Audits

Audit Overview

  • Verify specific data based on the focus of the audit
    • Policies and procedures related to UNO’s financial system
    • Policies and procedures for monitoring project spending and progress
  • Examine:
    • Invoices
    • Deliverables – meet deadline
    • Subrecipient monitoring – see separate document on Subcontracting
    • Effort commitment and reporting
      • Only if federal funds are involved
      • Personnel Activity Reports (PARs) at UNO
        • Review, sign and return timely
        • Verify salary distribution
        • Should not change the payroll distribution once the PAR is signed
    • Cost share commitments
    • Cost transfers
      • Must not be excessive
      • Must be timely (within a short period of identifying an error)
      • Must have proper justification and approval
  • Ensure compliant with award or contract terms
    • Legally bind the University and must be followed
    • If any terms are not met, the University and/or Principal Investigator could face restitution, fines, and/or jail time
  • If federal funds, must be compliant with applicable federal regulations
    • Expenditures must be:
      • Allowable – certain expenditures, such as alcohol, are never allowed to be paid with federal funds
      • Allocable – expenditures can be clearly identified as benefiting the project
      • Reasonable – incurred cost is what a prudent person in a similar situation would pay
      • Consistently applied – costs in like situations are treated the same (i.e. a cost cannot be part of indirect cost in one situation but directly charged to a grant in a similar situation)
  • Different audit organizations/offices
    • UNO internal auditors 
      • Regular audit plan
      • Rotate which department or office on campus is audited
      • Perform follow-up work if an outside entity discovers a problem
    • Office of Louisiana Legislative Auditors
      • Annual audit – called the A-133 or single audit
      • Conducted based on guidelines established in Office of Management and Budget Circular A-133
      • Examines grant finances and management as well as overall university finances
    • UNO’s assigned cognizant federal agency
      • Assigned if spend more than $50 million in federal funds in a fiscal year
      • Can audit a grant based on a request by the federal sponsor
        • Based on a tip
        • Prior or related audit findings
        • Large award amount
    • Not recurring
  • Award sponsor
    • Includes a federal sponsor
    • Can be initiated based on a tip, prior or related audit findings, or large award amount
    • Generally not recurring - some sponsors will conduct an annual audit

Legal Framework

There are three Office of Management and Budget (OMB) Circulars that regulate spending on federal awards and the audit of federal awards.NOTE:For consistency, UNO follows the federal regulations for grant management of all awards and not just federal awards.

OMB Circular A-21

  • Principles for treatment of costs on grants
  • Defines allowable costs
  • Provides a distinction between direct and indirect costs
  • Examples of direct and indirect costs:

Direct Costs

Indirect Costs

PI salary Heating
Project specific supplies Lighting
Equipment for the project General office supplies
  Support staff

OMB Circular A-110

  • Provides the administrative requirements for managing awards
  • Allows for consistency and uniformity among the different Federal agencies

OMB Circular A-133

  • Provides the audit guidelines to conduct an audit of federal grants and agreements
  • Provides uniformity in audits

Audit Findings

University of Massachusetts Medical School

  • Cited for inadequate subrecipient monitoring
  • Paid subcontract invoices without the necessary support
  • Required to reimburse the sponsor $249,525 which is 33% of the total amount paid to subrecipients

Saint Louis University

  • Cited for overstating faculty time spent on research (effort reporting)
  • Faced a lawsuit by the Federal Government
  • University officials agreed to a $1 million dollar settlement
  • Will have increased oversight by federal sponsors

George Washington University

  • Cited for making false expense claims
  • Personal expenses
  • Season tickets for a NFL team
  • Condominium in the south
  • Unauthorized GA stipends
  • Scholarships to family and friends
  • University paid a $1.8 million settlement
  • Principal investigator had a three year jail sentence

Duke University

  • Cited for $1.7 million in unallowable salary and administrative costs
  • University was requested to return the funds
  • University required to increase internal controls

Keys to Success

  • Prepare at the start of the award
    • Don’t wait until the auditors are coming
    • Manage each award as if it will be audited
  • Proper documentation
    • Cost paperwork and project monitoring
    • Unusual or generally not allowable cost on the award (such as additional compensation) should have specific prior written approval from the sponsor
    • Meet terms and conditions of the award
      • Deliverable or progress report deadlines
      • Invoicing schedules
      • Subcontract monitoring – see the Subcontract document for more information
  • Budget adjustments must have adequate justification
    • Budget adjustments should be done before a cost is incurred
  • Cost transfers must have adequate justification and approval
    • Within 90 days of discovering an error
    • Transfers, including salary, at end of project are red flag for auditors and will probably be examined
  • Costs must be allowable, allocable, reasonable, and consistently applied
    • Contact the sponsor’s program officer or UNO’s Sponsored Programs Accounting office if unsure
  • Good communication and cooperation with the auditor
    • Respond timely to requests
      • Meet auditor deadlines
      • If deadline can’t be met, ask for an extension and provide a justification for the request
    • Be honest with answers
    • Only answer the questions asked by the auditor
    • If you don’t know the answer, let them know you need to research and get back to them
    • Give the auditor a copy of a document
    • If you have to give the original,
      • Keep a log – include a copy of what was given and the date
      • Make note in the log when the original was returned
    • Write a summary of all meetings and phone calls with the auditors

Typical Audit Questions

The following are typical questions the auditor needs to answer during the course of the audit; this does not mean that the auditor will ask these questions, but rather these are issues that the auditor needs to research.

Have any unallowable or unallocable costs been included in sponsor billings?

  • Will generally ask for a list of all costs on the award
  • May extract a sample to review or may review all costs on the award
  • Will request support documentation – make sure the charges are allowable and allocable
  • To prepare:
    • Monitor all costs on the award – PI is responsible
    • Keep a copy of documents initiated by the department or PI
    • Originals will be kept by responsible department
    • If don’t have a copy, know which department will have a copy or the original

Has all promised cost sharing been provided?

  • Will ask for a list of the cost share costs
  • Will ask for any letters of cost share from third parties
  • Includes both mandatory (required by the sponsor) and voluntary (offered by the principal investigator in the proposal)
  • Generally provided by Sponsored Programs Accounting
  • PI needs to ensure that the cost share speed key is used properly
  • PI may need to obtain cost share letter from third party
  • More information is provided in the Cost Share document

Have all cost transfers been processed in a timely manner and are they justified?

  • Will request and examine the original transaction and the transfer request documentation
  • Generally be provided by Sponsored Programs Accounting
  • PI needs to follow the procedures for requesting a cost transfer
    • Sponsored Programs Accounting manages the form for most transfers
    • Provide valid justification
    • Includes change in source of funds 101s
      • Enter reason for the change in the comments field of the form
      • Cannot cross semesters
  • Charge must have been incurred during the award/contract period
    • Exception – prior approval from sponsor for pre-award spending

Has the effort percent been properly reported?

  • Will request to examine the Personnel Activity Reports (PARs) and possibly the financial records
  • Generally be provided by Sponsored Programs Accounting
  • Auditor may ask the principal investigator questions
  • PI responsible for making sure all PARs are signed and returned in a timely manner
  • Information needs to accurately reflect what was done during the semester
  • Make changes before certify/sign the form
  • Auditors will question why a change was made after the PAR was certified

Have the terms and conditions of the award/contract been met?

  • Will request a copy of the award document or contract as well as copies of invoices, progress reports, and/or other deliverables
    • Award document is a legally binding document
    • Verify schedules or deadlines have been met
  • Will be provided by the Office or Research or Sponsored Programs Accounting
  • PI must know and follow requirements in the award or contract
    • Request an extension if cannot meet the schedule

Are subrecipient expenses properly reviewed?

  • Will ask for copies of the subcontractor’s invoices
  • Must be reviewed by the UNO principal investigator
    • Initial and date the invoice as being approved for payment
  • More information on this topic can be found in the Subcontract document

Are subrecipient activities monitored?

  • Will examine the subcontract and determine the required monitoring activities
  • Will request to examine any monitoring documents, such as
    • Monthly meeting minutes
    • Email correspondence
    • Telephone summaries
    • Site visit write-ups
  • PI is responsible for monitoring, but the Office of Research provides assistance
  • More information on this topic can be found in the Subcontract document

Typical Questions About Audits

The following are typical questions or concerns individuals may have during an audit.

What questions are appropriate?

  • Any question within the general audit topic
  • If doubt about the appropriateness of a question,
    • Politely ask the auditor the meaning of the question
    • If still doubt, tell the auditor you need to research the question and then contact the Office of Research or Sponsored Programs Accounting for assistance
    • Make sure that the auditor’s question is answered – do not ignore the question

How quickly should I respond to audit questions?

  • Should be answered as soon as possible
  • Definitely before any deadline established by the auditor
    • If cannot meet the deadline, ask for an extension as soon as possible
  • Acknowledge receipt of emails and voicemails – do not ignore them
    • Answer the question immediately if possible
    • If need time to gather information, let auditor know how long it will take

Sometimes the auditor asks questions that show lack of knowledge of UNO policies, what should be done?

  • Answer in a friendly and polite manner
  • Auditor may be trying to determine whether the individual knows the UNO policies
  • If the auditor is confused about a policy
    • Try to clarify any misunderstandings
    • Direct them to either the Office of Research or Sponsored Programs Accounting, depending on the type of question, for additional clarification if necessary

What if I get overlapping questions from different auditors?

  • Each auditor or team of auditors has own audit and set of steps (questions) to complete
    • May not be in contact with other auditors
    • May need confirmation on information provided
  • Treat each auditor with respect and answer their questions
    • Do not respond by saying another auditor already asked that question

What should I do if the sponsor requests a copy of UNO’s A-133 audit?

  • Forward them to the UNO Compliance Officer

Summary

Be prepared before the auditors come

  • Diligence in financial matters
    • Costs are allowable
  • Diligence in non-financial matters
  • Meet deliverable deadlines
  • Monitoring subcontractor activities

Treat auditors with respect

  • Answer questions honestly and timely

Copies of documents is acceptable in most situations

Don’t offer more information than what they are requesting

Relax – auditors are doing their job and the audit will be over soon

Responsibilities

Principal Investigator

  • Monitor spending on awards
    • Obtain approval for budget adjustments, if necessary
    • Follow cost transfer procedures
  • Monitor subcontractors
  • Maintain proper records or know who to contact for documents
  • Follow terms and conditions of the award/contract
  • Cooperate with the auditor(s)

College or Department Offices

  • Provide assistance to investigator as needed

The Office of Research and Sponsored Programs

  • Maintain records of award documents
  • Assist with monitoring subcontractors
  • Cooperate with the auditor(s)

Sponsored Programs Accounting

  • Properly approve/process budget adjustments and cost transfers
  • Follow invoicing requirements
  • Cooperate with the auditor(s)