External Audit Cost Advisory for Non-Federal Sponsors
Sometimes non-federal sponsors will request an external audit as part of a sponsored research project. Find out how to plan ahead for this during proposal preparation and what happens if a request is made at award.
This advisory is intended to inform the campus community of U-M’s policy regarding external audit requirements and the responsibilities of all parties in accepting a project-specific external audit requirement.
Institute-wide versus project-specific audits
Every year, U-M conducts a single institution-wide audit as required by the Uniform Guidance Subpart F, “Audits of States, Local Governments, and Non-Profit Organization.”
Occasionally, however, a non-federal sponsor will require U-M to hire an external auditor to conduct a separate audit specific to the project funded by the sponsor, with U-M’s acceptance of the award contingent upon agreeing to this requirement.
Budget planning for external audits
Because separate external audits can be costly, principal investigators and their project teams are advised to include audit expenses in their proposal budgets when such a sponsor requirement is known in advance.
Process if audit is unknown until award
Sometimes an external audit requirement is unknown until the award. If not known in advance (and thus not included in the proposal budget), ORSP will attempt to negotiate the removal of the separate audit requirement from the final award terms and conditions.
If ORSP’s negotiation is unsuccessful and the sponsor will not agree to forgo its project-specific audit requirement, then the administrative home department must agree to cover the cost of the audit or the award will be declined.
Documenting the decision
The decision whether to cover the cost of the project-specific audit must be explicitly documented through the Agreement Acceptance Request process in eRPM.