Huron Consulting Report: Review of Oversight & Compliance for Research-Intensive ISOs CRAD Meeting April 23, 2015

Evaluation Scope Engaged Huron Consulting to evaluate our policies & procedures for oversight of “research-intensive” ISOs Evaluation focused on two key areas: –Compliance focus  Has UMN been too risk-averse in developing its financial policies and procedures related to recharge center oversight, thereby adding unnecessary administrative costs and burden? –Process Enhancement focus  Are there opportunities to simplify or reduce back office activities for these recharge centers (e.g., rate development, accounting, and billing), by adopting different tools, processes or service models?

Current Environment Approximately 150 units providing services for a fee to other university departments Financial oversight of ISOs is largely provided by local budget/finance offices (RRCs) Robust policy and procedure framework in place at University of Minnesota Internal/External Sales Office (I/ES), within the Controller’s Office provides policy and compliance oversight

Huron’s Observations Compared to other research institutions: –I/ES performs periodic, risk-based compliance reviews in order to focus oversight resources on ISOs more susceptible to compliance concerns (e.g., those with significant charges to federally- sponsored grants) –Strong oversight operation that is more recently focused on continuously improving service to ISOs. –In addition to periodic education sessions, numerous tools and templates exist to help administrators understand compliance requirements –An Advisory Committee has been created in order to provide input to I/ES on process enhancements; there have been numerous improvement initiatives as a result

Huron’s Conclusions Compliance: “The U of M’s approach to compliance is in line with federal regulatory requirements; indeed, UMN’s oversight is more extensive than many other research institutions.” Process Enhancement “Opportunities do exist, but I/ES (Internal & External Sales) has incorporated and facilitated significant improvements in the last several years.”

Recommendations Compliance: Formalize and implement the proposed policy and procedure changes that are currently in draft format. Process Enhancement: Enhance collaboration between the ISOs, especially among the smaller units, to share best practices and consider common systems and processes Explore the concept of a “shared service center” which would provide rate calculations, billing and reconciliation for multiple ISOs potentially freeing up resources to focus on ISO service within the ISO Continue to enhance customer service to ISOs Other: Consider formalizing a competitive process for OVPR to provide financial support to research ISOs

Suggestions to Consider Requiring higher risk tolerance: –Reduce frequency of rate reviews –Reduce detailed reviews for ISOs’ having no past compliance issues –Stretch the period for recovering initial costs, surpluses, deficits over multiple years (vs one year) –Possibility of building future capital investments into ISO rates (for non-federal & external customers)

Suggestions to Consider Additional service enhancements: –Improve equipment processes – timeliness of tagging –Further refine policies related to asset trade-ins –Adopt “differential depreciation schedules” for highly-specialized research equipment –Expediting review and negotiation of contracts –Training & education related to financial reporting for ISOs (e.g, budget to actual)

Implementation Plan Classified and prioritized 6 primary Huron recommendations Moving forward with changes to the Internal Sales policy & procedures –Policy to be updated by 7/1/15 Closely monitoring Core Facilities Work Group, for overlap and integration

Internal Sales Policy Pending Changes Lengthen frequency of reviewing and updating rates Remove requirement for annual review by the Deans Established risk-based approach to the level of oversight Relaxed Business Plan requirements Relaxed Training requirements Clarification provided in areas that had frequent questions

Questions