NIH SBIR STTR Conference 2006' Federal Grants Management Compliance Avoiding Risky Business, Kathlee

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Federal Grants Management Compliance
Avoiding Risky Business Kathleen J. Shino,
M.B.A. NIH SBIR/STTR Specialist NIH SBIR/STTR
Conference, Cleveland Ohio July 13, 2006
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Overview

• Roles and Responsibilities
• Eligibility for SBIR and STTR
• Application Process
• Award Actions
• Post Award Requirements
• Compliance Basics

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NIH Staff Roles

• Grants Management Officer
• - awards, compliance, prior approvals
• Grants Management Specialist
• Day to day grants portfolio management
• Program Official
• scientific, and/or technical aspects of grant
• Scientific Review Administrator (SRAs)
• Manages the activities of Scientific Review
  Groups

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NIH Staff Serve as a Resource to Grantees

• Prior approval items (NIH prior approval
  required)
• Grants Management - review for compliance with
  policies and regulations
• Program Official - change in scientific scope
• Noncompetitive applications (Annual progress
  report)
• Grants Management - review for compliance
• Program Official - review scientific progress
• Closeout of terminated projects (Final reports)
• Grants Management - responsible for receipt of
  all close-out documents
• Program Official - review final scientific
  progress report

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Grantee Institution

• The award is made to the institution, not an
  individual
• The Institution Official (I0)
• Is legally responsible for the proper conduct and
  execution of the project
• Provides fiscal management of the project
• Provides oversight on allocation decisions
• Ensures compliance with Federal laws and
  regulations, and NIH policies and procedures

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Principal Investigator (PI)

• Responsible for the scientific and/or technical
  aspects of the grant
• Day-to-day management of the project
• Responsible for the scientific conduct of the
  project and to provide the required progress
  reports

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Small Business Innovation Research
Small Business Technology Transfer Research

• See NIH SBIR/STTR website
• http//grants1.nih.gov/grants/funding/sbir.htm
• Phase I Feasibility/design
• Normally from 6 months (SBIR) to 1 year (STTR)
• Normally up to 100,000 Total Award (DCIDCFee)
• Phase II Full RD continuation of Phase I
• Only Phase I awardees eligible for for Phase II
• Normally up to Two Years and 750,000 Total Award
• Phase III commercialization- no SBIR funding

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SBIR/STTR Eligibility

• For-profit U.S. business firm
• 51 U.S. owned by individuals independently
  operated
• Small Business Concern (SBC) located in the U.S.
• 500 or fewer employees, including affiliates
• See SBA regulations for SBIR STTR ownership

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SBIR/STTR

• Eligibility determined at time of award
• All project activities in U.S.
• Normally Not-To-Exceed levels (NTE)
• Project period
• SBIR R43 request 12 months budget period if
• Animals
• Human subjects involvement
• Third party (consortium/contracts)

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SBIR and STTR

• New Applicant Organizations need
• Tax Identification Number
• DUNS
• Human Subjects FWA/SPA (SBC)
• Animal Assurance for grantee (SBC)
• Required for SF424RR submission

• Annual Reporting required Misconduct in
  Science to the Office of Research Integrity (ORI)

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SBIR Requirements

• P.I. primarily employed by SBC gt50
• Dont confuse employment w/Time and Effort
• PI employment is rarely negotiable
• Phase I third party involvement
• Normally NTE 33 of total award amount
• Includes consultants consortia
• Does not include fee for service contracts
• May exceed 33 if requested, justified, and
  approved by reviewers and program
• Justify in the application deviations from SBA
  guidelines in funding levels project period

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SBIR Requirements Phase II

• Commercialization Plan required for All Phase II
  applications
• Phase II (R44)
• PI employment 51 by SBC
• Third party costs normally NTE 50
• Total amount awarded normally NTE 750,000 (D.C.,
  FA fee) for two years

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STTR Phase I and II

• Single Research Institution Minimum 30
• STTR budget page and letter from RI required
• Small Business Minimum 40
• Principal Investigator
• Minimum 10 time effort
• Must have formal agreement with SBC
• Commercialization Plan for Phase II

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Types of Costs http//www.arnet.gov/far/loadmainr
e.html

• Indirect Costs/FA Costs
• Not Easily Identified With A Specific Project
• Fringe Benefits, Overhead, Exec. salaries
• Direct Costs
• Easily Identified With A Specific Project
• Direct Salaries Wages
• Materials Supplies
• Consultants Subcontracts
• Unallowable Costs -- Government will not
  reimburse!

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Percentage Calculations

• Work Performance (Research Activities)
• Normally based on total award amount
• Explain in budget justification for exceptions
• Fee/profit (NTE 7)
• ONLY for SBIR/STTR grantee (SBC)
• Based on total DC FA
• Grantee justified in application?
• All other mechanisms prohibited from fee/profit
  on grants

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SBIR STTR Fee/Profit

• Fee must be requested in application
• May not exceed 7 of total costs (direct and
  indirect) requested for NIH grants
• Fee must be justified in the application
• Based on profit margin consistent with all
  projects of similar scope, regardless of source
  of funding.

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Phase I Applications and Indirect Cost Rates
(ICR)

• PHASE I If you have a current negotiated ICR
  agreement, request the ICR stated in the
  agreement
• PHASE I If no current negotiated ICR agreement,
  indirect costs funded cannot exceed 40 of total
  direct costs.
• NIH does not negotiate ICR for Phase I SBIR or
  STTR awards.

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Phase II Applications and Indirect Cost
Rates (ICR)

• If you have a current negotiated ICR agreement
  use the ICR stated in the agreement.
• If you do not have a current negotiated ICR
  agreement and your proposed indirect costs
  exceeds 25 of total direct costs, rates must be
  reviewed by DFAS. Award will restrict indirect
  cost recovery to 10 of Salaries Wages until
  DFAS review is complete.
• PHASE II - If proposed indirect costs are 25 or
  less of total direct costs, you do not need to
  provide supporting documentation or negotiation

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Questions about Indirect Costs?

• NIH Division of Financial Advisory Services
  (DFAS)
• http//oamp.od.nih.gov/dfas/rates.asp
• Ruth Bishop, Branch Chief
• Ph [phone]

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• Award Actions
• Federally funded
• Science with Strings Attached

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Notice of Grant Award (NGA)

• A legally binding contract with the government
• Official notice that an award has been made
• Includes
• Funding level (amount available for project)
• Periods of support (Project and budget period)
• Terms and conditions (Restrictions/requirements)
• NIH contact information Who do you call first?
• Program Official for Scientific issues
• Grants Management Specialist for administrative
  issues

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Standard Terms and Conditions Expanded
Authorities

• Carryover
• The authority to expend funds from the previous
  budget period
• Streamlined Non-competing Award Process (SNAP
  uses PHS 2590 forms) (Phase II)
• Eliminates need for annual submission of budget
  with progress report and annual submission of
  Financial Status Report (FSR)

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Expanded Authorities

• All NIH awards are under EA, which means
• 90 day pre-award cost authority at grantees own
  risk
• Reasonable rebudgeting authority
• gt 25 of total award
• May change consortium participant
• May automatically extend project period

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No-cost Extensions

• Grantee may extend (without additional funds) the
  final budget period of the project up to 12
  months (one-time only).
• If registered in Commons grantees can enter a
  first NCE through the Commons (up to 90 days
  before the end date of the award).
• No revised NGA for first, on-time extension

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Other Terms and Conditions

• Restrictive terms - may specify required action
  on the part of the grantee to remove restriction
  (e.g., IDC rate negotiation, human subjects)
• Close-out reporting requirements
• Included in the Final year Notice of Grant Award
  (NGA)
• Financial, invention and final progress report
• Strings see Section IV of your NGA

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Grantee Acceptance

• The grantee indicates acceptance of the terms
  and conditions of the award by drawing down funds
  against the grant from the Payment Management
  System.
• DHHS Division of Payment Management
• http//www.dpm.psc.gov

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Post Award

• NIH prior approval requirements
• Close-out (termination)
• More Strings

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Prior NIH Approval Required

• Change of PI and other Key personnel named in
  Notice of Grant Award
• Change of Grantee Organization
• Change of Scope

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Actions Likely to be Considered a Change in
Scope

• Change in the specific aims from those approved
  in the competing application
• Substitution of one animal model for another
• Any change from the approved use of animals or
  human subjects
• Shifting the research emphasis from one disease
  area to another
• Adding new subcontract

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Changes - Prior Approval Required!

• Notify the NIH (Grants Management Specialist)
  immediately if any of these apply or will apply
  to your business
• Successor-in-interest
• Name change
• Merger

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Changes Prior Approval Required!

• The following changes involving the Principal
  Investigator or other key personnel should also
  be promptly reported
• Withdrawal from the project entirely
• An absence of three months or more
• Reduced time devoted to the project by 25 or
  more
• Key personnel named in the Terms of Award

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Submitting prior approval requests to NIH

• Requests for project changes that require NIH
  approval must be submitted in writing and signed
  by the Institution Official (IO) to the Grants
  Management Officer (GMO)
• An e-mail request is acceptable
• Sent through the IO to the awarding institute
  GMO and Program Official

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2nd No-cost Extensions (NCE)

• Requests submitted after the project period has
  expired or extensions beyond the initial 12 month
  extension require NIH prior approval
• 2nd NCE (or late) request should include
• Length of the request
• An estimate of funds remaining for project
• A brief progress report and the goals to be
  attained during the extended period
• If the request was submitted late, state the
  reason for the late request
• If approved, a revised NGA will be issued

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Close Out Requirements

• Due within 90 days of the end of the project
  period to the awarding Institute
• Final Progress Report (no form, format included
  in final Notice of Grant Award terms!)
• Final Invention Statement - Form HHS 568
• Final Financial Status Report SF 269A or SF 269
• Refer to the terms and conditions on the final
  Notice of Grant Award (Section IV)

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Compliance

• Internal Controls
• Close-out
• Compliance Basics

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Why is Compliance Important?

• It strengthens the relationship of trust that
  exists between sponsor and recipient
• It suggests a presence of the stewardship
  necessary to properly safeguard the Federal
  investment in biomedical research
• Compliance Program Guidance for Recipients of
  NIH Research Grants
• http//grants.nih.gov/grants/compliance/complianc
  e.htm

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Compliance is

• The effective management of public funds to
  maximize research outcomes
• The avoidance of fraud, institutional
  mismanagement, and poor management of Federal
  funds

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Internal Controls

• Are budgetary controls in effect to preclude
  incurred expenses/obligations from exceeding
  total awarded funds or budget cost categories?
• Is there a separation of duties (record keeping/
  cash receipts/ cash payments)?
• Are all accounting entries adequately documented?
  (Journal Chart of Accounts?)

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Internal Controls Capability

• The grantee must have
• a job cost accounting system,
• an adequate timekeeping system,
• must segregate direct and indirect costs.
• Must have written policies procedures
• Federal Financial and Business Management Systems
  Sample Policies and Procedures
• http//www.niddk.nih.gov/fund/crfo/sbirsttr.htm

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Compliance Basics

• Do the right thingfrom the start!
• Keep your policies current with Federal
  requirements
• Develop a continuing training program
• Perform risk assessments and implement
  appropriate internal controls
• COMMUNICATE, COMMUNICATE, COMMUNICATE!
• With your employees and with NIH

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Who is Accountable for Compliance?

• The Company is accountable for the finances and
  the administration of the grant
• The PI is accountable for the research
• The PI makes allocation decisions
• The Company exercises oversight on allocation
  decisions

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Types of Compliance Issues

• Misuse of funds
• Unallowable costs
• Allocation of costs
• Accelerated expenditures
• Large unobligated balances
• Cost transfers
• Financial Conflict of interest

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Common Contributors to Compliance Problems

• Lack of understanding of roles and
  responsibilities of institutional staff
• Inadequate resources
• Outdated or nonexistent policies and procedures
• Inadequate staff training and education
• Inadequate systems
• Perception that internal control systems are not
  necessary

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NIH External Compliance Activities

• Institutional compliance process
• Technical assistance
• Corrective action process
• Settlement process
• Outreach
• Educational seminars
• National and regional meetings
• NIH Regional Seminars
• Proactive Compliance Site Visits
• Targeted Site Reviews (FCOI)

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SoWhat do Grantees Need to Comply with?

• Code of Federal Regulations (CFR)
• 42 CFR Part 52 Grants for Research Projects
• http//www.access.gpo.gov/nara/cfr/waisidx_03/42c
  fr52_03.html
• 45 CFR Parts 74 and 92 Public Welfare,
  Administrative Requirements
• (74) http//www.access.gpo.gov/nara/cfr/waisidx_0
  4/45cfr74_04.html
• (92) http//www.access.gpo.gov/nara/cfr/waisidx_04
  /45cfr92_04.html
• 45 CFR Part 46 Public Welfare, Protection of
  Human Subjects
• http//www.access.gpo.gov/nara/cfr/waisidx_04/45c
  fr46_04.html

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SoWhat do Grantees Need to Comply with?

• OMB Circulars - http//www.whitehouse.gov.ombcircu
  lars/
• Administrative Requirements or Standards
• A-102 Uniform Administrative Requirements for
  Grants and Cooperative Agreements awarded to
  State and Local Governments and Indian Tribes
• A-110 Uniform Administrative Requirements for
  Grants and Agreements awarded to Universities,
  Hospitals, and Other Non-Profit Organizations (
  for-profits at NIH)
• These include pre-award and post-award
  requirements

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SoWhat do Grantees Need to Comply with?

• Cost Principles Applicable OMB Circulars and
  CFRs
• A-21 Cost Principles for Educational
  Institutions
• A-87 Cost Principles for State and Local
  Governments and Indian Tribes
• A-122 Cost Principles for Non-Profit
  Organizations
• 45 CFR Part 74, Appendix E Principles for
  Determining Costs Applicable to Hospitals
• 48 CFR Subpart 31.2 (Federal Acquisition
  Regulation) Applicable to For-profit
  organizations

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SoWhat do Grantees Need to Comply with?

• Audit Requirements Applicable OMB Circular and
  CFR
• A-133 Audits of States, Local Governments, and
  Non-Profit Organizations
• 45 CFR Part 74.26 Audits of For-Profit and
• Foreign Organizations

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SoWhat do Grantees Need to Comply with?

• NIH Grants Policy Statement
• http//odoerdb2.od.nih.gov/gmac/nihgps_2003/index
  .htm
• Notice of Grant Award
• NIH Guide to Grants and Contracts
• (for new requirements)
• http//grants.nih.gov/grants/guide/index.html

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NIH Enforcement Actions

• Special terms and conditions of awards
• Loss of carryover authority
• Cost disallowances
• Exclusion from Expanded Authorities
• Suspension/termination of award
• Opportunity for improved grantee systems and
  policies to assure compliance

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Financial Conflict of Interest(FCOI)

• Expectation Companies must establish written
  policies and procedures to address financial
  conflict of interest for their investigators.
  These standards are designed to ensure that
  investigators maintain research objectivity in
  the design, conduct, analysis and reporting of
  research funded under grants.

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Financial Conflict of Interest

• Identified a conflict of interest? You must
• Notify Chief GMO to assure that the conflicting
  interest is being managed, reduced, or eliminated
• Provide additional information, if requested
• FCOI must be addressed in consortium, consultant
  and employee contractual agreements
• See NIH Guide http//grants2.nih.gov/grants/guide
  /notice-files/NOT-OD-OO-040.html
• COI regulations exclude Phase I SBIR and STTR
  awards!

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Reminder!

• All SBIR/STTR recipients must register with SBA
  Tech-Net for reporting purposes
• http//tech-net.sba.gov
• SF424RR applications See the new forms and
  application instructions for SBIR STTR
  http//grants.nih.gov/grants/funding/424/index.htm
  
• Register NOW with Grants.gov and eRA
• http//era.nih.gov/ElectronicReceipt/preparing.htm
  4

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NIH Grants Information Sources

• Notice of Grant Award (read it!)
• Provides terms of award and agency contacts
• Frequently Asked Questions
• http//www.grants.nih.gov/grants/funding/giofaq.ht
  m
• Grants Information
• grantsinfo_at_nih.gov (contact email address)
• NIH Grants Policy Information
• http//grants1.nih.gov/grants/policy/policy.htm

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QUESTIONS??

• E-mail sbir_at_od.nih.gov
• Thank You!
• Kathleen J. Shino, M.B.A.
• NIH SBIR/STTR Program Specialist
• Voice 301 435-2689 Fax [phone]
• Email shinok_at_mail.nih.gov