Why We Preaudit
Why We Preaudit
Accounting documents which correct or change posted entries to sponsored program accounts require extra attention due to federal regulations surrounding the timeliness of charges and allowable costs.
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Sponsored program accounts include projects funded by federal, state and local governments in Indiana, foreign (international) governments, industrials, foundations, societies, universities, and Purdue University/Purdue Research Foundation funds managed by Sponsored Program Services (SPS), as well as federal appropriations, industrials and joint transportation research funds managed by the various Schools/Colleges. |
Adjusting and correcting entries are targets for federal audits and potential cost disallowances. To assure that such corrections and/or changes are appropriate, documents are reviewed by an individual with experience in sponsored program management (the preauditor) prior to entry into the accounting system.
At one time, these documents were routed through Sponsored Program Services (SPS) for approval. A subsequent process delegated SPS approval authority to selected "preauditors" in the Business Manager organization. This guide outlines the preaudit process, certification procedures for preauditors, and the process review necessary to assure and preserve the integrity of the preaudit process.
The focus of the preaudit process is on documents which correct or change posted entries to sponsored program accounts. Each college/cluster/administrative area has the ability to expand the scope of what is preaudited as appropriate for that area. At a minimum , all:
· Journal Vouchers (JVs)
· Cost Distribution Forms (CD-01) for non-exempt staff
· Post-PARs and revised PARs
which include any entries involving funds 3401* – 3451* and 40*-45* must be preaudited and have affixed an authorized preauditor's signature before Accounting Services or Costing enters the document into the accounting system.
PARs processed during the current PAR periods are not preaudited within the College/School/area unless they are revised. Post-PARs (60 days after the end of the reporting period), or revised PARs should be forwarded to the designated preauditor for the college/school/area.
How effort is certified: The timecard is the certified Personnel Activity Report (PAR) for non-exempt staff. The semester PAR is the certification for exempt staff who work on a sponsored program. All payroll corrections made for non-exempt staff are, by definition, recertifications, a nd must be preaudited.
CD-01s for exempt staff do not require preauditing. Until the PAR has been completed and certified, the CD-01 represents only an estimate of payroll distribution.
Additional Reviews and Approvals
In addition to the college/school/area preaudit, other reviews and approvals may be required before a document is processed.
must authorize PARs which require:
· · Approval for post-PAR period adjustments
· Approval for adjustments of less than five (5) percent effort
Preauditors Qualifications, Certification, Recommended Staffing Levels
This guide outlines a readiness assessment for preauditors and provides templates for memoranda requesting certification of preauditor status. Preauditors perform a critical function, assuring compliance with University rules, regulations and policies and with federal cost allocation guidelines. As such, candidates must demonstrate a high level of knowledge and accuracy to qualify for preauditor certification.
Each college/school/area should identify and certify at least one (1) designated preauditor. If a designated preauditor has not been certified within the college/school/area, an authorized preauditor from another school/area should be designated as the responsible preauditor. Backup agreements within or across schools/areas are recommended.
Colleges/Schools/Areas should monitor preaudit document flow to assure that enough preauditors have been identified to review and process documents within two (2) days of receipt from the preparer. In no case should the quality of the preaudit process be compromised, or a preauditor certified who is not sufficiently experienced and knowledgeable. Timely processing, although important, is less important than accuracy.
Sources Utilized in Preparation of This Guide
· Signature Authority Delegation Guide
· Correcting Document Preparation Guide
· Guidelines for Budgeting, Allocating and Charging Costs to Sponsored Programs
"The Dean, Director, and Department Head are the chief administrative officers for their area of responsibility and, as such, are expected to manage all programs and funds within their areas of responsibility in accordance with University rules, regulations and policies. The financial responsibility of the Dean, Director, and Department Head includes an assurance that costs are allocated appropriately to the various funding sources under their control, including sponsored programs...."
"Directors of Financial Affairs and Business Managers have been assigned primary responsibility for assisting Deans, Directors, and Department Heads in fulfilling their fiscal responsibilities. Business Managers provide assistance in the determination of the allowability of costs and assistance in the determination of appropriate cost allocation techniques."
Each of the roles described below includes specific operational steps to insure accurate document preparation, review, routing and processing. Implicit in each role and most important is the assurance from each staff member that there is an understanding and certification of allowability in terms of time period, prior approvals, etc., and assurance that the charge is not restricted by the funding agency.
For information about the role of:
· Assure funds availability
· Prepare the Journal Voucher (JV) in accordance with the document preparation guidelines
· Verify:
o Proper document form is used
o Debits equal credits
o Fund centers and gl accounts are appropriate
· Explanations (reasons for entries) must be clearly and carefully worded so that regardless of the passage of time, a person unfamiliar with the situation can fully understand why and how the error occurred, understand the corrective action, and find it appropriate
· Assure proper backup documentation is available to establish that the cost is properly allocable to the project to be charged
· Prepare document in accordance with the Guidelines for Budgeting, Allocating and Charging Costs to Sponsored Programs; assure that allowability, allocability, reasonableness and timeliness have been carefully considered and the change deemed appropriate
· Assure that under no circumstances are costs moved to a federally sponsored or federally appropriated account solely for convenience or funds availability
· Assure that the proposed transaction will correct the identified error
· Error corrections are to be posted to the General Ledger no later than thirty (30) days after occurrence. Assure that correcting documents reach Accounting Services by the document cut-off date for the month after the error first appears on the monthly reports
· In accordance with account management guidelines, closing adjustments are to be processed within sixty (60) days of expiration of the project
· Obtain Principal Investigator certification when necessary
· Obtain authorized signature of your Business Manager or other individual as appropriate
· Assure that the document is forwarded to the proper office in a timely manner for processing:
o Journal Vouchers ( JVs):— moving transactions involving 3401* – 3451* and 40*-45* forward to the college/school (area) preauditor; all other funds forward directly to Accounting Services
o CD-01s for non-exempt staff on these funds should be forwarded to the college/school (area) preauditor; all other funds forward directly to Accounting Services
o PARs processed during the current PAR reporting period should be forwarded directly to Costing
o Revised PARs or Post PARS on these funds should be forwarded to the college/school (area) preauditor
· Assure compliance with the document preparation guidelines
· Assure that the explanation contains sufficient information to support the correction.
· Assure that the document has appropriate certifications to establish allocability.
· Verify document prepared in accordance with the Guidelines for Budgeting, Allocating and Charging Costs to Sponsored Programs; assure that allowability, allocability, reasonableness and timeliness have been carefully considered and the change deemed appropriate.
· Assure that under no circumstances are costs moved to a federally sponsored or federally appropriated account solely for convenience or funds availability.
· For funds 3401*-3451*, the Preauditor should assure that the document does not change activity from a prior Federal fiscal year (Federal fiscal year is October 1-September 30). Any such changes must have the approval of the AG Accountant/Business Manager.
· If the document requires a revision or correction, take appropriate steps to communicate the required revision and initiate the appropriate corrective action.
· Provide feedback and explanation to the preparer about the required change.
· Assure that the document is forwarded to the proper office in a timely manner for further processing.
o If no special approvals are required, forward the document directly to Accounting Services or Costing.
· Documents which should NOT be preaudited:
o Correcting documents which do not include any Federal appropriated AG or SPS funds
o PARs processed during the current PAR period
AG Accountant/Business Manager
· Must authorize correcting entries for federal appropriated funds
· Reviews for authorized preauditor signature or AG Accountant/Business Manager when required on JVs
· Approves document for processing
· Approves Payroll Distribution Changes
· Approves post-PAR period adjustment
· Approves effort adjustments of less than five (5) percent
Delegation of Preaudit Authority
Before requesting Preauditor Authority a readiness assessment must be conducted and documented.
Journal Vouchers (JVs), CD-01s and PARs should be reviewed with the candidate utilizing the questionnaires included on the following pages.
Documents reviewed should include corrections representing:
· Federal to Federal Funds
· Non-Federal to Federal Funds
· Sponsored funds to non-sponsored funds
To assist in the assessment process, utilize selected documents from the college/school and/or department(s) for which preaudit authorization will be exercised.
Upon completion of the readiness assessment a
summary form
should be completed.
For those individuals not qualifying for preaudit delegation, a training plan should be developed to prepare them for future delegation.
Questionnaire for Preaudit Readiness Assessment
Journal Voucher (JV)
1. Is the explanation complete?
o entry code
o referenced document number
o date of referenced document
o reason why or how error occurred
o reason why correction is proper/necessary
o if correction will move charges to a continuation account, is correct classification of continuation indicated (i.e., competing or non-competing)
o if entry is due to the project having been set up late, indicate the document number and date of the new Notice of Award
o explanations (reasons for entries) must be clearly and carefully worded so that regardless of the passage of time, a person unfamiliar with the situation can fully understand why and how the error occurred, understand the corrective action, and find it appropriate
o if the correction is not timely (to post by cut-off date for documents in month following date of error), explain why
o is the project period included for all SPS accounts?
o Does the document have appropriate signatures?
o preaudit block signed by authorized preauditor
o administrators should sign documents; not initial
o preparer and preauditor must be different individuals
2. Is Principal Investigator (PI) certification required? Is it correct?
o certification is required for a transfer of an expense from an account that received no benefit from the charge to a sponsored program account that did receive the benefit
§ Stamp the JV with the certification statement: "This is to certify that project XXX XXXX-XXXX received the described materials and the correction is proper."
§ signed by appropriate person
o certification is not required for:
§ obvious typographical, data entry or transposition errors
§ incorrect object codes
§ movement of charges between minor accounts within the same project
§ movement of charges to new accounts which have been established as the result of a department number change within the university accounting system
§ non-competing continuations
§ VCS
3. If the document records voluntary cost sharing, is it appropriate?
o use correct VCS gl account
o state project end date
o charges allowable to project
o charges within project period
4. Is the correction
o allocable?
o allowable?
o reasonable?
o timely?
5. Miscellaneous
o changes made legibly, initialed and dated?
Questionnaire for Preaudit Readiness Assessment
CD-01,
1. Is the Explanation Complete?
o pay period number
o pay period dates
o reason why or how error occurred
o reason why correction is proper/necessary
o if correction will move charges to a continuation account, is correct classification of continuation indicated (i.e., competing or non-competing)
o if entry is due to the project having been set up late; indicate the document number and date of the new Notice of Award
o explanations (reasons for entries) must be clearly and carefully worded so that regardless of the passage of time, a person unfamiliar with the situation can fully understand why and how the error occurred, understand the corrective action, and find it appropriate
o if the correction is not timely, explain why
2.
Is Principal Investigator (PI) certification required? Is it correct?
This is the Cost Distribution Change (CD_01) certification and authorization block.
Signatures are required for changes to the effort recorded for non-exempt employees after the pay has been certified.
Signatures are not needed for obvious typographical, data entry or transposition errors, changes for the distribution of a monthly exempt employee salary prior to the end of the academic reporting period, voluntary cost sharing, movement of charges between minor accounts within the same project, movement of charges to non-competing continuation accounts, or movement of charges to new accounts which have been established as the result of a department number change within the university accounting system.
3. Does the document have appropriate signatures?
o preauditor signature
o administrators should sign documents; not initial
4. Is the correction
o allocable?
o allowable?
o reasonable?
o timely?
5. Miscellaneous
o changes made legibly, initialed, and dated?
Preaudit Process Readiness Assessment—Summary ( Form to Download and Update )
Approval Procedure to Name an Individual As a Preauditor;
Procedure to Revoke Preaudit Authority
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( Form to Download and Update ) Delegation of Authority to Preauditor
The Director of Sponsored Program Services is the only person who delegates Preaudit authorization.
This memorandum: · Is addressed to the Director of Sponsored Program Administration (SPS) · Is sent from the respective Director of Financial Affairs to the Director of Business Managers · Requests approval from the Director of Sponsored Program Administration (SPS) for preauditor status |
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Revocation of Delegated Preaudit Authority
This memorandum: · Is addressed to the Director of Sponsored Program Administration (SPS) · Is sent from the College/School/area if revoking authority for a Director of Financial Affairs |
Approved
original copies of each memorandum should be forwarded to:
- The Secretary to the Director of SPS/YONG who is responsible for maintaining the permanent file of approvals. A list of authorized preauditors will be maintained on the SPS Web page, with a link also available from the Accounting Services home page.
Sponsored Program Services (SPS) is responsible for a semi-annual review of the preaudit process and will develop appropriate audit tools and methodology. As each audit is completed, SPS will communicate their findings to the organizational areas reviewed. Feedback and appropriate training will also be provided.
The Director of Sponsored Program Administration; Director of Business Managers; and Comptroller will be notified that the semi-annual review of the preaudit process has been completed. Organization areas reviewed and any significant findings will also be reported.
SPS is responsible for maintaining a master list of all individuals who have been delegated preauditor authority . This list is verified at least annually and is readily available for audit purposes.