Staff Sponsored Projects Services Contact Us FAQs Principal Investigators Handbook Proposal Preparation Post Award Administration Forms/Other
Sponsored Projects at The University of Arizona Staff Forms/Other Post Award Administration Proposal Preparation Principal Investigators Handbook

Audit/Compliance FAQs

  • What is A-21?

    OMB Circular A-21 lists the cost principles for educational institutions prescribed by the Office of Management and Budget. The full name of this Circular is Principles for Determining Costs Applicable to Grants, Contracts, and Other agreements with Educational Institutions.

    A-21 establishes principles to be used in determining the allowable costs of work performed by colleges and universities under sponsored agreements. The principles are used to determine the costs of work performed under subgrants, cost reimbursement subcontracts, and other awards received under sponsored agreements. The principles are also used as a guide in the pricing of fixed price contracts and subcontracts where costs are used in determining the appropriate price.

    See this web site for the full text of A-21: http://www.whitehouse.gov/omb/circulars_a021_2004

  • What is A-110?

    OMB Circular A-110 is Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations . It was fist issued by Office of Management and Budget in 1976 and then amended in 1993 and 1999. This Circular is directed to Federal agencies. Grant policies issued by Federal agencies mirror requirements prescribed by A-110.

    A-110 is organized in the following four major subparts:

    • General: provides purpose and definitions, etc.
    • Pre-Award Requirement: prescribes pre-award policies, etc.
    • Post-Award Requirement: prescribes policies for financial and program .management, property management, procurement, reports and records, and termination and enforcement.
    • After-the-Award Requirement: prescribes policies for closeout procedures, subsequent adjustment, continuing responsibilities, and collection of amount due.

See this web site for the full text of A-110:

http://www.whitehouse.gov/omb/circulars_a110/

  • What is A-133?

    OMB Circular A-133 prescribes standards for audits of states, local governments, and non-profit organizations. This Circular is issued pursuant to the Single Audit Act of 1984, P.L. 98-502, and the Single Audit Act Amendments of 1996, P.L. 104-156. Auditors use Circular A-133 as guidelines when they conduct the audit for major Federal programs. The audit for major Federal programs is also called single audit or A-133 audit. A-133 audit is intended to provide a cost-effective audit for non-Federal entities in that one audit is conducted in lieu of multiple audits of individual programs.

    The emphasis of Circular A-133 includes:

      • Setting standard for audit consistency and uniformity
      • Identifying compliance requirements
      • Establishing criteria for testing internal Controls
      • Testing for reasonable assurance that financial statements are accurate

    The University of Arizona is subject to A-133 audit on an annual basis. The A-133 audit report for the University is combined with the A-133 audit report for the State of Arizona .

    See the full text of Circular A-133 at:

    http://www.whitehouse.gov/omb/circulars_default (scroll down to find A-133)

    See A-133 audit reports of the State of Arizona at:

    http://www.gao.az.gov/financials/

  • Who audits Sponsored accounts? What are my responsibilities during an audit?

    Sponsored accounts are subject to audit by The University of Arizona internal audit staff, the State of Arizona Auditor General, Department of Health and Human Services (our cognizant audit agency), Arizona Board of Regents, and individual sponsors. The comptroller of the University is the official contact for all audits; Sponsored Projects Services (SPS) acts as coordinator. All audits of sponsored grants and contracts are coordinated through SPS. If an auditor contacts you directly, refer them to the director or the manager for quality assurance of SPS. Do not allow an external auditor or investigator to look at documents or interview personnel without the involvement of these central offices. Do not allow the FBI, attorneys, or any other investigators of law enforcement officials to proceed with an investigation without involving the Vice President for Research or the Office of General Counsel.

    Once SPS completes an audit arrangement with the auditor, the principal investigator (PI) and department business personnel will be notified for the audit entrance conference. During the entrance conference, the auditor explains the audit plan and may also ask questions about internal controls and other general project management questions. The date and time of an exit conference is usually determined during the entrance conference.

    Because an audit usually involves internal control assessment and test of detail transactions, the PI, department business personnel, and central financial personnel may be interviewed by the auditor. An SPS representative will participate in these interviews. To test controls and detail transactions, the auditor will request financial supporting documents such as time sheets, invoices, purchase orders, and receipts. The Financial Service Office (FSO) usually keeps these documents. The department business personnel may be contacted by FSO for records such as time sheets, on-line roster, and P-Card transaction receipts.

    After reviewing the documents selected, the auditor will discuss preliminary findings during the audit exit conference. Additional requests for documents or further questions may be left for both the central and department personnel to follow up.

    Before the audit is completed, the University may be given the opportunity to respond to final findings, if any. An audit report may be issued to the University to conclude the audit. The University is required to implement the measures promised in the response to findings in a timely fashion.

    Audit Tips:

    • Do not make the auditors do your work; pull the records for the auditors.
    • Do tell the truth and answer questions honestly and directly.
    • Do not do the auditors' work for them; limit your response to the question being asked.
    • Call a central administrator if you ever feel uncomfortable about the way an audit is being conducted.
    • Do not tamper with or manufacture records. If you have no records, say so. This is not the time to make records!
    • Be alert. Auditors may not know the regulations applicable to your project as well as you do.
    • Auditors are people too. Kindness and respect go a long way.

 

  • What should I do with the "Audit Confirmation Letters" I receive?

    You may receive three types of audit confirmation letters:

    •  Letters from sponsors asking the University to confirm that our A-133 audit is completed

    These letters are usually sent by sponsors to Sponsored Projects Services (SPS) directly. Occasionally, sponsors may use department addresses by mistake. When you receive these letters, forward them to SPS to the attention of the Manager for Quality Assurance.

    •  Letters from sponsors asking the University to confirm award/contract specific information

    These letters are usually initiated by sponsors when they are audited. Their auditors may require their grantees (the University) to confirm award/contract specific information such as the amount paid in the past year. A pre-addressed envelope is normally attached because the completed letter needs to be mailed to the auditor directly. These letters are usually sent to SPS directly by sponsors. Sometimes, they may be sent to department addresses. If you receive these letters, forward them with the attached envelopes to SPS to the attention of the Manager for Quality Assurance.

    •  Letters from subcontractors asking the University to confirm specific information about subcontracts

    These letters are usually initiated by subcontractors when they are audited. Their auditors may require their grantors (the University) to confirm certain subcontract information such as the amount paid in the past year. A pre-addressed envelope is normally attached because the completed letter needs to be mailed to the subcontractor's auditor directly. These letters are usually sent to Office of Research and Contract Analysis (ORCA) directly by subcontractors. Sometimes, they may be sent to department addresses. If you receive these letters, forward them with the attached envelopes to the Subcontract Officer in ORCA.

  • What can I do to ensure financial compliance for federally funded projects?

    The key to financial compliance is to understand and follow OMB Circulars (A-110 and A-21) and Federal sponsor regulations. When managing your federally funded projects on a daily basis, asking the following questions will guide your projects, your department, and the university towards compliance. Of course we assume that you know the right answers.

    Are you proposing a budget reflecting the expected project costs? Is the budget inflated intentionally?

    Are you charging unrelated costs to projects? For example, purchasing equipment that will not be used by the project.

    Are you charging unallowable costs?

    Are you shifting costs from grant to grant to use up the balance?

    Are you charging salaries of individuals who do not work on the project?

    Are you charging salaries more than the actual effort of PIs, researchers, and administrators?

    Are you charging salaries over the NIH salary cap?

    Are you charging indirect costs directly? For example, administrative salaries and other costs that are not budgeted and justified.

    Are you double charging the government? For example, billing Medicaid and charging the grant for the same patient care cost.

    Do you have adequate internal control procedures to avoid errors in charging the Federal government?

    Are you charging costs without authorized signature?

    Are you maintaining properly authorized timesheets?

    Are you documenting adequately for cost transfers?

    Are you reimbursing subcontractors and consultants without verifying if the service is completed?

    Are you tracking the cost sharing committed?

    Are you monitoring subcontractors sufficiently?

    Are you claiming effort without an effective method of tracking the effort?

    Are you managing federally funded equipment properly?

  • How long should I keep my grant related records?

    OMB Circular A-110 states that Financial records, supporting documents, statistical records, and all other records pertinent to an award shall be retained for a period of three years from the date of submission of the final expenditure report or, for awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, as authorized by the Federal awarding agency. The exceptions to this rule include:

    •  If any litigation, claim, or audit has started before the expiration of the 3-year period, the records need to be retained until all litigation, claims or audit findings involving the records have been resolved and final action taken.

    •  Records for real property and equipment acquired with Federal funds need to be retained for 3 years after final disposition.

    •  When records are transferred to or maintained by the Federal awarding agency, the 3-year retention requirement is not applicable.

    •  Different retention rules apply to the indirect cost proposal related records. (See OMB Circular A-110 paragraph __.53(g).)

    Because the period of a grant may range from 1 to 10 or more years, the 3-year rule needs to be considered together with the length of the grant. For example, the records of a grant starting in 2005 and ending in 2008 should be kept until 2011 or 2012 depending on the date of the final financial report submission.

  • Is a Fixed Price Contract Subject to Audit?

Fixed-price contacts are not subject to the annual A-133 audit but may be subject to audit with limited scope by sponsors.

Unlike a cost-reimbursement contact, a fixed-price contract pays the University a fixed sum of money to provide a deliverable, service, or specified level of effort.  A fixed-price contact disregards the actual costs incurred by the University to perform the contact.  The University assumes the risk of over spending.  If the project is completed with less spending than the contracted amount, the University can keep the unexpended funds for unrestricted use.  For this reason, sponsors may be interested in auditing the proposal of a fixed-price contact to look for unnecessary and overestimated costs.  However, they may not audit the accounting records unless the contact is terminated early.

The billing term for a fixed-price contact usually includes pre-payment of a fixed amount, fixed quarterly payments, or payments in fixed amounts based on schedules such as milestones, tasks, or deliverables.

Occasionally, the terms of a contact may be inconsistent.  For example, a contact is titled “fixed-price,” but the billing term is cost-reimbursement.  This means that the University is not paid until the costs are incurred.  Under such circumstances, the contact has to be treated as a cost-reimbursement contact.  Both the proposal and the accounting records of such a contact may be subject to audit.  It is always wise to consult the UA attorneys for a legal opinion when mixed terms present in a fixed-price contact.

  • Why are IDB transactions posted to Sponsored Accounts scrutinized by auditors?

The Interdepartmental Billing (IDB) is a University accounting mechanism to charge a department for goods and services provided by another department or a service center.  Because the IDB transactions are internal to the University, sponsors may pay special attention to these charges to verify that they are dealt with at arm's length.

The service provider, regardless if it's a department or a service center, is required, according to OMB Circular A-21, to operate on a break-even basis.  This means that sponsors should only bear the cost of service but not a profit built in the IDB charge. 

To prove that the IDB transactions are conducted at arms length and to comply with the requirement of A-21, the following steps should be followed:

  1. Billing rates should be calculated and published on an annual basis by the service provider
  2. For the same type of good or service, the same billing rate should be applied to all the University departments and all types of accounts.
  3. A billing statement issued by the service provider should indicate the billing rate and the quantity of goods/services provided.  The billing statement should be included together with the IDB form as supporting documentation for the transaction. 
  4. The IDB charges posted to a sponsored project must be reasonable and necessary to complete the project’s scope of work.  The amount billed must be on a cost basis and allowed by the terms of the sponsor agreement.

The following improper use of the IDB is not allowed:

  1. IDB processed before goods and services are rendered 
  2. IDB amount based on the grant budget instead of the costs of goods and services provided
  3. IDB used to transfer equipment from on department to another
  4. IDB used to transfer grant funds to co-investigator in another department
  5. Use of IDB to avoid obtaining supporting billing statement from the service providing department
  6. IDB processed without supporting billing statement and authorized signature to prove that the goods and services provided are accepted
  7. Giving a break in billing rate to some users or charging more to some other users
  8. Use of IDB rather than Request for Accounting Assistance (RFAA) to transfer costs from on account to another, especially to a restricted grant account
  9. Using the same authorized signer for both revenue and expense accounts 


Sponsored Projects Services is a unit of the
Office of the Senior Vice President for Research

Mailing Address:
PO Box 210158, Rm 510
Tucson, AZ 85721-0158

Express Mail Address:
888 N. Euclid Ave, Rm 510
Tucson, AZ 85719

Phone: (520) 626-6000
Proposal Fax: (520) 626-4130
Post Award Fax: (520) 626-4137
Email: sponsor@email.arizona.edu

The University of Arizona
All contents copyright © 2011. Arizona Board of Regents.