Research Administration Network

1. Research Administration Network November 15, 2013

2. Mark Your Calendars! • RAN Jeopardy! Date: Monday, December 9, 2013 Location: McGill Faculty Club, Ballroom, 3450 McTavish Street Time: 9am to 11am Continental breakfast will be provided RSVP online (link will be provided shortly) • 2014 RAN sessions Scheduled on every 3rd Friday of the month The 2014 Calendar of Events will be distributed in December 2013… stay tuned!

3. Life Cycle of an Audit Elvie Coletta– Director, RFMS November 15, 2013

4. Audit definition Roles & responsibility of the external auditor Types of audits Audit cycle External Sponsors What to expect during an audit What happens after an audit Responding to audit findings How to prepare for an audit How audits help us Questions Today’s Objective 4

5. What is an Audit? • An audit is performed in accordance with specific rules and regulations of a company, government entity, other legal entity or organization. • An examination and verification of a company'sfinancial and accounting records and supporting documents • Performed by an independent professional, such as a Certified Public Accountant(CPA) or an Agency Representative

6. Who can audit us? Why audit? • Internal Audit (IA) • Assess whether the controls, processes, and procedures implemented by management are enabling governance and stewardship responsibilities • External Audit (Sponsor Audit) • Reviews the systems to ensure that controls are in place to mitigate risks • Ensure that the stakeholders' interests (Granting Agencies/Sponsors) are well protected and that the management of public funds are used in accordance with set policies & guidelines.

7. External Auditors’ Roles & Responsibilities • An external auditor is an independent service provider whose impact can provide significant influence on the organization being audited and its stakeholders. • They play a key role in developing internal controls. • Auditors comment on weaknesses in the accounting records, systems and controls that they review during the audit. • They provide a statistical analysis on the clarity and effectiveness of the accounting policies put in place by the company. • Provide constructive suggestions that can improve processes and internal controls.

8. Types of Audit • Financial Audit • Financial-related audits include determining whether: • Financial information is presented in accordance with established or stated criteria • The entity has adhered to specific financial compliance requirements • The entity's internal control structure over financial reporting and/or safeguarding assets is suitably designed and implemented to achieve control objectives. • Expenses incurred are directly related to the scope of the research.

9. Types of Audit • Compliance audit • Determines whether the audit is following specific procedures or rules set down by a higher authority • Operational audit • Reviews any part of an organization’s operating procedures and methods for the purpose of evaluating efficiency and effectiveness

10. Types of Audit • Fraud audit • Undertakes forensic investigations including suspected fraudulent activities • Follow-up audit • Conducted to verify that recommendations have in fact been implemented

11. Audit Cycle – Sponsor Audits

12. Audit Process • All research grants/contracts are subject to sponsor audits • Can happen at any time during the project and often after project termination • Sponsor will employ an independent CPA to perform the audit • Research Financial Management Services is notified of the expected audit • Scope and period of the audit is defined • Preliminary dates scheduled for possible site visits • Mutually agreeable date for the commencement of the audit, generally within 15 working days notice • Some audits are conducted remotely (desk audits), while others involve on-site interviews and an examination of financial records and accounts (field audits).

13. Audit Process • Ledger Details & Sample Selection • RFMS Monitoring & Compliance Team provides auditors with a detailed list of revenue and expenditure transactions for the fund(s) or project(s) being audited • Auditors will select a sample list of transactions that they would like to review • RFMS Monitoring & Compliance Team will work with the RFMS Financial Administrator, the PI, local support staff and other central units to gather the documentation (original copy of expenses, backup documentation, etc.) for the selected transactions • Auditors meet with RFMS and other central units as needed and may request to meet with the researcher during their audit visit.

14. What to expect during audits • The auditor will explain the records required for the review • Gather all documents before the set meeting date • Auditors may also request the following: • Signed agreements, notification of award • Copies of sub-agreements with other institutions • Copies of letters of transfers • Bank reconciliations • Evidence of exchange rates • Public Tender document & POs • Cancelled cheques • Worksheets • Training manuals • Roles & Responsibilities document

15. During the Audit • Keep Brief Notes • Questions asked/responses provided • Documents requested – provided/pending • Discussions of complex matters • Keep copies of all documents provided to the auditor • A brief wrap-up at the end of each day to confirm • Outstanding items • Questions • Additional requests required for next day

16. During the Audit • Respond to all questions in an honest, simple and complete manner • Do not rely on memory alone – refer to source documents and policies/procedures • Locate the appropriate person(s) to respond to specific questions within a specified timeframe • Deferring to answer a question until the next day for review purposes is acceptable • Listen actively • Clarify any misunderstandings with positive rather than negative statements • Be professional at all times – Auditors are always observing

17. What Happens After An Audit?

18. What happens after an audit? • Performance is assessed against set criteria and standards • A written report is provided after the audit is concluded including: • Findings and observations • Recommendations • A review of the audit findings and recommendation ensues • Identify changes required • Corrective measures • Changes in processes, internal controls, etc.

19. Responding to Audit Findings • A written response to the report is submitted to the auditor within a specified timeframe • Response includes corrective/preventive measures that will be taken • The response should include measureable results: • Specific • Attainable • Timeframe for implementation • Auditable • Be clear and precise • Do not commit to a plan that cannot be immediately carried out • Provide a proposed plan and timetable for implementation • Provide regular updates – deviation from original plan/timetable

20. Ensuring Successful Audits Preventive Actions = PROACTIVE • Seek Training • Standard Administrative Procedures (SAPs) • Sponsor and/or McGill University policies and guidelines • InfoEd Terms and Conditions • Checklists • Research Administration Network (RAN) • Financial Services Teams (FST) • Internal Meetings • Ensure accuracy and compliance every time • Charge direct costs correctly • Use appropriate account codes for all expenses • Avoid expenditure transfers from one fund to another • Plan salary distribution and other expenses based on fund termination dates • Be mindful of large purchases in the last six months

21. Ensuring Successful Audits • Maximize effort reporting accuracy and timeliness • Timesheets, Appointment Forms • Submit technical and financial reports on time • Monitor sub-award recipients • Exert correct internal controls over payables • Demonstrate that requisition or purchase order, invoice, and packing slip all match for each purchase • Ensure expenditure eligibility • Ensure document(s) completeness • Expenses must be clearly explained as to avoid further questions

22. Ensuring Successful Audits • Document, Document, Document • If a document is related to the research grant/contract – KEEP IT • Less is not better • Ensure all documents are consistently saved in a central local repository(dept./faculty; NOT in individual Inbox) for 7 years at a minimum • Ensure PI (or delegate) approval is obtained and kept in central local repository(dept./faculty; NOT in individual Inbox) • Monitoring & Compliance Team • Performs regular cyclical reviews of transactions streams • Communicates findings to each Faculty • Works together with McGill community to ensure findings are well understood in order that proper training is put in place

23. Put yourself in the shoes of an external auditor who is not familiar with the research project, the PI or McGill.  What would you want to see that would help explain and/or justify the costs being charged to a grant and demonstrate compliance with agency and institution rules/regulations?

24. Recurring Findings Ineligible & Non Compliant Transactions: *NEW – Boarding Pass NO longer required when other evidence exists to prove trip occurred (e.g. one of the following is attached – hotel invoice, taxi chit, meal receipts)

25. Supporting Evidence Requirements *ALL expenditures must be authorized by the grant holder or delegate* *Authorization must be kept on file at all times*

26. Examples of recentaudits & findings • Tri Agency Monitoring Visit – September 2010 • Lack of visibly defined Roles & Responsibilities • No Training Program • Lack of evidence of PI’s authorization of expenditures • Lack of supporting documents • Timesheets • Minerva Appointment Form • Lack of PI’s authorization of labor distribution • PCard receipts • CIDA • Evidence of sub-award agreement required in order to transfer funds to another partner • Lack of supporting documents • Timesheets • Lack of evidence of PI’s authorization of expenditures • Offer letters

27. US Federal Audit Requirements • In 2016, first OMB-A-133 Audit • All US grants (NIH, US Army, NSF, etc.) and sub grants • Will become an annual requirement • Non Compliant A-133 audits result in returning funds for all non compliant expense • A fine will be issued to the institution • A working group will be assessing McGill’s controls as they relate to A-133 audit requirements……..stay tuned.

28. How audits help us • Can be used as a tool for improvements • Guides process enhancements • Identifies areas that require improvements • Identifies “Best Practices” • Builds a partnership with Sponsors

29. Thank you!Questions?