromptreportingtoIRBofproposedchangesin
researchactivity
√ √ √ √ √ √ √ √ √
Ensurepromptreportingofanyunanticipatedproblems,
seriouscontinuingnoncompliance,oranysuspension/
terminationofIRBapproval
√ √ √ √ √ √ √ √
TheA&MSystemChiefResearchComplianceOfficerhasbeenworkingwithA&M
SystemmemberstoincreasecompliancewithfederalandA&MSystem
requirementsregardinghumansubjectresearch.Guidanceincludedexperttoolsto
reviewthemember’shumansubjectresearchprogramforcompliance,various
educationalprograms,annualmeetings,onsitevisits,andofferstoperformprogram
reviewsofeachmemberandtrainingforIRBmembersandprincipalinvestigators.
ItshouldbenotedthattheaboveresultswereasofFebruary2014.Duringthe
springof2014,theSystemChiefResearchComplianceOfficerbeganassistingA&M
Systemmembersindevelopingcomprehensiveuniversityrulesandprocedures
relatedtohumansubjectresearch.Asaresult,someofthemissingrulesand
procedureshavealreadybeenaddressedaccordingtomanagement.
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Recommendation
ContinuetoworkcloselywithA&MSystemmemberslocatedoutsideBrazosCounty
toensuretheyareincompliancewithfederalandA&MSystemrequirements
governinghumansubjectresearchincluding:
 CompletingcurrenteffortstodevelopuniversityrulesasrequiredbyA&MSystem
Regulation15.99.01.
 Developingandimplementingcomprehensivehumansubjectresearch
procedureswhichaddressallfederalrequirementsandtakeintoconsideration
guidanceprovidedintheOfficeforHumanResearchProtection’sdocument
“GuidanceonWrittenIRBProcedures.”
 Assessingandrecommendinghumansubjectresearchcompliancestaffinglevels
andexpertiseneededbyeachA&MSystemmembergiventhemagnitudeoftheir
humansubjectresearchactivities.
 PeriodicallymonitoringandreportingresearchcomplianceresultstoeachA&M
Systemmember’sexecutivemanagementinordertostrengthenthe
accountabilityofeachmember’sresearchstaffformaintainingcompliance.
Management’sResponse
Managementagreeswiththerecommendationsmadeinthisreport.TheA&M
SystemChiefResearchComplianceOfficerwillcontinuetoworkcloselywithA&M
Systemmemberstoensuretheyareincompliancewithallrequirementsgoverning
humansubjectresearch.TheChiefResearchComplianceOfficerwillamongother
activities:
 Ensure,byDecember31,2014,thatallA&MSystemmembers,asrequiredby
A&MSystemRegulation15.99.01eitherhaveanapprovedruleorhave
submitteddraftrulestotheOfficeofGeneralCounselforreview.Currently
ofthesixA&MSystemmembersthatdidnothaveauniversityruleinplace
atthetimeoftheaudit,two(WTAMUandTAMU‐CT)nowhaveanapproved
ruleandthreeothers(TAMU‐T,TSUandPVAMU)havesubmitteddraftrules
forreviewbytheOfficeofGeneralCounsel.
 WorkwithA&MSystemmemberstoensure,byMarch31,2015,thatthey
havedevelopedandimplementedcomprehensivehumansubjectresearch
procedures.
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

Conduct,byMarch31,2015,anassessmentofthestaffinglevelsand
expertiseneededbyeachA&MSystemmembertoensurecompliancewith
federalandA&MSystemrequirementsgoverninghumansubjectresearch.
MonitoronanongoingbasistheadequacyofeachA&MSystemmember’s
researchcomplianceenterpriseandreport,nolessthanannually,theresults
totheirexecutivemanagement.
2. TarletonStateUniversityHumanSubjectResearchProgram
AlthoughTarletonStateUniversity’sIRBwasestablishedin2001,thereisnota
fullyfunctioningprograminplaceformanagingtheprotectionofhuman
subjectsinvolvedinresearchandestablishedproceduresarenotadequately
documentedanddonotmeetfederalandA&MSystemrequirements.Areview
ofexistinghumansubjectresearchprocessesinplaceatthetimeoftheaudit
identifiedmultipleconditionsandinstancesofnoncompliancewithA&MSystemand
federalrequirementsasfollows:
 Nodocumentedproceduresareinplaceforthesubmissionandreviewof
initialprotocols;protocolcontinuations,amendments,expirations,and
closeouts;administeringprotocolsinvolvingvulnerablepopulations;ensuring
thatrequiredtrainingofprincipalinvestigators(PIs)doesnotexpirewhile
protocolresearchisbeingperformed;ensuringIRBregistrationrenewalsand
updatesaremadeasrequired;trainingIRBmembersontheirIRBduties;and
handlingorpenalizingPIsthatarenotcompliantwithprocedures.
LevelsofProtocolReview
 Therearenorecordsdocumentinghow
protocolsmeetExemptdeterminationsor
Exempt‐Researchinvolvinghumansubjects
Expeditedapprovalrequirements;thatPIshave withincertainlowriskcategories.These
protocolsarenotassignedanexpiration
takenrequiredtrainingpriortosubmissionof
dateanddonothavetoundergocontinuing
protocols;andprojectcloseouts.
review.
Expedited‐Researchinvolvinghuman
 NoIRBmeetingswereconvenedfor10years
subjectswithnomorethanminimalriskor
priortoNovember2013.ThepreviousIRB
minorchangesinapprovedresearch.These
protocolscanbereviewedbyaqualifiedIRB
chairsclassifiedallprotocolsasexemptduring
reviewerratherthanataconvenedIRB
thistime.
meeting.
FullBoard–Researchinvolvinghuman
 Theuniversity’sIRBmembershiphasrecently
subjectswithgreaterthanminimalriskor
changed;however,theIRBmembershiproster
minimalrisk,butdonotqualifyfor
hasnotbeenupdatedsinceJanuary3,2012.
expeditedreview.Theseprotocolsare
reviewedatconvenedIRBmeetingsat
whichamajorityoftheIRBmembersare
present.
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TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideofBrazosCounty






IRBmeetingminutesdonotincludetheprotocols’votecountfor,againstor
abstainingasrequired.Asaresult,itcannotbedeterminediftherequirement
foraquorumwasmetfortheIRBvotesonprotocols.
ProtocolapplicationformsincludereviewcategoriesotherthanExempt,
ExpeditedandFullBoard,whicharetheonlyauthorizedcategories.
Currentprotocollistsmaintainedincludeallprotocolssince2001withno
designationindicatingwhichprotocolsareactiveorinactiveotherthanbythe
protocolrenewaldate.
Protocolnumberingmethodsdonotfacilitateeaseoftrackingprotocol
continuations.Thecurrentprocessassignsanewprotocolnumberfor
continuationswhichisnotfiledwiththeoriginalprotocol.
Nocontinuingreviewsorreviewsforamendmentshavebeenperformedandit
hasnotbeenfullydeterminedtheextenttowhichcurrentresearchis
continuing.
Norecordsretentionprocedureshavebeendeveloped.Allrequiredrecords
documentingIRBactivitiesarenotretainedasrequired.Inaddition,manual
recordsofprotocolshavebeenretainedthatextendback14years.
Interviewswiththeuniversity’shumansubjectresearchprogramstaffindicateda
generalunawarenessofmanyoftherequirementsandoperationalprocesses
neededforoperatingaprogram.Withoutafunctioningprogram,theuniversityis
innoncompliancewithA&MSystemrequirementsaswellasfederalregulationsto
theextentthatfederallyfundedresearchisperformedinvolvinghumansubjects.
Thisnoncompliancecouldleadtopenalties,lossofresearchfunding,and
reputationaldamagetotheuniversity.
TexasA&MSystemRegulation15.99.01,UseofHumanSubjectsinResearch,
Section2.4statesthatproceduresforsafeguardingtherightsofindividualsshall
beconsistentregardlessofsourcesoffunding.ThisincludeseachIRBmeetingthe
requirementssetoutinthefederalregulationssuchashavingallprotocolsfor
researchonhumansubjects,whetherfundedorunfunded,approvedbytheIRB
beforetheinitiationoftheresearchproject.Inaddition,writtenIRBprocedures,
includingproceduresrelatedtothereviewofhumansubjectresearchprotocols
andreportingguidelines,mustbedeveloped.PIsarealsorequiredtosubmit
continuingreviewstotheirrespectiveIRBs,asdirectedbytheIRB,butnotless
thanannually.
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Theuniversityindicatedithasrecentlyputforthsignificantefforttocreateand
implementproceduresforimprovingtheirhumansubjectresearchprogramandIRB
processestobringthemincompliancewithA&MSystemrequirementsandfederal
laws.Theuniversityisalsointheprocessofaddressingrecommendationsmade
duringahigh‐levelreviewofitsprograminJanuary2014bytheSystemChief
ResearchComplianceOfficerincludingreviewsofpastprotocolsforpotential
noncomplianceinvolvinglackofproperclassification,review,andapproval;lackof
continuingreviews;lackofamendments;andotherpotentialinstancesof
noncompliance,etc.
Recommendation
Completethedevelopmentandimplementationofahumansubjectresearch
programthatisincompliancewithfederalandA&MSystemhumansubject
researchrequirementsasfollows:
 Preparecomprehensivehumansubjectprotectionandinstitutionalreview
boardproceduresthataddressallrelevantfederalandA&MSystemhuman
subjectresearchrequirements.Updatetheseproceduresasneeded.
 Implementaprocessformonitoringandenforcingcompliancewithuniversity
proceduresanddocumentthesemonitoringprocesses.
 Developatrainingprogramtoensureallindividualsassociatedwithhuman
subjectresearchprocessesattheuniversityhavebeenadequatelytrainedand
areawareofallfederalandA&MSystemhumansubjectresearch
requirements.Thisincludesensuringthatallresearchpersonnelinvolved
withhumansubjectresearchapplicationshavecompletedrequiredtraining
priortoIRBapprovaloftheapplication.



Ensureallhumansubjectresearchprocessesandactivitiesaredocumentedas
requiredandfollowstatedrecordsretentionpolicies.
Developgoals,objectives,andperformancemeasuresfortheprogram
includingspecificmeasurableperformancetargetsthatareconsistentwiththe
program'sobjectives.Trackandreportcorrespondingperformancedatato
universitymanagementtoensurethehumansubjectresearchprogram
achievesitsobjectives.Utilizetheperformancetargetstoperformaworkload
analysistodeterminetheresourcesneededfortheprogramtoachieveits
statedperformanceexpectations.
Provideadditionaloversightandguidancetoensurecompliancewithlawsand
policiesgoverninghumansubjectresearch.
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
CompleteimplementationoftheSystemChiefResearchComplianceOfficer’s
recommendationsincludingreviewsofactiveprotocolsforpotential
noncomplianceinvolvinglackofproperclassification,review,andapproval;
lackofcontinuingreviews;lackofamendments;andotherpotentialinstances
ofnoncompliance.Takethenecessarystepstoaddressinstancesof
noncomplianceidentifiedandanyrequiredreportingoftheseinstances.
Management’sResponse
TarletonStateUniversityhasmadesignificantimprovementsinrebuildingaquality
humansubjectsprotectionprogramincludingimplementationofnewhumansubject
researchprogrampolicies,newIRBleadershipandparticipantswithCollaborative
IRMTrainingInitiative (CITI)training,IRBtrainingmeetings,andelectronic
documentationofproposalreviewandtracking.Theseimprovementswillcontinue
untilTarletonisinfullcompliancewithA&MSystemandgovernmentalregulations.
TheuniversityrulefortheUseofHumanSubjectsinResearchhasbeenapprovedby
A&MSystemGeneralCounselforlegalsufficiencyreview.Implementationofthese
updatedprocessesandprocedureswillbecompletedbyOctober13,2014.
3. PrairieViewA&MUniversityHumanSubjectResearchProgram
AdditionaloversightandguidanceisneededforPrairieViewA&MUniversity’s
humansubjectresearchprograminthefollowingareastoensurecompliancewith
federalandA&MSystemrequirements:
3a.InstitutionalReviewBoard’sReviewofResearchProtocols
Researchprotocolreviewstestedwerenotincompliancewithfederaland
A&MSystemrequirements.Eightof17(47%)initialand/orcontinuing
protocolstestedwhichwenttothefullIRBforapprovaldidnothaveevidencethat
therewasaquorumoftheIRBpresentwhentheprotocolwasapproved.IRB
meetingminuteswerenotalwaysadequatetodetermineifaquorumwaspresent.
For11monthsofIRBmeetingminutestested:


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Fourof11(36%)didnotincludeaccuratevotingdetailbasedonthestatedIRB
membercount.
Fiveof11(45%)didnothaveaquorumatsomepoint;however,actions
continuedtobevotedupon.Thiswasalsonotedduringtestingofinitial
protocolsaboveinwhicheightof17(47%)oftheinitialprotocolstesteddid
nothaveaquorumoftheIRBwhentheinitialprotocolwasapproved.
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
Fourof11(36%)hadgueststhatwereincorrectlyrecordedasvoting
membersintheminutes.

VotingmembersfrequentlyenterandexittheIRBmeetingandthiswasnot
consistentlydocumentedinthemeetingminuteswhichcreatedconfusionasto
howmanymemberswereremainingaseligiblevoters.
A&MSystemRegulation15.99.01,UseofHumanSubjectsinResearch,Section2.4
statesthatallresearchonhumansubjects,whetherfundedorunfunded,mustbe
approvedbytheIRBbeforetheinitiationoftheresearchproject.CodeofFederal
Regulations(CFR),Title45,Part46,ProtectionofHumanSubjectsrequiresthat
proposedresearchbereviewedandapprovedatconvenedmeetingsatwhicha
majorityofthemembersoftheIRBarepresent.Inaddition,theuniversity’s
InstitutionalReviewBoardMemberHandbookindicatesthatnolegallyvalidIRB
actionmaybetakenwithoutaproperlyconstitutedquorum.Ifaquorumislost
duringameeting,thenthecommitteecannotconductofficialbusinessuntilthe
quorumisrestored.Ifthequorumisnotrestored,themeetingisconcludedand
remainingbusinesscontinuesatthenextscheduledmeeting.
CFR,Title45,46.115,IRBRecordsstatesaninstitution,orwhenappropriateanIRB,
shallprepareandmaintainadequatedocumentationofIRBactivitiesincludingthe
minutesofIRBmeetingswhichshallbeinsufficientdetailtoshowattendanceatthe
meetings;actionstakenbytheIRB;thevoteontheseactionsincludingthenumberof
membersvotingfor,against,andabstaining;thebasisforrequiringchangesinor
disapprovingresearch;andawrittensummaryofthediscussionofissuesandtheir
resolution.Inaddition,theuniversity’sInstitutionalReviewBoardMember
Handbookstatesthatnon‐voting(ex‐officio)membersmayattendthemeetings,but
thesemembersmaynotvoteonthedecisionsandarenotincludedindeterminingor
establishingaquorum.IRBmeetingminutesmustreflectthepresenceofnon‐voting
membersandhumansubjectresearchcompliancestaff.
Recommendation
IncreasemonitoringeffortsandtrainingofPIstoensureinitialprotocolsare
properlyapprovedwithaquorumofIRBcommitteemembers.
ProvideadditionaltrainingtoIRBmembersontheIRBmembershipandcommittee
requirementsstipulatedinthefederalregulationsandtostaffrecordingminutesto
properlytrackanddocumenttheentranceandexitofvotingmemberstoensurean
accuratevotecountandquorum.
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Management’sResponse
Weagreewiththisrecommendationandwillincreasemonitoringeffortsand
trainingofPlstoensureinitialprotocolsareproperlyapprovedwithaquorumof
IRBcommitteemembers.
WewillprovideadditionaltrainingtoIRBmembersontheIRBmembershipand
committeerequirementsstipulatedinthefederalregulationsandstaffrecording
minutestoproperlytrackanddocumenttheentranceandexitofvotingmembersto
ensureanaccuratevotecountandquorum.
WehavedevelopedatrainingmoduleforPIeligiblefacultytoincludethesteps
requiredforthereview,approval,andcontinuationofprotocols.
TheseactivitiesarebeingimplementedandwillbecompletedbyNovember30,2014.
3b.HumanSubjectResearchTraining
Humansubjectresearchtrainingrequirementswerenotconsistentlymet
forresearchersinvolvedinhumansubjectresearch.Nineof31(29%)initial
andcontinuingresearchprotocolstesteddidnothaveevidenceofcurrenthuman
subjectresearchtrainingonfileforallresearchersinvolvedwiththeproject.
Overall,therewere83totalresearcherswhoparticipatedontheresearch
protocolstestedofwhichalmost10%lackeddocumentationofcurrenthuman
subjectresearchtraining.Alackofevidenceofmonitoringandenforcementof
trainingresultedintheidentifiednoncomplianceissue.
PVAMUHumanSubjectResearch,GuidelinesforCompletionoftheCollaborativeIRB
TrainingInitiativeProtectingHumanResearchParticipantsTrainingstatesthat
documentedevidenceisrequiredthatallprincipalandco‐investigatorsandall
master’sanddissertationcommitteemembershavecompletedhumansubject
researchtrainingandthattheirtrainingcertificationiscurrent.Researchersmustbe
preparedtoprovideevidenceofacurrentelectronictrainingcertificatetosupport
theirfilesandtofacilitatereleaseoffunds.Initialandcontinuingreviewswillnotbe
performedwithoutproofofcurrenttrainingcompletion.Requiredtraininghelpsto
ensurethatresearchersareawareofapplicablefederallawsandensurestheir
compliancewiththeuniversity’sprocedures.
Recommendation
Increasemonitoringandoversighttoensureallresearchpersonnelinvolvedwitha
humansubjectresearchprotocolhavecompletedrequiredtrainingpriortoreceiving
theIRBapprovalletterfortheprotocol.
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Management’sResponse
Weagreewithyourrecommendations,andtheOfficeofResearchCompliancewill
increasemonitoringandoversighttoensureallresearchpersonnelinvolvedwith
humansubjectresearchprotocolhavecompletedrequiredtrainingpriorto
receivingtheirIRBapprovalletterfortheprotocol.
TheOfficeofResearchCompliancehasdraftedapre‐proposalformthatrequires
humansubjectresearchtrainingaspartoftheproposalsubmissionprocess.The
OfficeofResearchCompliancewillprovidemonitoringofthisrequirement.
TheOfficeofResearchCompliancehasinitiatedthedevelopmentofatraining
moduleforPIeligiblefacultytoincludethestepsrequiredforthereview,approval,
andcontinuationofprotocols.ThetrainingmodulewilldirectPIeligiblefacultyand
researchteammemberstoparticipateinthecompletionofCITItraining.
ThisprocesswillbeimplementedbyDecember31,2014.
3c.ConflictofInterestDisclosureStatement
Fiveof29(17%)humansubjectresearchprotocolstestedinvolvedresearch
personnelthatdidnotfullyorproperlycompleteaconflictofinterest
statementasrequired.Disclosurestatementswereoftensubmittedbutnot
completedfullyorproperlybyresearchpersonnel.Inaddition,instanceswerenoted
inwhichresearchersindicatedtheyhadapotentialconflictofinterestbutdidnot
submittheappropriateformtomanagetheconflict.Researchcompliancestaffdid
notalwaysensurethatdisclosurestatementswerecompletedproperlyorfollowup
toensurethepotentialconflictwasresolvedbeforetheprotocolwasapproved.
TexasA&MSystemRegulation15.01.03,FinancialConflictsofInterestin
SponsoredResearch,andCFR45Part94indicatethatdisclosingfinancialconflicts
ofinteresttohumansubjectresearchparticipantsisamethodtomanage,reduce,
oreliminatetheseconflicts.Inaddition,thePVAMUInstitutionalReviewBoard
MemberHandbookstatesthatfacultyandtheirstaffmayhavefinancial
relationshipswithoutsideorganizations,whichmightcreatethepotentialfor
financialconflictsofinterest.WhiletheIRBcanbehelpfulinidentifyingpotential
conflicts,itisthefacultyorstaffmember’sresponsibilitytocomplywiththe
university’sDisclosureofSignificantFinancialInterestpolicy.
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Recommendation
Provideadditionalguidanceandoversighttoensureallresearchpersonnelinvolved
withhumansubjectresearchproperlyandfullycompleteandsubmittherequired
conflictofintereststatementpriortoIRBapprovaloftherespectiveresearch
protocol.
Management’sResponse
Weagreewithyourrecommendations,andtheOfficeofResearchCompliancewill
provideadditionalguidanceandoversighttoensureallresearchpersonnelinvolved
withhumansubjectresearchproperlyandfullycompleteandsubmittherequired
conflictofintereststatementpriortoIRBapprovaloftherespectiveresearch
protocol.
TheOfficeofResearchCompliancehasdraftedapre‐proposalformthatrequires
humansubjectresearchtrainingandthePVAMUConflictofInterestDisclosure
Statementaspartoftheproposalsubmissionprocess.
ThisprocesswillbeimplementedbyDecember31,2014.
3d.ResearchProtocolClassificationandProcessing
Researchprotocolsarenotbeingproperlyclassifiedbytheuniversitywhich
resultsininefficiencieswithintheprotocolapprovalprocess.Theuniversity
hasbeenclassifyingandprocessingmostresearchprotocolapplicationsasfull
boardeventhoughmanywouldqualifyasexemptorexpeditedundercurrent
federalregulations.Thedecisiontoclassifytheseprotocolsasfullboardwas
madetoeducatefacultyandstaff,especiallystudentsontheprotocolapproval
process,andreducepotentialnoncomplianceduetopreviousissueswith
researchernoncomplianceattheuniversity.Asmallnumberofprotocolsrecently
beganbeingprocessedasexpeditedprotocols;however,nonehaveyetbeen
classifiedasexempt.Theuniversityresearchcompliancestaffindicatedthatthe
majorityoftheresearchprotocolsapprovedafterafullboardreviewwouldhave
mettheexemptcriteria.
CFR45,Part46statesthatresearchactivitiesinwhichtheonlyinvolvementof
humansubjectswillbeincertainlow‐riskcategoriesareexemptfromIRBreview.
Inaddition,expeditedreviewprocedurescanbeusedforcertainkindsofresearch
involvingnomorethanminimalrisk.Reviewofprotocolsbyamajorityofthe
membersatconvenedIRBmeetingsisrequiredwhenresearchinvolvesgreater
thanminimalriskorminimalrisk,butdoesnotqualifyforexpeditedreview.
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Properclassificationandreviewofprotocolsisneededtoachieveefficiencywithin
theproposalreviewprocessresultinginadditionaltimeavailabletoreviewfor
complianceinotherareas.
Recommendation
Properlyclassifyresearchprotocolsbasedonthefederalcriteriaforexempt,
expedited,andfullboardreview.Determinethelevelofreviewneededforthese
protocolswithconsiderationtothecorrespondingriskandthecostversusthe
benefitofperformingmorereviewstepsthanthoserequiredgivenresource
limitations.
Developandimplementanexpeditedproposalreviewprocessasneededthatis
congruentwithfederalrequirements.
Management’sResponse
Weagreewithyourrecommendations,andtheOfficeofResearchCompliancehas
developedadocumentthatwillproperlyclassifyresearchprotocolsbasedonthe
federalcriteriaforexempt,expedited,andfullboardreview.Wewilldeterminethe
levelofreviewneededfortheseprotocolswithconsiderationtothecorresponding
riskandthecostversusthebenefitofperformingmorereviewstepsthanthose
requiredgivenresourcelimitations.
Wewillalsodevelopandimplementanexpeditedproposalreviewprocessasneeded
thatiscongruentwithfederalrequirements.
ThisprocesswillbeimplementedbyDecember31,2014.
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TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideofBrazosCounty
BasisofReview
ObjectiveandScope
Theoverallobjectiveofthisauditwastosurveyhumansubjectresearchcompliance
controlsandprocessesatA&MSystemmemberslocatedoutsideofBrazosCounty
andperformadditionalreviewsatselectedmembersbasedonassessedriskto
ensurehumansubjectresearchactivitiesareincompliancewithlawsandpolicies.
ThereviewofhumansubjectresearchcompliancecontrolsandprocessesatTSU
focusedonthestateoftheoverallhumansubjectprotectionprogramduetoalackof
documentationtoperformdetailedtestwork.Detailedtestworkofhumansubject
researchprotocolreviews,IRBmembershipcompliance,andIRBmeetingminutes
andprocedureswereperformedatPVAMU.FortheothereightA&MSystem
universitieslocatedoutsideBrazosCounty,testworkwaslimitedtoareviewof
humansubjectprotectionproceduresinplaceforcompliancewithfederalandA&M
Systemrequirements.Nodetailedtestworkwasperformedtoensurecompliance
withtheseprocedures.Theauditperiodfortestworkperformedfocusedprimarily
onactivitiesfromMarch2013toFebruary2014.Fieldworkwasconductedfrom
FebruarytoMay2014.
Criteria
OurauditwasbaseduponstandardsassetforthintheSystemPolicyand
RegulationManualoftheTexasA&MUniversitySystem;CodeofFederal
RegulationsTitle45Part46ProtectionofHumanSubjects;PVAMUHuman
SubjectResearch"GuidelinesforCompletionoftheCollaborativeIRBTraining
InitiativeProtectingHumanResearchParticipantsTraining;”PVAMUInstitutional
ReviewBoardMemberHandbook;andothersoundadministrativepractices.This
auditwasconductedinconformancewiththeInstituteofInternalAuditors’
“InternationalStandardsfortheProfessionalPracticeofInternalAuditing.”
Additionally,weconductedthisperformanceauditinaccordancewithgenerally
acceptedgovernmentauditingstandards.Thosestandardsrequirethatweplanand
performtheaudittoobtainsufficient,appropriateevidencetoprovideareasonable
basisforourfindingsandconclusionsbasedonourauditobjectives.Webelievethat
theevidenceobtainedprovidesareasonablebasisforourfindingsandconclusions
basedonourauditobjectives.
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TheTexasA&MUniversitySystem:ReviewofHumanSubjectResearchComplianceOutsideofBrazosCounty
AuditTeam
CharlieHrncir,CPA,Director
BrianBillington,CPA,AuditManager
HollyBlue,CPA
LoriEllison
MarkHeslip
DistributionList
Mr.JohnSharp,Chancellor
Mr.BillyHamilton,ExecutiveViceChancellorandChiefFinancialOfficer
Dr.JonMogford,ViceChancellorforResearch
Dr.BruceWhitney,ChiefResearchComplianceOfficer
Ms.JanetSmalley,EthicsandComplianceOfficer
Dr.F.DominicDottavio,TSUPresident
Dr.KarenR.Murray,TSUProvostandExecutiveVicePresidentforAcademicAffairs
Mr.TyeMinckler,TSUVicePresidentforFinanceandAdministration
Dr.BertLittle,TSUAssociateVicePresidentforAcademicResearchandGrants
Ms.VickieSwam,TSUDirector,UniversityCompliance
Dr.GeorgeWright,PVAMUPresident
Dr.FeleciaNave,PVAMUProvostandSeniorVicePresidentforAcademicAffairs
Dr.CoreyS.Bradford,PVAMUSeniorVicePresidentforBusinessAffairs
Dr.CajetanAkujuobi,PVAMUVicePresidentforResearch&Dean,GraduateSchool
Dr.ElizabethNoel,PVAMUAssociateVicePresidentforResearch
Dr.DennisDaniels,PVAMUAssociateVicePresidentforResearchandAssociateDeanfor
GraduateStudies
Ms.LydiaCavanaugh,PVAMUDirector,UniversityCompliance
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The Texas A&M University System Internal Audit Department
Fourth Quarter Report for Fiscal Year 2014
TEXAS A&M UNIVERSITY –
CORPUS CHRISTI
Review of Financial Management
Services
Catherine A. Smock, C.P.A.
Chief Auditor
Project #20141503
TexasA&MUniversity–CorpusChristi:ReviewofFinancialManagementServices
Table of Contents
OverallConclusion
Overall,controlsandprocessesestablishedoverfinancialmanagementservices’
operationsreviewedatTexasA&M
Financial Management
University–CorpusChristiprovide
Areas Reviewed
reasonableassurancethatassetsare
 Bank & Clearing Account Reconciliations
safeguardedandresourcesareusedin
 Cash Receipts & Cash Handling
compliancewithapplicablelawsand
 Accounts Receivable Administration
 Procurement Card Processing
policies,exceptintheareaofaccounts
 Analysis of Selected Procurement &
receivables.Theuniversity’scurrent
Accounts Payable Data for Anomalies
accountsreceivablecollectionprocesses
donotensurecompliancewithstatelawsandA&MSystemregulations.
Opportunitiesforimprovementalsoexistintheareasofreconciliations,
departmentalcashhandling,andprocurementcardadministration.
Detaileddataanalysiswasperformedonallexpendituretransactionsprocessed
onvouchersandprocurementcardsfromMay1,2013toApril30,2014.Minimal
issueswerenotedindicatingthatcontrolsareinplacetoensurethatthesetypes
ofexpenditureswereprocessedinaccordancewithstateandA&MSystem
requirements.
SummaryofSignificantResults
AccountsReceivableCollectionProcedures
Accountsreceivablecollectionprocessesdonotensurecompliancewithstate
lawsandA&MSystemregulations.Thereviewfoundahigherrorratefor
complianceexceptionsindemandletterstodebtorsandretentionofhistorical
collectiondocuments.Statelawscontainspecificrequirementsandrestrictionsin
theseareas.Noncompliancewithstatelawscoulddamagetheuniversity’s
reputationandincreasetheriskofthelossofuniversityfunds.Themajorityof
accountsreceivablebalancesareforstudentdelinquencieswhichtotaledover
$2.6millioninfiscalyear2013.Thisresultedintheissuanceofover4,700
demandletterstostudentdebtors.
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SummaryofManagement’sResponse
TexasA&MUniversity‐CorpusChristiagreeswiththeresultsoftheauditandwill
movetoaddresstheissuesraisedandmakeimprovementsintheaccounts
receivable,reconciliations,cashhandling,andprocurementcardprocessingareas.
DetailedResults
1. AccountsReceivableCollectionProcedures
Accountsreceivablecollectionprocessesdonotensurecompliancewithstate
lawsandA&MSystemregulations.Noncompliancewithstatelawscoulddamage
theuniversity’sreputationandincreasetheriskofthelossofuniversityfunds.The
majorityofaccountsreceivableisforstudentdelinquencies.Infiscalyear2013,the
universitysentoutmorethan4,700demandletterstostudentsforamountstotaling
$2.6million;$1.8million(69%)ofthisamountwascollectedasaresultofthe
demandletterswiththeremaining$800,000sentforcollection.Althoughmorethan
99%ofallstudentrevenuesareultimatelycollected,thecurrentaccountsreceivable
collectionprocessdoesnotcomplywithstatelawsandA&MSystemregulationsas
follows:
 Nineof38(24%)firstdemandletterstestedwerenotissuedincompliance
withTexasAdministrativeCode(i.e.within30daysofthedelinquentdate).
 Twenty‐eightof30(93%)seconddemandletterstestedwerenotissuedin
compliancewithTexasAdministrativeCode(i.e.within60daysoffirst
demandletter).
 Elevenof38(29%)delinquentaccountstesteddidnotproperlyrecordand
maintaindocumentationofallattemptstocollectthedebtasrequired.
 Fourof22(18%)delinquentaccountstesteddidnothaveaFinancial
AccountingManagementInformationSystem(FAMIS)holdproperly
applied.
 Threeof32(9%)delinquentaccountstesteddidnothaveastatehold
appliedasrequired.
 Accountswithbalancesunder$100werenotconsistentlysentdemand
lettersasrequired.
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Managementdesignedthecollectionprocesssothatseconddemandlettersarenot
senttostudentsuntilafterthestartofthefollowingsemesterduetothefactthat
studentsarerequiredtopaytheiroutstandingbalancespriortoregistering.This
greatlyreducedtheamountofseconddemandlettersneedingtobesentsavingstate
resourcesrelatedtostafftimeanddepartmentalmailingcosts.However,thisisnot
incompliancewithstateandA&MSystemrequirementsinregardtotherequired
timelineforsendingthesedemandletters.Theuniversity’scurrentaccounts
receivableproceduresdonotspecificallyaddressdemandlettersforcollecting
accountsreceivablesandtheircorrespondingrequirementsandrestrictions,but
ratherrefertosendingoutpastduenoticesandpastduebalanceletters.
TexasAdministrativeCode§59.2,UniformGuidelinesandReferralofDelinquent
CollectionsandA&MSystemRegulation21.01.04,ExtensionofCreditstatethatthe
firstdemandlettertodebtorsshouldbesentnomorethan30daysafterthe
obligationhasbecomedelinquent,andtheseconddemandlettershouldbesent30
to60daysafterthefirstdemandletter.Inaddition,documentationofallattemptsto
collectthedebtmustberecordedandmaintainedonfile.Whenthedebtis
determinedtobedelinquent,theStateComptroller’swarrantholdprocessshouldbe
utilizedtoensurepaymentsarenotissuedtotheindividualorentitythatisindebted
tothestate.
Recommendation
Implementaccountsreceivablecollectionproceduresthatarecompliantwith
statelawsandA&MSystemregulationsandmonitortoensurecompliancewith
theseprocedures.Maintaindocumentationofallattemptstocollectdebtsowed
ondelinquentbalancesandissueFAMISandstateholdsasrequired.Clarify
accountsreceivableprocedurestobetterdefinedemandlettersandthe
correspondingstaterequirementsforsendingtheseletterstodebtors.
Management’sResponse
InSeptember2014(fall2014transactions),weimplementedanewprocesstoensure
compliancewithstatelawandTexasA&MUniversitySystemregulations.
2. Reconciliations
Bankandclearingaccountreconciliationsandreviewprocessesrequire
improvementtoensureoldoutstandingitemsareclearedinatimely
manner.Ofthefifteenreconciliationsreviewed,five(33%)haveoutstanding
itemsgreaterthan90daysold.Ofthosefive,three(20%)reconciliationshave
outstandingitemsgreaterthanoneyearold.Carryingunexplainedreconciling
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itemsforextendedperiodsoftimereducestheeffectivenessofthereconciliation
asaninternalcontrolwhichincreasestheriskthaterrors,discrepanciesand
misappropriationscouldoccurwithoutbeingdetected.Managementwasaware
ofthisissueandindicatedthatstaffturnoverhasnotallowedtimetodevoteto
workingonclearingoldreconcilingitems.Anagingofreconcilingitemsisalsonot
beingusedtohelptrackandreportoldreconcilingitems.
Inaddition,379outstandingchecksrangingfrom2003through2011whichtotal
morethan$84,000arestillpresentontheApril2014accountspayablebank
reconciliation.Theseoutstandingcheckshavenotbeenreportedandturnedoverto
thestateasunclaimedpropertyasrequired.TexasPropertyCode,Title6,Unclaimed
Property,Chapter74,Report,Delivery,andClaimsProcessrequiresproperty,
includingoutstandingchecks,presumedabandonedtobeturnedovertotheState
ComptrolleronorbeforethefollowingJuly1accompaniedbyareportofthat
property.
Recommendation
Improveprocessesandprocedurestoensurethatoldreconcilingitemsareresolved
andclearedinatimelymannerwhichmayincludeestablishingtimeframesortargets
bywhichoutstandingreconcilingitemsmustbeclearedorreportedtoahigherlevel
ofmanagement.Provideanagingreportofoutstandingreconcilingitemsto
managementtoassistinprioritizingtheseitems.Annuallyreportchecksthatare
outstandingformorethanthreeyearstotheStateComptrollerandturnthis
unclaimedpropertyoverasrequired.
Management’sResponse
Theuniversitywillworktoimproveprocessesandprocedurestoensurereconciling
itemsareresolvedandclearedinatimelymanner.Anagingsystemonreconciling
itemswillbeputinplacewithallreconciliationspreparedinDecember2014.
Timeframesforoutstandingreconcilingitemsthatareconsideredagedwillbe
establishedinDecember2014afterconsultationwiththeuniversitycomptroller.
UnclaimedpropertyprocedureswillberevisedinNovember2014andall
outstandingchecksthatareeligibletobesenttothestatecomptrollerwillbe
submittednolaterthantheendofMarch2015.
3. CashHandling
Departmentalcashhandlingprocessesrequireimprovementtoincrease
compliancewithA&MSystemregulationsanduniversityrulesand
procedures.Improvementisneededrelatedtosegregationofdutyprocedures
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anddocumentationofthechainofcustodyforcashreceiptswithinsome
departments.Twooftwelve(17%)departmentstesteddidnothaveprocedures
formaintainingapropersegregationofdutiesinregardstothehandlingofcash
receiptswhichincreasetheriskthatfundscouldbelostormisappropriated
withoutbeingdetected.Inaddition,nodepartmentstestedformallydocumentthe
chainofcustodywhencashreceiptsaretransferredwithinthedepartmentas
requiredbyA&MSystemregulations.Asaresult,fundsarenotadequately
accountedforthroughouttheentirereceiptprocesswhichinhibitstheabilityto
identifythepointthatfundsarelostormisappropriated.Currentcashhandling
proceduresdonotaddresstransferoffundcustodywithinadepartment,but
ratheronlythetransferofworkingfundsordepartmentaldepositsmadewiththe
fiscaloffice.
A&MSystemRegulation21.01.02,Receipt,Custody,andDepositofRevenuesstates
thatcashhandlingandrecordkeepingfunctionsshouldbeseparated.Inaddition,the
documentationoftransactionsandthebalancingofcashatallpointsoftransferand
transportarecriticaltomaintainaccuracyandsafetyofcashtransactions.Whenone
individualtransferscustodyofcashfundstoanother,cashshouldbecountedinthe
presenceoftwoparties.Theamountshouldberecordedonatransmittallogandthe
logshouldbesignedbythepersonacceptingcustody.Cashreceivedwithin
universitydepartmentstotaled$360,000infiscalyear2013.
Recommendation
ComplywithA&MSystemregulationsanduniversityrulesandproceduresrelated
todepartmentalcashreceiptanddepositprocesses.
Ensurealldepartmentsreceivingcashreceiptshaveproceduresformaintaining
anadequatesegregationofduties.
Reviseuniversitycashhandlingprocedurestoaddressthetransferoffundcustody
withindepartmentstocomplywithfundcustodytransferrequirementswithinA&M
Systemregulationsandmonitorforcompliancewiththeserequirements.
Management’sResponse
UniversitycashhandlingprocedureswereupdatedinSeptember2014tocomply
withrequirementswithinTexasA&MUniversitySystemregulationsanduniversity
cashhandlershavebeennotifiedofthesechanges.InMarch2015duringtheannual
reviewofworkingfunds,theuniversityComptroller’sOfficewillverifythatall
departmentshavedocumentedintheirproceduressegregationofdutiesand
transferoffundsrequirements.
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4. ProcurementCardProcessing
Although,procurementcardpurchasestestedwereappropriate,additional
complianceisneededwithprocurementcardguidelines.Threeofforty(8%)
cardholderpacketstestedwerenotsubmittedtoPurchasinginatimelymanner(by
the20thdayofthemonth)andfive(13%)wereapprovedbythesupervisorpriorto
theemployee’sapproval.Detailedmonitoringofprocurementcardtransactionsfor
compliancehasbeeninhibitedtosomeextentduetolimitedstaffavailableinthis
areagiventhelargenumberofprocurementcardholdersattheuniversity.Without
adequatemonitoringofprocurementcardtransactionsthereisanincreasedriskof
noncompliancewithstateprocurementlawsandinappropriateprocurementcard
purchases.
Recommendation
Reassesstheadequacyofcurrentstaffingavailabletomonitorprocurementcard
transactionsespeciallyastheuniversitycontinuestogrowandincreaseutilizationof
thisformofpayment.Increasemonitoringtoensureprocurementcardpurchases
andcorrespondingdocumentationcomplywithuniversityprocurementcard
guidelines.Continueperiodictrainingforemployeestoensuretheyunderstandall
universityrulesandproceduresgoverningprocurementcardusage.
Management’sResponse
WeincreasedmonitoringofprocurementcardtransactionsinOctober2014by
reviewingtheCitiMonthlyAdminAnalysisReport.TheProcurementDepartment
willcontinueperiodictrainingforprocurementcardholdersonuniversityrulesand
proceduresgoverningprocurementcardusage.
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BasisofReview
ObjectiveandScope
Theoverallobjectiveofthisauditwastoreviewcontrolsandprocessesoverthe
financialmanagementservices’operationsatTexasA&MUniversity–CorpusChristi
toensureresourcesareusedefficientlyandeffectively,assetsaresafeguarded,and
compliancewithlawsandpoliciesisachieved.Thereviewoffinancialmanagement
services’operationsatTexasA&MUniversity–CorpusChristifocusedonbankand
clearingaccountreconciliations,cashreceiptsandcashhandling,accountsreceivable
administration,procurementcardprocessing,andanalysisofselectedprocurement
andaccountspayabledataforanomalies.Theauditperiodfocusedprimarilyon
activitiesfromMay1,2013toApril30,2014.FieldworkwasconductedfromJuneto
July2014.
Criteria
OurauditwasbaseduponstandardsassetforthintheSystemPolicyand
RegulationManualoftheTexasA&MUniversitySystem;TexasAdministrative
Code§59.2CollectionProcess,UniformGuidelinesandReferralofDelinquent
Collections;TexasPropertyCode,Title6,UnclaimedProperty,Chapter74,Report,
Delivery,andClaimsProcess;TexasA&MUniversity‐CorpusChristiprocedures;
andothersoundadministrativepractices.Thisauditwasconductedin
conformancewiththeInstituteofInternalAuditors’“InternationalStandardsfor
theProfessionalPracticeofInternalAuditing.”
Additionally,weconductedthisperformanceauditinaccordancewithgenerally
acceptedgovernmentauditingstandards.Thosestandardsrequirethatweplanand
performtheaudittoobtainsufficient,appropriateevidencetoprovideareasonable
basisforourfindingsandconclusionsbasedonourauditobjectives.Webelievethat
theevidenceobtainedprovidesareasonablebasisforourfindingsandconclusions
basedonourauditobjectives.
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AuditTeam
DickDinan,CPA,Director
BrianBillington,CPA,AuditManager
DanielleCarlson,CPA
LoriEllison
MarkHeslip
DistributionList
Dr.FlaviusKillebrew,President
Dr.ChrisMarkwood,ProvostandVicePresidentforAcademicAffairs
Ms.KathyFunk‐Baxter,ExecutiveVicePresidentforFinanceandAdministration
Ms.BeckyTorres,Comptroller
Ms.JudyHarral,ExecutiveDirector,AdministrativeServices
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The Texas A&M University System Internal Audit Department
Fourth Quarter Report for Fiscal Year 2014
THE TEXAS A&M UNIVERSITY SYSTEM
Review of Trademark Licensing
Programs
Catherine A. Smock, C.P.A.
Chief Auditor
Project #20140115
TheTexasA&MUniversitySystem:ReviewofTrademarkLicensingPrograms
Table of Contents
OverallConclusion
Overall,thecontrolsestablishedovertrademarklicensingprogramswithinthe
TexasA&MUniversitySystemprovidereasonableassurancethattheA&MSystem
anditsmembers’trademarklicensesarecontrolledandprotectedandtheroyalty
revenuesarecollectedinaccordancewiththecontracts.Infiscalyear2014,Texas
A&MUniversityearned$4.6millionintrademarklicensingroyaltyrevenues,an
increaseof16%overfiscalyear2013.AsofJuly2014,TexasA&MUniversity
earnsastandard14%royaltyfromthesaleoflicenseditemswhichisoneofthe
highestroyaltyratesinthenationamongitspeerinstitutions.TheotherA&M
Systemmemberscombinedearned$433,000infiscalyear2014,anincreaseof
3%overfiscalyear2013.TheotherA&MSystemmembersearna10%standard
royaltyrate.
Opportunitiesforimprovementwerenotedinthecashhandlingcontrolsand
manualfilingsystemintheTexasA&MUniversityTrademarkLicensingOffice.
Additionally,improvementshouldbemadeinthemonitoringoftheStrategic
MarketingAffiliates’contractforcompliancewiththecontractor’sliability
insurancecoveragerequirementsbytheA&MSystemOfficeofMarketingand
Communication.
TexasA&MUniversity’sretailrelatedtrademarklicensingactivitieshavebeen
contractedouttoCollegiateLicensingCompanysince2009.Infiscalyear2014,
TexasA&MUniversityranked9thinCollegiateLicensingCompany’slistoftop‐
sellinginstitutions.Theretailrelatedtrademarklicensingactivitiesforallother
A&MSystemmembershasbeencontractedouttoStrategicMarketingAffiliates
sinceSeptember2011.TheStrategicMarketingAffiliatescontractisanA&M
Systemcontract.
DetailedResults
1. TexasA&MUniversityTrademarkLicensingOffice
TheTexasA&MUniversityTrademarkLicensingOffice(Office)needsto
improveitsdepartmentalcashhandlingcontrolsrelatedtoitscrafter’s
agreementsandmanualrecordsfilingsystem.
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CashHandling
TheOfficedidnotrestrictivelyendorsechecksforcrafter’sagreementsandother
smalldollarcontractswhentheywerereceived.Thecheckswerealsohelduptofive
businessdaysinorderfortheOfficetoreviewandapprovetherelatedcontracts
priortodepositingthechecks.Copiesofthecheckswhichcontainconfidentialclient
informationwerestoredinafolderwiththerelatedcontractontopofacabinet.The
Officereceived$17,350infiscalyear2013forroyaltyfeesonagreementsfor
crafters,murals,photography,andvideolicensesforwhichcheckswouldhavebeen
received.Unsecuredcheckcopiescouldresultinalossofconfidentialclient
information.Officepersonnelwereunawareofthecashhandlingrequirements
whichresultedinnoncompliancewithA&MSystemregulations.A&MSystem
Regulation21.01.02Receipt,CustodyandDepositofRevenuesstates:
 Checksmustbeendorsed"ForDepositOnly"immediatelyuponreceipt.
 Feesandotherchargescollectedmustbedepositedtotheapplicablefiscal
departmentonadailybasisoratleastonceeverythreebusinessdaysifthe
amountcollectedislessthan$200.
 Checksmustbedepositedinthebankwithinseven(7)calendardaysofthe
originaldateofcollectionasrequiredbySection51.003,TexasEducationCode.
TheOfficeusesTexasA&MUniversity’sDepartmentalAccountingServicestohandle
themajorityoftheiraccountingneedsincludingpreparingdeposits,processing
purchaseandtravelvouchers,reconcilingtheiraccounts,andpreparingtheir
financialreports.DepartmentalAccountingServicesendorsedthechecksupontheir
receiptofthem.DepartmentalAccountingServicesdidnotinformtheOfficethatthe
personwhoreceivesthechecksisresponsibleforendorsingthem.Additionally,
DepartmentalAccountingServiceswasunawarethattheOfficewasholdingthe
checks.
ManualRecordsFilingSystem
TheOffice’smanualrecordsarenotwellorganized,wellsecured,orbackedup.Files
containingalloftheiroldcontractsandinvoicesarekeptintwounlocked,wooden
filecabinets.Thesehistoricalrecordsarekeptincasetheyareeverneededtodefend
theuniversity’strademarks.Originalsignedcrafter’sagreementsandothersmall
revenueagreementswerekeptinafolderontopofacabinet.Theywereorganized
bythedatereceived.
Althoughsomenewerdocumentshavebeenscannedandstoredelectronically,
thereisnobackupfortheolderdocumentsandthecrafter’sagreements.Imaging
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TheTexasA&MUniversitySystem:ReviewofTrademarkLicensingPrograms
softwareisavailableattheuniversity;however,theOfficehasnotrequestedthe
resourcesnecessarytoimplementtheuseofthesoftware.
Theuseofelectronicimagingprovidesformoreefficientoperatingprocessesby
reducingphysicalspaceneededforstorageandsimplifyingtherecordsretention
process.Imagingthefileswouldalsoallowtheabilitytostoreelectronicbackupsof
criticaldatainasecureoffsitelocationthatcouldbereadilyaccessedintheeventofa
disaster.
Recommendation
TexasA&MUniversityneedstoimplementprocedurestoensurethatpayments
receivedbytheuniversity’sTrademarkLicensingOfficearehandledincompliance
withA&MSystemcashhandlingregulationsandthatconfidentialinformation,
includingcheckcopies,issecured.
Theuniversityneedstoimplementanorganizedandsecuredfilingsystemforthe
TrademarkLicensingOffice’srecords.Theorganization,security,andretentionof
theOffice’srecordscouldbesignificantlyenhancedthroughtheuseofanelectronic
filingsystem.
Management’sResponse
CashHandling
ProceduresimplementedasofAugust2014:
 Cashhandingemployeecompletedonlinecourse2111772:CashHandling–
SystemVersiononAugust19,2014.
 ‘ForDepositOnly’stamppurchased.Checksarenowimmediatelyendorsed
uponreceipt.
 Crafteragreementsaretheonlycontractsthatrequireadepositbeforethe
universitywillconsidergrantingalicensetoanindividualtohandmakea
smallquantityoflicensedproducts.Basedonthenatureoftheproducts
made,theuniversitymaychoosenottoenterintoanagreementwiththe
crafterandcurrentlyholdstheircheckuntilthetypesofproductsbeing
requestedforproductionhasbeenreviewed.Thedelayinchecksbeing
depositedwasduetothetimeittookfortheAssistantVicePresident(AVP)
ofBusinessDevelopmenttoreviewthephysicaldocumentandprovidea
signature.Toremovethedelay,thedocumentisnowsentelectronicallyto
theAVPorhisdesigneeforsignaturetoensurechecks/feescollectedare
takentothefiscaldepartmentfordepositeitheronthedayofsignatureor
within3daystoensurechecksaredepositedinthebankwithin7business
daysasrequiredbySection51.003,TexasEducationCode.
TheTexasA&MUniversitySystemInternalAuditDepartment
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TheTexasA&MUniversitySystem:ReviewofTrademarkLicensingPrograms

Keystothefiledrawershavebeenlocated.Copiesofcheckswhichcontain
confidentiallicensee/clientinformationarenowsecuredinlockedfile
drawer.
ProceduretobeimplementedbyJanuary31,2015:
 Currentlygatheringinformationtoimplementanonlinepaymentsystemfor
customerstohavetheoptiontopayfeesduewhichwillresultinfaster
approvalsanddeposits.
Weplantohaveallauditfindingsaddressedandproperproceduresinplaceby
January31,2015.
ManualRecordsFilingSystem
ProceduresimplementedasofAugust2014:
 Keystothefiledrawershavebeenlocated.Oldcontracts/invoices/historical
recordsarenowsecuredinlockedfiledrawer.
 Originalsignedcrafteragreementsandothersmallrevenueagreements
whichcontainpersonalinformationarenowsecuredinalockedfiledrawer.
ProceduretobeimplementedbyJanuary31,2015:
 Currentlygatheringinformationtoimplementasecurefiling/scanningsystem
forallTrademarkLicensingOfficerecordsandfiles.
 Thecurrentfilingsystemhastwosections,oneforcontractsorlegal
incidents(i.e.BuffaloBillsuseof12thMan)andanotherfortrademark
registrations.Thefilingsystemisalphabeticalforeachandthenwithineach
folderitisbydate.Notallfoldersareinternallyorganizedbydateandthis
needstobecorrected.AfterthephysicalmoveoftheofficefromBizzellto
theWilliamsBuilding,thefilingsystemwillbeorganizedasoutlinedand
digitallyscannedtohaveabetterpreservationofrecords.
2. A&MSystemOffices’MonitoringofContractorLiabilityInsurance
WhileStrategicMarketingAffiliates’insurancecoveragemetthecontract’s
minimumrequirementsformostoftherequiredcoverageamounts,theA&M
SystemOfficeofMarketingandCommunicationswasnotmonitoringthe
contracttoensureallrequiredcoveragewasbeingmaintained.Thefollowing
liabilityinsuranceareasdidnotmeettheminimumrequirementslistedinthe
contract:
 Aggregatelimitcoverageforcommercialgeneralliabilityinsurance‐Strategic
MarketingAffiliatesonlyhas$2millionincoveragewhenthecontractcallsfor
$3million.
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TheTexasA&MUniversitySystemInternalAuditDepartment
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Project#20140115
TheTexasA&MUniversitySystem:ReviewofTrademarkLicensingPrograms

Damagetopremisescoverageforcommercialgeneralliabilityinsurance–
StrategicMarketingAffiliatesonlyhas$500,000incoverage,butthecontract
callsfor$1million.

Automobileliabilityinsuranceforallownedautos–StrategicMarketing
Affiliatesdoesnothavethiscoverage,butthecontractcallsfor$1millionin
coverage.
LiabilityinsuranceisnecessarytolimittheA&MSystem’sliabilityintheeventofa
lawsuitstemmingfromvendorservices,toensurethevendor’sabilitytoprovide
continuedservicestotheA&MSystem,andtoprovidetheA&MSystemcoverage
underthevendor’spolicy.Procedureswerenotinplacetomonitorcompliancewith
thisaspectofthecontract.Noncompliancewiththeinsurancerequirementscould
resultinStrategicMarketingAffiliatesnothavingadequatecoverageintheeventofa
lawsuit.
Recommendation
TheA&MSystem’sOfficeofMarketingandCommunicationsneedstoimplement
monitoringprocedurestoensureStrategicMarketingAffiliatesmaintainsinsurance
incompliancewithcontractualrequirements.
Management’sResponse
TheA&MSystem'sOfficeofGeneralCounselandRiskManagementhaveboth
reviewedtheinsurancecoveragemaintainedbyStrategicMarketingAffiliatesand
concludedthatitisadequate.TheOfficeofGeneralCounselwillamendthe
insurancerequirementsinthecontract.TheOfficeofMarketingand
CommunicationswillhavetheamendmentexecutedonorbeforeJanuary31,2015.
StrategicMarketingAffiliateswillsendacertificateofcoverageindicatingproper
insurancecoveragetobereviewedbytheA&MSystemonanannualbasistoensure
compliancewithinsuranceasrequiredbythecontract.
TheTexasA&MUniversitySystemInternalAuditDepartment
FourthQuarterforFiscalYear2014
Project#20140115
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TheTexasA&MUniversitySystem:ReviewofTrademarkLicensingPrograms
BasisofReview
ObjectiveandScope
Theoverallobjectiveofthisauditwastodetermineifpoliciesandproceduresarein
placetoprovidereasonableassurancethattheTexasA&MUniversitySystemandits
members’trademarklicensesarecontrolledandprotectedandthatroyaltyrevenues
arecollectedinaccordancewiththecontracts.Asystem‐widetrademarklicensing
activitysurveywasperformedandusedtoselectmembersforadditionalreview
basedonassessedrisk.ThereviewoftrademarklicensingatA&MSystemmembers
focusedontheCollegiateLicensingCompanyandStrategicMarketingAffiliates’
contractcompliance.Italsoincludedareviewofaffiliationagreementswith
affiliatedfundraisingorganizationsandtheTexasA&MUniversityTrademark
LicensingOffice’scashhandlingandfilingpractices.Theauditperiodfocused
primarilyonactivitiesfromSeptember1,2012toApril30,2014.Fieldworkwas
conductedfromMaytoAugust,2014.
Criteria
OurauditwasbaseduponstandardsassetforthintheSystemPolicyandRegulation
ManualofTheTexasA&MUniversitySystem;TexasA&MUniversityStandard
AdministrativeProcedures;andothersoundadministrativepractices.Thisaudit
wasconductedinconformancewiththeInstituteofInternalAuditors’“International
StandardsfortheProfessionalPracticeofInternalAuditing.”
Additionally,weconductedthisperformanceauditinaccordancewithgenerally
acceptedgovernmentauditingstandards.Thosestandardsrequirethatweplanand
performtheaudittoobtainsufficient,appropriateevidencetoprovideareasonable
basisforourfindingsandconclusionsbasedonourauditobjectives.Webelievethat
theevidenceobtainedprovidesareasonablebasisforourfindingsandconclusions
basedonourauditobjectives.
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TheTexasA&MUniversitySystemInternalAuditDepartment
FourthQuarterforFiscalYear2014
Project#20140115
TheTexasA&MUniversitySystem:ReviewofTrademarkLicensingPrograms
AuditTeam
CharlieHrncir,CPA,Director
DavidMaggard,CPA,AuditManager
HollyBlue,CPA
BillWilliams,CPA
DistributionList
Mr.JohnSharp,Chancellor
Mr.BillyHamilton,ExecutiveViceChancellorandChiefFinancialOfficer
Mr. Shane Hinckley, Director of Collegiate Licensing and TAMU Interim Vice President for
MarketingandCommunications
Ms.JanetSmalley,EthicsandComplianceOfficer
Dr.MarkA.Hussey,TAMUInterimPresident
Dr.KaranL.Watson,TAMUProvostandExecutiveVicePresidentforAcademicAffairs
Dr.JerryStrawser,TAMUVicePresidentforFinanceandAdministration
Dr.MernaJacobsen,TAMUInterimAssociateVicePresidentforUniversityRiskand
Compliance
TheTexasA&MUniversitySystemInternalAuditDepartment
FourthQuarterforFiscalYear2014
Project#20140115
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The Texas A&M University System Internal Audit Department
Fourth Quarter Report for Fiscal Year 2014
TEXAS A&M HEALTH SCIENCE CENTER
Review of the Center for Innovation in
Advanced Development and
Manufacturing Contract Compliance
Catherine A. Smock, C.P.A.
Chief Auditor
Project #20142303
TexasA&MHealthScienceCenter:ReviewoftheCenterforInnovationinAdvanced
DevelopmentandManufacturingContractCompliance
Table of Contents
OverallConclusion
ControlsandprocessesattheCenterforInnovationinAdvancedDevelopmentand
ManufacturingprovidereasonableassurancethattheTexasA&MHealthScience
Center,astheprimecontractor,isoperatingincompliancewiththeU.S.Department
ofHealthandHumanServicescontractrequirements.TheCenterhasacontract
valuedat$285.6millionthroughDecember2017,withoptionperiodsthroughJune
2037.Theoptionperiodsincludereadinessfeesvaluedupto$434millionandupto
$2.3billiondollarsavailablethroughtaskorderwork,exclusiveoftaskordersfor
productionofpandemicinfluenzavaccine.ThecontractbetweentheHealthScience
CenterandtheU.S.DepartmentofHealthandHumanServiceshasmanyspecific
contracttermsofwhichourauditfocusedoncontractcomplianceduringthefirst
year’soperations.WedeterminedthattheCenterwasincompliancewithitscost
sharingrequirements,variousworkplansandtechnicalreportdeliverables,and
appropriateinvoicingofconstructioncosts.
TheCenterforInnovationinAdvancedDevelopmentandManufacturingisoneof
threecentersestablishedaspublic‐privatepartnershipswiththeU.S.Department
ofHealthandHumanServicestodevelopandmanufacturecountermeasures.The
Centerwillbolsterthenation’sabilitytorespondtoanyattackorthreat,including
novel,previouslyunrecognized,naturallyoccurringemerginginfectiousdiseases,
aswellasvariouschemical,biological,radiologicalandnuclearthreats.
BasisofReview
ObjectiveandScope
ThereviewoftheTexasA&MCenterforInnovationinAdvancedDevelopmentand
ManufacturingatTexasA&MHealthScienceCenterfocusedoncompliancewith
selectedtermsintheCenter’scontractwiththeU.S.DepartmentofHealthand
HumanServices.TheauditperiodfocusedprimarilyonactivitiesfromMay1,2013
toApril30,2014.Contractareasreviewedincludedthoserelatedtocostsharing,
statementofwork,performancedeliverables,performanceevaluation,andspecial
requirements.FieldworkwasconductedfromJunetoAugust,2014.
TheTexasA&MUniversitySystemInternalAuditDepartment
FourthQuarterforFiscalYear2014
Project#20142303
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TexasA&MHealthScienceCenter:ReviewoftheCenterforInnovationinAdvancedDevelopmentandManufacturing
ContractCompliance
Criteria
OurauditwasbaseduponstandardsassetforthintheSystemPolicyand
RegulationManualoftheTexasA&MUniversitySystem;requirementsinthe
contractbetweentheTexasA&MCenterforInnovationinAdvancedDevelopment
andManufacturingandtheDepartmentofHealthandHumanServices;andother
soundadministrativepractices.Thisauditwasconductedinconformancewith
theInstituteofInternalAuditors’“InternationalStandardsfortheProfessional
PracticeofInternalAuditing.”
Additionally,weconductedthisperformanceauditinaccordancewithgenerally
acceptedgovernmentauditingstandards.Thosestandardsrequirethatweplan
andperformtheaudittoobtainsufficient,appropriateevidencetoprovidea
reasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.
Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindings
andconclusionsbasedonourauditobjectives.
AuditTeam
CharlieHrncir,CPA,Director
BrianBillington,CPA,AuditManager
LoriEllison
MarkHeslip
DistributionList
Dr.MarkA.Hussey,InterimPresident
Dr.KaranL.Watson,ProvostandExecutiveVicePresidentforAcademicAffairs
Dr.JerryR.Strawser,VicePresidentforFinance&AdministrationandCFO
Dr.BrettGiroir,ExecutiveVicePresident&CEO,TexasA&MHealthScienceCenter
Dr.BarryNelson,VicePresidentforFinanceandAdministration,TexasA&MHealth
ScienceCenter
Dr.GeraldParker,VicePresidentforPublicHealthPreparednessandResponse,Texas
A&MHealthScienceCenter
Dr.KerrieDeMarco,ProgramManager,CenterforInnovationinAdvancedDevelopment
andManufacturing
Ms.VernaFritsche,Finance&AccountManager,CenterforInnovationinAdvanced
Development&Manufacturing
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TheTexasA&MUniversitySystemInternalAuditDepartment
FourthQuarterforFiscalYear2014
Project#20142303