Understanding an A133 Audit through the Lens of SAS112

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Understanding an A-133 Audit through the Lens of
SAS-112

• A Roadmap To Success

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Speakers

• Jeff Yepsen
• Assistant Accounting Officer - Accounting and
  Reporting
• External Audit Coordinator
• Scott Fong
• Cash and Controllers Manager Accounting and
  Reporting
• SAS 112 Coordinator
• Michael Grafton
• Award Set-Up, Special Projects Manager EMF
• A-133 Support Specialist
• Wendy Hom
• Compliance Manager EMF
• A-133 Support Staff Member

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Objectives

• Provide overview of A-133 audit
• Share background and requirements
• Discuss high risk areas
• Preparing for the audit
• Roadmap and Timeline

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Agenda

• Overview (10-15 min)
• Scope and Framework
• What is an A-133 audit?
• Evidence of review
• SAS112 Relevance
• Financial Audit
• Full audit vs. A-133 testing
• A-133 full audit findings from other campuses
  FY07
• Timeline and Roadmap
• High Risk Areas and Preparation (30-45 min)
• Verification of Expenditures (KC13)
• Payroll Expense Distribution Report (KC28)
• Cost Transfers (KC25)
• Cost Sharing
• Effort Reporting
• Subcontract Monitoring
• Bi-Annual Physical Inventory
• Wrap Up (5 min)
• QA (30 min)

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Scope and Framework

• What is an A-133 audit?
• The University's expenditures of Federal funds
  are audited annually in accordance with Office of
  Management and Budget Circular A-133.
• A-133 audits are conducted on a consolidated
  basis and reports on all campus locations.
• The University's fiscal year ends June 30, and
  the A-133 audit report is issued by the end of
  March in the following year. Copies of the A-133
  audit report are submitted to the Federal Audit
  Clearinghouse Bureau of the Census.
• Information from current and prior A-133 audits
  is accessible at the Federal Audit Clearinghouse
  website http//harvester.census.gov/sac/ See
  "UNIVERSITY OF CALIFORNIA
• UCOP Policy http//www.ucop.edu/costingpolicy/aud
  it_info.html

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Scope and Framework

• Evidence of review
• Importance
• Types Allowed
• Outcome when not shown
• SAS 112 Relevance
• Does not require more for work for the
  departments
• It does require that we are following established
  UC and UCSF Policy and Procedure
• Evidence that we have complied with established
  internal controls
• Governments position is that if we accept the
  contract then we have proper internal controls in
  place and we are compliant

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Scope and Framework

• Financial Audit vs A-133
• Financial audit is of the entire campus funds
• A-133 only covers Federal Funds
• Financial audit, materiality is considered
• A-133, any error is considered material
  Compliance
• Financial audit is broad in scope
• A-133 is very narrow on scope, therefore the
  details of transactions are audited more closely

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Scope and Framework

• UCSF A-133 Audit FYE 2005
• Incomplete physical Inventory
• Untimely cost transfers
• A-133 Audit FYE 2007 at UC
• UCLA
• San Diego
• Areas looked at will be discussed by the EMF
  staff

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Timeline Roadmap

• SAS 112 Review Committee
• Reviewed FY 07 and looked ahead
• Audit Services
• Assess SAS 112 key controls in schools
  departments
• Controllers Office
• Develop conduct training
• Schools Departments
• Follow-up on assessment training

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Timeline Roadmap
SAS112 Review Committee 1st Townhall
Understanding an A-133 Audit Townhall Audit
Services Schedule review A-133 key controls
for Schools Depts (Nov May)

• Training
• Higher risk areas
• Areas with needs
• Extension from prior year
• Sampling Testing
• Follow-up by Schools / Depts
• A-133 RSA Survival Guide

Review AS Assessment Develop Training
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Verification of Expenditures

• Key Control 13
• Verification of Expenditures Presentation
• http//acctg.ucsf.edu/internal_controls/sas112/pre
  sentations/Campus_Presentation_April_2007.ppt
• Verification of Expenditures Job Aid
• http//acctg.ucsf.edu/internal_controls/sas112/key
  _controls/UCSF_Verification_Review_Process.pdf
• Evidence of Review (Verification of Expenditures
  Checklist)
• http//acctg.ucsf.edu/internal_controls/sas112/key
  _controls/Verification_Checklist.doc

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Journal Source Code Guidelines

• Source Code 135 / Budget Adjustment Journal
• solely for appropriations in a single fund-FY,
  but between different account types and different
  expenditure DPAs possible non-zero budget
  issues
• adjustment to revenue or unexpended balance
  solely done by EMF
• Source Code 535 / Financial Journal
• carry forward of cash balances between funds or
  between fund-FY
• financial adjustments that are not specific to a
  direct cost expenditure, such as facilities and
  administration (FA), accounts receivable (A/R),
  or unexpended balance (fund year error for
  intercampus subcontracts)
• Source Code 545 / Cost Transfer Journal
• credit or debit of a specific direct cost to or
  from a sponsored project fund
• uses a search mechanism to prevent duplication of
  transfer
• Source Code 547 / Exceptional Cost Transfer
  Journal
• lump sum transfers from sponsored funds to
  discretionary funds
• transfers of personnel costs between fund years
  on sponsored funds

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Prohibited Departmental Financial Transactions

• For internal control purposes, departments CANNOT
  process the following types of financial
  transactions to sponsored project funds
• Facilities and administration (FA), expenditure
  NCA codes 490000, 490030, 490040 - because of its
  offset to a liability account
• Unexpended balance (U/E) balance sheet NCA codes
  in the 1198xx range because U/E is like cash.
  
• Revenue codes 3xxxxx, because units that spend
  cannot be involved in revenue recognition
  billing, invoicing, and accounts receivable
  processes in the PeopleSoft research
  administration system (RAS)

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Cost Transfers

• PET and 545/547 Timeliness
• NIH 90 days vs. UCOP 120 days
• PET Signature Requirements
• Preparer
• Dept approver (EMF-certified)
• PI signature for federal funds (front page only
  of PET) and Att E for new charges to federal
  funds
• Meaningful Att Es

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Journal Enforcement

• Instructions
• http//acctg.ucsf.edu/files/pc/up773.xls
• http//acctg.ucsf.edu/files/pdf/upay646-2.pdf
• Tips and Refreshers
• Lesson 10 Preparing a 545 Cost Transfer Journal
• http//www.acctg.ucsf.edu/peoplesoft/journals/trai
  ning/jobAids/Lesson_10.pdf
• Journal Entry Guidelines
• http//www.acctg.ucsf.edu/peoplesoft/journals/trai
  ning/jobAids/Journal_Entry_Guidelines.pdf
• Campus Communication 5-13-04 Job Aids, Tips,
  Cost Transfers
• http//www.acctg.ucsf.edu/peoplesoft/journals/trai
  ning/journal_tips/Regular_and_Exception_Cost_Trans
  fers20(3).pdf
• Campus Communication 5-21-04 Use of Attachment
  E
• http//www.acctg.ucsf.edu/peoplesoft/journals/comm
  unications/journals/May202120OLFS20Journals20C
  ommunication.pdf
• Attachment E with PI signature approving cost
  transfer should be scanned and saved as a PDF to
  be included with the journal on peoplesoft.
• EMF Research Administration Corner
• http//acctg.ucsf.edu/extramural_funds/rac/index.h
  tm

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Effort Reporting

• How ERS was implemented

• Timelines per UCOP Policy
• EMF to distribute within 45 days end of cycle
• - Departments to certify within 30 days

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ERS Certification Statistics
http//acctg.ucsf.edu/ers/index.htm
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Subcontract MonitoringRoles and Responsibilities

• General roles and responsibilities of managing
  and monitoring subcontracts can be found on the
  following Office of Sponsored Research website
• http//www.research.ucsf.edu/cg/polproc/cgSubrecMo
  nitoring.asp

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Subcontract MonitoringRoles of the Controllers
Office

• Evidence of review and approval of expenditures
  depends upon whether the subcontractor is an
  external vendor, or another UC campus
• For external subcontract invoices, the invoice is
  recorded by Accounts Payable, and is reviewed and
  approved by the departmental representative or
  PI.
• For an intercampus request for reimbursement
  (IRR), there is no formal review done payment
  is made through the sister campus financial
  control.

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Subcontract MonitoringRoles of the Controllers
Office

• External Subcontractors
• Accounts Payable sets up payment schedule.
• The first 25,000 of expenditures are assigned
  to NCA code 437510, subject to FA. The
  remaining expenditures are assigned to NCA code
  437520, and are exempt.
• Invoices are submitted by subcontractors, citing
  xxxxSC subcontract number.
• Invoices are accrued to the GL, then sent to a
  departmental representative for approval.
• Accounts Payable schedules disbursement to
  subcontractor.

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Subcontract MonitoringRoles of the Controllers
Office (contd)

• Intercampus Subcontractors
• An intercampus request for reimbursement (IRR) is
  submitted to EMFIRR_at_ucsf.edu from a sister
  campus.
• Service Team 7 is responsible for sweeping the
  IRR mailbox by
• source code 570 financial journal, crediting the
  IRR to the 1195xx financial control, and debiting
  the 1198xx unexpended balance, citing program
  code X08xx to correspond to the sister campus
• source code 135 budget adjustment journal,
  reducing the expenditure appropriation in NCA
  code 437520 by the IRR amount.

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Bi-Annual Physical Inventory (KC 18)

• Physical Inventory is conducted by the department
  custodian/PI every two years. Campus Asset
  Management ensures the inventory is conducted
  every two years. Records are reconciled to the
  physical inventory results.
• Departmental Responsibilities
• Adequate maintenance, control and safeguarding of
  all University Assets
• Notifying Capital accounting of any change in
  status of Inventorial Capital Assets.
• Change in departmental custodianship or service
  location
• Change is service status
• Significant events where Capital assets are
  involved. (Theft, Damage, impairment)
• Performing the biannual inventories and
  certifications
• Controllers Office Responsibilities
• Maintain up to date consolidated capital asset
  records (physical and financial)
• Coordinate biannual physical inventory and
  reporting
• Provide departmental guidance regarding
  regulatory requirements and University policies
• Compliance reporting

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Wrap-up

• Follow existing policy, proper procedures and
  practices
• Look for
• Audit Services
• Future training announcements
• Follow-up by Schools/Depts on A-133 preparation
• What if
• Impacts Future Funding, Penalties and Fines,
  Reputation

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Non-Compliance Damage
University of Michigan Chief Urologist charged
with Conflict of Interest 100K penalty plus 1
year probation
Johns Hopkins University Effort Reporting 9
Million
University of Minnesota Misuse federal grants 32M
Public Demand For Improved Control!
Johns Hopkins Harvard Yale Miscellaneous
Scientific Misconduct
New York University Medical Center Inflated
research grant costs 15.5 Million
Harvard University Conflict of Interest 34
Million
Stanford University Inflated Research Overhead
Costs 1.2 Million
Harvard University Questioned Costs Self-reported
2.4 Million
Northwestern University Committed Time/Effort 5
Million
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Previous Training and Tools
SAS 112 Website http//acctg.ucsf.edu/internal_con
trols/sas112/index.htm Verification of
Expenditures Presentation http//acctg.ucsf.edu/in
ternal_controls/sas112/presentations/Campus_Presen
tation_April_2007.ppt Verification of
Expenditures Job Aid http//acctg.ucsf.edu/interna
l_controls/sas112/key_controls/UCSF_Verification_R
eview_Process.pdf Evidence of Review
(Verification of Expenditures Checklist) http//ac
ctg.ucsf.edu/internal_controls/sas112/key_controls
/Verification_Checklist.doc
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Q A
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Who to contact

• Michael Grafton 476-1462MGrafton_at_accounting.ucsf.
  edu
• Wendy Hom 476-8688Wendy.Hom_at_ucsf.edu
• Scott Fong 476-0834Scott.Fong_at_ucsf.edu
• Jeff Yepsen 502-7430JYepsen_at_accounting.ucsf.edu

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Other Key Controls

• User Access Administration (PWC Finding)
• Leave Balance Accrual (New KC)