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Critical Audit Issues and How to Avoid Them

Critical Audit Issues and How to Avoid Them. Agenda. It’s all about Compliance Audits at ECU (Internal and External) The Federal Audit Environment – and Why ECU Should Care Examples of Audits and Lessons Learned. It’s All About Compliance. Why compliance is important

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Critical Audit Issues and How to Avoid Them

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  1. Critical Audit Issues and How to Avoid Them

  2. Agenda • It’s all about Compliance • Audits at ECU (Internal and External) • The Federal Audit Environment – and Why ECU Should Care • Examples of Audits and Lessons Learned

  3. It’s All About Compliance • Why compliance is important • Penalties and consequences of non-compliance • Specific issues to grants and contracts • What’s the worst that could happen?

  4. It’s All About Compliance • Fines and penalties • Required pay back of sponsored program funding • Reputational damage • Reduction in subsequent funding • Debarment and Suspension (PI and Institution) • Escalating audits (Yale as an example)

  5. How ECU is Audited • ECU’s Office of Internal Audit • Annual Audit Plan – Based on Risk • Assessments of Operations, Compliance, Controls, IT/Information Security • Fraud, Waste, Misuse, etc. • Consultations • External Audits • NC Office of the State Auditor • Various project sponsors • Other ECU groups that assess risk and monitor for compliance

  6. The Federal Audit Scene • Escalation of audits and emphasis on compliance from federal agencies • The Single Audit • Agency audits, Site Visits, and Data Analytics • State agencies • Independent organizations • Federal agencies • Prime Pass Through Entities

  7. Work Plans • Updated annually – Modified for 2019 • Identifies both internal and external types of reviews • Prompts audits according to agency’s determination of risk

  8. Data Analysis CASH DISBURSEMENTS PAY/ ENTITLEMENT AWARD CLOSE-OUT PRE-AWARD REVIEW CASH REQUEST SOLICITATIONS POST AWARD PROPOSALS AWARD ACTIVE AWARD RISKS AWARD END RISKS PRE-AWARD RISKS • Unallowable, Unallocable, Unreasonable Costs • Inadequate Documentation • General Ledger Differs from Draw Amount • Burn Rate • No/Late/Inadequate Reports • Sub-awards, Consultants, Contracts • Duplicate Payments • Excess Cash on Hand/Cost Transfers • Unreported Program Income • No/Late Final Reports • Cost Transfers • Spend-out • Financial Adjustments • Unmet Cost Share • Funding Over Time • Conflict of Interest • False Statements • False Certifications • Duplicate Funding • Inflated Budgets • Candidate Suspended/Debarred DATA ANALYSIS

  9. Let’s look at some troublesome audits What can we learn? https://www.youtube.com/watch?v=Buuen1pwJdo

  10. Troublesome Audits and Lessons Learned…… • Howard University, UNC, UC Riverside – Issues with accurate effort certification • Michigan University and many others – Failure to observe the NSF “2 months” rule • Texas A&M – Charging personnel not actually working on the project, charging supplies not benefitting project • Howard University, University of Pennsylvania, others – too many cost transfers, cost transfers not appropriately documented • Columbia University, University of Florida – multiple issues in charging inappropriate charging salaries, charging items not benefitting the project

  11. What Have We Learned? • It is very important to reconcile sponsored program expenditures at least monthly • Identify/Remove erroneous charges • Ensure costs are directly related to the project • Monitoring expenditure rate – too little or too much • Ensure appropriate individuals are paid from the award • Ensure cost sharing is being done throughout the project

  12. What Have We learned? • Accurate reporting of effort • Only booked when actually expended • Calculated correctly • Managed when there is a reduction of >25% • Documentation of NSF variations – 2 month rule • Correct application of IBS

  13. What Have We Learned? • Unallowable costs? • Costs for items/services that don’t directly benefit the project? • Appropriate documentation of cost transfers? • The reason the initial charge happened? • What caused the error? • What is being done to prevent this from happening again?

  14. Resources • NSF OIG Plan: https://www.nsf.gov/oig/_pdf/2017%20Annual%20Audit%20Plan.pdf • How NSF Uses Data Analytics: https://www.nsf.gov/oig/_pdf/2013dawslides.pdf • What to Expect When You’re Expecting…Your Single Audit http://srainternational.org/publications/catalyst/201606/what-expect-while-you%E2%80%99re-expecting%E2%80%A6your-single-audit

  15. Resources • Internal Controls and the Single Audit http://srainternational.org/publications/catalyst/201609/changes-and-effects-internal-controls-2016-compliance-supplement • HHS OIG Work Plan https://oig.hhs.gov/reports-and-publications/workplan/index.asp • NIH Audits https://oig.hhs.gov/reports-and-publications/oas/nih.asp

  16. Contact UsORA@ecu.edu

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