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Auditing

When the PI or the department is contacted directly regarding any type of audit, the college financial officer or Research Accounting should be informed immediately. 

Overview

When the University accepts funds from outside organizations for research and other activities, those organizations presume the University will expend the funds for the purposes for which they were given and in accordance with any terms and conditions set forth in the award document. Similarly, the federal and Commonwealth governments have an obligation to the taxpayers to assure that recipients of funds are providing proper stewardship of those funds.

The University's sponsors generally reserve the right to audit the University financial records for sponsor awards and, in some cases, may audit the project's scientific records and data. This overview addresses financial audits by the federal government as well as the University’s Office of Internal Audit, since they are the most common audits to which the University is subjected. Other sponsors, however, can and occasionally do perform various audits. Typically, these audits will be of the awards themselves.

Post-Award and System Audits

Audits are generally one of three types:

  • Audits conducted by federal auditors, typically the cognizant audit agency assigned to the auditee – Office of Naval Research, in the case of PSU. Any federal agency can, however, audit its awards. These audits tend to be aggressive efforts to determine whether the University is managing grants and contracts in accordance with federal laws and regulations.
  • Audits conducted annually by the University's external auditors, as required by the "Single Audit Act of 1984" and the Office of Management and Budget (OMB) Part 200—Uniform Administrative Requirements, Cost Principles, and Audit Requirements  for Federal Awards
  • Program audits conducted by the University’s external auditors, as required by the Commonwealth on Commonwealth-funded awards. The Department of Community and Economic Development (DCED) requires a program audit  for awards greater than $100,000 (including cost share, if any). The limit for audit fees is $7,510 as stipulated in section II B (7) of the DCED Program Guidelines. When an award has audit costs, it is recommended that allowable audit fees be encumbered at the beginning. This will avoid situations when the award is fully spent out without the audit fees being charged. 

Audit Findings and Resolution

When the audit is completed, the auditors issue a report identifying their findings. Such findings may range from comments on the adequacy of the University's systems for ensuring good grants management to specific disallowances of costs deemed improper. In many cases, the federal agency will extrapolate findings from a small audit sample to the entire expenditure universe, resulting in large dollar findings. While the University vigorously negotiates with auditors over the appropriateness of their findings, sometimes it is necessary to repay previously expended funds. Additionally, please check FN19  for handling and distributing confidential internal audit reports and other documents