1. The Office of Research Services The Office of Research Support Services 1 August 17, 2006 Module 5 Closeouts and Audits of Sponsored Project Funds Sponsored Programs at Penn

2. The Office of Research Services The Office of Research Support Services 2 August 17, 2006 Closeout of Sponsored Project Funds Agenda PI & Department responsibilities –Communication –Pre-closeout review –Adjustment period –Freeze/unfreeze grants –Technical & invention reports ORS responsibilities –Unfreeze requests –Financial & non-financial reports –Disabling accounts SPP # 2126 Interim & Final Financial Reports SPP # 2128 Account Close-out

3. The Office of Research Services The Office of Research Support Services 3 August 17, 2006 PI and BA Responsibilities

4. The Office of Research Services The Office of Research Support Services 4 August 17, 2006 Communication Must occur between –Business Administrator (BA) –Principal Investigator (PI) –Office of Research Services (ORS) and –Sponsor During the award period, as we prepare for account closeout, and during the closeout process

5. The Office of Research Services The Office of Research Support Services 5 August 17, 2006 Determining Which Grants are Due to Expire/Freeze Business Objects Org Summary.rep There is a tab for funds freezing in the next 90 days as well as a tab for Due and Late Reports Ben Financials Utilize 132.ORG “List of Terminated Grant and Contract Funds” and the 133.ORG”List of Grant and Contract Funds Due to Close”

6. The Office of Research Services The Office of Research Support Services 6 August 17, 2006 ORG.Summary – Funds freezing in Next 90 days

7. The Office of Research Services The Office of Research Support Services 7 August 17, 2006 ORG.Summary – Due and Late Reports

8. The Office of Research Services The Office of Research Support Services 8 August 17, 2006 Pre-Closeout Review Occurs during the last 90 days of the account –PI and BA meet to review and discuss: Budgeted vs. Actual expenses and final anticipated expenses Spending Rate and disposition of remaining funds, if any Possible need for any adjustments Possible need for extension to complete project Possible need for an Advance Account or Account Continuation Request for following year (if salary charges are to continue past end date, this will be necessary)

9. The Office of Research Services The Office of Research Support Services 9 August 17, 2006 Pre-Closeout Review (cont.) Subcontract closeout(s), if applicable Service center charges Any unallowable expenses on award or other adjustments which still need to be made –Remember »Unallowable expenses should never be charged »Cost transfers must happen no later than 90 days from month end during the award Cash received on fund or receivable issues Delays in meeting deliverables or technical report deadlines

10. The Office of Research Services The Office of Research Support Services 10 August 17, 2006 Pre Closeout Review Issues Potential Issues –(Revenue) not equal to Expense - Implies Overdraft, Unallowable Object Code Charges –Waywards should be removed - utilizing 115.Org (BEN) Report or Sub budgets/Other orgs chgs/Waywards(Business Objects) Report –Overcharging 5332 Subcontracts above the first $25K per Subcontract as this causes incorrect charging of Indirect Costs.

11. The Office of Research Services The Office of Research Support Services 11 August 17, 2006 What is the Adjustment Period? Period of up to 60 days after Account end date –Allows for final review of project activity so adjustments can be made prior to final reporting 30/31 days: Account End Date + 15 days 45 days: Account End + 30 days 60/61 days: Account End + 30 days 90/91 days: Account End Date + 60 days

12. The Office of Research Services The Office of Research Support Services 12 August 17, 2006 Adjustment Period (cont.) Run 134.ORG Report in BEN Financials or Fund Summary in Business Objects –Review the following areas PBUD/PBIL should be equal Revenue vs. Expense –Should be equal –If not, requires further review –F&A and Employee Benefits (EB) – Were the correct rates applied?

13. The Office of Research Services The Office of Research Support Services 13 August 17, 2006 Adjustment Period (cont.) –Review the following areas (cont.) DOD Cap(where applicable) should only be 35% of Total Costs Payroll – review accuracy of payments/effort & maintain documentation for any significant administrative/clerical effort Service Centers –Were the charges handled appropriately Cost transfers- were transfers over 90 days approved & documented in files Other direct costs for allowability

14. The Office of Research Services The Office of Research Support Services 14 August 17, 2006 Final Review Prior to End of Adjustment Period Review PBIL/PBUD, NOGA and approved carryforward, if applicable Review subcontracts and respective closeouts Communicate with ORS Accountant –Outstanding reporting/receivable issues Determine and address –Unliquidated and unobligated carryovers All adjustments must be processed by end of the fund adjustment period –Complete all approved, allowable, allocable and appropriate adjustments identified during pre- closeout review

15. The Office of Research Services The Office of Research Support Services 15 August 17, 2006 Best Practices for Communications Emails - the subject line of your email should be informative –“Action Fund#, P.I., Description –Examples: “Closeout 538500, Mendel, 5K23MH024680-03” “Unfreeze 538000, Frankenstein, 5R01HG012345-05 One email per fund action Email ORS Accountant and confirm the Direct, Indirect, and Total Expenses to report. - This should occur by the end of the adjustment period

16. The Office of Research Services The Office of Research Support Services 16 August 17, 2006 Freeze/Unfreeze Grant Functionality

17. The Office of Research Services The Office of Research Support Services 17 August 17, 2006 Freeze Grants Functionality Tool that allows authorized research administrators and ORS to limit activity against an award –Can be used during life of project and during the adjustment period –Can reduce cost transfers and overruns after the end of the fund project period –Improve timeliness and accuracy of final financial reports

18. The Office of Research Services The Office of Research Support Services 18 August 17, 2006 Freeze Grants Features Awards are frozen/unfrozen at fund level –Payroll can be frozen manually prior to the Account End Date –Functionality frozen automatically after Account End Date New Purchase Orders/Requisitions –Functionalities frozen automatically after Adjustment Period End Date (APED) Manual Journal Entries C-forms Feeder Journal Entries Payroll

19. The Office of Research Services The Office of Research Support Services 19 August 17, 2006 Freeze Grants (cont.) If a fund has ended and, upon review, is in order –Contact ORS to confirm total expense to report and freeze the fund If fund is not in order and additional corrections/adjustments are needed –Process them before the end of the adjustment period and maintain supporting documentation

20. The Office of Research Services The Office of Research Support Services 20 August 17, 2006 Unfreeze Grants If final adjustments to correct errors are not made prior to fund fully freezing –An unfreeze request can be made Prior to submitting an unfreeze request to ORS –Proposed adjustments should be reviewed for allowability, allocability, appropriateness, and compliance with sponsor and university policies

21. The Office of Research Services The Office of Research Support Services 21 August 17, 2006 Unfreeze Request (cont.) Are not necessary to: –Prepare budget journals –Pay already encumbered amounts on an existing P.O. –Unfreeze advance accounts (request an extension of advance/continuation of fund account)

22. The Office of Research Services The Office of Research Support Services 22 August 17, 2006 Unfreeze Worksheet

23. The Office of Research Services The Office of Research Support Services 23 August 17, 2006 Unfreeze Grants (cont.) Submit your request to: –School of Medicine departments Send worksheet and details (including documentation) to Office of Research Services Support (ORSS) Grant Manager with a cc to ORS Accountant ORSS will review and, if approved, will forward to Research Services Accountant and cc Assistant Director –All other Schools Send worksheet and details to ORS Accountant and cc Assistant Director –Unfreeze requests are normally addressed within two business days

24. The Office of Research Services The Office of Research Support Services 24 August 17, 2006 ORS Responsibilities

25. The Office of Research Services The Office of Research Support Services 25 August 17, 2006 ORS Reporting Period Tasks Review Due Reports to determine which reports due Send email to BA requesting closeout information ORS Accountant reviews the following; - Terms and conditions of award and sponsor reporting requirements –Review the 734 report in Business Objects (similar to 134.ORG report in Ben Financials) –Check PBUD/PBIL for accuracy –Reconcile EB’s, F&A and Cash –Review 252 report for stale dated checks

26. The Office of Research Services The Office of Research Support Services 26 August 17, 2006 ORS Reporting Period Tasks (cont.) Review expenses posted to the fund for allowability –Revenue 4600, 4620, 478X, 4822, TIF, Program Income & Other Revenue Review remaining balances or deficits ORS will communicate any issues identified and request a response from the BA If the ORS Accountant does not receive a response regarding closeout, the report will be issued by the due date and an email will be sent to the BA providing the total reported to the sponsor

27. The Office of Research Services The Office of Research Support Services 27 August 17, 2006 ORS Reporting Period Tasks (cont.) Overdrafts –ORS will contact department regarding a resolution –If no response is received by report due date, fund will be reported up to award amount and ORS will process journal to transfer resources from departmental fund to grant fund to offset overdraft via object code 4822 SPP # 2129 Chargeback of Overdrafts and Disallowances

28. The Office of Research Services The Office of Research Support Services 28 August 17, 2006 ORS Reporting Period Tasks (cont.) Unexpended Balances –Will be reported to sponsor –Carryover will be processed and/or requested as appropriate –Residual cash will be remitted to sponsor according to agreement –Carryovers and/or unliquidated obligations will be determined and handled as appropriate

29. The Office of Research Services The Office of Research Support Services 29 August 17, 2006 ORS Reporting Period Tasks (cont.) Final Financial Status Report (FSR) Submission –Financial report will be issued by ORS no later than due date –A copy will be sent to department and a copy will be scanned into the ORS imaging system –ORS will process any closing entries based upon final financial reports

30. The Office of Research Services The Office of Research Support Services 30 August 17, 2006 Revised FSRs Only done in rare circumstances –When revising to increase total expenses, most sponsors will only accept revised reports for limited period of time following the end of the award. Some agencies will not accept upward revised FSRs. –When revising to decrease total expenses, there is no time limit. These should be completed immediately upon identification of the need for a revised FSR. SPP # 2137 Revised Final Financial Reports

31. The Office of Research Services The Office of Research Support Services 31 August 17, 2006 Disabling Funds How does a fund get Disabled? –ORS runs 717.RA report in BEN Financial weekly To identify funds that meet disable requirements –ORS runs Business Objects 717 To identify funds that expired >90 days –If the fund is eligible for disabling ORS checks “Enable” flag Enters date in BEN Financials

32. The Office of Research Services The Office of Research Support Services 32 August 17, 2006 Requirements to Disable Funds 1.Financial Report must be submitted if required- Last FIN Report Filed=Next FIN Report Due 2.FSRD and FSRI s/b posted reflecting Direct and Indirect Costs reported 3.PBIL=PBUD=FSRD+FSRI=Total Expenses reported and on the G/L 4.No Encumbrances can remain 5.Object Code 1220 Receivable must =0 6.Equipment in Object Code 183X/187X must be transferred to School Surrogate Accounts via an Object Code 4826 Equipment Transfer 7.BRIM (ORS billing system) is reconciled (requires ORS action) 8.All stale dated checks have been satisfactorily addressed

33. The Office of Research Services The Office of Research Support Services 33 August 17, 2006 ORG Summary - Analysis of Expired Funds Why isn’t my fund disabled?

34. The Office of Research Services The Office of Research Support Services 34 August 17, 2006 Miscellaneous - Cost Sharing “A portion of the project costs that is not funded by the sponsor” Various Types of Cost Share - Mandatory- Required by the sponsor -Voluntary Committed- Identified in the proposal (a discouraged practice) -Voluntary Uncommitted- Not required by the sponsor or identified in the proposal. -In-Kind sponsor requirement of a non-cash contribution ( ex. Equipment).

35. The Office of Research Services The Office of Research Support Services 35 August 17, 2006 Miscellaneous - Cost Sharing (con’t.) Cost Sharing –How is it recorded in our system? Must be separately accounted - a 5 fund must be established if Cost Share > $10K –How is the fund managed? Expenses should be recorded and monitored on a timely basis Revenue entries must be routinely performed Documentation from agency regarding changes in requirements must be maintained – What needs to be done at closeout? Mandated cost sharing must be reported to the sponsor SPP #2119 Cost Sharing/Matching Requirements

36. The Office of Research Services The Office of Research Support Services 36 August 17, 2006 Miscellaneous – Interest Bearing Funds Interest Bearing Funds –When does a sponsored project fund receive interest? Monthly basis –How do I know if my fund should be set up as interest bearing? T&C of award determine –Can I spend these funds? T&C of award determine –At Closeout, what happens to these funds? T&C of award determine

37. The Office of Research Services The Office of Research Support Services 37 August 17, 2006 Miscellaneous – Program Income Program Income –What is Program Income? Gross income earned & directly attributable to the sponsored activity –How is Program Income handled? Additive vs. Deductive –How is Program Income handled at closeout? SPP #2121 Accounting for Program Income

38. The Office of Research Services The Office of Research Support Services 38 August 17, 2006 Miscellaneous – Record Retention What do I need to retain? How long do I need to keep it? SPP #2132 Record RetentionSPP #2132 Record Retention

39. The Office of Research Services The Office of Research Support Services 39 August 17, 2006 Miscellaneous – Award Transfers If a PI is planning to leave the University, ORS staff should be contacted as soon as possible to expedite the process “Statement of Relinquishment” or similar document –Required information must be verified –ORS signature must be obtained –Estimated unobligated balance-funds awarded on NOGA for current year only exclusive of any amounts carried over –Not finalizing costs may delay transfer of funds to the next University –Any property being transferred must be addressed

40. The Office of Research Services The Office of Research Support Services 40 August 17, 2006 Non-Financial Close Out Issues Final technical and/or progress report Final invention statement Final property report

41. The Office of Research Services The Office of Research Support Services 41 August 17, 2006 Getting Assistance on Closeouts For financial matters: –Contact ORS accountant or Post- Award Assistant Director Regarding extensions, requests for budget or other modifications to agreement, or non-financial matters: –Contact your Contract Administrator

42. The Office of Research Services The Office of Research Support Services 42 August 17, 2006 Questions???

43. The Office of Research Services The Office of Research Support Services 43 August 17, 2006 Audits Sponsored Programs at Penn

44. The Office of Research Services The Office of Research Support Services 44 August 17, 2006 Pre-Award Audits Performed by agency to verify –Accuracy of costs on application –Adequacy of University systems and controls Usually performed by or at the request of the sponsor Federal Awards –DHHS is Cognizant Agency –Sponsoring Agency

45. The Office of Research Services The Office of Research Support Services 45 August 17, 2006 Agency or Programmatic Audits Performed on Active or Terminated awards Federal Awards normally a result of a request by the Sponsor –Review by Dept of Health & Human Services (DHHS) –Foundations and Associations –Other

46. The Office of Research Services The Office of Research Support Services 46 August 17, 2006 Investigative/Criminal Audits Usually based on allegations of fraud –Misuse of funds on awards including: Purchasing Card charges Petty Cash abuses –Audit of how we comply with regulations –If Federal OIG audit Subpoena powers

47. The Office of Research Services The Office of Research Support Services 47 August 17, 2006 Internal Audits University audits projects to –Evaluate system controls –Assess compliance with University and sponsor policies and applicable OMB circulars –Investigate reports of fraud

48. The Office of Research Services The Office of Research Support Services 48 August 17, 2006 Compliance Audits Assess compliance with –Sponsor regulations –University policies Human Subject/Animal issues

49. The Office of Research Services The Office of Research Support Services 49 August 17, 2006 F&A Cost Proposal Audits Audit occurs cyclically –During the F&A negotiation process F&A recovery rates are affected by expenditures Interviews of PI and BA to determine basis for assigning space to research –Space drives the rate –32.5 points of 57% rate

50. The Office of Research Services The Office of Research Support Services 50 August 17, 2006 OMB Circular A-133 Audit Required annual audit of federal grants & contracts Performed by independent auditors –Penn: PricewaterhouseCoopers (PwC) Audit of systems and transactions Cost Transfers, Effort Reports, Subcontracts, Service Centers, Technical & Financial Reports

51. The Office of Research Services The Office of Research Support Services 51 August 17, 2006 General Principles for Audits Good award management is the key to good (uneventful) audits Good documentation is essential in –Department and ORS Audits are everyone’s responsibility –PI, BA, School, Pre and Post-award in ORS –Don’t go in alone

52. The Office of Research Services The Office of Research Support Services 52 August 17, 2006 Audited on compliance with all applicable regulations & policies –Federal –State –Sponsor –Specific award terms –University General Principles for Audits (cont.)

53. The Office of Research Services The Office of Research Support Services 53 August 17, 2006 General Principles for Audits (cont.) Audited on consistency of policy application Audits may provide feedback for process improvement Audit results can be expensive ORS & PI have a responsibility to educate the auditor about the purposes of the project

54. The Office of Research Services The Office of Research Support Services 54 August 17, 2006 Preparing for Audits Notify ORS as soon as you learn of audit –SPP #2130 External AuditsSPP #2130 External Audits ORS & PI/BA meet to prepare for audit –Anticipate questions –Develop procedures for working with auditors File management Prepare and support the PI –Work to prevent adversarial relationship Don’t panic

55. The Office of Research Services The Office of Research Support Services 55 August 17, 2006 Audit Lessons Learned

56. The Office of Research Services The Office of Research Support Services 56 August 17, 2006 ARRA (Stimulus) Critical Audit Concerns Timely execution, set up, and expending of funds –Awards to Penn from funding Agency –Sub awards made to Penn from other entities –Penn sub awards to other entities Monitoring –Advance accounts –Restrictions on spending (IACUC/IRB/Other) Timely & accurate quarterly report submission Comingling of expenses between ARRA and non ARRA awards Compliance with the following: –rebudgeting and carryover terms –“NO” Cost transfers from non ARRA to ARRA awards –Submission of final financial (SF269/425) and progress report due dates

57. The Office of Research Services The Office of Research Support Services 57 August 17, 2006 Critical Audit Concerns Salary Charges on Awards –Effort on award must equal or exceed salary charged –Effort must be documented in Personnel Activity Report form –Payroll Reallocations Same as Cost Transfers –Administrative/Clerical Salaries Monitoring compliance with A21 (exhibit c) Document projects with significant administrative effort Communicate with PI

58. The Office of Research Services The Office of Research Support Services 58 August 17, 2006 Critical Audit Concerns (cont.) Cost Transfers –Auditors view them as corrections of errors –Explain why the error occurred –Establish correlation of charge to next grant –Provide documentation –Maintain documentation in file –Cost Transfers must be prompt and justified –“Parking” a charge is illegal

59. The Office of Research Services The Office of Research Support Services 59 August 17, 2006 Critical Audit Concerns (cont.) Documentation –Costs that deviate from the proposal must be justified in terms of the project –Maintain all approvals from sponsor –Explain why decisions were made –PI must approve ALL costs incurred on award

60. The Office of Research Services The Office of Research Support Services 60 August 17, 2006 Critical Audit Concerns (cont.) Consultants –Document relationship with consultants Do not circumvent IRS employee regulations Do not engage an employee of sponsor or Penn employee as a consultant –Consulting agreement (work for hire) must document scope of work, rate and payment terms Proper inventory of equipment –Tag & document transfer, move or disposal

61. The Office of Research Services The Office of Research Support Services 61 August 17, 2006 Critical Audit Concerns (cont.) Service Centers are reviewed (A-133 & F&A proposal) –Surpluses are problematic Are federal awards being overcharged? –Rates must be adjusted to off-set the surplus –At least annually adjust to compensate for surplus or deficit –Maintain documentation of charges –Maintain records of rate determination SPP #2115 University Service Centers

62. The Office of Research Services The Office of Research Support Services 62 August 17, 2006 Critical Audit Concerns (cont.) Subcontracts –PI must monitor subrecipient performance and expenses –Subrecipient must verify that it is not debarred or suspended –ORS monitors subrecipient audit reports If findings result from expenditures of subcontract, Penn department is responsible for the cost of findings.

63. The Office of Research Services The Office of Research Support Services 63 August 17, 2006 Critical Audit Concerns (cont.) Financial Conflict of Interest –Are we managing Graduate Student Aid/NSF Audit –Ensuring tuition & labor payments are allocable and appropriate Close-Out –Penn must submit all required reports Programmatic, Financial, Patent, Property –Timeliness of reports Non compliance impacts University A133 findings and audit risk level

64. The Office of Research Services The Office of Research Support Services 64 August 17, 2006 If you are contacted by a sponsor regarding an audit… …Contact ORS Executive Director

65. The Office of Research Services The Office of Research Support Services 65 August 17, 2006 Questions???

66. The Office of Research Services The Office of Research Support Services 66 August 17, 2006 Resources Sponsored Programs at Penn

67. The Office of Research Services The Office of Research Support Services 67 August 17, 2006 ORS Website and Resource Tour http://www.upenn.edu/researchservices/ –Homepage –Left Quick Links –Sponsored Projects Manual –Sponsor Links –Spotlights –ORS Newsletters and listserv –Brown Bags and other Training Opportunities

68. The Office of Research Services The Office of Research Support Services 68 August 17, 2006 In Closing…. What have we learned? Where do we go with future questions? How can we learn more? What is new and upcoming in Sponsored Projects Administration?