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