Module 5 Closeouts and Audits of Sponsored Project Funds

The Office of Research ServicesThe Office of Research Support Services

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August 17, 2006

Module 5 Closeouts and Audits of Sponsored Project Funds

Sponsored Programs at Penn


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August 17, 2006

Closeout of Sponsored Project FundsAgenda

• PI & Department responsibilities– Communication– Pre-closeout review– Adjustment period– Freeze/unfreeze grants– Technical & invention reports

• ORS responsibilities– Unfreeze requests– Financial & non-financial reports– Disabling accounts

SPP # 2126 Interim & Final Financial ReportsSPP # 2128 Account Close-out

http://www.finance.upenn.edu/vpfinance/fpm/2100/2126.asp



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August 17, 2006

PI and BA Responsibilities


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August 17, 2006

Communication• Must occur between

– Business Administrator (BA)– Principal Investigator (PI)– Office of Research Services (ORS) and– Sponsor

• During the award period, as we prepare for account closeout, and during the closeout process


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August 17, 2006

Determining Which Grants are Due to Expire/Freeze

• Business Objects Org Summary.repThere is a tab for funds freezing in the next 90 days as well as a tab for Due and Late Reports

• Ben FinancialsUtilize 132.ORG “List of Terminated Grant and Contract Funds” and the 133.ORG”List of Grant and Contract Funds Due to Close”


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August 17, 2006

ORG.Summary – Funds freezing in Next 90 days

ORG SUMMARYFunds Freezing in the next 90 days from 6/9/06 (nearest freeze date listed first)

Fund Org Fund Desc PI Name FreezeDate

AcctEnd PBIL Operating

BudgetSum Grant

ExpendituresSurplus/(Deficit) Revenue Receivable Cash

Received

544888 0768 C000015013 HIGGINS,GREGORY L 08/31/06 06/30/06 6,319,440.00 6,319,440.00 2,748,736.84 3,570,703.16 -2,748,736.84 2,386,965.37 361,771.47

544931 C000015013 HIGGINS,GREGORY L 08/31/06 06/30/06 430,560.00 430,560.00 403,668.18 26,891.82 -403,668.18 392,840.85 10,827.33

545209 3540055097 HIGGINS,GREGORY L 08/31/06 06/30/06 465,686.00 465,686.00 145,825.36 319,860.64 -145,825.36 46,540.87 99,284.49

545191 SP4800-03-2-0322 HIGGINS,GREGORY L 10/15/06 09/30/06 0.00 0.00 0.00

545193 SP4800-03-2-0322 HIGGINS,GREGORY L 10/15/06 09/30/06 150,000.00 150,000.00 50,574.80 99,425.20 -50,574.80 12,134.97 38,439.83

0768 Count = 5

Count = 5 Totals: 7,365,686.00 7,365,686.00 3,348,805.18 4,016,880.82 -3,348,805.18 2,838,482.06 510,323.12


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August 17, 2006

ORG.Summary – Due and Late Reports

Due FSRsFund Org Fund Desc PI Name Rpt

CodeReportIssued FSR Due Acct End PBIL Operating

BudgetSum Grant

ExpendituresTotal Reported(FSRD + FSRI) Revenue Receivable Cash Received Encumbr. Equipment

544888 0768 C000015013 HIGGINS,GREGORY L

F 09/28/06 06/30/06 6,319,440.00 6,319,440.00 2,748,736.84 -2,748,736.84 2,386,965.37 361,771.47 3,546,675.91 23,492.04

544931 C000015013 HIGGINS,GREGORY L

F 09/28/06 06/30/06 430,560.00 430,560.00 403,668.18 -403,668.18 392,840.85 10,827.33 5,155.43

545209 3540055097 HIGGINS,GREGORY L

F 09/28/06 06/30/06 465,686.00 465,686.00 145,825.36 -145,825.36 46,540.87 99,284.49 8,464.86

0768 Count = 3

Due 3 Due

ORG SUMMARYLate or Due FSRs as of 6/9/06 (earliest date listed first)


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August 17, 2006

Pre-Closeout Review• Occurs during the last 90 days of the account

– PI and BA meet to review and discuss:• Budgeted vs. Actual expenses and final

anticipated expenses• Spending Rate and disposition of remaining

funds, if any• Possible need for any adjustments• Possible need for extension to complete project• Possible need for an Advance Account or

Account Continuation Request for following year (if salary charges are to continue past end date, this will be necessary)


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August 17, 2006

Pre-Closeout Review (cont.)• Subcontract closeout(s), if applicable• Service center charges• Any unallowable expenses on award or other

adjustments which still need to be made– Remember

» Unallowable expenses should never be charged

» Cost transfers must happen no later than 90 days from month end during the award

• Cash received on fund or receivable issues• Delays in meeting deliverables or technical

report deadlines


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August 17, 2006

Pre Closeout Review Issues• Potential Issues

– (Revenue) not equal to Expense - Implies Overdraft, Unallowable Object Code Charges

– Waywards should be removed - utilizing 115.Org (BEN) Report or Sub budgets/Other orgs chgs/Waywards(Business Objects) Report

– Overcharging 5332 Subcontracts above the first $25K per Subcontract as this causes incorrect charging of Indirect Costs.


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August 17, 2006

What is the Adjustment Period?• Period of up to 60 days after Account end

date– Allows for final review of project activity so adjustments can be made prior to final

reporting• 30/31 days: Account End Date + 15 days• 45 days: Account End + 30 days• 60/61 days: Account End + 30 days• 90/91 days: Account End Date + 60 days


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August 17, 2006

Adjustment Period (cont.)• Run 134.ORG Report in BEN Financials or

Fund Summary in Business Objects

– Review the following areas• PBUD/PBIL should be equal• Revenue vs. Expense

– Should be equal– If not, requires further review– F&A and Employee Benefits (EB) – Were

the correct rates applied?


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August 17, 2006

Adjustment Period (cont.)– Review the following areas (cont.)

• DOD Cap(where applicable) should only be 35% of Total Costs

• Payroll – review accuracy of payments/effort & maintain documentation for any significant administrative/clerical effort

• Service Centers –Were the charges handled appropriately

• Cost transfers- were transfers over 90 days approved & documented in files

• Other direct costs for allowability


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August 17, 2006

Final Review Prior to End of Adjustment Period

• Review PBIL/PBUD, NOGA and approved carryforward, if applicable

• Review subcontracts and respective closeouts• Communicate with ORS Accountant

– Outstanding reporting/receivable issues • Determine and address

– Unliquidated and unobligated carryovers• All adjustments must be processed by end of

the fund adjustment period – Complete all approved, allowable, allocable and

appropriate adjustments identified during pre-closeout review


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August 17, 2006

Best Practices for Communications

• Emails - the subject line of your email should be informative– “Action Fund#, P.I., Description– Examples:

• “Closeout 538500, Mendel, 5K23MH024680-03” • “Unfreeze 538000, Frankenstein, 5R01HG012345-05

• One email per fund action• Email ORS Accountant and confirm the Direct,

Indirect, and Total Expenses to report.-This should occur by the end of the adjustment period


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August 17, 2006

Freeze/Unfreeze Grant Functionality


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August 17, 2006

Freeze Grants Functionality• Tool that allows authorized research

administrators and ORS to limit activity against an award– Can be used during life of project and

during the adjustment period– Can reduce cost transfers and overruns

after the end of the fund project period– Improve timeliness and accuracy of final

financial reports


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August 17, 2006

Freeze Grants Features• Awards are frozen/unfrozen at fund level

– Payroll can be frozen manually prior to the Account End Date

– Functionality frozen automatically after Account End Date• New Purchase Orders/Requisitions

– Functionalities frozen automatically after Adjustment Period End Date (APED)• Manual Journal Entries• C-forms• Feeder Journal Entries• Payroll


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August 17, 2006

Freeze Grants (cont.)• If a fund has ended and, upon

review, is in order– Contact ORS to confirm total expense to report

and freeze the fund

• If fund is not in order and additional corrections/adjustments are needed– Process them before the end of the adjustment

period and maintain supporting documentation


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August 17, 2006

Unfreeze Grants• If final adjustments to correct errors

are not made prior to fund fully freezing– An unfreeze request can be made

• Prior to submitting an unfreeze request to ORS– Proposed adjustments should be

reviewed for allowability, allocability, appropriateness, and compliance with sponsor and university policies


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August 17, 2006

Unfreeze Request (cont.)• Are not necessary to:

– Prepare budget journals– Pay already encumbered amounts on

an existing P.O.– Unfreeze advance accounts (request

an extension of advance/continuation of fund account)


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August 17, 2006

Unfreeze WorksheetFund #: 536420 Unfreeze Request 7/3/2003P.I.: Downey Jr.,R.Sponsor: NIH 5R01DA078842-05Award: $2,430,775.00end date: 4/30/2003

ENTER ENTERCurrent Adjustments to be reported Description

insert row s for object codes affectedlist object code

5010 920,167.19 (5,730.00) 914,437.19 see detail below5190 262,247.65 (1,730.46) 260,517.19 E.B.@ 30.2%5193 0.00 57.30 57.30 Res Svcs to reverse 1% E.B.5228 47,858.32 (253.47) 47,604.85 batch: 5150 Payables 5764588: A 198076

Fisher Sci., 5/31/03ENTER CURRENT to be moved to cont yr 547530

COSTS BELOW

Direct Costs 1,523,041.81 (7,656.63) 1,515,385.18

Indirect Costs 919,868.95 (4,479.13) 915,389.82 F&A @ 58.5%

Total 2,442,910.76 (12,135.76) 2,430,775.00

Balance (0.00)

Person Pay Period Amount To be charged to:Downey,R 5/31/2003 2,865.00 547530 cont yr

6/30/2003 2,865.00 547530 cont yr


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August 17, 2006

Unfreeze Grants (cont.)• Submit your request to:

– School of Medicine departments• Send worksheet and details (including documentation)

to Office of Research Services Support (ORSS) Grant Manager with a cc to ORS Accountant

• ORSS will review and, if approved, will forward to Research Services Accountant and cc Assistant Director

– All other Schools• Send worksheet and details to ORS Accountant and cc

Assistant Director

– Unfreeze requests are normally addressed within two business days


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August 17, 2006

ORS Responsibilities


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August 17, 2006

ORS Reporting Period Tasks• Review Due Reports to determine which reports

due• Send email to BA requesting closeout information• ORS Accountant reviews the following;

- Terms and conditions of award and sponsor reporting requirements

– Review the 734 report in Business Objects (similar to 134.ORG report in Ben Financials)

– Check PBUD/PBIL for accuracy– Reconcile EB’s, F&A and Cash– Review 252 report for stale dated checks


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August 17, 2006

ORS Reporting Period Tasks (cont.)• Review expenses posted to the fund for

allowability– Revenue

• 4600, 4620, 478X, 4822, TIF, Program Income & Other Revenue

• Review remaining balances or deficits

• ORS will communicate any issues identified and request a response from the BA

• If the ORS Accountant does not receive a

response regarding closeout, the report will be issued by the due date and an email will be sent to the BA providing the total reported to the sponsor


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August 17, 2006

ORS Reporting Period Tasks (cont.)

• Overdrafts– ORS will contact department regarding a

resolution– If no response is received by report due date,

fund will be reported up to award amount and ORS will process journal to transfer resources from departmental fund to grant fund to offset overdraft via object code 4822

SPP # 2129 Chargeback of Overdrafts and Disallowances




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August 17, 2006


• Unexpended Balances – Will be reported to sponsor– Carryover will be processed and/or requested as

appropriate– Residual cash will be remitted to sponsor according

to agreement– Carryovers and/or unliquidated obligations will be

determined and handled as appropriate


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August 17, 2006


• Final Financial Status Report (FSR) Submission– Financial report will be issued by ORS no later

than due date – A copy will be sent to department and a copy will

be scanned into the ORS imaging system – ORS will process any closing entries based upon

final financial reports


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August 17, 2006

Revised FSRs• Only done in rare circumstances

– When revising to increase total expenses, most sponsors will only accept revised reports for limited period of time following the end of the award. Some agencies will not accept upward revised FSRs.

– When revising to decrease total expenses, there is no time limit. These should be completed immediately upon identification of the need for a revised FSR.

SPP # 2137 Revised Final Financial Reports



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August 17, 2006

Disabling Funds• How does a fund get Disabled?

– ORS runs 717.RA report in BEN Financial weekly • To identify funds that meet disable

requirements– ORS runs Business Objects 717

• To identify funds that expired >90 days – If the fund is eligible for disabling ORS

checks “Enable” flag • Enters date in BEN Financials


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August 17, 2006

Requirements to Disable Funds1. Financial Report must be submitted if required-

Last FIN Report Filed=Next FIN Report Due2. FSRD and FSRI s/b posted reflecting Direct and

Indirect Costs reported3. PBIL=PBUD=FSRD+FSRI=Total Expenses reported

and on the G/L4. No Encumbrances can remain5. Object Code 1220 Receivable must =06. Equipment in Object Code 183X/187X must be

transferred to School Surrogate Accounts via an Object Code 4826 Equipment Transfer

7. BRIM (ORS billing system) is reconciled (requires ORS action)

8. All stale dated checks have been satisfactorily addressed


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August 17, 2006

ORG Summary - Analysis of Expired FundsWhy isn’t my fund disabled?


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August 17, 2006

Miscellaneous - Cost Sharing• “A portion of the project costs that is

not funded by the sponsor”• Various Types of Cost Share -Mandatory- Required by the sponsor -Voluntary Committed- Identified in the

proposal (a discouraged practice) -Voluntary Uncommitted- Not required by the

sponsor or identified in the proposal. -In-Kind sponsor requirement of a non-cash

contribution ( ex. Equipment).


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August 17, 2006

Miscellaneous - Cost Sharing (con’t.)• Cost Sharing

– How is it recorded in our system?• Must be separately accounted - a 5 fund must be

established if Cost Share > $10K– How is the fund managed?

• Expenses should be recorded and monitored on a timely basis• Revenue entries must be routinely performed• Documentation from agency regarding changes in

requirements must be maintained– What needs to be done at closeout?

• Mandated cost sharing must be reported to the sponsor

SPP #2119 Cost Sharing/Matching Requirements



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August 17, 2006

Miscellaneous – Interest Bearing Funds

• Interest Bearing Funds– When does a sponsored project fund receive

interest?• Monthly basis

– How do I know if my fund should be set up as interest bearing?• T&C of award determine

– Can I spend these funds?• T&C of award determine

– At Closeout, what happens to these funds?• T&C of award determine


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August 17, 2006

Miscellaneous – Program Income

• Program Income– What is Program Income?

• Gross income earned & directly attributable to the sponsored activity

– How is Program Income handled? • Additive vs. Deductive

– How is Program Income handled at closeout?SPP #2121 Accounting for Program Income



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August 17, 2006

Miscellaneous –Record Retention

• What do I need to retain?

• How long do I need to keep it?

• SPP #2132 Record Retention




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August 17, 2006

Miscellaneous –Award Transfers

• If a PI is planning to leave the University, ORS staff should be contacted as soon as possible to expedite the process

“Statement of Relinquishment” or similar document– Required information must be verified– ORS signature must be obtained– Estimated unobligated balance-funds awarded on NOGA

for current year only exclusive of any amounts carried over– Not finalizing costs may delay transfer of funds to the next

University– Any property being transferred must be addressed


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August 17, 2006

Non-Financial Close Out Issues

• Final technical and/or progress report

• Final invention statement• Final property report


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August 17, 2006

Getting Assistance on Closeouts

• For financial matters: – Contact ORS accountant or Post-

Award Assistant Director

• Regarding extensions, requests for budget or other modifications to agreement, or non-financial matters:– Contact your Contract Administrator


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August 17, 2006

Questions???


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August 17, 2006

Audits



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August 17, 2006

Pre-Award Audits• Performed by agency to verify

– Accuracy of costs on application– Adequacy of University systems and

controls• Usually performed by or at the

request of the sponsor• Federal Awards

– DHHS is Cognizant Agency– Sponsoring Agency


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August 17, 2006

Agency or Programmatic Audits• Performed on Active or Terminated

awards• Federal Awards normally a result of

a request by the Sponsor– Review by Dept of Health & Human

Services (DHHS) – Foundations and Associations– Other


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August 17, 2006

Investigative/Criminal Audits• Usually based on allegations of fraud

– Misuse of funds on awards including:• Purchasing Card charges• Petty Cash abuses

– Audit of how we comply with regulations– If Federal OIG audit

• Subpoena powers


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August 17, 2006

Internal Audits• University audits projects to

– Evaluate system controls– Assess compliance with University

and sponsor policies and applicable OMB circulars

– Investigate reports of fraud


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August 17, 2006

Compliance Audits• Assess compliance with

– Sponsor regulations– University policies

• Human Subject/Animal issues


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August 17, 2006

F&A Cost Proposal Audits• Audit occurs cyclically

– During the F&A negotiation process

• F&A recovery rates are affected by expenditures

• Interviews of PI and BA to determine basis for assigning space to research– Space drives the rate – 32.5 points of 57% rate


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August 17, 2006

OMB Circular A-133 Audit• Required annual audit of federal grants &

contracts

• Performed by independent auditors– Penn: PricewaterhouseCoopers (PwC)

• Audit of systems and transactions• Cost Transfers, Effort Reports, Subcontracts, Service

Centers, Technical & Financial Reports


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August 17, 2006

General Principles for Audits• Good award management is the key to

good (uneventful) audits

• Good documentation is essential in– Department and ORS

• Audits are everyone’s responsibility– PI, BA, School, Pre and Post-award in ORS– Don’t go in alone


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August 17, 2006

• Audited on compliance with all applicable regulations & policies– Federal– State– Sponsor– Specific award terms– University

General Principles for Audits (cont.)


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August 17, 2006

General Principles for Audits (cont.)• Audited on consistency of policy

application• Audits may provide feedback for

process improvement• Audit results can be expensive• ORS & PI have a responsibility to

educate the auditor about the purposes of the project


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August 17, 2006

Preparing for Audits• Notify ORS as soon as you learn of audit

– SPP #2130 External Audits

• ORS & PI/BA meet to prepare for audit– Anticipate questions – Develop procedures for working with auditors

• File management• Prepare and support the PI

– Work to prevent adversarial relationship

• Don’t panic



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August 17, 2006

Audit Lessons Learned


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August 17, 2006

ARRA (Stimulus) Critical Audit Concerns

• Timely execution, set up, and expending of funds– Awards to Penn from funding Agency– Sub awards made to Penn from other entities– Penn sub awards to other entities

• Monitoring – Advance accounts– Restrictions on spending (IACUC/IRB/Other)

• Timely & accurate quarterly report submission• Comingling of expenses between ARRA and non ARRA

awards• Compliance with the following:

– rebudgeting and carryover terms– “NO” Cost transfers from non ARRA to ARRA awards– Submission of final financial (SF269/425) and progress report due

dates


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August 17, 2006

Critical Audit Concerns• Salary Charges on Awards

– Effort on award must equal or exceed salary charged

– Effort must be documented in Personnel Activity Report form

– Payroll Reallocations• Same as Cost Transfers

– Administrative/Clerical Salaries• Monitoring compliance with A21 (exhibit c)• Document projects with significant administrative

effort• Communicate with PI


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August 17, 2006

Critical Audit Concerns (cont.)• Cost Transfers

– Auditors view them as corrections of errors– Explain why the error occurred– Establish correlation of charge to next grant– Provide documentation– Maintain documentation in file– Cost Transfers must be prompt and justified– “Parking” a charge is illegal


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August 17, 2006

Critical Audit Concerns (cont.)• Documentation

– Costs that deviate from the proposal must be justified in terms of the project

– Maintain all approvals from sponsor– Explain why decisions were made– PI must approve ALL costs incurred on

award


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August 17, 2006

Critical Audit Concerns (cont.)• Consultants

– Document relationship with consultants• Do not circumvent IRS employee regulations• Do not engage an employee of sponsor or Penn

employee as a consultant– Consulting agreement (work for hire) must

document scope of work, rate and payment terms

• Proper inventory of equipment– Tag & document transfer, move or disposal


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August 17, 2006

Critical Audit Concerns (cont.)• Service Centers are reviewed (A-133 & F&A

proposal)– Surpluses are problematic

• Are federal awards being overcharged?– Rates must be adjusted to off-set the surplus– At least annually adjust to compensate for

surplus or deficit– Maintain documentation of charges– Maintain records of rate determination

SPP #2115 University Service Centers



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August 17, 2006

Critical Audit Concerns (cont.)• Subcontracts

– PI must monitor subrecipient performance and expenses

– Subrecipient must verify that it is not debarred or suspended

– ORS monitors subrecipient audit reports

• If findings result from expenditures of subcontract, Penn department is responsible for the cost of findings.


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August 17, 2006

Critical Audit Concerns (cont.) • Financial Conflict of Interest

– Are we managing • Graduate Student Aid/NSF Audit

– Ensuring tuition & labor payments are allocable and appropriate

• Close-Out– Penn must submit all required reports

• Programmatic, Financial, Patent, Property– Timeliness of reports

• Non compliance impacts University A133 findings and audit risk level


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August 17, 2006

If you are contacted by a sponsor regarding an audit…

…Contact ORS Executive Director


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August 17, 2006

Questions???


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August 17, 2006

Resources



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August 17, 2006

ORS Website and Resource Tour• http://www.upenn.edu/researchservices/

– Homepage– Left Quick Links– Sponsored Projects Manual– Sponsor Links– Spotlights– ORS Newsletters and listserv– Brown Bags and other Training

Opportunities

http://www.upenn.edu/researchservices/


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August 17, 2006

In Closing….• What have we learned?

• Where do we go with future questions?

• How can we learn more?

• What is new and upcoming in Sponsored Projects Administration?

Module 5 Closeouts and Audits of Sponsored Project Funds

Documents

Transcript of Module 5 Closeouts and Audits of Sponsored Project Funds