Audit News

This is the seventh in a series of newsletter abstracts of audits to bring you up to date with what is happening in the Federal audit arena. this month we have an audit of the University of Puerto Rico. Please note there is a considerable lag between when an audit occurs and when the audit report is published.

University of Puerto Rico Audit – October 20, 2006

Audit Agency: Mayer Hoffman McCann P.C. for NSF OIG

Title: Report on Compliance and Other Matters on Internal Control over Financial Reporting for the Period July 1, 1998 to March 31, 2006.

Objective: To determine whether the Schedule of Award Costs claimed on the Federal Cash Transaction Reports (FTCR) and the costs claimed, including cost sharing, are in conformity with Federal and NSF award requirements. Additionally, to identify noncompliance and weakness in UPR’s internal controls that could affect proper reporting, administration and monitoring of NSF awards.

NSF Cooperative Agreement DUE-9753543 – Puerto Rico Collaborative for Excellence in Teacher Preparation
NSF Grant EPS-0223152 – Attaining Research Extensive University Status – Building a Competitive Infrastructure

Findings: There were three findings. First, there was inadequate sub-awardee monitoring that resulted in $7,546 of questioned costs. UPR failed to monitor and review sub-awardees’ costs and lack the necessary policies and procedures to assess and document each subawardee’s risk of claiming non-allocable or non-allowable costs. Second, there was lack of controls over Subawardee cost sharing expenditures. UPR accepted cost sharing from its subawardees solely based upon certifications from the subawardees. Finally, there was a lack of policies and procedures to ensure that facilities and administrative cost (F&A) are properly claimed. this resulted in an overcharge of $7,500.

Significance of Audit: The questioned costs are relatively insignificant; however, what the UPR agreed to in response to the findings is potentially precedent setting for other educational institutions. UPR agreed to develop the necessary policies and procedures to ensure subawardees’ claimed costs are allowable, allocable, and properly documented, including cost sharing expenditures, in compliance with NSF regulations, and anay OMB Circulars. UPR’s policy now requires subawardees’ invoices to be supported by pertinent supporting documentation and evidence to verify the expenses claimed. Emory has about 300 subrecipients with millions of dollars in agreement costs.

Lessons for Emory: Solely relying on certification statements from subcontractors that they have accomplished the work billed for and accepting what they report as their cost sharing contribution is not acceptable subrecipient monitoring. the Emory PI must review and approve the invoices based upon their knowledge of the work completed. This knowledge can come from a variety of sources including the review of reports from the subcontractor, interactions with the subcontractor, or receipt of deliverables. Emory university has the right to request further back up or detail for any costs billed to Emory. If the PI does not feel comfortable approving any items included on the invoice, he/she must ask for further back up or contact OGCA for assistance with this process. Requested back up can include copies of effort reports, copies of invoices to support the items billed or other supporting documentation. The review can also include questioning the benefit to the award for specific expenditures. As the institution receiving the award, we are responsible for not only how we spend the funds received, but also for how our subcontractors spend any funds we issue to them. It is our responsibility to ensure that the costs are reasonable and necessary, are allocable to the award, are consistently treated and conform to any limits and exclusions in the regulations or sponsored agreement. Any funds reported as cost sharing are subject to the same requirements. Any questions regarding subrecipient monitoring or specific issues related to the review of subcontractor invoices should be directed to Ronald Thompson, Director of Post Award Financial Administration at

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