Audit and Timekeeping Requirements

Transcription

1 Audit and Timekeeping Requirements Department of Health & Human Services National Institutes of Health / OD / OALM / OAMP Division of Financial Advisory Services Hruta Virkar, Director Dan Milstead, Branch Chief Kyle Kroneberger, Auditor 19th Annual NIH SBIR/STTR Conference November 8, 2017 About DFAS Deputy Director Vacant Division Director Hruta Virkar Admin Support Special Reviews Branch Chief Hruta Virkar (Acting) Indirect Cost Branch A Chief Emma Smith Indirect Cost Branch B Chief Dan Milstead Indirect Cost Branch C Chief Alan Lichtman Indirect Cost Branch D Chief Robert Clee Resolves Single Audit & OIG Audit Findings Performs Financial Capability & Accounting System Reviews Negotiates IDC rates for NIH commercial contractors Negotiates IDC rates for all NIH grantees and contractors that receive the majority of their funding through the SBIR/STTR program Negotiates IDC rates for DHHS commercial contractors Negotiates IDC rates for DHHS commercial contractors Performs Cost Analysis Negotiates IDC rates for non-sbir/sttr grantees 3 1

2 Presentation Objectives Understand the audit requirements of forprofit organizations Understand the requirements of an adequate timekeeping system 3 Audit? Who said anything about having an audit? The Department of Health and Human Services (HHS) did! HHS specifies requirements for audits of for profit organizations in Title 45 CFR Part (i). 4 2

3 What is 45 CFR Part 75? Title 45 CFR Part 75 is adopted from OMB Uniform Grant Guidance 2 CFR Part 200 (also known as the Super Circular) with additional requirements. Effective December 26, 2014, 2 CFR Part 200 combined several OMB circulars (A 21, A 50, A 87, A 89, A 102, A 110, A 122 and A 133). The impact on for profit organizations is found in Title 45 CFR Part (i). Additional overall impact: Increases sub recipient monitoring burden. Reduces audit costs for organizations with less than $750,000 in expenditures (reduces audit burden for approximately 5,000 while maintaining Single Audit coverage for over 99% of the Federal dollars currently covered). 5 Audit Requirements A for profit organization is subject to audit requirements for a non Federal audit if, during its Fiscal Year, it expended $750,000 or more under HHS awards and at least one award is an HHS grant or sub grant. Therefore, the organization must have one grant or sub grant in order to be required to obtain a non Federal audit, but other HHS awards are included in the threshold calculations and the scope of the audit. Your grant related records must be available to NIH officials for review or audit even if the above audit requirements are not met. These requirements are effective December 26,

4 Title 45 CFR Part (i) provides for profit organizations with two options regarding the type of audit that will satisfy the audit requirements either: a financial related audit of the HHS awards in accordance with Generally Accepted Government Auditing Standards an audit that meets the requirements contained in Title 45 Part 75 Subpart F OR 7 The audit period is the awardee s Fiscal Year not the grant budget period, the grant project period or the Government s Fiscal Year. Audits must be completed and submitted within: 30 days after receipt of the auditor s report OR 9 months after the end of the audit period Whichever is earlier 8 4

5 Example 1: HHS Grant HHS Cost Reimbursable HHS Fixed Price Subcontract under HHS Grant Expended during FY Amount to be included in Threshold Calculation Include in Audit Scope? $300,000 $300,000 Yes 250, ,000 Yes 200,000 0 No 200, ,000 Yes 950, ,000 REQUIRED 9 Example 2: HHS Cost Reimbursable HHS Fixed Price Subcontract under HHS Grant Expended during FY Amount to be included in Threshold Calculation Include in Audit Scope? $450,000 $450,000 Yes 200,000 0 No 300, ,000 Yes 950, ,000 REQUIRED 10 5

6 Example 3: HHS Grant HHS Fixed Price HHS Cost Reimbursable Expended during FY Amount to be included in Threshold Calculation Include in Audit Scope? $225,000 $225,000 Yes 300,000 0 No 350, ,000 Yes 875, ,000 NOT REQUIRED 11 Example 4: HHS Grant HHS Cost Reimbursable Expended during FY Amount to be included in Threshold Calculation Include in Audit Scope? $425,000 $425,000 Yes 200, ,000 Yes DOD Cost Reimbursable 200,000 0 No 825, ,000 NOT REQUIRED 12 6

7 Example 5: Sub grant under HHS Grant HHS Cost Reimbursable DOD Cost Reimbursable Expended during FY Amount to be included in Threshold Calculation Include in Audit Scope? $200,000 $200,000 Yes 550, ,000 Yes 200,000 0 No 950, ,000 REQUIRED 13 Example 6: Department of Education Grant HHS Cost Reimbursable Expended during FY Amount to be included in Threshold Calculation Include in Audit Scope? $200,000 $0 No 750, ,000 Yes 950, ,000 REQUIRED 14 7

8 The Audit Process In addition to examining your financial statements and controls for evidence of general GAGAS (Yellow Book) compliance, a Single Audit delves into specific issues related to the control of funds provided by the Federal government. These issues include: Proper classification and documentation of allowable and unallowable costs Cash Management Period of availability of Federal funds Reporting Procurement and Suspension and Debarment Internal Controls Compliance with laws, regulations, contracts and grant agreements 15 The Audit Process Audit reports of for profit organizations should be submitted directly to: Department of Health and Human Services Office of Inspector General Office of Audit Services National External Audit Review Center (NEARC) 1100 Walnut Street, Suite 850 Kansas City, MO Phone: or HHS identifies organizations not meeting audit requirements. Failure to comply may jeopardize eligibility to receive future HHS awards. For more information about audit requirements, see the information posted at the NIH Division of Financial Advisory Services website, Non Federal Audit Requirements for Commercial (For Profit) Organizations profit audits 16 8

9 The Audit Process What happens once the audit report is submitted to NEARC? The National External Audit Review Center (NEARC) will process the audit report checking for adequacy and identifying audit findings. NEARC will code each finding for tracking purposes. The Transmittal Letter identifying each coded finding is sent to the auditee. The auditee has 30 days to respond to the Transmittal Letter. A copy of the Transmittal Letter and the audit report is also sent to the respective awarding components. The Special Reviews Branch (SRB) of DFAS is responsible for resolving findings coded by NEARC relating to NIH awards. A management decision on audit findings is due within six months after the audit report has been received. 17 Why is an Audit Important? Federal agencies look at the audit report as a report card of how the organization spends its money. The organization is responsible for ensuring that the reported expenditures are compliant with the terms and conditions of the award and applicable Federal cost principles. It strengthens the relationship of trust that exists between the Federal agency and the recipient organization. 18 9

10 Types of Audit Findings Misuse of funds Untimely submission of audit reports Unallowable costs Misallocation of costs Accelerated expenditures Large unobligated balances Cost transfers Conflict of interest 19 Common Contributors to Audit Findings Inadequate resources Lack of understanding of roles and responsibilities Outdated or non existent policies and procedures Inadequate staff training and education Inadequate accounting system Inadequate segregation of duties Inadequate timekeeping system 20 10

11 Timekeeping Adequate timekeeping system ALL employees must complete timesheets 21 Timekeeping To be acceptable, timesheets must: Account for all hours worked and all hours absent on a daily basis Account for all activities, not just the time worked on Federal awards Report hours or increment of hours not % of effort Separately track direct, indirect and PTO Be signed and dated by the employee and approved by a supervisor Timesheet changes must be made by the employee and initialed by the employee 22 11

12 Timekeeping 23 Timesheets: Timekeeping the GOOD the BAD the UGLY 24 12

13 Timekeeping Exceeding standard hours: A salaried employee that works a standard 40 hour week earns $10 per hour, or $400 per week (40 hrs. x $10/hour). Suppose that employee works 50 hrs. in any given week as follows: NIH Grant = 40 hours Other non Federal (IR&D) = 10 hours Q1: How many hours should be recorded on the timesheet? 25 Timekeeping Exceeding standard hours: A salaried employee that works a standard 40 hour week earns $10 per hour, or $400 per week (40 hrs. x $10/hour). Suppose that employee works 50 hrs. in any given week as follows: NIH Grant = 40 hours Other non Federal (IR&D) = 10 hours Q2: How much salary should be charged to the NIH Grant 26 13

14 Inquiries DFAS Auditors are available to address your questions. Please feel free contact them: Audit and timekeeping inquiries via Audit and timekeeping inquiries via phone Questions? 28 14