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Research Administration Forum Compliance Challenges: Allocation of Costs to Sponsored Projects May 26, 2004 Today’s Agenda Define our major research compliance challenges and the opportunities they afford

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research administration forum
Research Administration Forum

Compliance Challenges:

Allocation of Costs to Sponsored Projects

May 26, 2004

today s agenda
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
building the research enterprise
Building the Research Enterprise
  • UC Davis Vision
    • Discovery
      • Growth in the level of extramural funding across all disciplines
building the research enterprise4
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
building the research enterprise5
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

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.

components of an effective compliance program
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
components of an effective compliance program8
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
accountability risks
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
accountability major risks
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
accountability cost allocation
Accountability – Cost Allocation
  • Allowable costs
    • Reasonable
      • Arm’s length transaction?
      • Necessary
    • Allocable
    • Consistent treatment
      • Like treatment in like circumstances
accountability cost allocation12
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?
accountability cost allocation13
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
accountability other issues
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
accountability other issues16
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?
maximizing grant recovery
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
maximizing grant recovery19
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
maximizing grant recovery20
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
maximizing grant recovery21
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

Washington, DC

maximizing grant recovery23
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
providing an effective environment for research administration
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
providing an effective environment for research administration25
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
  • 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
  • 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

What we don’t want:

Vice Chancellor Klein to end up in jail.


  • 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
we need your help
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