Financial Compliance

The PI is responsible for setting up an internal accounting system, which includes recordkeeping and internal controls that will ensure the efficient operation of the grant program.  An efficient internal control system will enable early detection of deficiencies and correction of these deficiencies in a timely manner.

A new accounting system is not required; however, the accounting system must have the capabilities to maintain and provide financial information required by the agency.  If the grant funds are small, then the accounting system can be maintained on a spreadsheet and submitted to OSP/or accounting department for reconciliation.  Please note that your accounting system should “mirror” the budget proposal and be capable of tracking all expenditures and any income.  Budget templates (Budget no match and Budget with match) have been provided for you to use, please download and save the file before use. 

OSP will assist you in setting up and maintaining the accounting system

The objective of an accounting system is to:

  1. Ensure that the recordkeeping system can identify separately the receipts, disbursements, assets & liabilities (if needed)
  2. Provide a summary of financial information necessary to submit reports

PI is responsible for:

  • Recordkeeping – Organizing and maintaining an efficient recordkeeping system that should  provide:
    • the information required for all financial reports. PI is responsible for maintaining and retaining all financial records and supporting documents;
    • a mechanism, which ensures that costs do not exceed approved budget items.  In addition, the system should provide information of expenditures on a comparative basis, that is the budgeted vs. actual costs; and
    • a cash management system, which will include information necessary to prepare requests for budget  revisions that will include:
      • supporting documentation
        • Purchase orders
        • Financial recordkeeping that will provide results of technical transactions
        • Assurances of project compliance with terms and conditions
        • Time and attendance records
      • a basis for reviewing  expenses periodically, and if necessary re-allocate funds, however, prior approval is required from OSP and agency

All financial and program records, supporting documents, statistical and other records relating to the grant have to be retained for three years.  In case there is an audit, records must be maintained until the audit is completed and all issues have been resolved.

  • Accounting Controls – controls implemented to ensure the reliability and accuracy of financial data and the maintenance and review of the data.  These controls should provide for:
    • adequate documentation on compensation to employees.  Compensation for employees is one of the biggest single line item in a grant budget.  Although the time and effort report is not submitted to the agency, they have to be available for inspection.  Also, the functions of employees have to be well defined and should be easily identified with descriptions on the budget.
    • A well-defined system to ensure that goods and services obtained are approved by authorized employees
    • Well developed procedures that facilitate timely review of financial activity and an internal audit if necessary
  • Compliance Controls – Although all aspects of internal operating and accounting controls are important, the agency is most interested in the compliance control for the most obvious reasons.  These controls are important:
    • For evaluating the PI’s system for ensuring that the grant funds are not misused;
    • the funds are disbursed only to eligible individuals;
    • and for checking if matching requirements and other limitations are met

 All required reports have to be submitted to OSP in a timely manner for review; OSP will then submit the reports to the agency.  Some agencies provide financial forms for completion and submission.

At the completion of a grant project all financial accounts, including journal and ledgers have to be reconciled and closed.