Internal Controls Protect resources against waste and fraud Ensure accuracy and reliability Secure compliance Evaluate the level of performance in all.

Internal Controls

• Protect resources against waste and fraud• Ensure accuracy and reliability• Secure compliance• Evaluate the level of performance in all

organizational units• Provide management peace of mind• Good business practice

Internal Controls• Who is responsible?• How much do they cost to

implement?• What can jeopardize internal

controls?

Control Environment• Sets the tone of the agency• Starts from the top down• Leadership philosophy and operating

style• Commitment to competence• Policies and procedures• Integrity and ethical values

Risk Assessment• Process of identifying and analyzing

risk on an ongoing basis• Forms a basis for determining how

the risks should be managed

General Risks• Noncompliance with federal or state laws• Noncompliance with agency policies and

procedures• Personal responsibility for contracts• Process completed inefficiently or incorrectly• Misappropriation of funds

Potential Risks• Lack of budgetary control• Unauthorized transactions• Lost or stolen cash and checks• Budget shortfall• Tax penalties• Fraud• Overpayments

Potential Risks• Unauthorized access to computers• Destruction of critical data• Unauthorized purchases• Compliance violations• Inappropriate purchases• Unreported leave

Control Activities• Policies and procedures that help ensure

management directives are carried out• Include approvals, authorizations,

verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties

Information and Communication

• Training for personnel• Employees understand their role • Must include a means of

communicating significant information to all areas of the agency

Monitoring• Assessing the quality of the system’s

performance over time• Should be ongoing• Must include regular management

and supervisory activities

Examples of Monitoring Findings• Inadequate tracking numbers• Missing equipment tags• Lack of separation of duties• Failure to manage audit results• Excess cash on hand• Questioned expenditures• Commingling of funds• Supplanting

Super Circular Changes• Must establish and maintain effective internal

controls• Must comply with Federal statues, regulations

and terms and conditions• Must evaluate and monitor internal controls• Must take prompt action on audit findings• Utilize Green Book

Sub-Recipient Monitoring

• Required under Super Circular• Vendors are now referred to as contractors• Should provide grant management training to

sub-recipients when necessary• Must monitor using desk monitoring or site

visit monitoring• Must allow sub-recipient to receive in-direct

Sub-Recipient Monitoring• Sub-recipient must provide a copy of

audit findings to grantee• Take action including withholding of

payments with notification and suspension or termination of sub-award when warranted

A sub-recipient relationship is appropriate when:

• Substantive, programmatic work or an important or significant portion of the project is being undertaken by the other entity.

• The program or project is within the objectives of the entity• The entity participates in a creative way in designing and/or

conducting research for the project• The entity retains some element of programmatic control and

discretion over how the work is carried out.• The entity commits to a good faith effort to complete the

design or conduct the research.• The entity makes independent decisions regarding how to

implement the requested activities. (continued on next slide)

A sub-recipient relationship is appropriate when: (continued)

• A principal investigator has been identified at the entity and functions as a "co-investigator".

• There is the expectation that the entity will retain ownership rights in potentially patentable or copyrightable technology or products that it produces upon completing the scope of work.

• Publications may be created or co-authored at the entity.• The entity provides cost sharing or matching funds for

which it is not reimbursed by the grantee.• The entity regards itself, and/or is regarded by the grantee,

as "engaged in research" involving human subjects.

A Contractor relationship is appropriate when:

• The entity is providing specified services in support of the grant project.

• The entity has not significantly participated in the design of the grant.

• The entity is not directly responsible to the grantor.• The entity markets its services to a range of

customers,.• Little or no independent decision-making is involved in

the design and conduct of the work being completed. (continued on next slide)

A Contractor relationship is appropriate when: (continued)

• The agreement only specifies the type of goods or services which if not satisfactorily completed will result in nonpayment or requirement to redo deliverables.

• The entity does not expect to have its employees or executives credited as co-authors on papers that emerge from any research.

• The expectation is that the work will not result in patentable or copyrightable technology or products that would be owned by the vendor.

• In the case of an individual vendor of consulting services, the person has no employment relationship with the grantee, if applicable to local policies.

Indirect Costs

• Costs to run the organization that cannot be specifically allocated to a program (also those that are difficult to allocate as direct costs)

• Facility costs (rent, utilities)• Administrative salaries (accounting, administrative,

executives, general.)• Legal services, insurance, taxes

Super Circular Changes• Federally approved negotiated in-direct rate

shall be accepted by all federal agencies• Sub-recipients are allowed to collect in-direct• If no negotiated in-direct rate, a de minimus

rate of 10% will apply• Can receive an IDC rate extension for up to four

years

Documentation of Personnel Expenses

• Takes the place of time and effort reporting• No documentation outside the payroll system

is required• Single grant objective must complete semi-

annual verification• Electronic signatures are allowable

Documentation of Personnel Expenses

• PARs are no longer required• Focus has shifted to stronger internal controls• Final charges to personnel costs must be made

at least quarterly• After-the-fact certified report must be

completed at least every 12 months if a semi-annual certification was not used

Documentation of Personnel Expenses

• Work activity can be expressed as hours or percentage of time and must be after the fact

• Can be certified by either employee or immediate supervisor

• Not required to document effort• Nonprofessional employees must maintain

time sheets

Documentation of Personnel Expenses

• Salaries and wages used in meeting match requirements must be supported in the same manner

• Conditions in apportioning and certifying for IHE faculty