1. Module 5 Closeouts and Audits of Sponsored Project Funds
Sponsored Programs at Penn
Module 5 Closeouts and Audits of Sponsored Project Funds
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2. 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. PI and BA Responsibilities

4. 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

5. 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

6. 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”

7. ORG.Summary – Funds freezing in Next 90 days

8. ORG.Summary – Due and Late Reports

9. 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)

10. 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

11. 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.

12. 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

13. 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

14. 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

15. 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

16. 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

17. Best Practices for Communications
Make the subject line of your mean something.
“Action Fund#, P.I., Description
Examples:
“Report , Mendel, 5K23MH ”
“Unfreeze , Frankenstein, 5R01HG
One per fund action
ORS Accountant and notify them of the Direct, Indirect, and Total Expenses to report by the end of the adjustment period (sooner, if possible).

18. Freeze/Unfreeze Grant Functionality

19. 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

20. 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

21. 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

22. 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

23. 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)

24. Unfreeze Worksheet

25. 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

26. ORS Responsibilities

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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)

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

36. 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

37. 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?

38. 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

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

40. 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

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

42. 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

43. Questions???

44. Sponsored Programs at Penn
Audits

45. 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

46. 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

47. 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

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

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

50. 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

51. 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

52. 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

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

54. 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

55. 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

56. Audit Lessons Learned

57. 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

58. 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. 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

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

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

65. Questions???

66. Sponsored Programs at Penn
Resources

67. ORS Website and Resource Tour
Homepage
Left Quick Links
Sponsored Projects Manual
Sponsor Links
Spotlights
ORS Newsletters and listserv
Brown Bags and other Training Opportunities

68. 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?