Tri-Agency Financial Monitoring Review Results RAD 301 Tri-Agency Financial Monitoring Review Results Michael Walesiak and Martine Desrochers Research Services Office

What is a Financial Monitoring Review? Representatives of the Agency will conduct periodic reviews of the institutions' management control framework to: assess the effectiveness of policies, systems and internal controls within the institution; confirm that the institution fulfills its research grant funds management responsibilities as outlined in the Agreement on the Administration of Agency Grants and Awards by Research Institutions; ascertain the level of confidence that research funds are used in accordance with Tri-Agency requirements; and share and disseminate information on guidelines and expectations for the continuous improvement of research fund management.

General Principles for Research Expenditures Grant funds must contribute towards the direct costs of the research for which the funds were awarded, and the benefits should be directly attributable to the grant. The funds must be used effectively and economically, and the expenses must be essential for the research for which the funds were awarded. The grantee is responsible for authorizing expenditures from his/her grant account in accordance with the Agency's requirements and conditions of grants and with the institution's policies. No other party may initiate or authorize expenditures from an Agency's grant account without the grantee's written delegated authority.  Where the link to the research is not evident from the supporting documentation, additional information or explanation should be documented which demonstrates that the expenditure is a direct cost of the funded research.

Overall Comments and Observations The UofA has all of the policies and procedures in place that we need to properly manage Tri-Agency funds. The challenge we face is ensuring compliance with those policies and procedures in a decentralized internal control environment.

General Principles – Use of Funds Funds must be used effectively and economically and be essential for the funded research – with proper supporting documentation and detailed justification “The institution has the right and responsibility to withhold and withdraw approval of expenses that contravene the Agency’s policies”

Highlights from 2016 Guide Tri-Agency: Use of Grant Funds – guidelines to what is eligible and not eligible Note that some funding opportunities will have expenses that may be different from the Use of Funds

Highlights from 2016 Guide cont’d Travel and Subsistence Costs now harmonized across the Tri-Agency Collaborators’ travel expenses (new to CIHR only) Nursing mothers travel cost (new to SSHRC) Sabbatical Leave – travel costs to and from institution now harmonized (New to SSHRC I trip only) Living expenses not eligible = subsistence and accommodation costs Computer & Electronics Communications Home internet not eligible Reporting & Supporting Evidence More clarity on the need to have evidence that demonstrates the link to the research

Observation – Expenditure Authorization Finding: Expenditures were not properly authorized by grantees (recurring recommendation) and did not have adequate supporting documentation. Response: The UofA will implement more rigorous testing of expenditures for compliance and eligibility. We will also use the results of our testing to develop training, education and process improvements for those who review and approve expenditures.

Observation – Salary & Benefit Adjustments Finding: A number of salary redistributions were considered an ineligible expense because the supporting documentation did not clearly describe the nature of the work performed by the employee and that it related to the research project objectives. It has also been observed that redistributions of prior year’s salaries raise concerns about the accuracy of financial reports submitted in those years. Response: New procedures for the “Salary and Benefit Adjustment” or “SBA” process have been developed. Project Holders will be required to attest that all SBA’s relate to work performed on the project receiving the charge. Restrictions on redistributing prior years’ salaries are also being put in place.

Salary & Benefit Adjustments – Further Details Due to the recommendations issued by the Tri Agency Financial Monitoring Review and US Federal Government grant audits, we are implementing stronger controls on SBA’s that relate to prior fiscal years’ salary expenses. The SBA process will no longer be available for prior period transactions. Corrections of prior period salary expenses should be rare but if necessary, a “Prior Period Salary Correction Form” is being developed.

Salary & Benefit Adjustments – Further Details Why are SBA’s being scrutinized so heavily by our sponsors and auditors? Prior period salaries have already been claimed or reported to sponsors. Corrections not prepared within the period they were reported in has resulted in materially misstated financial reports. Salaries that are “parked” in another project prior to an adjustment results in other sponsors being improperly charged with salaries that do not relate to their research objectives. There are significant difficulties obtaining sufficient appropriate audit evidence for salary adjustments that were incurred months or years prior. Auditors have noted several instances where documentation was limited to a comment that the SBA or salary redistribution was necessary “to clear an over expenditure” in another project. Salary adjustments between restricted research projects and UofA operating accounts result in misstatements to the UofA audited financial statements.

Strategies to Minimize Use of SBA’s Ensure salaries are charged to correct speed code when paid. Proactively update Pay Action Forms as research team members begin work on different projects. If an SBA is deemed necessary, ensure Pay Action Forms are updated at the same time. Allocate salaries to multiple projects when appropriate. Regular reviews of project financial statements (Researcher Home page, Financial Overview, eTRAC, etc.). Request a “release of funds” for research projects that require ethics certifications (allows spending on the portion of research activities that do not require ethics certifications).

Salary & Stipends Salaries – for work performed by research personnel that contributes towards the funded research. Stipends – paid to trainees, shall be in accordance with institutional policies: Postdoctoral fellows are limited to 2 years’ support. 3 years is acceptable, when justified, to attract exceptional candidates from outside Canada. Supporting documents needed: Signed/Approved records regarding personnel paid from grant funds, including names, categories, salary levels, duties/affiliation to the grant. Signed/Approved time sheets for undergrads & NASA staff. Length of time supported in each case. Details of employee benefits charged and relevant calculations. Employment Offer letter, and PAF or ePAF.

Salary & Stipends cont’d Non Compliant: I need a redistribution of salary to clear my Over Expenditure. Compliant: I need to share this expense between my Kidney Foundation and CIHR project as the postdoc worked half time on each project supervising and training graduate students in analyzing processes. Leaving the salaries on my CIHR project has put it in over expenditures. We have submitted a job change form to update the distribution going forward as well.

Observation Finding: A number of “internal expenses” lacked evidence of formal delegation of signing authority. Internal expenses include lab stores, postage charges, indents, etc. Internal expenses must include: documentation indicating the exact charge made; the method of calculation or attribution; the grantee’s authorization for those assigned to the Agency account. Response: RSO’s expenditure testing will focus on internal expenses over the upcoming year. The results of our testing will be used to develop training, education and process improvements for those who process and approve internal expenditures.

Supplies & Equipment: Justification & Compliance A complete justification must demonstrate that the purchase is: Directly related to and necessary for the advancement of the funded research An economical use of funds A need that is not provided by the institution (equipment not currently available) or in the grant holder’s possession Supporting documents needed: Signed request for the equipment or supplies from the principal investigator or the person with delegation of signing authority Supplier invoices indicating detail of purchases Prices paid Packing slip or proof of receipt of item(s)

Supplies & Equipment Non-Compliant: The NVivo software was purchased for use on our lab computers. Compliant: The NVivo software purchased is required for the funded research as it compiles and analyses the gathered data providing the required results for this research. This software and other comparable are not supplied by the University. Supporting Documentation: Properly authorized invoices (signature/electronic approval) (if approval is delegated – include delegation form/on-line delegation). Supplier invoices indicating detail of purchases, price paid, and packing slip or proof of receipt. Orders require prior written authorization from grant holder/delegate.

Hospitality and Gifts Hospitality & Gifts: Non-eligible expenses: Must define the purpose or circumstances for the hospitality, or the gift, and the relationship to the funded research Non-eligible expenses: Spouses are not an eligible expense Ordering pizza for lab students is not an eligible expense Christmas presents for the team is not an eligible expense

Hospitality Non Compliant: Compliant: Supporting Documentation: January 15 – 19th 2017 XXX Conference Compliant: Welcome dinner for presenters for the XXX Conference held in Edmonton from January 15 to 19th 2017 for this CIHR Operating Grant. Supporting Documentation: Hosting/working sessions – detailed receipts for hospitality purposes, list of attendees, their institutions and their relation to the funded research. Hosting - At least 1 person external to the research group participating in the hospitality. Working sessions – Minimum 3 people, one must be external to the funded research but can be related to the research project. Must define the purpose or circumstances of the hospitality.

Gifts Supporting Documentation: List of names of recipients and their signatures indicating they have received the gift. Must define the purpose or circumstances of the gift.

Observation Finding: A “release of funds” is used when a researcher wishes to begin their research project without ethics certification in place when the work being performed is such that ethics certifications are not yet necessary. We currently release the entire first year of award in these situations. Going forward, we will be required to only release the portion of the award related to the “pre-certification” activities. Response: RSO to investigate how we can release a portion of the grant prior to ethics certifications being obtained.

Observation cont’d Finding: The Tri Agencies recommended that we pursue integrating the ethics database (REMO) with the PeopleSoft Grants and Contracts modules (Grants 3.0). Response: A similar recommendation was also provided by the recent RSO Consultation Review (“a long-term solution should be developed that enables an integrated system to manage certifications linked to projects”). RSO and REO will begin investigating this recommendation with Information Services and Technology.

222-D Campus Tower, 8625 – 112 Street Further Training Check RSO website or talk to your faculty assigned Research Facilitator and announcements for training sessions by RSO. Martine Desrochers Research Facilitator, Augustana, Campus Saint-Jean & Department of Medicine Research Facilitation and Strategic Initiatives Team Research Services Office, University of Alberta 222-D Campus Tower, 8625 – 112 Street Edmonton, AB T6G 2E1 Phone: 780-492-1575 Email: martine.desrochers@ualberta.ca Website: www.rso.ualberta.ca

Questions or Concerns? Michael Walesiak, CPA, CA Associate Director, Finance Research Services Office, University of Alberta Phone: 780-492-1642 Email: michael.walesiak@ualberta.ca Website: www.rso.ualberta.ca

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