Master Slide Show1 Accounting for Effort Federal Contracts and Grants Reporting Requirements

Master Slide Show2 UC – Contract and Grant Revenue FY03-04 GrantorAmountPercent of Total Federal Contracts and Grants $2.62 Billion68.5% Private Donors$654 Million17.1% State Agencies$397 Million10.4% Local Governments $153 Million4.0% Total$3.82 Billion100%

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4 UC Federal Contracts and Grants Funding Sources National Institutes of Health National Science Foundation National Endowment for the Humanities NASA Department of Agriculture Department of Defense Department of Energy

Master Slide Show5 Major Research Projects (here each campus might want to highlight some research projects underway and associated dollars) (intent here is to engage audience about the importance of the research work and make it personal to folks in the audience)

Master Slide Show6 Awards 101: A Brief Review Pre-Award –Propose Research –Identify Researchers –Propose Effort –Make Commitment to Sponsor Post-Award –Researchers Perform Research –Direct and indirect costs are charged to appropriate contract & grant –Report project status at regular intervals –Report financial status at regular intervals –Report effort at regular intervals

Master Slide Show7 Our Fiduciary Responsibility Researchers must do the research Researchers must provide periodic status reports Researchers must attest that effort was expended on the federal contract or grant, as agreed in the Award

Master Slide Show8 What Federal Sponsors Require Strict adherence to terms and conditions of federal contracts and grants. All effort expended on federal sponsored projects including committed cost sharing effort must be certified (per OMB Circular A-21).

Master Slide Show9 Why Do Federal Sponsors Focus On Effort? Salaries and wages typically comprise 2/3 of the direct costs charged to federal sponsored projects.

Master Slide Show10 What is Effort? Effort is the amount of time spent on a particular activity. Individual effort is expressed as a percentage of the total amount of time spent on work-related activities. Effort reporting is the mandated method of certifying to granting agencies that the effort required as a condition of the award was actually completed.

Master Slide Show11 Consequences of Improper Reporting of Effort and Non- Compliance with OMB A-21 Audit disallowances. Huge financial penalties can be levied against the institution. Withholding or suspension of federal research funding. Erosion in donor confidence leading to a drop off in donors. Worst case, federal funding can be suspended.

Master Slide Show12 The Audit Samples The Extrapolation Factor The Calculation Financial Penalty The Negotiation The Financial Expense The Human Expense

Master Slide Show13 Non-Compliance in the News Northwestern University received audit disallowances related to problems with effort reporting of $5.5 million on a grants and contract base of $325 million in FY University of Southern Florida returned $4.1 million to the federal government to settle a number of charging issues, including effort reporting.

Master Slide Show14 Johns Hopkins Johns Hopkins was recently required to give back $2.6 million in federal grants and contract money to settle claims that scientists had overstated the time they were spending on medical-research projects. The charges were first brought by a whistle-blower who still works at Johns Hopkins.

Master Slide Show15 Harvard University In 2004 Harvard University paid the government $3.3 million to settle accusations that the university’s researchers had over billed the National Institute for Health for four research and training grants. A portion of the out-of- compliance situation was attributed to discrepancies in effort reported.

Master Slide Show16 University of Alabama In 2005 The University of Alabama at Birmingham paid $3.39 million to settle allegations made by the federal government that researchers had overstated the percentage of work effort that the researchers were able to devote to the grant. The original charges were filed by a whistle-blower.

Master Slide Show17 An Ounce of Prevention Is Worth a Pound of Cure UC has the advantage of being able to: –learn from the experience of other federally funded institutions who have paid heavy financial penalties due to their out-of- compliance situation; –take a proactive approach by enhancing its compliance capability.

Master Slide Show18 How Do We Currently Comply? Since 1982 the university has relied on the Personnel Activity Report (PAR) to satisfy the effort reporting requirement. This paper-based, manually-intensive system has grown outdated and cumbersome as technology has changed and compliance standards have intensified.

Master Slide Show19 Limitations of the Current PAR Data Integrity Process Inefficiencies Notifications Challenges Inconsistent Reporting Data Accessibility Audit Ability

Master Slide Show20 Are We At Risk? The Controllers of UCOP/UC campuses agree that a significant risk exists if the university does not enhance its compliance capability for reporting effort through the deployment of automated tools and processes.

Master Slide Show21 The Business Need Ensure compliance with federal requirements for reporting effort accurately and on time. Enhance the control environment and reduce audit risk. Eliminate time-consuming paper intensive work. Reduce risk of document misrouting and loss, and processing by unauthorized individuals. Leverage off UC New Business Architecture Initiative.

Master Slide Show22 The Business Solution Develop a system that will: –Improve and streamline business processes and reduce time spent reporting effort –Automate the reporting of effort and eliminate paper processing –Provide online access to current and historical effort reporting information –Enhance reporting capability and flexibility

Master Slide Show23 The New UC Effort Reporting Initiative Berkeley, Davis, Los Angeles, San Diego and San Francisco campuses and UCOP formed partnership UCOP Developing the System Joint funding effort Joint system design and development effort –Management Steering Group –Functional Requirements Group –Technical Group Enlisted all campus constituencies: Users, Departments, Administrators, University Auditor

Master Slide Show24 The Effort Report System (ERS) Online and fully distributed access Web-based interface Interfaces with other existing enterprise systems to both gather and pass required information (e.g. Payroll, committed cost sharing) Reports and certifications distributed and captured electronically On line editing and edit checks Use of current campus security and access controls Ad hoc and management reporting capabilities Maintain historical information and audit trail Web-based training/compliance component

Master Slide Show25 Anticipated Benefits Compliance Improvements Effort Calculation Improvements Ease of use with Web-based application Tracking of payroll changes against effort reported Superior reporting capability

Master Slide Show26 Anticipated Change Re-engineered effort reporting processes and procedures to accommodate automated tool. End-user utilizes automated rather than paper-based tool to report and certify effort.

Master Slide Show27 Project Status ERS in development at UCOP Pilot begins at one campus in October, 2005 UCOP-delivered Communications and Training Tools released November, 2005 System Software Release to Campus: February 2, 2006 Implementation: to be determined by campus

Master Slide Show28 We Need Your Help We need your support and ask that you become an advocate for ERS We need to partner with you to communicate: – the importance of compliance – the risks of non-compliance – the need for change Faculty: to report effort accurately and ensure compliance with federal requirements your involvement is essential