1. POST-AWARD FINANCIAL COMPLIANCE Presented by: Jerry Fife, Assistant Vice Chancellor for Research Finance, Vanderbilt University, jerry.g.fife@vanderbilt.edu Ted Mordhorst, Assistant Director for Post Award Compliance, University of Washington, tedm2@u.washington.edu

2. Introduction COMPLIANCE: The legal and ethical conduct of sponsored projects or programs. This includes both the administrative and technical conduct of the project or program.

3. Workshop Goal Participants will: Participants will: gain a greater understanding of the post award compliance issues we all face. gain a greater understanding of the post award compliance issues we all face. be provided with a tool for assessing and monitoring the various areas of compliance. be provided with a tool for assessing and monitoring the various areas of compliance.

4. Compliance – Why? Maintains relationship of TRUST with sponsors Maintains relationship of TRUST with sponsors Provides for proper stewardship to safeguard investments in research. Provides for proper stewardship to safeguard investments in research. It is the right thing to do! It is the right thing to do!

5. What are the Risk Factors? Withholding of future awards. Withholding of future awards. Audit findings/cost disallowances Audit findings/cost disallowances Criminal, civil and administrative penalties. Criminal, civil and administrative penalties. Loss of administrative flexibility. Loss of administrative flexibility.

6. What are the Risk Factors? Reputation with sponsors, donors, legislators, staff, faculty and students. Reputation with sponsors, donors, legislators, staff, faculty and students. Public embarrassment. Public embarrassment. Loss of public confidence. Loss of public confidence.

7. Financial Mismanagement Incorrect reporting of time and effort. Incorrect reporting of time and effort. Not accounting for or reporting program income. Not accounting for or reporting program income. Improper allocation of costs. Improper allocation of costs.

8. Financial Mismanagement Inconsistent/improper accounting of F&A costs. Inconsistent/improper accounting of F&A costs. Last minute cost transfers. Last minute cost transfers. Improper payments to subcontractors. Improper payments to subcontractors.

9. Federal Sentencing Guidelines One significant aspect of the Guidelines is that each organization is responsible for the wrongful acts of its employees as long as the employees were acting in their official capacity. One significant aspect of the Guidelines is that each organization is responsible for the wrongful acts of its employees as long as the employees were acting in their official capacity. The theory is that the organization shares a degree of culpability if an employee acts in an unlawful manner, even if the organization did not know of or approve of their actions. The theory is that the organization shares a degree of culpability if an employee acts in an unlawful manner, even if the organization did not know of or approve of their actions.

10. Federal Sentencing Guidelines 1. the absence of proper internal controls, 2. knowing participation by high level management, 3. previous violations, 4. lack of anti-fraud procedures and 5. the absence of ethics training. Important factors upon which organizations will be judged by the federal government include:

11. What can we do? Initiate or maintain a proactive compliance program. Initiate or maintain a proactive compliance program. The NIH Office of Inspector General suggested compliance program guidelines. The NIH Office of Inspector General suggested compliance program guidelines.

12. NIH - OIG Compliance Program Guidance (CPG)for Recipients of NIH Research Grants Compliance Program Guidance (CPG)for Recipients of NIH Research Grants The purpose of this guidance will be to assist organizations in preventing fraud and abuse and in better complying with Federal requirements. We anticipate that the guidance for recipients of NIH research grants will contain seven elements that we consider necessary for a comprehensive compliance program. These seven elements include: The purpose of this guidance will be to assist organizations in preventing fraud and abuse and in better complying with Federal requirements. We anticipate that the guidance for recipients of NIH research grants will contain seven elements that we consider necessary for a comprehensive compliance program. These seven elements include:

13. NIH – OIG (continued) Implementing written policies and procedures that foster an institutional commitment to stewardship and compliance; Implementing written policies and procedures that foster an institutional commitment to stewardship and compliance; Designating a compliance officer and compliance committee; Designating a compliance officer and compliance committee; Conducting effective training and education; Conducting effective training and education;

14. NIH – OIG (continued) Developing effective lines of communication; Developing effective lines of communication; Conducting internal monitoring and auditing; Conducting internal monitoring and auditing; Enforcing standards through well- publicized disciplinary guidelines: Enforcing standards through well- publicized disciplinary guidelines:

15. NIH – OIG (continued) Responding promptly to detected problems, undertaking corrective action, and reporting to the appropriate Federal agency. Responding promptly to detected problems, undertaking corrective action, and reporting to the appropriate Federal agency. NIH is also considering an eighth element, ``Defining roles and responsibilities and assigning oversight responsibility, '' that would include a discussion of the importance of effectively delegating oversight authority. NIH is also considering an eighth element, ``Defining roles and responsibilities and assigning oversight responsibility, '' that would include a discussion of the importance of effectively delegating oversight authority.

16. Where to Begin? Identify areas that most commonly result in non-compliance Identify areas that most commonly result in non-compliance Review recent audit results. Review recent audit results. Review agency audit plans Review agency audit plans

17. DHHS PILOT AUDITS 1. Direct Charging of Clerical and Administrative Salaries 2. Cost Transfers 3. Cost Sharing/Matching 4. Sub recipient Monitoring 5. Effort The DHHS OIG’s office plans to conduct pilot audits at universities in five areas.

18. Risk Management Plan Key component of institutional defense - “due diligence”. Key component of institutional defense - “due diligence”. Used to mitigate institutional risk to an acceptable level. Used to mitigate institutional risk to an acceptable level.

19. Risk Assessment RISK – An uncertainty that could impact the institution’s ability to achieve it’s goals and objectives. RISK – An uncertainty that could impact the institution’s ability to achieve it’s goals and objectives. Identify areas of Risk. Identify areas of Risk. Develop a Matrix Develop a Matrix Borrowed from the University of Texas at San Antonio web site with permission from Donna Holmes

20. The Risk Matrix In the left hand column, Identify activities with the greatest risk. In the left hand column, Identify activities with the greatest risk. Examples: Allowable costs Examples: Allowable costs ? ? ? In the rows identify the risk factors. In the rows identify the risk factors. Example for allowable costs: Costs charged to a grant are not allocable to the grant. Example for allowable costs: Costs charged to a grant are not allocable to the grant.

21. Areas used to Evaluate Risk level Balance size of population in dollars, (materiality). Balance size of population in dollars, (materiality). Size of area. Overall budgetary responsibility. Size of area. Overall budgetary responsibility. Responsibility for federal funds. Responsibility for federal funds.

22. Areas used to Evaluate Risk level Employee turnover. Employee turnover. Level of automation. Level of automation. Extent of decentralization. Extent of decentralization.

23. Areas used to Evaluate Risk level Segregation of duties. Segregation of duties. Applicability of external laws, regulations and terms & conditions Applicability of external laws, regulations and terms & conditions

24. Areas used to Evaluate Risk level Frequency of audit. Frequency of audit. Audit finding history Audit finding history Interest shown by outside constituents. Interest shown by outside constituents.

25. Basis for Determining Compliance Federal regulations: OMB Circulars, FAR, etc. Federal regulations: OMB Circulars, FAR, etc. Award Terms & Conditions Award Terms & Conditions Non-federal Terms & Conditions Non-federal Terms & Conditions Institutional Policies and Procedures, CAS Institutional Policies and Procedures, CAS Ethical Conduct Ethical Conduct

26. Monitoring Plan Area to be assessed Area to be assessed Specific risks Specific risks Risk Rating Risk Rating Regulatory Basis Regulatory Basis Institutional Policy Institutional Policy Person Responsible Person Responsible

27. Monitoring Matrix Operating control Operating control Evidence of control Evidence of control Supervisory Control Supervisory Control Evidence of control Evidence of control Oversight Control Oversight Control Evidence of control Evidence of control

28. Training Matrix Who to train Who to train Level of knowledge required Level of knowledge required Frequency Frequency Trainer Trainer Testing method Testing method

29. Reporting Matrix Activity to be reported Activity to be reported Type of information to be reported Type of information to be reported Frequency of Reporting Frequency of Reporting Recipient of report Recipient of report

30. Key Components Written Policies & Procedures Written Policies & Procedures Assessment Assessment Training Training Anonymous reporting Anonymous reporting

31. Wrap-Up Questions? Questions?

32. Resources University Compliance web pages University Compliance web pages Agency OIG web pages Agency OIG web pages NCURA and (SRA) NCURA and (SRA)