Federally Sponsored Accounts
The Office of Management and Budget (OMB) Circular A-133 requires an annual external audit of non-profits receiving federal funds. A sample of federal awards and their direct cost transactions are selected for testing (auditing) to determine that expenditures and procedures were appropriate, allowable, and allocable to the award. Specifically, that they were:

• In accordance with sponsor terms and conditions
• In accordance with OMB A-21 (Cost Principles)
• In accordance with OMB A-110 (Administrative Requirements and University Policies)

Non-Federally Sponsored Accounts
Non-federal sponsors will, from time to time, audit sponsored accounts to ensure that the fiscal requirements they impose on the award are being adhered to. To ensure compliance you should review and follow the sponsor's requirements as stipulated in the award.

Importance of Auditing
All federal and increasingly non-federal sponsors look at the A-133 audit as a "report card" of how Harvard spends its money. Audit findings are reported to the federal government and become public record; they are distributed to all federal agencies through the federal clearinghouse. Each department performing sponsored research must ensure that the reported expenditures are appropriate for the terms and conditions of the award, as well as federal cost principles/administrative requirements and University policies (OMB A-21 and OMB A-110)

Audit (Testing) Areas
The following areas are included in these audits:

• Direct attributions (linkage between cost and purpose of the project). This linkage must be established and demonstrated through supporting documentation.
• Relationships between costs and the project. A readily identifiable casual/beneficial relationship must exist between costs and the project (e.g., test tubes were purchased for a wet lab experiment involving fluid analysis).
• Consistency. Costs incurred for the same purpose in like circumstances should be treated consistently as either direct costs or as facilities and administrative costs.
• Other testing includes:
• Effort Reporting
• Internal control testing
• Cost Transfers
• Program income
• Monitoring Expenditures
• Subrecipient Monitoring
• Davis-Bacon Act
• Service centers
• Student financial aid
• Indirect cost and fringe benefit rate application. For more information please see Cost Analysis and Compliance

Audit Timing (OMB A-133)
The annual audit begins in April/May with a planning/audit selection. Orientation of the parties takes place in June and testing occurs in the summer/fall. Preliminary findings and draft reports are issued in the fall/winter (the issue resolution period), and the final report must be issued by the end of March.