Module 5 Closeouts and Audits of Sponsored Project Funds Sponsored Programs at Penn Module 5 Closeouts and Audits of Sponsored Project Funds Gggggggg

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

PI and BA Responsibilities

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 at closeout

Communication (cont.) Items that should be communicated include: Changes including extensions, renewals, and approvals of prior carryovers or re-budgeting Issues such as overspending, non-compliance with budget or award terms Delays in meeting deliverables or technical report deadlines

Determining Which Grants are Due to Expire/Freeze Business Objects Org Summary.rep A separate 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”

ORG.Summary – Funds freezing in Next 90 days

ORG.Summary – Due and Late Reports

Pre-Closeout Review Occurs during the last 90 days of the account PI and BA meet to review and discuss: Spending Rate, remaining funds, final anticipated expenses Possible need for extension to complete project Possible need for any adjustments 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)

Pre-Closeout Review (cont.) PI and BA meet to review and discuss (cont.) Account Continuation Request and Advance Account need, if applicable 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

Pre Closeout Review Issues Potential Issues (Revenue) not equal to Expense - Implies Overdraft, Unallowable Object Code Charges Remove Waywards utilizing 115.Org (BEN) Report or Subbudgets/Otherorgschgs/Waywards (Business Objects) Report Overcharging 5332 Subcontracts above the first $25K per Subcontract causes incorrect charging of Indirect Costs.

What is the Adjustment Period? Period of up to 60 days after Account end date Allows for final review of project activity Adjustments can be made prior to final reporting 30 days: Account End Date + 15 days 60 days: End of the next Accounting Period 90 days: Account End Date + 60 days

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

Adjustment Period (cont.) Review the following areas (cont.) F&A and Employee Benefits (EB) – Were the correct rates appropriately applied? Payroll – Any adjustments that may be needed must be made by the end of the adjustment period Service Centers – Were these handled appropriately? Other direct costs

Adjustment Period (cont.) All adjustments must be processed by end of the fund adjustment period Complete all approved, allowable, allocable, appropriate adjustments identified during pre-closeout review Correct errors identified during adjustment period in accordance with cost transfer policy SPP # 2113 Cost Transfers and Payroll Reallocations

Final Review Prior to End of Adjustment Period Review PBIL/PBUD and operating budget Make necessary adjustments and cost transfers Review subcontracts and respective closeouts Communicate with ORS Accountant Outstanding reporting/receivable issues Determine and address Unliquidated and unobligated carryovers

Best Practices for Communications Make the subject line of your email mean something. “Action Fund#, P.I., Description Examples: “Report 538500, Mendel, 5K23MH024680-03” “Unfreeze 538000, Frankenstein, 5R01HG012345-05 One email per fund action Email ORS Accountant and notify them of the Direct, Indirect, and Total Expenses to report by the end of the adjustment period (sooner, if possible).

Freeze/Unfreeze Grant Functionality

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

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

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 adjustments are needed Process them before the end of the adjustment period

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, and appropriateness

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 account)

Unfreeze Worksheet

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

ORS Responsibilities

ORS Reporting Period Tasks Once frozen, ORS reviews Terms and conditions of award and sponsor reporting requirements Report 734.RA in BEN Financials (similar to 134.ORG) or fund summary report in Business Objects PBUD/PBIL for accuracy

ORS Reporting Period Tasks (cont.) Expense at fund level for allowability Revenue 4600, 4620, 478X, 4822, TIF, Program Income & Other Revenue Reconcile F&A, EB and Cash Review over expenditures ORS will communicate any issues identified and request a response from the BA

ORS Reporting Period Tasks (cont.) Overdrafts ORS will contact department regarding 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 Write-off of Overdrafts and Disallowances

ORS Reporting Period Tasks (cont.) Unexpended Balance 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

ORS Reporting Period Tasks (cont.) Unexpended Balance (cont.) Financial report will be issued by ORS no later than due date and a copy will be sent to department ORS will process any closing entries based upon final reports

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

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 checks “Enable” flag Enters date in BEN Financials

Requirements to Disable Funds Financial Report must be submitted if required- (Last FIN Report Filed = Next FIN Report Due) FSRD and FSRI s/b posted reflecting Direct and Indirect Costs reported PBIL=PBUD=FSRD+FSRI=Total Expenses on books No Encumbrances can remain Object Code 1220 Receivable must =0 Equipment in Object Code 183X must be transferred to School Surrogate Accounts via an Object Code 4826 Equipment Transfer BRIM (ORS billing system) is reconciled (requires ORS action)

ORG Summary - Analysis of Expired Funds Why isn’t my fund disabled?

Miscellaneous - Cost Sharing “ A portion of the project costs that is not funded by the sponsor” How is it recorded in our system? Must be separately accounted What needs to be done at closeout? Mandated cost sharing must be reported to the sponsor SPP #2119 Cost Sharing/Matching Requirements

Miscellaneous – Interest Bearing Funds When does an award fund receive interest? Monthly basis How do I know if my fund is interest bearing? T&C of award determine Can I spend these funds? At Closeout, what happens to these funds?

Miscellaneous – 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

Miscellaneous – Record Retention What do I need to retain? How long do I need to keep it? SPP #2132 Record Retention

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 Information required ORS signature Not finalizing costs may delay transfer of funds to the next University Any property being transferred must be addressed

Non-Financial Close Out Issues Final technical and/or progress report Final invention statement Final property report

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

Questions???

Sponsored Programs at Penn Audits

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

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

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

Internal Audits University audits projects to Evaluate system controls Assess compliance with University and sponsor policies and applicable OMB circulars Investigate reports of fraud

Compliance Audits Assess compliance with Human Subject/Animal issues Sponsor regulations University policies Human Subject/Animal issues

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

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

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

General Principles for Audits (cont.) Audited on compliance with all applicable regulations & policies Federal State Sponsor Specific award terms University

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

Preparing for Audits Notify ORS as soon as you learn of audit SPP #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

Audit Lessons Learned

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 Communicate with PI

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

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 costs incurred on award

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

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

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.

Critical Audit Concerns (cont.) Close-Out Penn must submit all required reports Programmatic, Financial, Patent, Property Timeliness of reports

If you are contacted by a sponsor regarding an audit… …Contact ORS Executive Director

Questions???

Sponsored Programs at Penn Resources

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

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?