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Audit
101 - What is a Sponsored Programs Audit?
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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.
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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 penalties
- Additional
oversight/monitoring by the government
- Loss
of Expanded Authorities
- Potential
reduction in Federal funding
- Professional
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.
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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 in the Towne
House. 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.
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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.
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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.
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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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