Is a Fixed Price Contract Subject to Audit?
Fixed-price contacts are not subject to the annual A-133 audit but may be subject to audit with limited scope by sponsors. Unlike a cost-reimbursement contact, a fixed-price contract pays the University a fixed sum of money to provide a deliverable, service, or specified level of effort. A fixed-price contact disregards the actual costs incurred by the University to perform the contact. The University assumes the risk of over spending. If the project is completed with less spending than the contracted amount, the University can keep the unexpended funds for unrestricted use. For this reason, sponsors may be interested in auditing the proposal of a fixed-price contact to look for unnecessary and overestimated costs. However, they may not audit the accounting records unless the contact is terminated early. The billing term for a fixed-price contact usually includes pre-payment of a fixed amount, fixed quarterly payments, or payments in fixed amounts based on schedules such as milestones,
