Typical Audit Findings at PUIs: A Proactive Approach to Avoiding Negative Findings

1. Typical Audit Findings at PUIs:A Proactive Approach to Avoiding Negative Findings Dr. Carrie H. Brown and Jennifer Hanlon Stephen F. Austin State University

2. What does “AUDIT” mean ? • A = Analytical • U = Unbiased • D = Dings • I = Internal accountability • T = Typical • A = Awfully unnecessary • U = Useless paperwork • D = Damning evidence • I = I know nothing • T = Tyrants in charge

3. Why should we care? Transparency is the “new black” - Taxpayers expect accountability for their money - Sponsors expect accountability for their money Complex regulations require monitoring Protect Institution (bad press is bad press) Paying back a sponsor hurts (fiscally and otherwise)

4. Settlements UniversityAmountIssueUniversity of Minnesota $32 million misuse of federal fundsEast Carolina University $1.7 million effort certificationNorthwestern University $5.5 million effort certificationJohns Hopkins University $2.7 million effort certificationUniversity of the District $530,000 false payment claimsof Columbia

5. Unique Challenges for PUIs • Minimally staffed central office • Handle everything grant related (emphasis on preaward) • Central offices work directly with other offices (human resources, accounts payable, etc.) • More mandates don’t come with more money or people

6. Use Audits to Help You Discover weaknesses Emphasize areas of strength Test strength of policies and procedures Test need for new/updated policies and procedures Strengthen your case to implement policies and procedures from other institutions’ audits Train PIs, staff and other institution employees using lessons from other institutions’ audits

7. Typical Audit Types • F & A cost proposal • Compliance (IRB, IACUC) • Whistle blower • Issue specific • Time and effort certification • Cost transfers • Internal • Programmatic • Financial • A-133 • Pre-award • Desk review

8. Lifespan of an Audit • Agency contacts institution • Agency holds entrance conference • Institution collects and presents information requested • Agency drafts audit report • Institution responds to draft audit report • Closing meeting to review audit report and responses • Agency issues final audit report • Institution responds to audit • Agency follows-up on institution response

9. Prepare Review audits from other institutions Keep informed of current audit targets Develop and follow sound policies and procedures Regularly review and test your policies and procedures Develop an audit response plan Keep accurate, current and complete documentation Create and follow a records retention policy/procedure

10. Review other Audits • National Conference on College Cost Accounting http://www.costaccounting.org/audits.html • National Science Foundation http://www.nsf.gov/oig/auditpubs.jsp • US Department of Education http://www2.ed.gov/about/offices/list/oig/areports.html

11. From http://www.costaccounting.org/audits.html

12. Keep Informed of Audit Targets • U.S. Government Accountability Office • Federal Inspector General Sites http://www.ignet.gov/igs/homepage1.html • Follow each federal agency’s Office of Inspector General annual work plans • 2012 DHHS work plan included these review areas: • Cost sharing • Extra service compensation • ARRA awards • Direct charging of administrative and clerical salaries

13. Develop Sound Policies & Procedures Keep policies general - What is the rule - Change infrequently Clearly designate who monitors Develop specific procedures - How to implement the policy - Can change as needed Be consistent in policies, procedures and practice Include other offices in policy/procedure development Educate staff and faculty on all policies and procedures

14. Review Policies and Procedures Pilot new procedures - Obtain input at all stages - Preview with staff, faculty and other offices Review implementation of policy/procedure - Does it work how you expected? -Does it impact the right audience? Internal review - Auditor - General counsel - Human resources

15. Have an Audit Response Plan • Document data location and availability • Clarify all requests • Respond timely to requests • Ensure that data provided is accurate, complete, and addresses request • Develop audit response • Designate audit liaison • Organize audit response team • Understand audit schedule, roles of audit personnel • Identify and assign staff most knowledgeable to data needs

16. Documentation: Accurate, Complete, Current The “paperless office” myth Show what you did and why Train everyone - PIs, grant staff, department staff, pre/post award Keep hard copy back-up of electronic documents Keep phone logs Follow-up phone calls with written correspondence Obtain written sponsor approvals Electronic documents never die (email is eternal)

17. Records Retention / Retirement “The rights of access . . . are not limited to the required retention period but shall last as long as the records are retained.” OMB A-110, 215.53(e) Retention and access requirements for records Thus, if you have a record, it’s Findable. . . Tangible. . . Noticeable. . . Observable. . . Auditable. . .

18. Records Retention Process Institution should have system-wide policy Grant retention schedules may extend past institution policy Clearly identify who keeps what Define how you determine retention length Determine medium to maintain Maintain records disposition log

19. What do Auditors do ?

20. Interacting with Auditors: The Good • Truthfully answer all questions asked. • Respond only to questions asked. • Listen carefully to questions before responding. • Ask clarifying questions as needed. • Provide answers IF you have first-hand knowledge and facts to support your answers.

21. Interacting with Auditors: The Bad • Never argue. (Auditors are merely number crunchers and don’t know what they are doing, right?) • Don’t ramble on and on and on. (The more you talk, the less the auditor listens.) • Don’t get emotionally involved. (Of course the auditor is picking on YOU.) • Never ever speculate - even if asked. (Nothing is better than making stuff up during an audit!)

22. Overall Lessons Regularly educate faculty and staff. Develop a positive relationship with your general counsel and internal auditor. For mental well being, develop your audit response plan yesterday. Follow policies and procedures. Document when exceptions are made and explain. Don’t put it in writing if you aren’t going to follow. Less is more.

23. Discussions and Questions Contact Information: Dr. Carrie H. Brown brownch@sfasu.edu Jennifer Hanlon hanlonjd@sfasu.edu ORSP - http://www2.sfasu.edu/orsp/