1. Slide 1 FastFacts Feature Presentation 12/04/2013 To dial in, use this phone number and participant code… Phone number: 888-651-5908 Participant code: 182500 To participate via VoIP… You must have a sound card You must have headphones or computer speakers © 2012 The Johns Hopkins University. All rights reserved.

2. Slide 2 Today’s Topic We’ll be taking a look at… Research Audits: The Inside Scoop Common Research-Related Audit Findings and Tips for Avoiding Them

3. Slide 3 Today’s Presenter Jim Jarrell Director of Research and Operational Audits Office of Hopkins Internal Audits Contact: jjarrel1@jhu.edujjarrel1@jhu.edu 443-997-6393

4. Slide 4 Session Segments Presentation Jim Jarrell will discuss the role of Internal Audit at Johns Hopkins, what auditors look at when conducting an audit, the high risk areas, and the best practice approach to these areas. During Jim’s presentation, your phone will be muted. Q&A After the presentation, we’ll hold a Q&A session. We’ll open up the phone lines, and you’ll be able to ask questions. Jim will answer as many of your questions as time allows.

5. Slide 5 Contact Us If you would like to submit a question during the presentation or if you’re having technical difficulties, you can email us at: fastfacts@jhu.edu fastfacts@jhu.edu You can also send us an instant message! GoogleTalk – HopkinsFastFacts@gmail.comHopkinsFastFacts@gmail.com AOL Instant Messenger – HopkinsFastFacts MSN – FastFacts@jhu.edu

6. Slide 6 Survey At the end of this FastFacts session, we’ll ask you to complete a short survey. Your honest comments will help us to enhance and improve future FastFacts sessions.

7. Slide 7 How To View Full Screen Click Here

8. Slide 8 Research Audits: The Inside Scoop

9. Slide 9 Agenda After today’s presentation you will be able to: Describe the role of Internal Audit at Johns Hopkins and the services they provide Identify the highest areas of risk in research compliance. Develop effective internal controls to protect the institution from adverse risk Champion best practices for research compliance in your department.

10. Slide 10 Who are we..and what do we do? OHIA – Office of Hopkins Internal Audit Shared-Service Organization Independent Assess the effectiveness of procedures in place to manage risk Investigate fraud Champion of best practices related to internal control

11. Slide 11 Preventing Fraud Characteristics of Fraud Knowing who to call: Internal Audit Fraud Hotline – 1-877-WE-COMPLY Establish Effective Control Procedures Proper approval Independent and timely reconciliation

12. Slide 12 Research Compliance Roles A-133 Audit Internal Audit Activity Management Monitoring Research Administration – Office of Research Compliance (Controller’s Office) – Institutional Committees – Divisional Business Offices Departmental Administration

13. Slide 13 Lessons Learned from Recent Audits Utilization of Research Compliance Dashboard Separation of Pre- and Post-Award Duties Removes competing priorities Proficiency in SAP and BW Reporting Tools The data is available, use it Financial expertise of staff Accountability Include post-award responsibilities in performance evaluations of staff Makes post-award duties a priority Pro-active approach to Service Centers – don’t simply rely on them

14. Slide 14 High Research Compliance Risk Areas Effort Reporting Cost Transfers Account Reconciliation Sub-recipient Monitoring Other High-Risk Areas Not Included in this Presentation Human Subjects Animal Care and Use

15. Slide 15 Effort Reporting Effort Reporting Largest expense charged to Federal awards High-risk transaction - 2003 settlement - $2.3m Not limited to 40 hours per week, but includes all time Should be certified as soon as possible Managing committed effort

16. Slide 16 Effort Reporting – What We Look At Effort Reporting Timely and proper certification Allowability of Effort Charged to the Awards Salary CAP Compliance Administrative Salaries

17. Slide 17 Effort Reporting Best Practices Ways to Avoid Effort Related Findings Ensure certification by individual with first-hand knowledge Review/Reconcile salaries charged to awards each pay period Be knowledgeable of individual’s activities Engage and train faculty on effort requirements Escalate when necessary

18. Slide 18 Cost Transfers Consistent area of federal enforcement Indicator of account reconciliation process –No cost transfers could mean no reconciliation –Late cost transfers indicate untimely reconciliation –Too many cost transfers could mean ineffective front end controls

19. Slide 19 Cost Transfers – What We Look At Cost Transfers Allowability of cost transfers Documentation to support costs Rationale for making transfer

20. Slide 20 Cost Transfer Best Practices Ways to Avoid Transfer Related Findings Document the why’s and how’s Carefully scrutinize transfers onto the award near the project end Validate supporting documentation Don’t transfer unallowable costs to spend down available funding

21. Slide 21 Account Reconciliation - Project Procurement No one should control of all aspects of a transaction A-21 governs grants All purchases must relate to the award being charged Competitive bidding to ensure costs are reasonable Documentation should be maintained Administrative and clerical costs can only be charged if: Required by project’s scope of work Specifically identified in approved budget Can be identified with a high-degree of accuracy

22. Slide 22 Account Reconciliation – What We Look At Account Reconciliation Detective Control Documented evidence of monthly reconciliations Corroborating Evidence Allowability of charges Timeliness of cost transfers Effort Reporting

23. Slide 23 Account Reconciliation – Best Practices Working knowledge of A-21 Maintain award documentation and sponsor terms/conditions Ensure proposed budget is complete Pre-approval from agency when necessary Timely reconciliation to avoid late transfers Reach out – Office of Sponsored Research Compliance or Internal Audit

24. Slide 24 Account Reconciliation – Best Practices Risk-based Reconciliation Reliance on front-end approval controls Prioritizing transactions reviewed Access to Oculus Electronic Reconciliation

25. Slide 25 Account Reconciliation – Best Practices Real-time Reconciliation Utilizing SAP and Business Warehouse allows personnel to reconcile more frequently Advantages: Becomes part of regular routine – more structured Easier to keep up with reconciliation, less to reconcile Reduces end of month workload

26. Slide 26 Sub-recipient Monitoring Significant area of risk JHU ultimately accountable to the sponsor for sub-recipient funding Principal Investigator (PI) is ultimately responsible Risk mitigation needs to begin prior to contracting

27. Slide 27 Sub-recipient Monitoring – What We Audit Sub-recipient Monitoring Allowability of subrecipient costs Classification as subrecipient or vendor Financial and Technical Monitoring Procedures Invoice approval by PI – Payment Certification Form Compliance with JHU Policies and Procedures –Invoices –Advance Payments –Approval

28. Slide 28 Sub-recipient Monitoring – Best Practices Sub-recipient Monitoring Institute stronger financial monitoring controls for higher-risk subrecipients When approving invoice payments: –Detailed invoice –Scientific and technical progress validated –No advance payments (unless immediate cash need documented and approved by DBO) –No round numbers –Certification for Payment and Performance

29. Slide 29 Sub-recipient Monitoring Case Study Case Study Domestic sub-recipient Unsophisticated accounting systems Poor knowledge of sponsored requirements Significant overbilling to JHU identified during routine A-133 audit review Investigation revealed Invoices were based on budget, not actual costs IDC and Fringe rates were not based on actual costs Significant amounts of unallowable expenses charged to the award

30. Slide 30 Sub-recipient Monitoring Case Study – Lessons Learned Proper risk management starts prior to engaging the subrecipient Due diligence! Do they have proper capabilities to perform programmatically and manage funding Vendor/Sub-recipient Classification Risk assess to drive monitoring procedures – require additional documentation when necessary Thorough invoice review Training subrecipient and Principal Investigators on proper oversight responsibilities

31. Slide 31 Sub-recipient Monitoring Subrecipient Monitoring Task Force A taskforce has been appointed to make recommendations for improving JHU subrecipient monitoring policies and procedures Scope will review: Classification of subrecipients Risk rating of subrecipients Monitoring requirements for high-risk subrecipients Training of Principal Investigators and Subrecipients

32. Slide 32 Document Retention Accounts Payable Shared Services is central document holder Departments should maintain: all proposal and award information (including correspondence with sponsor) P-Card, Executive Card, supply/core store orders and goods receipt documentation 7 years past the project end date Scanning documentation is acceptable alternative For Federal contracts, documentation must be maintained for 1 year after scanning Grant Document Search

33. Slide 33 Conclusion Internal Audit is a shared service organization championing the value of internal control throughout institution There are a number of high risk audit areas in the research compliance world that departmental personnel must be aware of Departments must remain vigilant and put procedures in place to reduce the potential for adverse risk events In doing so, departments not only protect themselves, but protect the reputation of the Institution

34. Slide 34 We’re going to open the phone lines now! There will be a slight pause, and then a recorded voice will provide instructions on how to ask questions over this conference call line. We’ll be answering questions in the order that we receive them. We’ll also be answering the questions that were emailed to us during the presentation. If there’s a question that we can’t answer, we’ll do some research after this session, and then email the answer to all participants. Q&A

35. Slide 35 Thank You! Thank you for participating! We would love to hear from you. Are there certain topics that you would like us to cover in future FastFacts sessions? Would you like to be a FastFacts presenter? Please email us at: fastfacts@jhu.edu

36. Slide 36 Survey Before we close, please take the time to complete a short survey. Your feedback will help us as we plan future FastFacts sessions. Click this link to access the survey… http://connect.johnshopkins.edu/fastfactssurvey/ http://connect.johnshopkins.edu/fastfactssurvey/ Thanks again!

37. Slide 37 Resources This page contains links to the various resources mentioned throughout this presentation. You can click on the links or copy and paste the links into your web browser. Account Reconciliation Guide: http://finance.jhu.edu/reports_guides/acct_recon/acct_reconciliation_guide/Acct_Reconci liation_Guide.pdf Dashboards Sponsored Research: (for access contact fqchelp@jhu.edu)fqchelp@jhu.edu https://metrics.finance.jhu.edu/frac/runJasperDashboard.do Learning Solutions Program Sequence: http://tmod.jhu.edu/prof_dev/ProgramSequence.pdf Document Management System: (for access contact oculus@jhu.edu)oculus@jhu.edu http://dms.controller.jhu.edu:8989/Oculus/servlet/login