By Kathleen Hall & Marilyn Surbey  (July/Aug 2005 NCURA Newsletter)

Many universities undergo audits beyond the usual A-133 audit. When the sponsor conducts an audit of specific projects, the experience can be very different from what we are accustomed to in the usual A-133 audit. In addition to a thorough examination of effort reporting, non-salary costs are being reviewed in a new way. University research administrators tend to focus on the propriety of the expense. Is the expense allowable and allocable? Does it belong to the grant to which it was charged? If the answer to both of these questions is yes, we assure the principal investigator and university administration that everything will turn out fine. However, that reassurance may be premature.

Auditors are increasingly reviewing the detail behind the institutional forms or signature requirements and requesting proof of award-specific approvals and procedures that show knowledge of and compliance with the grant terms and condition. Auditors are going beyond the normal, general financial system requirements and are wanting to validate in-depth understanding and compliance with award terms, on a transaction-by-transaction basis.

The auditor will review the internal control structure that provides the authority to spend, the documentation for the expense, and the adequacy of the post-review. How will your institution answer the following questions?

Supplies: Who made the request and who approved the purchase? Are they different people? Are they familiar with the grant program terms and needs? Who gave them the authority? How is this documented? Prove it.

How do you document "receipt" when there is no receiving report? Are packing slips or other such documentation reviewed, noted and retained? If not, how can you prove the goods were received?

When costs are split, how is the allocation methodology explained and documented? ("The PI said so" is not an acceptable answer.) Are there written, internal departmental procedures (i.e., in addition to university procedures, detailed procedures for the local unit) for purchasing supplies on sponsored projects?

Travel: Who authorized the trip? Can you prove the trip was authorized prior to the trip being taken? Is the approver familiar with the program needs and the financial terms and conditions? Do they have the authority? How is this authority documented?

Does backup documentation to the travel expense justify how the trip was related to the grant rather than just justify the expenditures? Is there an agenda, meeting notice or other information that substantiates the purpose of the trip?

Are all prepaid expenses included on the voucher? If there is only prepaid airfare, how is the trip authorized, justified, etc.? Do you maintain the boarding passes or other evidence that the traveler actually took the trip?

If all of the above has been done properly by an authorized individual, familiar with the purpose of the trip, why would a cost transfer be necessary after the cost has been posted to the ledger?

 

Kathleen Hall is Associate Director, Office of Grants and Contracts Accounting, Emory University and Marilyn Surbey is Associate Vice President for Finance and Research, Emory University.  (Marilyn Surbey was previously Assistant Vice President for Research here at the University of Minnesota.)