“Surviving an Audit”

“Surviving an Audit” (or: Everyday things you can do that will both improve sponsored project management AND reduce audit findings) Al Willie Office of Internal Audit

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

How Are Specific Sponsored Projects Selected For Audit? • Financial Impact • award amount • $ amount of expenditures in the audit period • Federal vs. Non-Federal • high priority given to federally sponsored projects • Active Projects vs. Closed • almost always select active projects • “Nature” of Expenses Are Considered • salary, equipment, travel, subcontracts, types of supplies are reviewed • A typical audit of an academic department will include 2-3 sponsored projects; a college audit 3-5 projects

What Risks & Activities Are Covered In An Audit? • Eligibility of Project Personnel • FIRST/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 Proposal • Cost sharing • Matching • Program 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 • PV, TP, IX, IV, JV, PCard are all considered • IX charges to sponsored project accounts are thoroughly reviewed • Allowable and allocable • Proper coding and approvals • Timely processing • Proper justifications

Common Findings From Recent Audits 14 Reports Since 7/1/06 Contained 49 Sponsored Project Issues • Effort Reporting Most Common – 12 • Effort not certified or late (6), effort < proposed (4), effort not equal to payroll (4), salary > NIH salary cap (3), late HSAs (2) • Disbursement Policy Compliance – 9 • Proper justifications (8), not processed timely (6), unallowable expenses (4), not properly approved (4), inaccurate object codes (4)

Common Findings From Recent Audits (cont’d.) • Human Subjects – 6 • Consent form issues (4), subject payment procedures (3), inventory for items distributed (3), privacy/PHI (2) • Sponsor Notification & Reporting – 9 • Project delays, work scope changes, reduction in effort, change in key personnel, late technical reports • Other • Inappropriate cost transfers, REPA/ROC issues, subcontracts, allocation of expenses, record retention

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

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

“Surviving an Audit”