In our 7-part UGA series, we’ve explained the Uniform Guidance Audit, how it works, and how to avoid common findings. In this, our last blog, we’ll discuss what happens to NIH and DOE Grantees if there’s an audit finding.
WHAT HAPPENS IF THERE’S A UNIFORM GUIDANCE AUDIT FINDING
It’s important for you to understand that while a UGA can be intimidating, even nerve-wracking, it’s not a witch hunt. The government has invested in your innovation or research, and they want to make sure you are handling their funds correctly so that investment pays off.
That’s why they are going to make sure you:
- Comply with FAR Part 31
- Comply with Agency Supplemental Regulations
- Have defined, maintained and enforced internal controls in place
- Keep accurate and compliant timekeeping and labor distribution procedures
- Maintain a general ledger that matches the information in your time sheets
- Maintain a thorough, accurate and auditable direct equipment inventory
- Can produce accurate SF-425/FFR reporting
- Can show that your draw down funds from the PMS or ASAP properly
- Have not billed them when you exceed your provisional indirect cost rate
- Managed your sub-contractors and consultants, ensuring that work performed and costs billed mirrors written agreements
HOW BIG IS THE AUDIT FINDING?
It’s also important that you understand that there’s no materiality in findings. A finding is a finding, no matter how large or small.
Partners HealthCare System Inc received a lot of government funding. In fact, in 2016, their total federal expenditures were $977,866,783. That same year, during a UGA, their auditor reported two findings:
- A $6.25 alcohol receipt that was charged to the award
- A $100 flight upgrade that was charged to the award.
Both of those are unallowable expenses and resulted in audit findings.
The ramification is that these findings went into the UGA report, and the report went to every funding agency that gave this company a government award. Partners Health had to defend themselves, explain their mistake and demonstrate procedures that would be in place to prevent these mistakes from ever happening again.
THERE’S AN NIH GRANT AUDIT FINDING. NOW WHAT?
When submitting their very thorough report, your auditor will detail everything that is wrong in a list format to the funding agency.
At this point, you have the opportunity to come up with a corrective action plan, which you will need to submit to the agency. If accepted, the findings must be fixed by the following year.
Next year, your UGA auditor will check to see if you’ve made the necessary changes
Each year, your auditor is required to look at the prior year’s findings, review your corrective action plan, and determine if you are now in compliance.
If you make the corrective action and there are no findings, great job. You’ve demonstrated to your funding agency that you take your award seriously, want to be in compliance and will make the correction necessary.
If you keep making the same mistake and the auditor keeps having the same findings, it’s a serious red flag. You are now demonstrating to the federal government that you do not have good internal controls in place and you are not able to fix the problem.
This failure in your plan of action can have serious repercussions – resulting in administrative hassles, repatriation of funds and potential termination of your award.
WE’RE HERE TO HELP
We can help you avoid UGA findings to decrease your risk and maximize your funds, so you can spend less time worrying and more time innovating.
This is the last of our seven-part series about the Uniform Guidance Audit:
- Is Your Grant Subject To a Uniform Guidance Audit?
- What Happens During a Uniform Guidance Audit?
- How a UGA Auditor Tests Your Company’s Internal Controls
- How To Avoid Uniform Guidance Audit Findings on SF-425 Reporting
- How To Avoid UGA Findings: Direct Subcontractors
- How To Avoid UGA Findings: Direct Consultants
- What Happens To NIH and DOE Grant Audit Findings?
For additional resources…
- Download our white paper, “Understanding the Strings Attached to your Grant Award.”
- Watch an hour-long webinar on Uniform Guidance Audits
Ed Jameson, CPA, Managing Member
With over 40 years of experience as a government funding award accounting specialist, Ed is a recognized national expert in the field. In addition to helping hundreds of clients navigate FAR Part 31 compliance. he has been an active speaker and panel moderator at Tech Connect's National SRIR/STTR conferences since 2011. presents at the DOD's Mentor Protégé Summit and presents regularly for several state and local organizations.