Like zombies rising from the dead, inadequate documentation has a way of returning to haunt you in an alarming way. Want an example? I recently analyzed a case study where the review of administrative and clerical costs resulted in $1.7 million in costs being deemed unallowable! All those moaning sounds are not just the zombies.
So what makes documentation “adequate” and what are some examples of adequate documentation?
Here are some tips for grant managers.
According to the OMB Super Circular, the award recipient must be able to support accounting and cost records with adequate source documentation. The documentation should provide the means to verify proper separation of costs among various federal awards and non-Federal spending. The extent of the documentation required is affected by the size and complexity of the non-federal entities and the existing control mechanisms. The nature and type of the documentation needed may also vary, depending on the relationship to specific internal controls.
Examples of Adequacy
Adequate source documentation includes having receipts with sufficient detail to be able to determine:
- What the funds were spent on
- When the spending occurred
- Who made the purchase
Another example includes timecards or other labor reporting completed in a timely manner. A timecard should have sufficient detail to determine:
- What award was worked on
- When the work was done
- Who worked on the award
- When the time was reported
Some specific examples of adequate source documentation might include:
- A purchase request or requisition signed by a manager with direct budgetary responsibility for the project or program being charged for the purchase
- Reports supported by financial records that are reviewed and signed by an appropriate level of management
An example of poor source documentation is a receipt that provides too little detail about the purchase, such as a credit card receipt listing the total amount of purchase, but not the item(s) purchased. Without purchase details, federal recipients cannot ensure that purchases are allowable under the terms and conditions of a federal award.
Other Types of Documentation
Not all examples are related to financial records. Adequate program documentation can also include having a detailed narrative explaining project or program objectives.
Consider some of the specific documentation requirements for information technology departments. The overall control environment requires that IT departments document each major application system in an operations and maintenance manual. Examples of adequate source documentation in an IT systems manual would include:
- The software functions and hardware requirements, how the system operates, and how the databases interact.
- Explanations of various system messages and queries that are run or received
- A document listing the restart and notification procedures in the event of a system error or failure
- A list of reports that are routinely generated by the various systems
Likewise purchasing departments have a variety of additional types of documentation to maintain. For example, purchases should be properly authorized in accordance with internal policies and procurement standards. Therefore, purchasing documentation without evidence of proper authorization for the purchase may be considered insufficient source documentation.
It is recommended that the authorization document be included with the rest of the related purchase documentation to support purchasing compliance. Without prior authorization documented in the purchasing records, the non-federal entity may not be able to demonstrate that the purchases were properly authorized before the purchase was made. It is recommended that the authorization document be included with the rest of the related purchasing documentation to support purchasing compliance.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.