ABOUT EXTERNAL AUDITS:

1.  Which agencies perform external audits at UCSD?

2.  Why was I selected for a federal audit?

3.  What types of federal contract audits are performed?

4.  What criteria are generally used for a federal contract audit?

5.  What are the rights of a federal auditor performing a contract audit?

6.  What rights do employees have as the recipients of federal contract audits?

7.  Why was I selected for a state audit?

8.  What documents will I need for an external audit?

Because of the significant research dollars from the Federal government, UCSD is subject to audit by various Federal audit agencies.  The Health and Human Services - Office of Inspector General is UCSD's cognizant audit agency.

Other Federal and State agencies that frequently perform audits at UCSD include:

Ø      Department of Defense - Office of Inspector General

Ø      Department of Education - Office of Inspector General

Ø      National Science Foundation - Office of Inspector General

Ø      Office of Naval Research

The University of California also contracts with an external independent public accounting firm (currently Price Waterhouse Coopers) to perform the required annual financial statement and A-133 audits for the University of California system.

Federal contract audits are generally unplanned.  Sponsor contracting officers submit audit requests to the sponsor's Office of Inspector General to perform these audits.  The most common contract audits performed at UCSD are claimed cost and pre-award audits.

Whether an award is selected for audit is based on the contracting officer's judgment.  The contracting officer usually considers the following factors in deciding whether an audit is necessary: type of award; dollar amount of award; prior problems with the contractor or grantee; and progress and fiscal reports.

Ø      Claimed cost or closeout audits.  These audits are generally requested by the sponsor contracting officer upon submission of a final bill by the contractor or grantee.  The objective of a claimed cost audit is to verify the allowability, allocability, and reasonableness of costs charged and billed by the recipient of funds.

Ø     Pre-award audits.   These audits are conducted to verify the estimated costs submitted in pre-award proposals for large sponsored research projects.  Sponsor contracting officers can request the OIG perform these audits prior to negotiating an award.

4. What criteria are generally used for a federal contract audit?

Federal contract audits are generally based on pre-defined audit criteria.  The terms and conditions section of the award document may include specific requirements, in addition to the key policies and regulations that generally apply to federal awards:

·        A-21 provides principles for determining the costs applicable to research and development, training, and other sponsored work performed by colleges and universities under grants, contracts, and other agreements with the federal government.

·        A-110 establishes uniform administrative requirements for federal grants and agreements awarded to institutions of higher education, hospitals, and other non-profit organizations.  The requirements included in the circular replace the varying and conflicting requirements that have previously been imposed by Federal awarding agencies as conditions of sponsored agreements.

·        A-133 establishes audit requirements and defines Federal responsibilities for implementing and monitoring such requirements for institutions of higher education and other nonprofit institutions receiving Federal awards.

·        The Federal Acquisition Regulation (FAR) and agency supplements set forth uniform policies and procedures for acquisition of supplies and services with appropriated funds by all Federal executive agencies.

·         The Federal Demonstration Project (FDP) is intended to enhance productivity by reducing the administrative paperwork burden.  Minimal agency approvals are required for the expenditure of funds.  For example, FDP authorizes local approval for actions such as the carryover of unexpended balances/funds from one year to the next; pre-award costs/spending/and allowance for up to one year no cost extension of project period.

It is the University’s policy to cooperate fully with federal agencies performing contract audits.  If you are contacted directly by a federal agency wishing to conduct an audit, you should contact Audit & Management Advisory Services at 534-3617 immediately to seek assistance.  Generally speaking, a federal auditor has a right:

ü      To review and evaluate any topics within the scope defined in the auditor’s announced plan.

ü      To have reasonable access to any records which pertain to their topics of review.

ü      To be able to conduct their work in a constructive and cooperative environment during normal working hours.

ü      To gain factual answers to their questions.

ü      To ask questions of any employee.

ü      To be given data in the best formatting that is available.

ü      To be provided workspace facilities and equipment appropriate to their assignment.

Each circumstance may differ depending on the nature of the federal audit performed. .  If you are contacted directly by a federal agency wishing to conduct an audit, you should contact Audit & Management Advisory Services immediately at 534-3617 to seek assistance.  Generally speaking, employees have a right:

ü      To perform their assigned duties without major disruption.

ü      To maintain custody, security control and integrity of their file systems while permitting authorized access.  

ü      To be able to conduct their work in a constructive and cooperative environment during normal working hours.

ü      To provide known factual answers to the questions posed by the auditor.

ü      To refrain from speculation, hearsay, or opinion, and from decisions beyond their level of responsibility.

ü      To allow the auditors to do their own work, with no demand to generate special reports, summaries or compilations.

ü      To continue to exercise such supervisory functions as normally performed, and to discharge regular responsibilities.

The California Bureau of State Audit (Bureau), under the direction of the State Auditor, is the major State agency that performs audits at UCSD.  The Bureau performs audits based on legislative requests and statutorily mandated audits.

Audits may be requested by any member of the Legislature for any activity that uses state funds, including state and local governments, school districts, and state contractors.  The written request is submitted to the Chairman of the Joint Legislative Audit Committee for approval, and then prioritized based on the availability of resources.

8.  What documents will I need for an external audit?

The two most common external audits are claimed cost and pre-award audits.  Documents requested for these audits may include, but are not limited to, the following:

External Claimed Cost Audit

ü      Award document

ü      Operating ledgers

ü      Progress and financial reports

ü      Policies and procedures

ü      Approved indirect cost rate agreement

ü      Supporting documents for direct expenses selected in the auditor's sample.  Direct expenses generally reviewed include salaries and wages, travel, recharges, supplies and expenses, and cost transfers.

External Pre-Award Audit

ü      Request for application or solicitation

ü      Proposal and subcontractor proposals

ü      Current salary rates for proposed staff

ü      Currently approved benefit and indirect cost rates

ü      Currently approved escalation factors

ü      Itemized list of quantities and price for non-salary costs

ü      Supporting documents (price lists, vendor quotes, and subcontractor proposals) for non-salary costs