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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 enterprise1
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 enterprise2
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

Research administration forum 1348630

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 program1
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 allocation1
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 allocation2
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



Mrak Hall

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 issues1
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 recovery1
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 recovery2
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 recovery3
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

Research administration forum 1348630

Washington, DC

Maximizing grant recovery4
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 administration1
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

Impact Administration

  • 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

Impact Administration

  • 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

Impact Administration

What we don’t want:

Vice Chancellor Klein to end up in jail.


Impact Administration

  • 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 Administration

  • 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

Questions? Administration