1 Core Facilities – Federal Regulations & Audit Focus Jennifer Wei, CRA Director of Cost Studies January 2014 Core Facilities Workshop

2 Agenda Compliance Focus ◦ Audit Findings Federal Regulations or Clarifications ◦ NIH Core Facilities FAQs ◦ New Uniform Guidance & OMB A-21 ◦ Other regulations Financial Management Focus ◦ iLab Cores Benchmarking Report ◦ Research Subsidy & Indirect Cost (F&A) Recovery

3 Core Facility is also a Service Center (Recharge Center) Published April 8, 2013: Defines Core Facilities as “centralized shared research resources that provide access to instruments, technologies, services, as well as expert consultation and other services to scientific and clinical investigators“ (1.a.) Similar operating principles with other Recharge Centers (1.a.) Recovers the costs in the form of user fees (1.a.)

4 Core Facility is also a Service Center (Recharge Center) Categories of Service Centers: Service Center Specialized Service Facility (Direct + Indirect = Fully loaded costs) e.g., Solar farm, wind tunnel University-wide Service/Recharge Center (Managed by Central – e.g., Facility Management) Core Facilities (Shared resources with a research aim) e.g., Genomics Department Recharge Center (Operated by a department) e.g., Machine shop

5 Compliance Focus Relating to Recharge Recent Audit Findings ◦ Iowa State University, April 2013  No documentation to support certain charges  Direct vs. Indirect costs; Incorrect calculations in worksheets  IG and NIH did not agree on all findings  HHS-OIG, A ◦ Florida State University, July 2012  Centers included unallowable costs: memberships & office supplies  Specialized Service Facilities (SSF) costs  HHS-OIG, A

6 Compliance Focus Relating to Recharge “Summary of Report on Audits of Recharge Centers at 12 Universities”, January 1994 ◦ oig.hhs.gov/oas/reports/region9/ pdf oig.hhs.gov/oas/reports/region9/ pdf ◦ Surplus funds not used to analyze/adjust billing rates ◦ Inventory not consumed during the year of purchase ◦ Revenues used for unrelated purposes  e.g., Renovating academic offices ◦ Inconsistent billing rates; Federal research overcharged ◦ Did not establish or adhere to policies and procedures ◦ Did not maintain adequate accounting system ◦ Did not conduct annual cost studies or monitor recharge centers on a regular basis

7 Federal – NIH Core Facilities FAQs (continued) Recharge rates must be based on actual costs and actual usage (2.a.), using a documented method (2.b.) Clarifies what costs can be included in the rates: applicable direct costs and indirect costs that do not bear F&A recovery (2.c.) Allowable vs. Unallowable in the rates: follow A-21 Treatment of equipment costs specifically defined (6) ◦ Annual depreciation (purchase cost divided by useful life) if not funded by NIH (6.b.) Charging external customers ◦ Should include F&A Costs; may include additional fee ◦ Not mentioned: Unrelated Business Income Tax (UBIT)

8 Federal - New Uniform Guidance (Latest 12/26/2013) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ◦ Supersedes 8 circulars, including OMB A-21 ◦ Specialized Service Facilities  Equivalent to OMB A-21, Section J. 47  No major changes at the first glance

9 Federal – Other Regulations IRS Publication 598 ◦ Tax on Unrelated Business Income (UBIT) of Exempt Organizations  Northwestern Tax-exempt status – 501 (c)(3) University’s Accounting Practices ◦ NU’s Disclosure Statement (DS-2)

10 Financial Management Focus iLab 2012 Cores Benchmarking Study ◦ 33% - Institutional support (Subsidy) ◦ 48% - Customer Revenue  Using Established Recharge Rates ◦ 11% - Grants Support (e.g. P30) ◦ 8% - others URL: Research Subsidy – the Reality ◦ Indirect Costs (F&A) are not fully reimbursed by the Fed  Administrative Rate Capped at 26% (unchanged for over 20 years)  Negotiated Indirect Cost (F&A) Rate is Lower than the Actual Rate ◦ Research subsidized by non-sponsored sources ◦ Importance of financial management and strategic planning

11 Questions? CONTACT: Jennifer Wei, CRA