“Surviving an Audit”

Al Willie, Office of Internal Audit02.17.2009

Today’s Objectives:

Share what Internal Audit looks at when planning and conducting a typical sponsored project audit

Review some of the more common audit findings from audits of the past 2 ½ years

Discuss “best practices” used by University units to manage sponsored projects

How Are Specific Sponsored Projects Selected For Audit?

• Financial Impactaward amount $ amount of expenditures in the audit period

• Federal vs. Non-Federalhigh priority given to federally sponsored projects

• Active Projects vs. Closed almost always select active projects

• “Nature” of Expenses Are Consideredsalary, equipment, travel, subcontracts, types of supplies

are reviewed• A typical audit of an academic department will

include 2-3 sponsored projects; a college audit 3-4 projects

What Risks & Activities Are Covered In An Audit?

• Eligibility of Project PersonnelFIRST/RCR training, chemical/radiation, human subjects,

animals• Unallowable Expenses

Administrative/clerical staff, postage, phone, photocopies, etc.

OMB Circular A-21 provides the general guidelines• Compliance With Specific Provisions of the Sponsor

or the ProposalCost sharingMatchingProgram income (properly accounted for & reported, correct

method)

What Risks & Activities Are Covered In An Audit? (cont’d)

• Effort Reporting Ensure that salary is equal to effort certified Timeliness of the certification process Mandatory and voluntary committed cost share commitments

are met Effort decreases >25% are approved by the sponsor PI has certified some effort on the project during the grant year

reviewed Effort commitments are being met Cost sharing is not excessive NIH salary cap compliance

• Human Subjects Proper IRB approvals have been obtained Consent form used is approved Form signed by the participant and the person performing the

consent process

What Risks & Activities Are Covered In An Audit? (cont’d.)

• Animals IACUC approvals obtained Purchases were made per University policy

• Subcontract Payments Contract/agreement on file defining roles and responsibilities Payments properly supported and made per the

contract/agreement Discuss with PI how progress is monitored and payments approved

• Technical Reporting to the Sponsor• Transaction Testing

Sample of transactions charged to the project are selected and tested

All transaction types are considered Cost transfers to sponsored project accounts are reviewed Allowable and allocable Proper coding and approvals Timely processing Proper justifications

Common Findings From Recent Audits

• 14 reports from July 2006 to January 2008 contained 49 Sponsored Project issues

• 11 reports from January 2008 to January 2009 contained 40 Sponsored Project issues

Effort Reporting Most Common

◦ Effort not certified or late◦ Effort < proposed◦ Effort ≠ payroll◦ Salary > NIH salary cap◦ Late HSAs

7/06 to 1/08

12

6

4

4

3

2

1/08 to 1/09

9

11

2

3

3

2

Common Findings From Recent Audits (cont’d.)

Disbursement Policy Compliance

◦ Proper justifications◦ Not processed timely◦ Unallowable expenses◦ Not properly approved◦ Inaccurate object codes◦ Allocability issues

7/06 to 1/08

9

8

6

4

4

4

0

1/08 to 1/09

6

5

4

5

0

4

2

Common Findings From Recent Audits (cont’d.)

Human Subjects◦ Consent form issues◦ Subject payment procedures ◦ Inventory for items distributed ◦ Privacy/PHI

7/06 to 1/08

64

3

3

2

9

1/08 to 1/09

39

0

1

1

1Sponsored Notification & Reporting

◦ Project delays, work scope changes, reduction in effort, change in key personnel, late technical reports, late invoicing to sponsor, no follow-up on uncollected $

Common Findings From Recent Audits (cont’d.)

Cost Share ◦ Cost Share commitments not met

or monitored◦ Excessive Cost Sharing

7/06 to 1/08

21

0

1/08 to 1/09

43

2

Other◦ Inappropriate cost transfers, REPA/ROC issues, subcontracts,

record retention, poor controls over program income

Best Practices Ongoing tracking of PI effort to ensure effort commitments are being met

Periodic monitoring of match accounts to ensure the match amounts are being expended throughout the life of the project and are on target to meet the commitment

Others?

Cornerstones of an Effective Compliance

Culture Certified Approver program Effort reporting by those with first-hand knowledge of the effort to be certified

Rigorous standards for cost transfers Ongoing monitoring of project activities

Conclusions: “Surviving an audit” shouldn’t be the goal; appropriate management of sponsored project funding should be

Being aware of the major risks facing sponsored project management, and developing processes and controls into your daily routines to address those risks, will make the audit process much easier and at the same time help minimize risks to the University

Questions?

Internal Audit Website: http://www1.umn.edu/audit/Index.html