The Pasteur Principle: Chance Favors the Prepared Mind

How Best Practices for Managing Sponsored Projects Prepare for Audits

YOUR PRESENTERS

Michelle Melin-Rogovin• Manager Research Administration, Office for Research;

Northwestern University Feinberg School of MedicineMelody Delfosse• Information Team Manager, Northwestern University

Accounting Services for Research & Sponsored Projects

OBJECTIVES• Review the types of audits and how to prepare for

them• Learn about the relationship between research

administration best practices and audit preparedness• Discuss institutional roles and responsibilities for

audit preparedness and support in the event of an audit

NORTHWESTERN UNIVERSITY

• 2500 Faculty• 3 Research-Heavy

Schools on 2 Campuses• 20 Interdisciplinary

Research Centers• $550M Per Year in

Sponsored Awards

TYPES OF AUDIT• Site visit

• Assessing whether the site is suitable for the research• Can include observing facilities, interacting with staff and students,

accessing documentation• Desk audit

• Systematic review of documents and materials provided by institution under audit

• Can be on campus or conducted via email, phone, or video conference• Investigation

• A review prompted by a potential misconduct

WHO CONDUCTS THE AUDIT?• Internal audit department• External auditing firms• Federal Office of Inspector General (OIG)• State or local government• Institutions that issue sub-awards• Any agency that issues awards

THE A-133 AUDIT• OMB Circular A-133 requires an annual external audit of

non-profit organizations expending more than $500,000 in federal funds

• Viewed as a ‘report card’ of how the University spends their money

• Findings are reported to the federal government, become public record, and are distributed to all federal agencies through a clearinghouse

A-133 – WHAT IS TESTED?A sample of federal awards and their direct cost transactions are selected for testing to determine if expenditures and procedures are appropriate

• Internal control testing • Benefit of expenditures to the

grant• Effort reporting• Cost transfers• Program income eligibility • Sub-recipient monitoring

• Key personnel• Indirect cost and fringe benefit

rate application • Equipment and real-property

management • Service centers • Student financial aid

AUDIT TRENDS• Appropriateness of direct charges• Cost transfers• Subrecipient monitoring• Effort reporting accuracy and timeliness• Proof of payables• Equipment management• Timeliness of technical and financial reports• Administrative cost

• OIG Desk Audit of ARRA FundsThe works

• Dept. of Energy Site VisitEquipment walk through, faculty and staff interviews,

programmatic review

• NSF Desk AuditReview of expenditures reported on FFR

• Dept. of JusticeSub-recipient monitoring, administrative salaries, programmatic

review, validity of expenditures

RECENT AUDITS AT NORTHWESTERN

CENTRAL OFFICE PREPAREDNESS• Before meeting with auditors, resolve issues and be prepared to justify

and support anything unusual

• Audits can occur at any time, so be prepared to allocate staff time for audit prep

• Continually update and review policies, roles & responsibilities documents, and process documents

• Do cost to risk analysis of central roles to determine what must be reviewed prior to a transaction vs. what can be post audited

• If there are findings, you may need to hire consultants to add credibility

BUDGETING AS A CONTROLExamples from NorthwesternSpending can only occur on open budgetary accounts opened by pre-

award office based on award terms and conditions. Some items in restricted categories include:

• Capital equipment• Consulting• Subcontracts• Animals and animal care• Human subjects

• Office supplies• Administrative salaries• Books• Tuition• Stipend

APPROVE HIGH RISK TRANSACTIONSExamples from NorthwesternPeopleSoft workflow is configured to send research accounting office

high risk purchase requests for approval

• Capital equipment• Consulting• Subcontracts• Travel• If total request is $2,500+• Items charged to unusual expense accounts like indirects, payroll

or tuition

DETAILED REVIEW AT CLOSEOUTExamples from NorthwesternPrior to award closeout, research accounting office:

• Verifies effort certification is complete and valid• Reviews expenses for unallowable costs• Validates that indirect costs were charged appropriately• Insures subcontracts are finalized• Obtains PI certification attesting to validity of final expenses• Accounts for all program income

DEPARTMENT AND SCHOOL LEVEL PREPAREDNESS

SCHOOL LEVEL AUDIT PREPAREDNESSFEINBERG SCHOOL OF MEDICINE • Disseminates, promotes and implements consistent

adherence to university policies and business practices• Develops structures, policies and roles that respond to the

unique risk environment facing biomedical researchers• Human subjects/animal research• Financial Conflict of Interest in medical research• Complexity in research administration environment

• Actively engages with University and affiliate organizations affecting its audit environment to proactively manage research activities and address issues.

RESEARCH ADMINISTRATION SERVICES• Provides cradle to grave research administration services

to 14 medical school departments. (95 investigators, $30M+ portfolio)

• Provides training and education to staff on how to manage sponsored projects (financial management, compliance, how to work with PI’s)

• Provides assistance when problems are discovered with accounts that need to be fixed and documented with the sponsor.

• Supports the PI and department in the event of an audit.

RESEARCH ADMINISTRATION SERVICES• 12 research administrators and financial administrators work directly

with investigators and staff in departments to promote best practices • Financial Management of sponsored projects

• Tracking prime project and subcontractors• A21-driven best practices to manage allocation of costs to sponsored

projects• Compliance management behaviors

• Meetings with PI’s – regular reporting• Salary and effort management best practices

• Bridge people in central offices and school level offices with people working in departments to overcome barriers, and maximize understanding and successful outcomes

DEPARTMENT LEVEL AUDIT PREPAREDNESSSponsored Research Administration Best Practices:1. Direct Charging

a. Within 90 days

2. Reconciliation3. Timely Reporting

a. Internal – PI b. External – Progress Reports, FFRsc. Effort

4. Documentationa. Support your activitiesb. Document your decisions (at every level)

5. Communicationa. Meetings with PIsb. Department Business Administratorsc. Subcontractors

SALARY AND EFFORT MANAGEMENT TOOL• Allows the research administrator, business administrator and

PI to manage position funding across all sources of activity• Dynamic document that manages salary and effort together –

as related concepts. • Presented by source of funding for non-financial types, with

financial checks • Reconciled and updated when effort is proposed and certified,

clinical commitments change, and research ends and begins.

(VIEW SALARY AND EFFORT MANAGEMENT TOOL)

PROJECT FINANCIAL TRACKER• Examines the status of a sponsored project by month, by year for the project

year (by account code open for the project).• Provides rolling account balances for each year of the project and total

account balances for the status of the project (carry forward). • Provides expenses to budget for the project year.

• Answers the main questions PI’s ask:• How much have I spent this month? This year so far?• Am I over or under my budget?• Has this expense been paid?

• Serves as a reconciliation tool for the research/financial administration team. • Can be used to roll up summary portfolio data for the PI.

• Multi-project data can be presented in table format• Pivot tables and summaries provide key data.

(VIEW FINANCIAL TRACKER)

THREE THINGS YOU CAN DO NOW1. Set up systems to review projects with PIs and

obtain feedback/signatures from investigators.2. Review your institution’s documentation

retention policies and determine if your unit is following them.

3. Utilize current systems to “capture” documentation of decisions that will assist compliance without adding burden to process.

Public Perception Reality

AS LONG AS THE DISCONNECT EXISTS,WE WILL BE AUDITED