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Assessing risk for research awards using ACL

Scope of Research Activities. UC Davis is widely recognized as a world class research institution.$508 million in research funding was received during fiscal year 2006-07.We currently have approximately 9,500 contracts and grants from federal, state, local and private sources.. The Challenge

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Assessing risk for research awards using ACL

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    1. assessing risk for research awards using ACL Presented by UC Davis Internal Audit Services

    2. Scope of Research Activities UC Davis is widely recognized as a world class research institution. $508 million in research funding was received during fiscal year 2006-07. We currently have approximately 9,500 contracts and grants from federal, state, local and private sources.

    3. The Challenge IAS included an audit of Research Management and Oversight on its fiscal year 2008-09 Audit Plan. How do we identify the awards presenting the greatest risk in an efficient and effective manner? Is it possible to automate the risk assessment process?

    4. The Answer Create a Risk Assessment Scorecard using ACL.

    5. Risk Assessment Scorecard The Risk Assessment Scorecard ranks each award based upon a composite risk score. Score is derived by using ACL to analyze information contained in UC Davis’ key financial and decision support systems for predefined risk factors. Davis Information System (DaFIS) General Ledger Review System Payroll/Personnel System

    6. Scorecard Risk Factors HIGH RISK Award amount – large awards Award end date – nearing the end of the award period Source of funding – federal awards School or College – weak internal control environment as evidenced by previous audit findings, investigations, external audits, etc. Cost sharing – awards containing cost sharing commitments

    7. Scorecard Risk Factors, Cont’d. HIGH RISK Overdrafts – award accounts in overdraft Cost transfers – significant dollar amount and near end of award period Status of general ledger reviews – general ledger review is not current

    8. Composite Scores A closer look.

    9. Assignment of Scores to Risk Factors For each risk factor, we stratified the range of possible values ACL would identify for the awards in our population, and assigned a numeric risk score to each strata. Range of numeric risk scores is 1 through 5. 1 = lowest risk 5 = highest risk

    10. Example of Risk Factor Scoring – Award Amounts Step 1 – Stratify the population of awards. Produced with ACL by: UC Davis <<< STRATIFY over 3,134,968.00-> 59,558,130.00 >>> >>> Minimum encountered was 3,134,968.00 >>> Maximum encountered was 59,558,130.00 AWARD_AMOUNT COUNT <-- % % --> AWARD_AMOUNT 3,134,968.00 -> 14,419,600.39 113 84.96% 54.45% 605,787,882.85 14,419,600.40 -> 25,704,232.79 14 10.53% 23.68% 263,487,210.94 25,704,232.80 -> 36,988,865.20 3 2.26% 8.42% 93,670,076.54 36,988,865.21 -> 48,273,497.59 2 1.50% 8.09% 90,000,000.00 48,273,497.60 -> 59,558,130.00 1 0.75% 5.35% 59,558,130.00 133 100.00% 100.00% 1,112,503,300.33

    11. Example of Risk Factor Scoring – Award Amounts, Continued. Step 2 – Assign risk scores to the five strata.

    12. Awards’ Risk Ranking An ACL script is run for each risk factor to assign a score for each award. The results of the scripts for each award are combined in a table (Excel spreadsheet), and a total combined risk score is computed for each award. The awards are sorted by risk score, with the highest risk score preliminarily indicating the highest risk award.

    13. Additional Considerations We also used ACL to provide us with other information pertinent to the awards included in our analysis. We felt certain factors that when considered in totality by the auditor, spoke to the complexity of the award. Auditor judgment might be needed to adjust the ranking provided by ACL.

    14. Additional Considerations, Contd. These factors could influence the risk ranking of an award: Award accounts – How many general ledger accounts are being used to record project financial activities? Principal investigators – How many principal investigators are working on the project? Administrative staff positions – Are administrative staff being directly charged to the project? If yes, what are their roles?

    15. Added Information A closer look.

    16. Completed Risk Assessment Scorecard The final step would be to sort on the total risk

    17. QUESTIONS?

    18. Sherrill Jenkins Leslyn Kraus Principal Auditor Associate Director UC Davis Internal Audit Services UCD Internal Audit Services ssjenkins@ucdavis.edu lakraus@ucdavis.edu 530-752-0341 530-752-9173 Contacts

    19. ACL Scorecard Prior to export

    20. Additional Risk Factors Award End Date Risk Factor

    21. Additional Risk Factors Sub Fund Risk and Cost Share Risk

    22. Additional Risk Factors REC Date and Amount Combined factor

    23. Additional Risk Factors REC Date and Amount Combined factor

    24. Additional Risk Factors GL Online Review of Accounts

    25. Additional Risk Factors Account Overdrafts

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