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Extramural Awards Transaction Review Guide

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  • Review objectives

    Review of transactions is meant to provide a reasonable level of assurance that the transactions comply with the following seven control standards:

    • Appropriate - cost is allocable to the sponsored project and incurred solely to advance the scope of work as defined in the sponsored agreement
    • Valid – allowed by policy, law, contractual agreement, and/or professional standards
    • Reasonable – fair amount paid for a good or service
    • Funded – sufficient funding exists to cover the transaction
    • Accurately recorded – amount is consistent with value received, provided, or adjusted for; and is free from accounting coding or arithmetic error
    • Supportable - Amount and good or service received or provided, or justification for adjustment is consistent with supporting documentation, standard, situation, or practice
    • Timely recorded – transaction date is accurate

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  • Accountability

    A principal investigator (PI) is responsible for ensuring the accuracy and validity of each sponsored award-funded transaction.

    • Personnel Transactions: The PI is always responsible for reviewing and authorizing personnel-related transactions
      • This responsibility cannot be redelegated
    • Non-personnel Transactions: A PI or official designee is responsible for reviewing and authorizing non-personnel related transactions
      • A PI may delegate, in writing, non-payroll transaction review responsibilities associated certifying proper fund usage and accounting to a knowledgeable, well-positioned individual, such as a research assistant, working closely with the PI on the particular sponsored award
      • The PI is ultimately accountable for ensuring each transaction complies with the seven transaction control standards even if review responsibilities are redelegated to others
    • Ledger Transaction Review: A PI or official designee is responsible for reviewing ledger transactions
      • A PI may delegate, in writing, ledger transaction review responsibilities to a knowledgeable, well-positioned individual, such as a research assistant, working closely with the PI on the particular sponsored award
    • Unallowable Costs: Unallowable costs that have been mistakenly charged to a grant must be promptly removed once identified through the Ledger Transaction Review. The Principal Investigator and Research Accountant should discuss and move the cost to the appropriate award that the expense pertains to and if this is undetermined the cost must be moved to an unrestricted fund source under the PI’s department until resolved.
    • Division-Prepared Financial Report Review
      • Personnel costs appearing on the report
        • The PI is responsible for reviewing these costs
        • This responsibility cannot be redelegated to a designee
      • Non-personnel costs appearing on the report
        • The PI or official designee is responsible for reviewing these costs
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  • Review strategy

    The transaction review process for sponsored awards is comprehensive and begins when a transaction is initiated:

    Purchase Orders

    • The CruzBuy approval queue associated with the sponsored award must include either the Principal Investigator (PI) or authorized designee, and the research accountant
      • PI or authorized designee: Reviews the purchase request for appropriateness to the scope of the sponsored award and authorizes the transaction
      • Research accountant: Reviews and approves the purchase request for award, policy, and funding compliance
    • For subcontract-awards, the PI serves as the requester
      • PI: Works with the Office of Sponsored Projects (OSP) and the divisional research accountant to set up the subcontract-award agreement and associated special purchase order number
      • PI and research accountant: Both must approve each subcontract-award payment

    Direct Payments and Expense Reimbursement Requests

    • PI or designee: Reviews and authorizes each transaction for compliance with the sponsored award’s scope
    • Research accountant: Reviews and approves each transaction for policy and funding compliance

    Personnel Payroll Transactions

    • Appointment
      • PI: Specifies the period and percentage of effort of an employee’s appointment within the scope of the sponsored award
      • Research accountant: Reviews and approves the transaction for policy and funding compliance
    • Payroll review
      • PI: Reviews financial reports that include payroll costs for validity and appropriateness
      • Research accountant: Reviews the monthly Disbursement of Payroll Expenses Report (DOPE) for consistency with the terms of the appointment

    Transaction Corrections

    • PI: Authorizes cost transfers (required)
    • Research accountant: Reviews and approves cost transfers for award, policy, and funding compliance

    Ledger Reports (FIS or certified Business Objects reports prepared or distributed by the research accountant)

    • PI: Reviews financial reports (required)
      • Distribution of a report to the PI for review provides proof of ledger review by the research accountant
        • Note: The research accountant is expected to review ledger transactions as part of the report preparation process

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  • Risk areas

    Be on the lookout for these things in reviewing ledger transactions.

    • Unusual Transaction: Expenditures that appear to be out-of-the-ordinary or payments made to an unknown or inappropriate vendor
    • Duplicate or Erroneous Payments: Transactions involving the same vendor and/or payment amount
    • Unusual Fund - Organization - Account - Program - Activity - Location Codes (FOAPAL) Combinations: Transactions recorded to incorrect or inappropriate fund, organization, account, or activity code combinations
    • Incompatible Purchases: Purchases of goods or services that seem incompatible with the activities normally associated with an organization code
      • For example, the purchase of garden maintenance supplies by a unit other than Physical Plant or the purchase of food or beverages on federal contracts which are usually prohibited
    • Risky Transactions: High-risk payments, such as those involving contracts and grants, travel and entertainment, relocation, etc.
    • Deficit Balances: Unfunded transactions may indicate
      • A transaction is coded to the wrong FOAPAL
      • An incorrect or invalid lien
      • A missing budgetary entry
      • A budgetary issue requiring corrective action
    • Accruals: For financial report preparation purposes, take into consideration any accrual entries for such things as accounts receivable or unpaid, unencumbered expenses

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  • Post-review procedure

    Follow these steps if you identify a questionable transaction.

    Investigate to determine if the transaction is proper:

    • Erroneous transaction - initiate the process to correct the error
      • A ledger correction must be recorded within 120 days from the close of the month in which the original charge posts to the ledger
    • Unfunded transaction
      • review the budget to determine if a transfer of funds or transfer of expense is needed
      • if the fund is overdrawn, immediately process an expense transfer to an appropriate alternate funding source
    • Invalid or inappropriate transaction – discuss with either the transaction initiator or an appropriate supervisor or manager to
      • Make a correction
      • Cancel the transaction
      • Obtain a reimbursement or refund
      • Refer the matter to a higher authority (e.g. suspected fraud or embezzlement)
    • Incorrect transaction recording date, especially near the June 30 fiscal year-end closing date or other period-end financial reporting date
      • A good or service received prior to June 30 of the current fiscal year must be recorded as an expense in the current fiscal year even if the related invoice is received or payment is made in the following fiscal year
      • Process a journal entry to accrue the expense or revenue

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  • Ledger transaction review documentation

    Use one of the following approaches to document proof of ledger transaction review:

    1. Document the preparation and distribution of monthly FIS or certified Business Objects financial reports to a PI
    2. An authorized designee or Research Accountant may certify the validity, accuracy, appropriateness, and timely recording of each transaction appearing in the ledger.
      • Manually-Maintained Documentation
        • Signature and date maintained in Ledger Review Documentation Log
        • Signature and date on paper ledger report reviewed
        • Email message from designee to fund manager indicating completion of transaction review
      • InfoView System-Maintained Documentation
        • The ledger reviewer’s user identification and review date recorded by the InfoView system when a ledger report is accessed may serve as adequate documentation if the reviewer agrees, in writing, to all of the following conditions:
          • The review was conducted in a manner consistent with the approach adopted by the division
          • Ledger transactions were reviewed for compliance with the seven transaction control standards
          • Any questionable transactions identified have been or are in the process of being investigated and corrected as necessary
          • Ledger transactions, with the exception of those identified as questionable, comply with the seven transaction control standards

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  • Common oversights

    Avoid these oversights in devising a ledger or financial report review strategy:

    • Designating as a reviewer, someone not familiar with the relevant policies
    • Designating as a reviewer, someone having duties that conflict with reviewing the ledger, such as approving payments
    • Designating as a reviewer, someone not having the authority to investigate and resolve issues resulting from a ledger review
    • Ineffectively using ledger transaction review as part of the overall process control strategy to ensure each transaction complies with the seven transaction control standards

    Avoid these oversights in reviewing transactions:

    • Forgetting to investigate transactions that appear unusual or in error
    • Forgetting to make a correction
    • Forgetting to report errors or suspicious transactions to the appropriate person
    • Forgetting to review a transaction or ledger in time to make an adjustment prior to the 120-day deadline
    • Forgetting to document approvals of transactions
    • Forgetting to document your ledger review in a review log

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  • Policy references

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  • Where to get help

    Assistance is available for your general ledger review questions from the Extramural Funds Accounting Office

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