audit stories: examples and impact of audits on sponsored research activities timothy gordon...
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Audit Stories: Examples and Impact of Audits on Sponsored Research Activities
Timothy GordonAssociate Director MIT Audit Division
Overview:
• Types of Sponsored Program Audits at Universities
• Audit Response Management• Examples of Unfavorable Federal Award Audits
• Causes of Findings
• List of Higher Ed Audits/Investigations with significant repayment requirements
• Inspector Generals’ Work-plans• International Programs - Audit Requirements• Summary
What do auditors do to liven up the office party?
Not show up
Types of Audits:• OMB Circular A-133 Audits
• Independent Audit Firm• Office of Inspector General (OIG)
• HHS, NSF, DoD, DOE, etc• Audits and Investigations• Annual Plans highlighting areas of interest• Semi-annual reports to Congress
• Dept of Justice Investigations (False Claims)• Foundations and International Program Audits• Internal Audit Activities
Risks of Non-Compliance – “3 Rs”
• Research:• Hinders research progress
• Repayment: • Unallowable costs, penalties and fines
• Reputation:• Potential reputational damage
Audit Response Management
• Assign Primary Point of Contact• All communication flows to/from POC
• Strategic/controlled workspace for audit team• Team approach for Investigative Audits
• To include reps from Compliance Office, OSP, Controllers Office, Internal Audit, General Council, Department
• Strong leadership in the coordination and management of institution’s response is critical
Example 1• Major University – Medical School with Affiliated Hospitals• University self-reported matter to sponsor (reduced
settlement)• Issues:
• Training Grants• Annual Technical Reports• Cost Transfers• Effort exceeding 100%
• DOJ Investigation• Dept Administrator and PI were terminated• Department research activity significantly reduced• 2.5m Unallowable Costs
Example 1: Specific Unallowable ChargesSalaries: • Scientists who did not work on the grant• Scientists who did not meet award citizenship requirements • Scientists who did not award meet the 75% effort requirement • PI salary expenses in excess of the budgeted amountSupply and Equipment charges• Costs incurred by scientists who were not eligible to work on
the award or did not work on award• Animal Charges that were not related to the award or used by
scientists who were not eligible to work on the grant
Causes: Rogue PI; Weak Dept Administration; Lack of coordination between University and Hospital
Example 2• Major Public University• Issues:
• Administrative Costs Charged Direct• Amount Charged to award greater than actual effort• No effort report to support charge• Salary charges in excess of NIH salary caps• General use supplies charged direct• Unreasonable equipment costs
• $302,000 in actual unallowable costs extrapolated to $3,000,000 in recommended repayment
Example 2: Causes
Lack of Oversight:
• University left it to the discretion of its individual colleges and departments to interpret the procedures correctly and to comply with Federal regulations
• University did not review transactions to ensure that the departments and PIs charged costs to awards that fully complied with Federal regulations
• Inadequate controls over the charging and allocation of admin costs
Issues RepaymentAudit
AgencyYear
1 Effort Reporting, Admin Costs charged direct, Salary costs exceeding NIH cap $3,000,000 OIG HHS 2012
2 Unsupported sub-award and travel costs $244,000 OIG NSF 20123 Unsupported costs $169,000 OIG NSF 20124 Inadequate Effort reporting, unsupported payroll and other unsupported costs,
unapproved capital costs$1,700,000 OIG NSF 2011
5 Non-Compliance with university policies and procedures in the areas of budget transfers; participant support costs; travel policies; payroll and fringe benefits; accounting and reporting of indirect costs;
$351,000 OIG NSF 2011
6 Effort reporting and Cost Sharing $500,000 FCA DOJ 20107 PIs full research commitment not disclosed/exceeded 100% $2,600,000 FCA DOJ 2009
8 Effort reporting and Cost Transfers $7,600,000 FCA DOJ 20099 Unallowable admin and clerical salaries as well as “other administrative costs $1,600,000 OIG HHS 200910 Faculty Additive/Supplemental pay inflated $1,000,000 FCA DOJ 200811 Incorrect billing rates, excessive compensation, and cost sharing deficiencies $2,500,000 FCA DOJ 200612 Effort Reporting; Equipment purchases; improper billing 11,500,000 FCA DOJ 200513 Spending practices not in conformity with award requirements; improper reporting
to sponsor; improper salary charges
4,300,000 FCA DOJ 2005
14 Effort reporting for physician salaries 3,390,000 FCA DOJ 200515 Salaries, supplies, and costs of medical treatment were shifted at year's end to
grants that had funds remaining; charges were not properly allocated as direct or indirect costs.
6,500,000 FCA DOJ 2005
16 Costs charged improperly to project for which the funds were not intended 2,300,000 Internal Audit
2004
17 Unapproved human subjects research; did not adequately address conflicts of interest; and claimed unallowable costs.
1,000,000 HHS OIG 2004
18 Inappropriate salary charges and fraudulant reporting 2,400,000 FCA DOJ 200419 Over-commitment of effort for Physicians salaries 2,600,000 FCA DOJ 200420 Effort reporting for faculty and physician salaries 5,500,000 FCA DOJ 2003
List of Higher Ed Audits/Investigations by School (unnamed)
HHS OIG Work-plan (FY13)• Human Subject Protection Practices • Compliance With Cost Principles (Indirect cost audits) • Extra Service Compensation Payments• Use of Data and Safety Monitoring Boards in Clinical Trials• Oversight of Grants Management Policy Implementation• Inappropriate Salary Draws From Multiple Universities• Cost Sharing Claimed by Universities• Contract and grant closeouts• Bid proposal audits
International Program Audits
• Common requirement for many International Agreements
• Typically performed by Independent Audit Firm or possibly University Internal Audit
• Potential Issues:• Dept tries to handle it alone• Firm is unfamiliar with control environment• Audit methodology may call for more substantial testing
compared to A-133 or other Federal audits
Example 3: International Program
• International Agreement with a University• 10 year agreement• Agreement contained audit clause - never executed• Award terminated by sponsor after 5 years
• Issues:• Sponsor unsatisfied with progress• Fraudulent travel costs• Cost Transfers from Federal awards • General overall questioned costs – undetermined purpose• Treated like a discretionary account• Audit had ancillary affect on other programs……
Results of Mis-Conduct Investigations
HEADLINES“Former Professor Faces Indictment for $3 Million Grant
Fraud”
“Participants in Cancer Study sue University, Discredited Researcher”
“Former Post-Doc found Guilty of Research Misconduct”
“Former Faculty member found Guilty of Research Misconduct”
**All names have been redacted
Closing Summary
• Research Funds are subject to audit scrutiny from many audit and investigative agencies
• Appropriate and coordinated response is critical• Be aware of audit issues arising at other Universities• Always recognize the consequences of our actions
or inactions relative to “3 Rs”• Promote an ethical, compliance minded culture and
do your part to avoid the pitfalls of serious audit findings
