NCURA Region VI

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NCURA Region VI VII Spring Meeting

• Pitfalls and Advice from the Trenches on How to
  Survive Your Internal Audit
• Susan Phillips Moskowitz
• Department of Geophysics
• Stanford University

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What to expect in this session

• What goes through your mind when you hear
  internal audit?
• How do you prepare for the audit?
• What is the scope of an audit? (about Internal
  Audit at Stanford)
• Historical perspective of Stanfords indirect
  cost rate hearings (movie)
• Examples of documents requested during the audit
• Share your examples of the audit experience

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What do you think when you hear internal audit?

• Terror
• Fear
• Oh my files are a mess!
• What will happen to my job

4
How do you prepare for the audit?

• Prepare for your audit from day one
• Look at other institutions
• Hot topics sub recipient monitoring and cost
  sharing
• When you first receive your Notice of Award
• read it carefully. Then read it again
• The award comes with terms conditions and
  responsibilities
• Refer to your Notice of Award frequently
• Establish a good relationship with your OSR
  contract officer and ask questions
• Talk to your PI and alert him/her about details
• PI effort, budget, reporting requirements and
  deadlines, etc.

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How do you prepare for the audit?

• Review retention times
• When requirements for long-term retention of
  records overlap, the responsible office should
  retain records for the maximum period needed to
  meet legal and audit requirements
• Direct Charges to Contracts and Grants
• Stanfords requirements 3 years following the
  date of the OSR closeout (longer if circumstances
  such as an audit or litigation require it)
• Accounts included in Indirect Cost Rate
• 3 years following the final sign-off for that
  year by the federal government
• Business transaction records (not contract or
  grant-related) 4 years

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How do you prepare for the audit?

• Monthly expenditure reports
• Review carefully and look for
• Correct burden (indirect cost rate)
• Was the rate calculated correctly?
• Ex 6,000 scientific computer
• Do you need to complete a cost transfer?
• New regulations on cost transfer policy

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The Audit Departments Role

• The work includes examining, evaluating, and as
  necessary, recommending improvements to the
  Universitys internal controls. Internal
  controls encompass the policies, procedures,
  activities, and information systems through which
  University schools and departments ensure
• Reliability, integrity, and security of
  information
• Compliance with laws and regulations
• Compliance with University policies and
  procedures, including the Code of Conduct
• Safeguarding of assets
• Economical and efficient use of resources and
• Accomplishment of established objectives and
  goals for operations or programs.

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The Department Responsibilities

• The Department responsibilities include examining
  and evaluating the policies, procedures and
  systems which are in place to ensure
• Reliability and integrity of information
• Compliance with policies, plans, procedures, laws
  and regulation
• Safeguarding of assets
• Economical and efficient use of resources and
• Accomplishment of established objectives and
  goals for operations or programs

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How are internal audits scheduled?

• Periodically performs assessments of University
  operating units and control functions to identify
  areas of potential institutional risk.
• Red flags
• Food
• Travel

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What does a typical audit include?

• Scheduling an opening conference to discuss audit
  objectives, timing, and intended report format
  and distribution (usually via email to department
  manager)
• Evaluating internal control systems
• Testing to ensure proper operation of internal
  control systems
• Developing conclusions based on test results
• Reviewing audit issues and draft audit reports
  with management and staff
• Preparing and distributing an audit report which
  generally include managements responses to the
  issues raised
• Following up to ensure all issues raised in audit
  reports have been addressed
• Example

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How to work with auditors?

• Each audit engagement has a defined scope and
  objectives. Any auditor requesting information
  from you should be able to explain the audits
  purpose and objectives so you can understand the
  reasons for questions being asked and provide
  accurate answers. (Review the scope)
• Work with your Department Manager
• Ensure you/staff are well trained on current
  procedures
• Pull selected files and coordinate with all
  parties PIs, department administrators, etc.
• Provide the relevant information. Show your
  manager first before faxing documents
  (transactions). Be sure you have ALL backup
  materials

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Examples from the trenches

• Reimbursement procedure at Stanford
• Oracle IOU
• Foreign Air Carrier Fly America Act
• Calculating per diem while attending conference
  with meals included in the registration
• Save your documentation and teach your PI to save
  all receipts

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Other important information

• Stay cool, calm and truthful during the audit
• Review your source documents (what do you
  remember)
• Be sure to certify the expenditure statements on
  time and your PIs effort is recorded accurately
• Check expenditure types are accurate
• Coded for research or non research
• Pcard transactions
• Is your business purpose accurate? Did you use
  the word party in the business purpose?
  (Example)
• Spend carefully and dont buy equipment at the
  end of the grant just because you have extra
  money
• Email etiquette
• Remember the AARC
• Allowable, Allocable, Reasonable and Consistent

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Stanford 1991

• High indirect cost rate
• Indirect cost controversy
• Internal audit was expanded
• Movie

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Results from 1991

• Auditors recommended more training for staff
• New University President
• Office of Sponsored Research Training Program
  established
• ABCs quarterly meetings
• Cardinal Curriculum

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Summary

• Documentation
• Follow the terms and conditions
• Is it Allowable, allocable, reasonable and
  consisitent
• Ask your manager for help/training

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Resources

• Office of Sponsored Research
• NCURA
• NCURA Broadcast Workshop Series DVD Audits the
  Audit Process aired Jan. 13, 2009
• Special thank you to
• Patti McCabe and Lisa Teresi-Forgatsch in the
  Office of Research Administration for assistance
  in this presentation
• Susan Phillips Moskowitz
• Project Coordinator
• Department of Geophysics
• 650-723-1568
• Susanpm_at_stanford.edu

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Questions???