Office of Research and Project Administration
SPONSORED PROGRAMS COMPLIANCE
Audit 101 - What is a Sponsored Programs Audit?
1. Why are
there audits?
Any department or unit at the University expending sponsored program funds is
subject to audit by the third party providing the funding. Third parties want
assurance that their rules and regulations are being complied with as the research
is executed. They want assurance that processes and policies at the University
limit the probability that fraud, waste and abuse will occur.
Typically auditors are concerned with the direct costs that are charged to sponsored research accounts. As there are thousands of expenses being charged to ledger 5 accounts, it is impossible for the University to oversee compliance with rules and regulations centrally. Rather, the controls are within the departments and units themselves. This is especially true at the University of Rochester where the organizational structure incorporates a decentralized model that allows departments a large degree of autonomy.
2. Consequences
of Noncompliance/Public Demand For Improved Control
Because the controls are vested with the numerous departments and units of the University, a base understanding of relevant policies, procedures and regulations is essential for every administrator and Principal Investigator (PI). Compliance is everyone's responsibility. While the University operates in a decentralized manner, federal research sponsors and the external, independent auditors view the University as an integrated whole. Errors and noncompliance of one department can have ramifications for the entire University. What are the consequences of noncompliance? Examples include:
- Fines and penaltiesAdditional oversight/monitoring by the governmentLoss of Expanded AuthoritiesPotential reduction in Federal fundingProfessional integrity compromised
- Suspension, debarment, exclusion of individuals or the University as a whole
In recent years, major universities and medical centers have felt the impact of the public demand for improved control. Examples include:
- $15.5 million assessment against New York University Medical Center for inflated research grant costs
- $32 million fine against University of Minnesota for misuse of federal grants
- $650,000 fine against University of Chicago for research fraud and abuse
As
these examples show, maintaining compliance with the
rules and regulations applicable to the federal research
funding received by the University is of extreme importance.
3. Type of Auditors
A
department expending third party research funds may
be contacted by several types of auditors-federal
auditors, state auditors, auditors from industry
sponsors, representatives from the University's external
independent accounting firm (Pricewaterhouse
Coopers LLP),
and Office
of University Audit (OUA).
The Office of University Audit is located at Miller Center (formerly Eastman
Place). The Director of OUA, Salim M. Alani, reports to the Chair of the
University's Audit Committee of the Board of Directors and Ronald Paprocki,
Senior Vice President of Administration and Finance and Chief Financial Officer.
OUA's charter guarantees access to all University information. OUA's mission
statement is to provide audit and advisory services to the University Community
by assessing risks, analyzing controls, and ensuring that business practices
are effective, efficient, and compliant with University and regulatory policies.
4.
Types of Audits
As a PI, you are most likely to be contacted in connection with either a preaward
audit or a claimed cost audit.
Sponsors conduct preaward audits to verify the estimated costs submitted in proposals
for large sponsored research projects.
Claimed
cost audits focus on expenses actually charged to
the sponsored research. These audits are concerned
with the allowability and allocability of the expenditures.
By their nature, these audits are typically conducted
near completion of a sponsored program.
5. Audit Protocol
If you are contacted
by an external auditor, it is important that you
determine the legitimacy and purpose of the request.
Ask the inquirer what audit organization he/she represents,
what type of audit they are conducting, and the purpose
of the audit. It is important to inform Office of
Research Accounting and Costing Standards (ORACS)
of the impending audit and assistance should be sought
from this office. One person in the department/unit
should be identified as the liaison for auditors.
Responses
to auditor questions should be clear and concise.
Answer truthfully. Do not provide the answer that
you think the auditor wants to hear. Remember that
auditors typically look at documentation and relationships
among data. Any "guesses" or
false statements are destined for discovery. If you are unsure of an answer,
or need time to provide a well-informed response or explanation, tell the
auditor.
For virtually any question that can be asked by an
auditor, it will be beneficial to have a statement
from the PI related to each month's general ledger
and CumSal reports, that indicates the PI has reviewed
the financial activity and does not have any requested
changes.
6. Record Retention
Financial records, supporting documents, statistical records, and all other research
pertinent to an award shall be retained for a period of 3 years from the date
of submission of the final expenditure report. There are exceptions, such as
if any litigation, claim, or audit is started before the 3-year period is complete.
Refer to http://www.rochester.edu/ORPA/manual/.
The university's policy for record retention is that documentation must be retained
for three years from the date of close-out of a project. For a multi-phased project
spanning 15 years, this means that documentation for all 15 years must be retained.
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