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Use of the Right to Audit Clause in University and Hospital Contracts
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Function, Project, Program, Organization, Activity:

Use of the Right to Audit Clause in University and Hospital Contracts

Reason(s) Why Audit Is Needed:

The University enters into hundreds of contracts and contractual arrangements each year that result in the expenditure of millions of dollars. Many of the contracts establish relatively short-term arrangements, but some contracts are multi-year, million dollar arrangements that involve multi-tasking efforts where the University pays for the contractors' hourly efforts.

Because of questions raised during internal audits about support for contractor invoices and because of the uneasiness experienced by University personnel who have approved invoices for payments, the Office of the Internal Auditor developed and provided to the Materials Management Department examples of "right to audit" clauses. University officials agreed to consider using the clauses in contracts where they thought appropriate. The clause, as a matter of policy, is used in government contracts. We queried other colleges and universities and found that similarly-worded clauses were included in some, not all, of their larger service-oriented contracts.

Succinctly, the clause requires the contractor to retain and make available to the University or its representatives the support for all invoices issued under the contract.

Audit Objectives:

The objective of the audit is to determine the extent to which the "right to audit clause" has been used in University contracts that have a total value of $100,000 or more. If we find that the clause is not consistently included in the University's larger contracts where we believe the clause would benefit the University, the audit will then attempt to identify situations where the University would have benefited had the clause been used.

Priority: Medium


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