Financial Rep Meeting July 14, 2011

SPONSORED RESEARCH ROBERTA MCMANUS 2

Department of Health and Human Services (DHHS) Audit 3Section

DHHS Audit Process Entrance conference December 2010 Audit Period = October 1, 2008 – September 30, 2010 Audit Focus = charging F&A costs directly Audit Population = expenditures for all DHHS agency awards for the audit period Sample selection = 100 salary/100 non-salary items Exit Conference = May 27, 2011 Report draft in process – 2 findings ◦ Improve monitoring of policies and procedures ◦ Questioned costs and financial impact

Why Audits? Assure adherence to applicable rules and regulations Assure that controls are in place to limit the probability of fraud, waste, and abuse. 5

FDP “nomenclature” no longer valid ◦ Research Terms and Conditions (RTC) Provides budget flexibility NOT A BLANK CHECK!!! 6 Federal Demonstration Project

Key Items to Note re: RTC OMB Circular A-21 still applies ◦ Allowable  Per A-21 AND Award terms and conditions ◦ Allocable  Amount charged directly benefits award  Cost relates to the objectives of research ◦ Necessary and Reasonable  Reasonable person standard  Cost and benefit to award ◦ Consistent  All costs are incurred for the same purpose, in like circumstances either treat as direct OR indirect costs Examples of each included in posted ppt 7

Example – Allowable Goldie, Lab Assistant, works in Dr. Spear’s lab. Dr. Spear has one Federal award and all of the research is conducted in this one lab. There is no non sponsored funding that supports this lab. To show her appreciation for the hard work that Goldie does, Dr. Spear buys her a ticket to a Seminole soccer match and pays for it with Grant dollars (“It’s only five bucks!”). What is the issue with this scenario? ◦ Entertainment costs are unallowable (A-21, J17). L&L Hot Topics8

Example – Allocable Garnett, Lab Assistant, works in Dr. Seminole’s lab. Dr. Seminole has three Federal awards (X, Y, Z) and all of the research is conducted in this one lab. There is no non sponsored funding that supports this lab. The only research occurring in the lab are for Dr. Seminole’s sponsored projects. Garnett trains all research students doing experiments in that lab and also conducts experiments for all projects as assigned by Dr. Seminole. Each student conducts experiments for a particular project. Garnett’s salary and benefits are allocated 100% to Project Z. What is the issue with this scenario? ◦ Since Garnett’s work benefits all awards, then her salary should be allocated to all three projects on a reasonable basis. (A-21, C4. Allocable costs) L&L Hot Topics9

Example – Reasonable/Necessary Dr. Suzy purchased a specialized microscope that was needed on Project B for $25,000. Project B included federal demonstration terms and conditions. However, when it was time to purchase the equipment, some equipment funding had been used for other supplies and hiring another lab assistant. As a result, there was only $15,000 available for the microscope. Dr. Suzy had another Project C that did not include equipment in the budget. However, this was a federal demonstration project as well so Dr. Suzy directed staff to use $10,000 from Project C and $15,000 from Project B. Dr. Suzy did intend on using the microscope for both projects, but Project C did not need the specialized microscope as a regular microscope would have yielded the same results. What is the issue with this scenario? ◦ The $10,000 charged to Project C would be deemed unallowable. Even though this is federal demonstration (now Research Terms and Conditions), the specialized microscope was not reasonable or necessary for Project C. (A-21, C3. Reasonable costs) L&L Hot Topics10

Example – Consistent Gold, Lab Researcher, for Dr. Osceola who has 3 labs. Dr. Osceola has sponsored funding in 2 labs (2 Federal awards) and uses lab 3 for departmental research. Gold’s duties are to manage all 3 labs, order supplies for all research experiments, hire/appoint all personnel that will be working in Dr. Osceola’s labs, and reconcile both project and non-project funded ledgers. Gold is charged 100% to a Federally sponsored award. What is the issue with this scenario? ◦ The majority of Gold’s responsibilities are administrative in nature. Therefore, none of her salary should be charged to a sponsored funding source as she is part of administrative costs. Gold should be funded with E&G, Auxiliary or SRAD dollars. (A-21, F6b(2). Departmental administration expenses) L&L Hot Topics11

Facilities and Administrative Costs Costs normally treated as indirect per A-21F6b(2) and F6b(3) : ◦ Administrative and Clerical Salaries ◦ Postage ◦ Local Telephone ◦ Office Supplies ◦ Data Processing/Computer Supplies ◦ General Purpose Software ◦ Memberships ◦ Subscriptions If charge direct: ◦ Unlike circumstances (A-21Exhibit C) ◦ Cost Accounting Standard (CAS) Exemption 12

DO NOT CONFUSE CAS EXCEPTIONS WITH THE QUESTION OF ALLOWABILITY! L&L Hot Topics13

Cost Transfers Improper cost transfers ◦ Cover overruns ◦ Spend available balance close to end of project ◦ Transfer of unallowable cost from one project to another ◦ Circumvention of award limitation/restriction ◦ Charge costs to one project that belong to an award not yet executed Advance policy enacted for this reason! 14Section

15 Allowable transfers: To correct erroneous charge To allocate portion of charge that applies to the project (e.g. split purchases) *Timely (90 days) *Form with Justification

Service/Recharge Centers Aka Auxiliaries at FSU OMB Circular A-21 J47 Direct charge must be based on actual usage using standard rates ◦ May only recover aggregate costs of the service ◦ Cannot discriminate against federally supported activities of the institution Rate adjustments at least every two years!

Common Sense Don’t go on a spending spree during the last days of a grant Don’t appoint your only lab assistant 100% to one Award, when you have been awarded multiple awards Don’t appoint your post doc for a very limited number of hours on a major, multi-year Award (which happens to be the number he needs to qualify for a fellowship) Don’t order a large shipment of pipettes for your lab, and charge 100% to a modest Federal Award

Contact Roberta McManus ◦ ◦ Sponsored Research