Commonly Reviewed Audit Areas

PI’s are cautioned to take particular care in the following high risk areas which are known to be scrutinized by auditors:

  • Allocability – Project expenditures must be supported by evidence of direct benefit to a project. The availability of funds to pay an expense is NOT evidence of the allocability of that expense to a project.
  • Rate of Expenditures – Two common situations in which the allocability of an expense will be critically reviewed are those where expenses are incurred before the start of a project period, and those where expenses are incurred just before the end of a project period.
  • Sub Recipient Monitoring – PI’s have primary responsibility for monitoring sub recipients to ensure compliance with federal regulations and with both prime and sub recipient award terms and conditions.
  • Cost Transfers – A cost transfer is an expenditure initially posted to one project and then transferred to another with the intention to correct errors. Circumstances under which cost transfers are allowable are determined by federal regulation and NMSU’s policy, and should never be used to manage funds.
  • Expenditures in the last 90 days of the project period will require additional explanation to assure the expense is allowable and allocable.

Further justification of these transactions may be warranted to respond to audit inquiries.