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Effort Reporting: A Departmental Approach
to Meeting Audit Requirements
Dianne Valdez, MBA, CIA, CISA, CCSAEnrique Valdez Jr., MBA
Overview of AuditWhat do you think when you hear “Internal Audit”?
What and Who is Internal Audit?• “Internal auditing is an independent, objective assurance
and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” 1
• “Performed by professionals with an in-depth understanding of the business culture, systems, and processes, the internal audit activity provides assurance that internal controls in place are adequate to mitigate the risks, governance processes are effective and efficient, and organizational goals and objectives are met.” 2
Internal Audit vs. External Audits
Internal• Performed by auditors
who are independent of operations, but are part of, and familiar with your institution. 3
• Audits based on:• Annual Risk Assessments• Management Requests• Specific Events and/or
Incidents.
External• Performed by State/Private/
Federal auditors to provide an independent opinion. 3
• Audits based on:• Regular Schedule• Special Requests• Specific Events and/or
Incidents.
• Samples are often extrapolated to full population.
Types of Audits
• Operational• Process• Departmental
• Financial
• Compliance
• Combination
What is Effort Reporting?
• Required by Federal Government as requirement as condition for receiving federal funding.*• It is the means for reporting work on sponsored
and non-sponsored funding sources.• A way for sponsors to be assured that they are
getting what they are paying for.
*Uniform Guidance discussion later in presentation.
Effort Reporting Audits
• Why are they Performed?
• What is the Process?
• What are the Benefits?
The Auditor’s Role
• Examine, evaluate, and recommend improvements to Internal Controls.• Internal Controls encompass the policies,
procedures, activities, and systems that are designed to ensure:• Reliability, integrity, and security of information• Compliance with regulations and guidance • Safeguarding of assets• Financial efficiency • Accomplishment of objective/goals.
The Department’s Role
• Examine and evaluate policies, procedures, and systems in place.• Ensure:• Reliability and integrity of information• Compliance with policies, procedures, regulations, and
guidance• Accomplishment of established objectives and goals.
Effort Reporting AuditsWhat auditors are looking for and how to prepare.
Educated Faculty and Staff
What Auditors look for:• Understanding by faculty
and staff of effort reporting requirements.• Consistency between
reported and stated effort in interviews with faculty and staff.• No delegation of
responsibility to unqualified individuals.
How Departments can prepare:• Send faculty and staff to
institutional training, including refresher training.• Encourage departmental
discussions and reviews of effort reporting.• Meet with faculty and
staff to review applicable policies and procedures.
Documented Controls
What Auditors look for:• Documented procedures
that are clear and easy to understand.• Procedures that are
compliant with institutional and sponsor requirements.• Indications that
procedures are being followed.
How Departments can prepare:• Document and review
procedures to ensure that they represent what you do.• Periodically review
institutional and sponsor requirements.• Do what you say you will
do and keep records as proof.
All Effort Cards Certified in a Timely Manner
What Auditors look for:• All cards are certified.• Cards were completed
within the prescribed reporting period.• No cards were not
reopened and recertified.
How Departments can prepare:• Monitor and follow up
with key personnel concerning all open effort cards.• Diligently follow
institutional timeline requirements.• Make sure that effort
reporting is done correctly the first time.
Reasonable Level of Effort Commitments
What Auditors look for:• Commitments
commensurate with the level effort of the individual and at least 1% for Principal Investigators.
• Commitment levels that allow time for other duties.
• Consideration during pre-award of what is reasonable if proposal is awarded.
How Departments can prepare:• Periodically review total
effort commitment levels for key personnel.• Ensure that key personnel
have time for institutional and other duties.• Scrutinize proposed effort
in applications, have a plan for requesting reductions if required.
Reasonable Estimates of Effort
What Auditors look for:• Effort not less than salary, but
exact ties between salary and effort for the duration of the project can raise questions.
• Effort not certified to the hundredth of a percent. • How Justified?
• Effort applied to non project responsibilities• Teaching • Administrative Duties• Proposal writing.
How Departments can prepare:• Report effort as an estimate
that is not based upon salary: effort drives salary.• Encourage key personnel to
review calendars, lab notebooks, data, and/or other documents to refresh their memories.• Avoid simply replicating
previously reported effort percentages.
Fulfilment of Effort Commitments
What Auditors look for:• Monitoring of changes in
reported effort to committed effort. Effort commitments are obligations to sponsors.• Timely notification of
sponsors in event that adjustment in commitment needs to be made.
How Departments can prepare:• Consistently monitor, do not
assume that the Sponsor will allow changes in commitment. • Initiate effort reduction
requests if required. Institutions do not have authority to reduce committed effort on a sponsored program without approval.
Effort Reports are Consistent with Other Reports
What Auditors look for:• Consistency with
Appointment Letters.• Consistency with
Clinical Reporting Requirements, if applicable.• Consistency with
progress reports.
How Departments can prepare:• Periodically review and
compare Appointment Letters to effort.• Ensure that key personnel
are meeting sponsor requirement as well as clinical responsibilities.• Prior to submitting progress
reports, review certified effort for consistency.
Dealing with Auditors• Treat internal auditors as professionals, and with respect.
• They work for the same institution!
• Be truthful and succinct with answers.• Qualify your responses if required.
• Ask for clarification if required.• Demonstrates a desire to understand.
• Keep an audit perspective by leaving a clean audit trail.• Document actions.
• Develop processes that are easy for you to understand and explain.• This will promote understanding by the auditors.
• Establish an audit file that contains:• Audit correspondence• Conversation notes.• Copies of all documentation provided to the internal auditor.
Uniform Guidance Internal Controls get tested.
Questions?
References
• 1 The Institute of Internal Auditors. (2013). Definition of Internal Auditing in The IIA's International Professional Practices Framework (IPPF). Retrieved from: https://na.theiia.org/standards-guidance/mandatory-guidance/Pages/Definition-of-Internal-Auditing.aspx
• 2 The Institute of Internal Auditors. Retrieved from: https://na.theiia.org/about-us/about-ia/Pages/About-the-Profession.aspx
• 2 The Institute of Internal Auditors. Retrieved from: https://na.theiia.org/about-us/about-ia/Pages/frequently-asked-questions.aspx