Association of College and University Auditors Compliance Track Research and Compliance Issues

1
Association of College and University
AuditorsCompliance TrackResearch and Compliance
Issues

• Jane A. Youngers, The University of Texas Health
  Science Center at San Antonio
• Amy Barrett, CPA, The University of Texas System
• Paige Buechley, CISA, The University of Texas
  System
• April, 2006

2
A Primer on Research IssuesPart I

• Jane A. Youngers
• Assistant Vice President for Research
• The University of Texas Health Science Center at
  San Antonio

3
What We Will Do Today

• identify key research compliance areas
• discuss fundamental regulations and resultant
  requirements
• review hot button topics

4
Florida International UnivEffort Certification
Direct Costs 11.5 million
Johns Hopkins Univ Effort Certification
2.7 million
University of MinnesotaMisuse federal funds
32 million
New York University Medical CenterInflated
research grant costs15.5 million
Univ California/San Francisco Animal Care
Allegations 92,500 fine
Univ of Southern California Questioned Costs
HHS/OIG Audit 400,000
Results of Non-Compliance Significant
Audits/Settlements
Mayo FoundationMischarging federal grants 6.5
million
East Carolina Univ Questioned Costs HHS/OIG
Audit 2.4 million
Cornell Medical Clinical Research Issues 4.4
million
Univ Alabama/BirminghamEffort Certification
Clinical Research Billing 3.4 million
Harvard/BIDMC Costing Issues
Self-Reported 3.25 million
Northwestern University Committed Time/Effort 5
million
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A Sampler of Compliance Areas

• Conflict of Interest
• Misconduct
• Cost Sharing
• Effort Reporting
• Purchasing
• Intellectual Property
• Data Management
• Subcontracting
• Export controls

• Human Participants
• Animal Welfare
• Property Management
• Technical Reporting
• Socio-Economic
• Biosafety
• Chemical Safety
• Radiation Safety
• Privacy

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What Are the Hot Spots?

• HHS Audit Plan FY 2006 provides insight
• Other Examples
• HHS/OIG NIH Compliance Guide
• Agency Audits/Reviews
• Export Control Reviews
• OBA Reviews of Biosafety Compliance

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HHS OIG NIH Compliance Guide(as proposed in
Federal Register, 11/28/05)

• Identified elements essential to compliance
  program and provided exacting detail
• Identified Risk Areas
• effort certification
• cost allocation
• reporting other support

8
HHS OIG FY06 Audit Plan

• conflict of interest
• direct charging of clerical and administrative
  salaries
• cost transfers
• subrecipient monitoring
• level of commitment

9
Other Audits/Reviews

• NSF Labor Effort Reporting
• NIH Conflict of Interest Site Visits
• OBA Review of Biosafety Compliance

10
What are the basic rules and regulations?

• OMB Circulars
• A-21, Costing Principles (2 CFR 220)
• A-110, Administrative Requirements (2 CFR 215)
• A-133, Audit
• http//www.whitehouse.gov/omb/grants/grants_circul
  ars.html
• Federal Acquisition Regulations (FAR)

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OMB Circular A-21(2 CFR 220)Cost Principles for
Educational Institutions

• defines often-used terms
• defines methods of FA cost calculation
• defines allowable and unallowable costs (the j
  section)
• includes Cost Accounting Standards

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Cost Accounting Standards

• 501 consistency in estimating, accumulating and
  reporting costs
• 502 consistency in allocating costs incurred
  for the same purpose
• 505 accounting for unallowable costs
• 506 consistency in using the same accounting
  period
• CASB Disclosure Statement (DS-2)

13
OMB Circular A-110 (2 CFR 215)Uniform
Administrative Requirements

• sets maximum requirements for the government
• sets minimum standards for institutions
• individual agencies then implement
• emphasizes
• systems
• written procedures

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OMB Circular A-133Audit Requirements

• standards for annual audit of federal funds
• annual compliance supplement is particularly
  instructive re audit areas and best practices

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What do federal rules involving sponsored
programs have in common?

• shades of gray
• Primarily
• Usually
• Normally
• Generally

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Award Administration

• Grants (federal)
• rules fairly consistent
• lots of budget flexibility
• concept of expanded authorities
• one-time no cost extension
• carryforward of balances
• incur pre-award costs
• Grants (non-federal)
• varies by sponsor
• typically not as much budget flexibility

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Award AdministrationRules of Costing

• for a cost to be allowable, it must be
• reasonable and necessary
• prudent person rule for reasonableness
• is cost necessary for performance of project?
• are costs incurred consistent with institutional
  policies?

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Award AdministrationRules of Costing (cont)

• allocable
• assignable to a cost objective in accordance with
  benefits received
• incurred to advance work under the project
• consistent
• costs incurred for the same purpose, in like
  circumstances, must be treated consistently as a
  direct or indirect (FA) cost

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Award AdministrationRules of Costing (cont)

• unallowable costs
• not reimbursable under award
• examples
• alcohol
• entertainment
• meals
• student aid, except on training awards
• airline fares in excess of coach or on foreign
  flag carriers (with exceptions)

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Award AdministrationRules of Costing (cont)

• unallowable costs
• individual awards may designate additional costs
  as unallowable
• what happens to unallowable costs if they are
  charged to an award?

21
Award AdministrationRules of Costing

• sensitive costs
• administrative clerical salaries
• general purpose equipment
• office supplies
• memberships (unallowable on federal awards)
• subscription costs books
• telephone charges other than long distance

22
Award AdministrationCost Transfers

• cost transfer moves expenses from an account of
  one project to another project
• cost transfers are necessary to correct errors
• transfers should be exception NOT rule
• must have documentation on why transfer necessary
• 90 day rule
• always a red flag (particularly salary transfers)

23
Award AdministrationCompensation

• Employee compensation controlled by A-21, J.10
  and by specific agency requirements
• rate of pay
• certification requirements
• NIH Salary Cap (FY06 183,500 Executive Level I)
• Institutional base salary (NIH definition)

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Award AdministrationCompensation (cont)

• Institutional Base Salary (per NIH)
• annual compensation paid by an organization for
  an employees appointment whether that
  individuals time is spent on research, teaching,
  patient care, or other activities
• issue of clinical practice compensation
• guaranteed by institution
• shown on appointment and paid through institution
• included in effort certification

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Award AdministrationEquipment Purchases

• common definition 5,000 or greater and service
  life of one year or more
• general purpose equipment not usually allowable
• if charged to project, principal use must be on
  project
• purchase during last months of a project is
  problematic

26
Award AdministrationTravel and Business Expenses

• institutions travel expense rules apply
• meals other than travelers are unallowable
  business meals
• entertainment expenses also unallowable

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Award AdministrationConsultants

• institution personnel cant receive extra pay to
  consult on institution-administered projects
• to hire a consultant, use institutional policies
• work for hire doctrine
• consultants must be independent contractors as
  defined by the IRS

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Award AdministrationProject Periods

• must incur cost within award period (and
  pre-award period, if applicable)
• may generally extend performance period through
  no-cost extension
• unused funds not sufficient reason for no-cost
  extension

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Frequent Costing Questions

• Allowability of
• home access to internet,
• pagers, BlackBerrys, PDAs,
• memberships,
• subscriptions
• extra-compensation for employees
• accelerated Visa costs

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Costing Issues Effort Certification

• OMB A-21, J.10 sets forth requirements
• January 2001 OMB clarification memo
• CAS Requirements
• committed vs actual effort
• accounting for effort

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Costing Issues Effort Certification

• Effort Certification
• faculty and professional staff
• clerical staff
• suitable means of verification
• includes cost-shared effort
• some institutions use plan confirmation systems

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Common Issues and Risks in Effort Certification

• Individuals understanding of the certification
• Clinical faculty/VA appointees
• Who signs
• What about K awards or salary cap
• Accounting for donated effort

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Costing Issues Cost Sharing

• Cost Sharing
• controlled by OMB A-110, __.23
• mandatory vs voluntary
• committed vs uncommitted
• definitions and specific requirements for what
  constitutes cost sharing
• must be identifiable in recipients records

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Costing Issues Cost Sharing (cont)

• A-110 Requirements
• verifiable in institutions records
• necessary and reasonable
• allowable under cost principles
• not other federal money
• in approved budget
• conform to other provisions of A-110

35
Costing Issues Program Income

• gross income earned that is directly generated by
  a sponsored activity
• can include
• fees for service
• use or rental of real or personal property
• sale of commodities or items made under award

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Costing Issues Program Income (cont)

• may be used as
• additive
• cost sharing
• deductive
• for research, always additive
• for other programs, unless specified, is deductive