Cost Transfers and Guaranteed Funding/Advanced Accounts

1. SPTP Cost Transfers and Guaranteed Funding/Advanced Accounts

2. Objectives • Increase the use of guaranteed funding/advanced accounts • Decrease the number of cost transfers through pro-active grants management approach • Reduce compliance risks and audit findings Sponsored Projects Training Program

3. Cost Transfers Defined • Cost transfers defined: • After the fact salary or non-salary expense reallocation from one University chartstring to another • Requirements under OMB Circular A-21 • Transfers must be timely (within 90 days) and completely explained and justified • Simply stating “to correct error” or “transfer to the correct project” is NOT adequate • Late cost transfer explanations must fully address the reason for the lateness and corrective action to prevent a reoccurrence Sponsored Projects Training Program

4. Cost Transfers Background • UVM has significantly more cost transfers, particularly late cost transfers, than similar Universities • Creates fiscal management difficulties • Leads to delayed financial reporting • Creates compliance risk for the University • Many Universities do not allow cost transfers more than 90 days after the original transaction Sponsored Projects Training Program

5. Cost Transfers Background • Cost transfers were identified as a material weakness in FY08 A-133 audit • Due to the high volume of transfers and lack of supporting documentation • Lack of documentation to prove cost transfers from one project to another were not solely to cover cost overruns • KPMG recommended UVM review its cost transfer policy • The FY09 A-133 audit identified an additional finding about lack of approvals and clear documentation for cost transfers Sponsored Projects Training Program

6. Cost Transfer Background • PeopleSoft is NOT designed to accommodate multiple retroactive salary distribution changes • Leads to system processing failures and reconciliation issues • Significant resources are devoted to processing retros and fixing errors • Volume of retros indicate that quarterly review of effort is not consistently taking place Sponsored Projects Training Program

7. Cost Transfer Background • Cause of cost transfers • Many units have a culture that embraces a reactive approach, rather then proactive approach, to grants management • Untimely Purcard re-allocations and income/expense billing • Inconsistent monitoring of project budgets and expenses • Irregular review of committed, actual, and distributed effort on sponsored projects • More than 90% of sponsored projects are setup after start date • Primarily due to delays in receiving the award document from sponsors Sponsored Projects Training Program

8. Cost Transfers: Who is affected? • Principal Investigators • Fiscal management difficulties • Department & Dean’s Office Staff • Time required to prepare & approve cost transfers • Fiscal management difficulties • HRS, Cost Accounting Services & BPRT • Significant resources to review, process & resolve errors associated with retros • Grant and Contract Administrative Services • Resources needed to review & approve cost transfers • Delayed financial reporting • The University at Large • Compliance risks, which could result in audit findings, significant fines, and potential loss of funding from sponsors Sponsored Projects Training Program

9. Cost Transfers: Compliance in Perspective • Weill Medical College of Cornell University - $2.6M, March 2009 • Yale University - $7.6M, December 2008 • St. Louis University - $1.0M, July 2008 Sponsored Projects Training Program

10. Cost Transfers: Solutions • Proactive and continuous monitoring of sponsored projects • Responsibility of PI to manage the grant, with administrative assistance from unit administrator • Effort must be reviewed quarterly for accuracy • Prospective effort adjustments must be made • Roles and responsibilities for those involved in the grant lifecycle must be clearly defined • Award cost share commitments must be monitored closely from award setup to closeout Sponsored Projects Training Program

11. Cost Transfers: Solutions • Once a chartstring is set up in PeopleSoft, and you have implemented the quarterly review process, retroactive salary adjustments should not be necessary • Rarely retros may need to be processed, for instance due to a key punch error • Must be properly documented and processed in a reasonable time period (90 days) Sponsored Projects Training Program

12. Cost Transfers: Solutions • Conditions for approval of a retroactive salary distribution change: • Cost allowable and allocable to the grant to which it is transferred • Transfer must be supported by a clear explanation • Request must be authorized by all applicable departments • Request must be submitted immediately following detection of the error • Transfer must be in compliance with University policies and federal regulations Sponsored Projects Training Program

13. Cost Transfers: Solutions • Guaranteed funding/advanced accounts should be used • Ensures that chartstrings are set up and personnel effort is distributed before work on the project commences • Essential to avoid retros on sponsored projects since more then 90% of awards are received after start date • Under this practice, departmental suspense should be used for encumbrances only, not for actual expenses Sponsored Projects Training Program

14. Cost Transfers: Future Solutions • Utilitize PeopleSoft functionality to attach all back up documentation for non-salary cost transfers to the journal entry (FY11) • Cost transfer policy is being revised Sponsored Projects Training Program

15. Guaranteed Funding/Advanced Account Background • Guaranteed funding/advanced accounts • Mechanism to establish an award and associated chartstring(s) in PeopleSoft • When a PI receives notification from sponsor that a proposal will be funded, and • A department chairperson and/or dean agrees to accept the risk of covering expenses associated with the project if the award does not materialize. Sponsored Projects Training Program

16. Guaranteed Funding/Advanced Account Background • Use of guaranteed funding/advanced account: • Reduces salary and non-salary cost transfers • Allows for clear and more efficient fiscal management of award • Eliminates re-work for principal investigators, department administrators, and staff in central offices Sponsored Projects Training Program

17. Guaranteed Funding/Advanced Account: Solution • Work should not commence on a sponsored project until chartstrings are setup in PeopleSoft • Either through guaranteed funding/advance account or the receipt of the award document • Allows for both sponsored and cost share costs to be allocated to the proper chartstring • Will result in materially less cost transfers • Reduces compliance risk, potential audit findings, and possible fines and/or loss of funding Sponsored Projects Training Program

18. Guaranteed Funding/Advanced Account: Future Solution • New guaranteed funding/advanced account policy and request form under development Sponsored Projects Training Program

19. Guaranteed Funding/Advanced Account: Workflow • Requests are routed through the Office of Sponsored Programs Pre-Award Services (PAS) • Memo signed by PI and Chair indicating the intension to guarantee funding. The form can be found at : http://www.uvm.edu/~ospuvm/?Page=Forms/FormsMain.html • Confirmation from the sponsor of the award and the anticipated start date • Proposals must be routed • All protocols must be approved for IACUC, IRB and IBC Sponsored Projects Training Program

20. Guaranteed Funding/Advanced Account: Work Flow • Request must include the following: • Confirmation from the sponsor of the award, anticipated start date, and funding source • Signed routing form • Proposal • Budget • Appropriate protocol approval dates; if applicable • Memo of intention to guarantee the award; signed by the PI and department chair Sponsored Projects Training Program

21. Guaranteed Funding/Advanced Account: Work Flow • Requests are forwarded to Grant and Contract Administrative Services (GCA) from PAS • GCA then sets up award in PeopleSoft • Project is setup with sponsored and cost share chartstrings • GCA notifies PI, department, and others as appropriate Sponsored Projects Training Program

22. Guaranteed Funding/Advanced Account: Work Flow • Contract remains in guaranteed funding/advanced account status until award document is received • Ensures sponsor is not billed and revenue is not recognized • Upon receipt of executed award document, • GCA modifies budget and other award information, as needed • Activates the contract to allow billing to begin and revenue recognition to occur • Chartstrings remain unchanged; thus no cost transfers are required Sponsored Projects Training Program

23. Guaranteed Funding/Advanced Account: Required Practices • Culture change to one that is proactive • Guaranteed funding/advanced account requests must be initiated in a timely manner • Department will be able to discontinue guaranteed funding/advanced accounts on individual awards as appropriate • GCA would close down the award in PeopleSoft after the department removes expenses Sponsored Projects Training Program

24. Conclusion • Increase the use of guaranteed funding/advanced accounts • Decrease the number of cost transfers through pro-active grants management approach • Reduce compliance risks and audit findings Sponsored Projects Training Program

25. Questions/Contact Info • Dean’s Office • Office of Sponsored Programs, Pre-Award Services • http://www.uvm.edu/~ospuvm/ • Main Campus Office & Funding Information, 340 Waterman Building, 6-3360 • Health Sciences Office, 231 Rowell Building, 6-4067 • Grant and Contract Administrative Services • http://www.uvm.edu/~gcaacct/ • 223 Waterman Building, 6-1459 Sponsored Projects Training Program