External Audit Cost Advisory for Non-Federal Sponsors

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.

Every year, U-M conducts a single institution-wide audit as required by the Uniform Guidance Subpart F (formerly A-133), "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.

 When known in advance, budget $20k for separate audit expenses

Because separate external audits usually cost over $15,000 (and can exceed that amount by thousands of dollars), principal investigators (PIs) and their project teams are advised to include at least $20,000 for audit expenses in their proposal budgets when such a sponsor requirement is known in advance.

 If not known in advance, ORSP will attempt to negotiate to remove the separate audit

Sometimes we don't know of the audit requirement until we receive an award. If the requirement of an external project-specific audit was not known at the time of proposal submission (and thus was not included in the proposal budget) then ORSP will attempt to negotiate the removal of the separate audit requirement from the final award terms and conditions.

 If negotiations are unsuccessful, the PI's administrative home must agree to cover cost or decline the award

If ORSP's negotiation is unsuccessful and the sponsor will not agree to forego its project-specific audit requirement, then the PI's department, school or college must agree to cover the cost of the audit or the award will be declined.

 Post-a-comment to clearly document the decision

The decision whether to cover the cost of the project-specific audit must be explicitly documented by the PI's administrative home via a posted comment to the Proposal Approval Form in eRPM by the unit(s) agreeing to cover the cost of the audit.