COMPLIANCE

As we embark on new grant opportunities, new responsibilities come along. Compliance is a very important component of all grant awards, so it is important that we understand what we need to do to comply. Below is an articles taken from the July/August 2005 and September/October 2005 NCURA Newsletters that address some questions we need to ask ourselves when complying with grant regulations. Enjoy!

P-Card
Equipment
Consultants and Speakers
Cost Share
Supplies
Travel
Filing
General Audit Observations

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(Part 1 of a Series)

By Kathleen Hall and Marilyn Surbey

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-dept 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. 

Beyond the A-133 Audit: Expanding the Focus (Part 2 of 3)

By Kathleen Hall and Marilyn Surbey

This article is the second in a series of three addressing some of the questions auditors are currently asking that expand the audit scope for non-salary costs. Please refer to the July/August issue for the article on supplies and salaries. Additional cost categories are outlined below.

P-Card

P-cards have long been a hot topic in the research administration arena. Our institutional policies and procedures need to satisfactorily address the following questions. 

• Who made the request for departmental P-Cards and authorized their use on sponsored programs? Are they familiar with the terms and needs of the grant program as well as the program's financial terms and conditions? If not, did someone with that knowledge approve the cost before posting it to the sponsored account?
• Do the individuals that purchase or approve individual P-Cards have knowledge of the program terms, needs, and financial terms and conditions? If not, does documentation exist proving that individuals with that knowledge or authority approved the cost before posting it to the account?
• How are grant-related authorities documented? Where are the receipts? Where is the documentation for group meals, catering, food, etc., that outlines the grant-related purpose and lists the attendees? How is the allocation methodology documented and explained if the costs are split? (Dollars available is not the right answer!)
• How is the post-review procedure documented? Why would P-Card transactions be transferred after posting and be allocated to a different project if transactions are being handled appropriately and costs do not post to the account without a review and approval process?
• Are there written internal procedures?

Equipment

How is the allocation methodology documented and explained if costs are split? Who decided the split and how did they make the determination? Are there written internal procedures that outline the purchase request, approval, receipt of equipment, and post-review process?

Consultants and Speakers

Where is the written agreement or offer letter? Where is the documentation or explanation of how rates were determined?

Where is the documentation of the event for speakers, lecturers, etc? Does the event documentation include an explanation of the purpose of the event and outline how it relates to the grant program? Does the event documentation include a list of attendees? Does the event and attendee documentation provide proof that 100% of the speaker fee should be allocated to the grant? In case of a split, how was the allocation determined?

Cost Share

Can you prove the same level and type of documentation of knowledge and appropriate prior approval, review, cost appropriateness, and allocation procedures for cost shared costs?

How can you prove that an individual item is appropriately allocated to cost share for the specific program?

The final article will discuss filing and record retention and make some general observations.

Beyond the A-133 Audit: Expanding the Focus (Part 3 of 3)

by Kathleen Hall and Marilyn Surbey

FILING

When purging or destroying files, make sure that you are not destroying documentation that might be needed in an audit. Everything needed may not be available from the central system
repositories. All appropriate individuals should be knowledgeable about which departmental documents are considered original source documents for the purpose of audit. Where are the bits and pieces that would document all aspects of prior approval, authorities, postreview, etc.? Can you find everything for every transaction to provide a “complete” picture of the transaction and all oversight functions?

For documents going to Accounts Payable (AP) or Purchasing (or for E Journals), attach any/all information that would justify the purpose and allowability of the transaction and will help document
an appropriate approval/review process. This could include copies of emails or a note to the file that outlines who, why, what. The AP/Purchasing/E-journal source documents may have been scanned
or are otherwise available from central systems. If your documentation is with a centralized source, this will prevent the need to retrieve it at a later date from your own files.

GENERAL AUDIT OBSERVATIONS

For all transactions, how do you provide documentary proof that your department conducted a timely post-review of transactions on your account and that a knowledgeable individual with appropriate
authority either approved or questioned and removed the transactions?

For all transactions, program auditors are interested in the internal review and approval process by individuals who are “knowledgeable” about the program terms/conditions. The issue of
review and approval by “knowledgeable” individuals is separate from whether or not that individual is recognized for “processing” in the departmental or central systems. How are grant-related
authorities established and documented?

If the post-review process is essentially an accounting validation (check off), not conducted by an individual with an appropriate level of knowledge about the grant needs and terms/conditions,then the prior approval documentation must substantiate that an appropriate grant-related review occurred.

Budget availability is never an appropriate reason for allocation of costs, except when the cost is split between a grant account and an unrestricted account. In such an instance, the explanation must justify that the purpose of the allocation is to reduce or limit costs to the grant. Auditors want to see written departmental policies and procedures. They want to see departmental procedures that are in addition to those published at the institutional level. They want to see that the
department is aware of the institutional policies and that they understand their own responsibilities and have established their own quality control mechanisms that assure compliance with both
institutional policies and grant requirements.

Audits are often conducted years after the transaction occurred. If you do not have the documentation or ready access to the documentation that “proves” appropriate approval procedures, including programmatic and financial oversight and controls, costs
can be questioned or disallowed, even if the cost would otherwise have been allowable. Even if costs are not disallowed, weak or inadequate system procedures could lead to management comments that might require extensive and expensive corrective action or might lead to more restrictions in future funding.

Auditors express a “strong” concern about late cost transfers, especially when they are provided information about appropriate quality control procedures. They don’t understand why you would
have late transfers if you were following your procedures. Does this mean you are not following your procedures or that your procedures need to be rewritten?

Auditors express a “strong” concern about cost transfers for transactions that clearly have multiple opportunities to get allocated correctly (e.g., travel, P-Card). Why are there additional transfers
after multiple reviews? Does this mean reviewers are not following procedures or are not actually reviewing?

Are you ready for your next audit?

Kathleen Hall is Associate Director of Grants and Contracts, Emory University and Marilyn Surbey serves as Senior Manager, Education and Academic Medical Centers, BearingPoint, Inc.