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MIT 18 01 - Audit Division

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Audit Division18–3Audit DivisionThe MIT Audit Division delivers audit services through a risk-based program of audit coverage, including compliance assessments and financial, operational, and information technology (IT) reviews and audits. These efforts, in coordination with the Institute’s external auditors, provide assurance to management and the Auditing Commi�ee that good business practices and policies are adhered to, adequate internal controls are maintained, and assets are properly safeguarded. The Audit Division was fully resourced, employing 16 professional staff (13.6 full-time equivalents) at the beginning of FY2005, with core resources operating around four functional teams responsible for distinct areas of the Audit Plan: Financial and Compliance Review, Operational Audit, Information Technology Audit, and Construction Audit. Information Technology Audit resources provide support to the other teams, thereby integrating systems expertise into the examination of business processes. The division also houses a specialized function, Professional Standards and Strategy, staffed and led by an experienced member of the division with the title associate audit manager. Working with the Institute auditor and the audit management team, this function guides the division in se�ing policy and direction to help us achieve our long-term goal of becoming MIT’s world-class audit function. Effective July 1, 2004, the Audit Division officially launched a new function known as the Research Administration Compliance Program (RACP). Formation of RACP was initiated by the executive vice president, who provided incremental resources in recognition of the growing external focus on research compliance and the prominence of MIT within that framework. RACP provides ongoing research administration compliance monitoring by two individuals, with automated support provided by an individual with a 50 percent appointment to this effort; all three individuals are dedicated to research compliance, reporting to the associate audit manager, Operational and Compliance Risk Management. All other audit resources are assigned to core audit work, now referred to as Audit Operations, reporting to the audit manager. At the end of the year, Audit Operations comprised 10 professional staff responsible for delivery of audit assurance and occasional advisory services.Audit Operations underwent a shi� in emphasis during the year, principally motivated by the launch of RACP. Traditional audit scope and focus called for cycle-based inspections of individual departments, labs, and centers (DLCs) for compliance with Institute and federal policies, performed by the Financial and Compliance Review team. This practice continued during the first half of FY2005 as RACP was initiated. The design of RACP will accomplish this traditional approach in a “utility” fashion (broader and more frequent coverage); consequently, Audit Operations employs resources formerly dedicated to the cycle-based inspections in process-based operational auditing. Planning for this transformation began in 2004 with process-audit training, and in 2005 the associate audit manager led an effort to develop new audit work-paper templates and formats to facilitate the process-based reviews.MIT Reports to the President 2004–200518–4RACP is designed to monitor federally sponsored research activity throughout the Institute and to review financial and administrative practices within DLCs. This program also provides guidance to individual DLCs in research compliance and internal control issues. The program is divided into two primary functions—Spot Audits/Site Visits and Institute-wide Continuous Monitoring—as well as performing special projects relative to research administration. Following is a description of the program elements.Spot Audits/Site Visit Program. In an effort to strengthen compliance controls within individual departments, RACP staff will perform site visits on an ongoing basis. Site visits include targeted audit procedures for key compliance controls such as the monthly review of charges and certification of salary. Additionally, control assessments are performed through review of individualized compliance monitoring reports with administrative staff within the site and discussion-based review of practices to determine where practices may need strengthening or more targeted inspection might be required. During 2005, RACP staff performed four pilot site visits, selected in collaboration with assistant deans in the schools of Science and Engineering and for the vice president of research, to inform the permanent program going forward. Continuous Monitoring Program. The Continuous Monitoring Program is being designed to identify specific exceptions, potential problems, and trend data that may be useful in assessing the effectiveness of existing internal controls relative to the Institute’s research administration activity. Currently the Monitoring Program is linked primarily to the Site Visit Program. However, the goal is to implement a reporting process that will allow us to communicate potential exceptions directly to DLCs via email notification and track corrective action as applicable. During this past year, RACP staff performed an in-depth research administration roles and responsibilities study for the Department of Mechanical Engineering. Driven by the merger of the departments of Mechanical Engineering and Ocean Engineering, this project came as a request from the director of the Office of Sponsored Programs, based on discussions with the department head and the provost. As part of this review, we interviewed approximately 30 individuals (faculty, faculty support staff, headquarters staff, and central administration staff) and documented numerous business processes employed by the department. The end product was a report that identified a series of observations and recommendations. The report is currently being used by the department in their initiative to restructure their administrative operations. The Audit Division’s scope of services is equal to the full extent of MIT’s auditable activities. Allocation of audit resources across this broad spectrum is accomplished via a model for evaluating risks associated with individual units and/or operational processes, thereby determining a cycle of audit review. In 2005 the audit management team directed a comprehensive review of the audit


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MIT 18 01 - Audit Division

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