Current Financial Compliance Issues

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Current Financial Compliance Issues

• RADG Meeting - NOVEMBER 29, 2007
• Gary Talesnik, Special Consultant
• BearingPoint, Inc.

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Current Financial Compliance Issues

• Compliance Fundamentals Best Practices
• How Compliance Issues are Raised
• Main Regulatory Directives/Guidelines
• A-133 Audits vs. Federal Audits
• Effort Reporting
• Cost Transfers
• Inconsistent Costing
• Subrecipient Monitoring
• Other Issues

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Compliance FundamentalsBest Practices

• Positive Compliance Culture
• Top Management Commitment
• Understand the Rules
• Do the Right Thing
• Open Communication
• Clear Roles and Responsibilities
• Sound Institutional Policies and Systems
• Adequate Training
• Effective Enforcement
• Internal Review and Improvement
• Adequate Resources

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How Compliance Issues Are Raised and Addressed

• Normal Day-to-Day Institutional Operations
• Important to be Alert to Potential Issues
• Internal Reviews
• A-133 Audits
• Federal Audits
• Whistleblowers

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Main Regulatory Directives/Guidelines

• OMB Circular A-21, A-122, HHS Hospital Cost
  Principles
• OMB Circular A-110
• Agency Policy Statements
• NIH Grants Policy Statement
• NSF Grants Manual
• Industry Guidelines
• COGR Publication on Effort Reporting

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A-133 Audits vs. Federal Audits

• A-133 Audits Broad Scope
• Federal Audits Specific Issues or Projects
• Effort Reporting, Cost Transfers, Etc.
• Sometimes One or a Few Projects
• Can Be Very Detailed
• Federal Audits May be Conducted by Cognizant
  Agency or Awarding Agency

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Financial Compliance Issues

• Two Categories
• Egregious, High Profile Cases
• Salary Charges for Employees Not working on
  Grants
• Clinic Compensation in Institutional Base Salary,
  But Clinical Function Not in Activities Covered
  by Effort Reports
• Altering Documents
• Multi-Million Dollar Settlements
• More Common Issues
• Effort Reporting
• Cost Transfers
• Inconsistent Costing Direct vs. Indirect
• Subrecipient Monitoring
• Other Issues

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Effort Reporting

• Major Source of Controversy for Over 40 years
• Significant Impact on Charges to Federal Programs
  
• Difficulty Distributing Faculty Time
• Interrelationship of Academic Activities
• Research, Teaching, Patient Care
• Heavy Paperwork
• Basic Documentation for 60-70 of Direct Charges
• Substantial Impact on Indirect Cost Allocations
• Frequent Findings in HHS and A-133 Audits
• NSF Nationwide Audit of Effort Reporting Systems

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Effort Reporting Issues

• Overstatement of Grant Effort
• 100 Charged to Grants
• Inadequate Consideration of Non-Grant Activities
• Writing Competitive Grant Applications
• Administrative Duties
• Non-Federal Projects
• Teaching
• Useful to Define Institutionally Compensated Work
• Whats In and Whats Out

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Effort Reporting Issues

• Who Signs/Certifies Effort
• Administrators vs. Faculty/PI
• Suitable Means of Verification
• Auditors Interviewed PI/Faculty
• No Affirmative Confirmation (Documentation) From
  PI

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Effort Reporting Issues

• Other Effort Reporting Issues
• Missing, Lost, Unsigned Reports
• Late Certifications and Salary Adjustments
• No Documentation of Committed Cost Sharing
• Absence of Independent Internal Evaluations of
  Effort Reporting System
• Charges for Summer Salaries If Grants Charged
  100 of Summer Salary, Must Represent 100 Of
  Summer Effort

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Cost Transfers

• Inadequate Documentation
• Inadequate Explanations
• No Certification
• No Review/Approval
• Late Transfers
• Usual Standard is 90 Days
• No Explanation Why Late
• Sensitive Cost Transfers
• Projects with Overruns to Projects with
  Unexpended Balances
• Conflict with Certified Effort Reports (Should be
  Recertified)

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Inconsistent Costing

• Cost Accounting Standard 502
• Costs Incurred for the Same Purpose, in Like
  Circumstances, Must be Treated Consistently as
  Direct or Indirect Costs

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Inconsistent Costing

• Normal Indirect Costs Charged Directly
• Clerical Administrative Salaries
• Office Supplies
• Postage
• Local Telephone Costs
• Memberships
• Journals and Subscriptions

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Administrative and Clerical Salaries

• Normally Treated as Indirect Costs
• Can be Directly Charged Only Under Exceptional
  Circumstances
• Major Project
• Specifically Identified
• Explicitly Budgeted
• Definition of Major Project
• Requires an Extensive Amount of Administrative or
  Clerical Support
• Significantly Greater Than Routine Level Provided
  by Academic Departments
• Should have Written Justification and Approval

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Administrative and Clerical Salaries

• Examples of Major Project (Exhibit C of A-21),
  Direct Charges MAY be Appropriate
• Large, Complex Programs Center Grants, Program
  Projects
• Extensive Data Accumulation, Analysis, Reporting,
  Surveying, Tabulation (e.g., Epidemiological
  Studies, Clinical Trials)
• Making Travel and Meeting Arrangements for Large
  Numbers of People (e.g., Conferences and
  Seminars)

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Administrative and Clerical Salaries

• Examples of Major Project (Exhibit C of A-21)
• Principal Focus is Preparation and Production of
  Manuals, Large Reports, Books, Monographs
  (Excluding Routine Progress, Technical Reports)
• Geographically Inaccessible to Normal
  Departmental Administrative Services, Such as
  Research Vessels
• Project-Specific Database Management
  Individualized Graphics or Manuscript
  Preparation Human or Animal Protocols Multiple
  Project-Related Investigator Coordination

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Other Normal Indirect Costs

• Other Normal Indirect Costs Specified in A-21
• Office Supplies
• Postage
• Local (Basic) Telephone Services
• Membership Dues
• Journals and Subscriptions
• Can be Directly Charged Only Under Exceptional
  Circumstances
• Examples of Exceptional Circumstances
• Postage Mail Survey
• Local Telephone Dedicated Phone Lines for
  Telephone Survey, Hot Line
• Should Have Written Justification and Approval

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Subrecipient Monitoring

• Programmatic and Financial Monitoring
• Main Findings
• No Written Procedures
• Inadequate/Undocumented Reviews
• A-133 Audit Reports
• Invoices, Expense Documentation
• Performance Reports
• Conflict of Interests
• Need Clear Roles and Responsibilities PI vs.
  Administrators

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Other Issues

• Documentation of Non-Labor Charges
• Documentation of Cost Sharing
• Purchases Near End of Grant Period
• Late FSRs

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