Article
Budget monitoring for research institution compliance and fiscal health
Nov 06, 2023 · Authored by Alyssa Sciorillo
An essential part of a research institution’s grant award application process includes creating a budget. The budget serves as a detailed financial plan that provides the sponsor with a clear understanding of how the funds, if awarded, will be utilized.
Monitoring actual expenditures against the budgeted funds is a crucial element of the grant as it helps ensure that the project stays financially sound and aligned with the objectives set by the sponsors. Monitoring expenditures not only allows an institution to stay in compliance with the requirements outlined in Uniform Guidance 2 CFR 200.329 but also with any additional requirements established by the sponsor. Regular monitoring of funds also allows the institution to identify any deviations from the approved budget, adjust accordingly and obtain sponsor approval, if required.
Sponsors generally have specific guidelines and requirements regarding reporting the use of funds. This allows for accurate and timely financial reporting; fulfilling contractual obligations and maintaining a positive relationship with sponsors.
Key risks associated without budget monitoring
- Overspending: if funds are improperly managed, there’s a risk of exceeding the awarded budget, leading to potential financial strain on the recipient organization (as it may have to cover overspent costs from institutional resources) and potential difficulties in completing the project
- Financial mismanagement: lack of oversight may result in inefficient use of funds (i.e., poor project burn rate), misallocation or unauthorized expenses, compromising financial stewardship
- Non-compliance: failure to monitor the budget can lead to unintentional non-compliance with sponsor guidelines, contractual agreements and regulatory requirements
- Unforeseen expenses: without tracking, unexpected expenses may go unnoticed, impacting the project’s financial health as well as overlooking any prior approval that may be required from the sponsor
- Inaccurate reporting: inability to monitor may lead to inaccurate financial reporting, damaging the institution’s reputation and credibility with sponsors
How can Baker Tilly help?
Baker Tilly can help your research institution manage sponsored funds as well as determine how well internal controls over budget monitoring are performing.
| What we do | What you get |
| Assess the institution’s policies, resources and tools related to budgeting and monitoring of research funding and determine if they are efficiently supporting responsible management and stewardship of funds. | A facilitated discussion with key process owners across the institution to gain insight into existing practices related to budget creation and the monitoring of funds. |
| Identify the roles and responsibilities between departments that are involved in the budgeting and monitoring processes. | A clear understanding and layout of any controls or collaboration efforts in place to facilitate effective controls for spending sponsored funds. |
| Evaluate current procedures to assess compliance with Uniform Guidance and sponsor requirements. | Actionable recommendations to address identified gaps, challenges and risks, based on institutional policies, federal requirements and industry best practices. |
Case study: budget monitoring in action
Client need
A higher education institution engaged Baker Tilly to review its internal controls and processes in place to support their sponsored research activities.
Baker Tilly solution
The team reviewed the institution’s existing policies and procedural documentation and interviewed key personnel to understand the approach undertaken to stay in compliance with federal and institutional requirements. Additionally, our team performed testing by obtaining and reviewing supporting documentation to assess compliance with sponsor terms and conditions as well as the institution’s protocols for high-risk areas, such as salary charging and effort-reporting, cost charging and allocation and procurement.
Results achieved
Our team identified that the institution was not monitoring funds efficiently and tracking actual costs against what originally was budgeted for. Among other findings as part of this review, the institution did not have a robust effort reporting and subrecipient monitoring process. Our team provided guidance on revamping their processes and strengthening internal controls, which would allow them to create a more efficient and reliable budget monitoring process.
For more information on budget monitoring, or to learn more about how Baker Tilly’s higher education internal audit specialists can help your institution, contact our team.