Surviving an Audit NCURA FRA Conference New Orleans, Feb. 2008

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Surviving an Audit NCURA FRA Conference New Orleans, Feb. 2008

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1. © National Council of University Research Administrators FRA IX Conference 2008 Surviving an Audit NCURA FRA Conference New Orleans, Feb. 2008 Introduction: JillIntroduction: Jill

2. © National Council of University Research Administrators FRA IX Conference 2008 Gail McDermott Director, Risk Management & Audit Services Harvard University   Jill Mortali Director, Sponsored Programs Administration Harvard Medical School   Amy Miarecki Director of Post-Award Administration & Compliance Office of Financial Services University of Massachusetts Medical School   Introduction Jill Introduction Jill

3. © National Council of University Research Administrators FRA IX Conference 2008 Audit Survival Skills 101 Good business practices Sound Documented policies Good documentation Discretion Diplomacy Introduction JillIntroduction Jill

4. © National Council of University Research Administrators FRA IX Conference 2008 What we will cover Types of audits Good business practices Preparation Notification Negotiation Scoping “The Audit” Interviews, involving the faculty and others Field work Reviewing the facts Close-out, Reporting Responses Settlements Lessons learned Introduction JillIntroduction Jill

5. © National Council of University Research Administrators FRA IX Conference 2008 The Impact of Non-Compliance Introduction JillIntroduction Jill

6. © National Council of University Research Administrators FRA IX Conference 2008 Types of Audits Annual A-133 audit Sponsor audit (NIH, AHA, RWJ) Office of the Inspector General (OIG) – not for cause and for-cause F&A Review

7. © National Council of University Research Administrators FRA IX Conference 2008 A-133 Audits - WHY An Office of Management and Budget (OMB) Circular requires an annual external audit of non-profits receiving federal funds for sponsored programs in excess of $500k (as of 12/31/03) Audit performed by external auditor, sometimes with support from an internal audit group Gail OMB is the Office of Management and Budget arm of the government that oversees the budget and issues information and instruction to Federal agencies- called circulars- that apply to using federal funds. This is required, not optional.Gail OMB is the Office of Management and Budget arm of the government that oversees the budget and issues information and instruction to Federal agencies- called circulars- that apply to using federal funds. This is required, not optional.

8. © National Council of University Research Administrators FRA IX Conference 2008 A-133 Audits - WHAT OMB Circular A-110 “The Federal awarding agency…or any of their duly authorized representatives, have the right of timely and unrestricted access to any books, documents, papers, or other records of recipients that are pertinent to the awards.” “This right also includes timely and reasonable access to a recipient's personnel for the purpose of interview and discussion related to such documents.” GailGail

9. © National Council of University Research Administrators FRA IX Conference 2008 A-133 Audit - HOW Interviews Questionnaire Testing - Sample of federal awards & their direct cost transactions are selected for audit to determine if expenditures and procedures were appropriate (i.e., in accordance w/ federal policies, sponsor terms/conditions & University policies)

10. © National Council of University Research Administrators FRA IX Conference 2008 A-133 Audit – HOW continued Audit scope includes: effort reporting internal control testing cost transfers program income equipment testing financial & non-financial reporting sub-recipient monitoring Davis-Bacon Act service centers student financial aid F&A rate application GailGail

11. © National Council of University Research Administrators FRA IX Conference 2008 Common A-133 Findings Unallowable costs charged to grants Sales tax, travel Timely and Accurate Annual Financial Reporting 90 calendar days after the end of the grant year In FY 03, 5 reports were late out of a selection of 30 Timely and signed Effort Reporting Evidence of timely review by someone with first-hand knowledge Cost Transfers Timeliness, justification, authorization GailGail

12. © National Council of University Research Administrators FRA IX Conference 2008 F & A Audits What DHHS or ONR review of a Universities proposed F&A (indirect cost) rate proposal Why To test/verify the data that supports the proposed F&A rate Who Staff from the cognizant agency (DHHS, ONR) When Based on submission of F&A proposal and type of F&A rate (provisional, predetermined, fixed with carryforwards) AmyAmy

13. © National Council of University Research Administrators FRA IX Conference 2008 F&A reviews are looking to… F&A proposal reconciles to the audited financial statements Compliance with OMB Circular A-21 Compliance with Disclosure Statement Reasonableness of costs incorporated into the F&A proposal Review the accuracy of the space use survey to space functions Ensure the space and base match

14. © National Council of University Research Administrators FRA IX Conference 2008 Sponsor Audits Drivers: Sponsors are accountable too. Foundations: Donors Federal agencies: Congress, taxpayers “Not for cause” audits Verification of costs charged Specific concern e.g. charging administrative salaries Not always financial e.g. conflict of interest process “For cause” audits Self-reported Whistleblower

15. © National Council of University Research Administrators FRA IX Conference 2008 Office of Inspector General Audits What DHHS or ONR Inspector General Why To protect the integrity of DHHS and ONR programs, as well as the health and welfare of the beneficiaries of those programs Who Staff from the Office of Audit Services at the cognizant agency (DHHS, ONR) When Random – but you will know long before they get there AmyAmy

16. © National Council of University Research Administrators FRA IX Conference 2008 Some recent OIG findings…. Direct charging of costs that should have been included as indirect costs Direct charging salary for effort associated with grant proposal writing Improperly authorized and documented cost transfers Inadequate subrecipient monitoring procedures Costs charged were not compliant with A-21

17. © National Council of University Research Administrators FRA IX Conference 2008 Audit Preparation Good business practices Sound policies Good documentation Notification Negotiation Scoping GailGail

18. © National Council of University Research Administrators FRA IX Conference 2008 Good Business Practices = Sound Internal Controls A process designed to provide reasonable assurance objectives are achieved: Compliance Objectives – compliance with all legal, regulatory and policy requirements Operational Objectives – efficient and effective operations, safeguarding of assets, HR practices to hire quality personnel Reporting Objectives- Accurate and complete financial reports Example: Objective: Compliance with sponsor regulations and University policies Internal Controls: Approval of spending separate from person doing the transaction Monthly review of expenses transacted (detailed listings) Post audit for unusual transactions Routine monitoring of spending in high risk areas GailGail

19. © National Council of University Research Administrators FRA IX Conference 2008 Components of Internal Control There are five interrelated components of internal control derived from basic operations and administrative processes. The control environment is at the bottom because it is the foundation for all the others. GailGail

20. © National Council of University Research Administrators FRA IX Conference 2008 Auditors look for: Established policies and procedures Allowability, allocability and consistent practices over direct cost transactions Effort commitments & deviations Effort Reporting compliance Subrecipient Monitoring Cost Transfers supported Documented Cost sharing

21. © National Council of University Research Administrators FRA IX Conference 2008 Keys to Successful Audits Organized Files Documentation for expenses including business descriptions that show benefit to the award Appropriate Approvals Audit Trails Knowledge of policies and regulations (administrators and PIs)

22. © National Council of University Research Administrators FRA IX Conference 2008 Good Business Practices Help the PI manage the resources of the project to support timely and successful closeout of the project. Monitor expenditures on award funds; understand spending in the context of project milestones Keep abreast of regulations and policies Coordinate with PI and Central Offices on reporting; review all reports to be submitted to the sponsor Assist PI in compliance with regulations and policies Know when prior approvals are required or know when to ask Assist central administration with closeout and audit activities DOCUMENT!!!!!!

23. © National Council of University Research Administrators FRA IX Conference 2008 Roles and Responsibilities Liaison person for managing the auditors Internal communication strategy – who, when, how Negotiator and response team Trainers - especially for those who might be interviewed

24. © National Council of University Research Administrators FRA IX Conference 2008 Scoping and Negotiation Define the purpose of the audit. Focused on all compliance areas – no specific concern Specific concern e.g. PI effort or effort reporting Monitor work for consistency with purpose Obtain a written understanding on key points in advance: Start date, duration Awards selected Number and type of transactions Documentation to be submitted in advance of visit? Status updates Closeout process

25. © National Council of University Research Administrators FRA IX Conference 2008 Fieldwork “The Nitty Gritty” Interviews, involving the faculty and others Documentation Reviewing the facts Discretion Diplomacy

26. © National Council of University Research Administrators FRA IX Conference 2008 Audit Closeout process Closing meeting between institution and auditor Audit report draft to University University response Negotiation of audit issues Final Audit report issued Higher level review & University response Final resolution and settlement

27. © National Council of University Research Administrators FRA IX Conference 2008 To sum it up…

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