Research Administration Forum

1. Research Administration Forum Compliance Challenges: Allocation of Costs to Sponsored Projects May 26, 2004

2. Today’s Agenda • Define our major research compliance challenges and the opportunities they afford • Staff and faculty awareness of the rules—sponsored research is a rapidly expanding enterprise • Federal activism on a few major issues • Under-recovery of faculty compensation • Outline our response—improve effectiveness of our research administration infrastructure • Increase awareness—training and consultation • Improve systems • Maximize grant recovery • Working together to deal with these challenges

3. Building the Research Enterprise • UC Davis Vision • Discovery • Growth in the level of extramural funding across all disciplines

4. Building the Research Enterprise • Research expenditures have nearly doubled in the last 10 years from $167 mm in 1994 to $324 mm in 2003 • Growth in sponsored project funding (awards) has increased $160 mm in 1994 to $426 mm in 2003 • With increased funding comes increased scrutiny by regulators • Growth in the infrastructure to support increased research has not kept pace

5. Building the Research Enterprise • UC Davis Vision • Engagement • Strengthen research at all levels by facilitating the application for and management of grants of all sizes across all disciplines • Development of training opportunities to facilitate more effective fiscal management of grants

6. WASHINGTON, D.C. — Northwestern University will pay the United States $5.5 million to settle allegations that the school violated the False Claims Act with regard to claims in connection with federally-sponsored medical research grants, the Justice Department announced today. The government alleged that Northwestern misled the United States into paying more money than the Chicago-area school was lawfully entitled to receive. http://www.usdoj.gov/opa/pr/2003/February/03_civ_076.htm

7. Components of an Effective Compliance Program • NIH OIG issued a notice in the Federal Register regarding the elements considered necessary for a comprehensive compliance program. (68 FR52783-52784 September 5, 2003) • Implement written policies and procedures • Designate a compliance officer and committee • Conduct effective training and education • Develop effective lines of communication • Conduct internal monitoring and auditing

8. Components of an Effective Compliance Program • NIH OIG issued a notice in the Federal Register regarding the elements considered necessary for a comprehensive compliance program. (68 FR52783-52784 September 5, 2003) • Enforce standards through well publicized disciplinary guidelines • Respond promptly to detected problems, taking corrective action, and report to Federal agencies • Define roles responsibilities – oversight responsibility

9. Accountability – Risks • Ten compliance risks in research administration • Effort reporting • Direct vs. indirect cost charging practices • Recharge center / service center rates • Fixed price agreements • Financial status reports • Charging costs at the end of a grant period • Appropriate charging of costs to benefiting grants • Mandatory cost sharing • Protection of human subjects • Protection and charging of animal subjects

10. Accountability – Major Risks • Compliance risks identified by the Federal Government • The proper allocation of charges to grant projects • Time and effort reporting, including accurate reporting of the commitment of effort by researchers • Use of program income

11. Accountability – Cost Allocation • Allowable costs • Reasonable • Arm’s length transaction? • Necessary • Allocable • Consistent treatment • Like treatment in like circumstances

12. Accountability – Cost Allocation • Unallowable costs • Administrative and clerical salaries • Major Project? • Don’t make allowable costs unallowable, or when good costs go bad • Flat assessments (5%) • Rates not approved by Campus Rate Committee • General purpose equipment? • Meals?

13. Accountability – Cost Allocation • UCD Cost Accounting Standards Disclosure Statement (DS-2) • Required by A-21 • Filed by UCD on December 31, 1996 (Revised March 30, 2000) • Identifies UCD accounting practices, policies, and procedures for assigning costs to federally sponsored programs and to attest to the consistent treatment of those practices • Charging Practices for Federally Funded Grants and Contracts 1997 • http://accounting.ucdavis.edu/EX/

14. Accountability Mrak Hall

15. Accountability – Other Issues • Cost Sharing • Any program or project cost that is not supported by the sponsor • Must meet A-21 cost principles: allowable, allocable, reasonable • Committed: Mandatory & Voluntary (non-federal sources) • Mandatory: Stipulated as a condition of the agreement. • Voluntary: Discretionary use of matching funds from gifts, departmental (19900) funds, academic year salaries • Must be documented in the University’s financial records. • Academic year salaries charged to project? • Project Overruns: • Must be tracked and accumulated (reported as research) • Cannot be charged to departmental administrative account

16. Accountability – Other Issues • Review of monthly ledgers • Does the PI know what’s been charged to the project? • Do expenditures match the project plan? • Cost transfers • Cost transfers completed within 90 days? • Moving expenditures results in inaccurate reports and is a red flag • Cash management issues • Effort Reporting • Is the PI signing? • Are necessary payroll transfers made?

17. Maximizing Grant Recovery • PI’s are expending effort on sponsored projects during the academic year • Not charging their effort to Federally sponsored projects can create compliance problems • Effort Reporting • Voluntary Cost Sharing • Recovering actual costs could provide resource options

18. 2002-03 Ladder Rank Salaries

19. Maximizing Grant Recovery • Consider charging academic year salaries to sponsored projects • By reducing the percentage of salaries on general funds to 80% (excluding SOM) • $21.7 million in general fund savings would be available for re-budgeting on a current year basis • At the same time, reduces the risks associated with voluntary cost sharing

20. Maximizing Grant Recovery • Myths about charging AY salaries • Charging AY salaries is against OP Policy • The sponsor does not care how much time is accounted for • Charging salaries does not benefit the school/college/dept • Salary funds revert to OP if not used

21. Maximizing Grant Recovery • Facts about charging AY salaries • General fund savings can be re-budgeted on a current year basis • Not charging AY salaries when work is performed on the project exposes the University to compliance risks • Effort Reporting • Cost sharing • Could overstate UCD’s F&A Rate • CAS 501 – Consistency Estimating, Accumulating, and Reporting Costs

22. $$$$$$$    Washington, DC 

23. Maximizing Grant Recovery • Where do we go from here? • Increase proposal budgets to include AY salaries • Create incentives • Distribution of 19900 balances • Avoid compliance problems associated with not charging AY salaries to grants: • Cost sharing • Effort reporting

24. Providing an Effective Environment for Research Administration • Enhance the infrastructure to support growth • Training • Certificate Series in Grants Administration • Web based courses • Systems • Electronic Research Administration • Effort Reporting System • Cost Sharing

25. Providing an Effective Environment for Research Administration • Protect our good reputation • Avoid legal/compliance problems • Provide an effective compliance environment • UCD Task Force on University Compliance • Charged August 7, 2003

26. Impact • Risks of Non-Compliance • Cost Disallowances, Penalties • Withholding of Payments • Withholding of Future Award • Designation as a High Risk Organization • Special Monitoring and Corrective Action Plans • Personal Liability • Criminal prosecution

27. Impact • What we don’t want • Too much control • Lack of balance • Cost vs. benefit • Gotcha type of approach • No, what’s the question? • Risk averse • Redundant processes

28. Impact What we don’t want: Vice Chancellor Klein to end up in jail. Jail

29. Impact • What to remember • Know the rules, play by the rules • Be prepared to provide documentation that supports your action • A project/award is like your tax return

30. We Need Your Help • Set the “Tone-at-the-Top” • Designate officials within your unit who will be responsible for coordinating compliance efforts • Would serve as a point of contact that we can communicate with regarding compliance issues • Reinforce the elements necessary for a compliance program • Encourage participation in training programs

31. Questions?