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