Audit’s Role in Sponsored Programs

1. Audit’s Role in Sponsored Programs

2. Agenda: • Who we are • What we do • Why so much focus on Sponsored Programs? • What to do if an “Auditor” calls • Policies related to Sponsored Programs • Contact information

3. Cornell University Audit Office

4. What does the University Audit Office do? • Support the mission of the University by helping protect its assets and reputation. • Provide objective assurance and advice to University management and Board of Trustees. • Review operations and controls, provide analyses, recommend improvements and promote ethical behavior and compliance with policies and regulations.

5. Efficient and Effective Control Environment Compliance with university policies and procedures Compliance with laws and regulations Compliance with award terms and conditions Best Practices! What are Internal Auditors looking for?

6. Why so much focus on Sponsored Programs? • Top 3 Risks in University Audit Office Risk Assessment • Consequences of Non-compliance (Headlines) • Regulations create inherently high risk environment • Major Source of University Revenue

7. University Audit Office Risk Ranking Results Ithaca Campus (Top 3) • Research & Sponsored Programs • Animal Use in Research • Human Subject Use in Research

8. Consequences of Non-Compliance Fines, Penalties, and Repayments to Federal Government by Universities in the Recent Past: • University of Minnesota - $32 million fine and loss of FDP expanded authority • Florida International University - $27 million for effort reporting violations and unallowable charges • NYU Medical Center - $15 million for inflated research grant costs • Thomas Jefferson University - $12 million for unallowable charges • Northwestern - $5.5 million for effort reporting violations • Cornell (Weill Medical College) - $4.4 million settlement on allegations primarily relating to effort reporting • University of South Florida - $4 million for charging clerical costs without justification, purchase of equipment after project had ended, etc.

9. Consequences of Non-Compliance Reputation – all of the following examples resulted in negative press for the institutions involved which had an adverse effect on their reputation. • Michigan State – case involving conflict of interest case involving an anti-cancer drug which brought the university more than $160 million in royalties. • Boyce Thompson Institute – case involving research integrity where the PI falsified research documents resulting in 2 year debarment. • University of Pennsylvania – case involving the health and safety of human subjects where a participant in an experimental gene therapy trial died.

10. Regulations • OMB Circular A-21 – Cost Principles for Educational Institutions • OMB Circular A-110 – Uniform Administrative Requirements for grants and other agreements with Institutions of Higher Education • OMB Circular A-133 – Audits of States, Local Governments, and Non-profit Organizations

11. Sponsored Revenue(Extracted from FY05 Financial Statements) (In Thousands) • Federal Grants and Contracts $447,644 • State and Local Grants and Contracts $29,102 • Private Grants and Contracts $32,397 • Total Grant and Contracts = 20% of Total Revenue for FY05 $2,546,292

12. IMPORTANT – Sponsored Program Services and/or University Audit must be contacted prior to the commencement of an external audit and/or review (including Agency Accounts). Beware of any request for information from an external party, it may be an audit “in disguise”. Contacts University Audit Office, Pam Doran (5-9300) Sponsored Program Services, Jeff Silber (5-2016) What to do if an “Auditor” calls

13. Types of External Auditors • Certified Public Accountants provide assurance that the university’s financial statements fairly represent its financial condition and perform the A-133 audit (KPMG). • Government auditors come from federal and state sponsoring agencies such as NSF, USDA, HHS and NYS Ag & Markets, as well as regulatory bodies, such as the EPA, IRS, and NYS Sales Tax. • Some sponsors will hire public accounting firms to perform reviews for them.

14. A-133 Audit • Required for non-profit organizations which spend $500,000 or more (in a given year) in total federal funds (including pass-through funds). • Performed by a public accounting firm or government auditor (KPMG for Cornell). • Resulted from the Single Audit Act of 1984 and sets forth standards for obtaining consistency and uniformity for audits of non-profit organizations expending Federal awards. • Reports are public knowledge – published on the Federal Audit Clearing House. • Reportable Conditions typically prompt inquiries and/or audits from the cognizant agency or sponsoring agencies.

15. Relevant University Policies • Cornell University Policy 1.1: Cost-Sharing • Cornell University Policy 1.4: Care and Use of Animals in Research and Teaching • Cornell University Policy 3.6: Financial Irregularities • Cornell University Policy 3.8: Program Income from Sponsored Projects • Cornell University Policy 3.9: Capital Assets • Cornell University Policy 3.10: Recharge Operations and Service Facilities • Cornell University Policy 3.11: Effort Planning and Confirmation • Cornell University Policy 3.13: Graduate Tuition • Cornell University Policy 3.18: Charging Directly to Sponsored Projects Costs that are Normally Considered Indirect • Cornell University Policy 3.20: Cost Transfers on Sponsored Projects • Cornell University Policy 4.7: Retention of University Records

16. Additional Resources Available • OMB Circulars http://www.whitehouse.gov/omb/circulars/ • NSF http://www.nsf.gov/ • Grant Proposal Guide • Grant Policy Manual • Federal Demonstration Partnership (FDP) Terms and Conditions • NIH Grants Policy Guidance http://grants2.nih.gov/grants/policy/policy.htm • Department of Health and Human Services-Cornell’s Cognizant Agency http://www.hhs.gov/ • NCURA (National Council on University Research Administration) http://www.ncura.edu/ • COGR (Council on Governmental Relations) http://www.cogr.edu/

17. Contacts • Audit Office: 255-9300 • email: audit@cornell.edu • Web Page: http://www.aff.cornell.edu/audit/ • Hot Line: 1-866-293-3077 • Website Link available from: • http://www.aff.cornell.edu/audit/ • http://www.cuinfo.cornell.edu/

18. Questions