1. Service Center Roles and Responsibilities: Achieving Compliance at Every Level of the Process  Sriram Gollapalli, Chief Operating Officer, iLab Solutions  Joe O’Brien, Manager, Higher Education and Academic Medical Centers, Attain, LLC  Brian Squilla, Chief of Staff, Jefferson Medical College, Thomas Jefferson University 1

2. No.Agenda Item 1Introduction 2Service Center Compliance Primer 3Operational Challenges 4Roles and Responsibilities at the Department, School, and University levels 5Leveraging Technology to Support Service Center Operations 6Summary of Best Practices 7Discussion Questions 2

3. INTRODUCTIONS 1 3

4. Sriram Gollapalli is co-founder and Chief Operating Officer at iLab Solutions, where he leads the Engineering and Infrastructure teams. iLab Solutions offers Core Management and Inventory Management solutions to over 500 Research Cores at 50 Universities and Research Institutes. Sriram worked for Science Applications International Corporation (SAIC), Deloitte Consulting and Intel. He currently serves on the Carnegie Mellon University School of Computer Science, Alumni Advisory Board. Joe O’Brien is a Manager in Attain’s Higher Education & Academic Medical Centers practice, located in Boston, MA. Joe brings more than 20 years of experience in financial strategy and compliance at universities, academic medical centers, technology start-ups, and Fortune 50 companies. He directed cost analysis operations at the Broad Institute of Harvard and MIT, including managing financial operations of a $130M specialized service facility (SSF). Brian Squilla is the Chief of Staff to the Dean of the Jefferson Medical College at Thomas Jefferson University located in Philadelphia, PA where he performs strategic, operational and financial analyses tied to the educational, research and clinical missions of the Medical College. Brian spent 11 years at University of Pennsylvania, School of Medicine where he was the Administrative and Financial Officer for the Department of Pathology and Laboratory Medicine, which had $50 million sponsored awards portfolio and 8 research core facilities with over $11 million in annual revenue. Brian is currently the Chair of NCURA Region 2. 4

5. SERVICE CENTER COMPLIANCE PRIMER 2 5

6. What is a Service Center? – Service Center can be any business unit within an organization that charges other users for their services. – Specialized Service Facilities defined by OMB Circular A-21 as “highly complex or specialized facilities operated by the institution, such as computers, wind tunnels, and reactors.” – Recharge Center, interpreted to mean a non-specialized service facility such a copy center or glass-washing facility according to Section F.6.b. of OMB Circular A-21. – Research Core Facilities typically refer to a highly specialized service center providing a technical service such as genomics, imaging, or cell sorting facilities. Core facilities may also be subsidized by a National Institutes of Health (NIH) core center grant and be advertised by your institution as a competitive strength or focus area of science. – Animal Research Facilities which may fall under one or more of the definitions above. Animal research facilities also follow a special rate-setting guide called: Cost Analysis and Rate Setting Manual for Animal Research Facilities 6

7. 7 OMB CIRCULAR A-21 (REV. MAY 2004) 47. Specialized Service Facilities. A) The costs of services provided by highly complex or specialized facilities operated by the institution, such as computers, wind tunnels, and reactors are allowable, provided the charges for the services meet the conditions of either subsection 47.b. or 47.c. and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under subsection C.5. of this Circular. B) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established methodology that (1) does not discriminate against federally supported activities of the institution, including usage by the institution for internal purposes, and (2) is designed to recover only the aggregate costs of the services. The costs of each service shall consist normally of both its direct costs and its allocable share of all F&A costs. Rates shall be adjusted at least biennially, and shall take into consideration over/under applied costs of the previous period(s). C) Where the costs incurred for a service are not material, they may be allocated as F&A costs. D) Under some extraordinary circumstances, where it is in the best interest of the Federal Government and the institution to establish alternative costing arrangements, such arrangements may be worked out with the cognizant Federal agency.

8. 8 OMB CIRCULAR A-122 (REV. MAY 2004) 46. Specialized Service Facilities. A) The costs of services provided by highly complex or specialized facilities operated by the non-profit organization, such as computers, wind tunnels, and reactors are allowable, provided the charges for the services meet the conditions of either 46 b. or c. and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under Attachment A, subparagraph A.5. of this Circular. B) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established methodology that (i) does not discriminate against federally supported activities of the non-profit organization, including usage by the non-profit organization for internal purposes, and (ii) is designed to recover only the aggregate costs of the services. The costs of each service shall consist normally of both its direct costs and its allocable share of all indirect costs. Rates shall be adjusted at least biennially, and shall take into consideration over/under applied costs of the previous period(s). C) Where the costs incurred for a service are not material, they may be allocated as indirect costs. D) Under some extraordinary circumstances, where it is in the best interest of the Federal Government and the institution to establish alternative costing arrangements, such arrangements may be worked out with the cognizant Federal agency.

9. 9 Proposed OMB Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards (February 2013 DRAFT ) C-47 Specialized Service Facilities (1) The costs of services provided by highly complex or specialized facilities operated by the institution, such as computing facilities, wind tunnels, and reactors are allowable, provided the charges for the services meet the conditions of either paragraphs (2) or (3) of this section, and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under section __.608 Applicable Credits. (2) The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established methodology that: (A) does not discriminate against federally-supported activities of the entity, including usage by the institution for internal purposes, and (B) is designed to recover only the aggregate costs of the services. The costs of each service shall consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates shall be adjusted at least biennially, and shall take into consideration over/under applied costs of the previous period(s). (3) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs. (4) Under some extraordinary circumstances, where it is in the best interest of the Federal government and the institution to establish alternative costing arrangements, such arrangements may be worked out with the cognizant Federal agency.

10. OPERATIONAL CHALLENGES 3 10

11. 11 Convergence of Stakeholder Priorities Finance Operations Compliance Copyright 2013

12. 12 Finance Operations Compliance Be solvent to stay in business, while meeting budgetary, operational, and compliance expectations Charge all users established rates, don’t discriminate against federal awards, account for subsidies properly when necessary Invoice promptly, manage receivables, consider operations’ impact on cash requirements Do not offer free services, consider allowability of costs when incurring operational costs, don’t bill if service has not been performed.

13. ROLES AND RESPONSIBILITIES AT THE SERVICE CENTER, DEPARTMENT, SCHOOL, AND UNIVERSITY LEVELS 4 13

14. Service Center’s Roles and Responsibilities – The primary responsibility is to deliver the core services to the users of the service centers. – Keep track of order entry, order fulfillment, and provide invoicing data to business manager or department administrator. – Prepare an annual cost analysis in order to set the rate schedule, considering all items of cost and projected volume of usage for the upcoming fiscal year. – Maintain an inventory and ensure proper supply levels on hand. – Meet any regulatory compliance requirements for biohazards, safety, waste disposal, animal and human subject protocols. – Keep proper documentation to support scientific conclusions related to services rendered, costing documentation, and any other institutional record keeping requirements. 14

15. Scientific Director’s Roles and Responsibilities – Oversee the scientific integrity of the service center – Ensure all items of cost, particularly compensation, are appropriate. For example, moving research assistants salary onto a service center when there is a gap in funding is not an appropriate method to bridge their funding. – Contribute to the rate setting process and encouraging the business manager to set compliant rates. – Ensure all regulatory requirements are met in the service center lab. – Meet all budgetary requirements, including management responsibility for service center deficits, equipment purchases, and cash management process (i.e. invoicing and collection of accounts receivable). – Provide scientific and administrative direction for the overall service center operations. 15

16. Department Administrator’s Roles and Responsibilities – Support the scientific personnel of the service center with any financial or administrative business management requirements. – Facilitate the monthly invoicing process and assist with the cash collection of outstanding accounts receivable. – Lead the financial component of the annual cost analysis and rate setting process by setting up a cost analysis excel template, providing financial data in terms of detailed transaction reports, and assist with modeling different scenarios to arrive at a revised rate schedule. – Test for financial compliance by reviewing costs with the Service Center staff or Scientific Director, including reasonableness of items of costs included, allowability of those costs, and proper allocability to the service center. 16

17. School or College’s Roles and Responsibilities – Provide funding for equipment purchases; – Support the scientific endeavors of the service center and question operations when the services become obsolete. – Hold service centers accountable for budgetary, financial and regulatory compliance requirements. 17

18. Central University’s Roles and Responsibilities – Grant Accounting or Post-Award Office Review annual cost analysis to approve revised rate schedules Answer questions pertaining to allowability of costs and make final institutional ruling on the allowability of those costs. Maintain institutional policy and procedures regarding service centers, annual cost analysis, rate setting, frequency of invoicing, and allowability of costs. Train and educate the research community on the nuances of service center financial administration and costing compliance. – Internal Audit Incorporate reviewing service center costs analysis and rate setting documentation in their annual audit work plan and testing on allowability of costs charged to the individual service centers. 18

19. LEVERAGING TECHNOLOGY TO SUPPORT SERVICE CENTER OPERATIONS 5 19

20. 20 Save time for shared resource staff Save time for researchers Improve financial controls Streamline reporting Raise awareness and usage of services Increase recharge capture rates Improve compliance Contribute to a unified electronic research environment Search engine for researchers to find service center resources Request management tool, including equipment/resource calendars, usage tracking, project request forms, quote generation, milestone tracking, financial approvals, file-sharing Report generation engine for PI’s, core staff, and leadership to analyze patterns and prepare submissions (e.g., CCSG, CTSA) Billing and invoicing system, including ability to integrate with financial system (PeopleSoft, SAP, Oracle, etc) and leverage existing institution user directory Over 50 institutions use iLab Built from university personnel feedback Benefits of a centralized system Who uses iLab

21. 21 Lab Head Sets budget threshold and auto-approval amounts Principle Investigator (P.I.) Designated by P.I. Verifies lab members, approves quotes from service centers, and approves invoices Often designated as the “key contact” for billing Lab or Financial Manager Can be part of one or several labs (verified by the P.I. or Lab Manager of each lab) Makes requests to service centers and is informed of completed services Lab Member Develops quotes for requested work/services Completes requested work, invoices requester, and sends billing information to financial system Service Center Personnel Analyzes financial and usage data to monitor shared resources provided by service centers Institution Administrator

22. 22 PIs/Lab Managers or Specific Grant Owners can assign researchers access to their lab, assign fund numbers/grants to each lab member, and designate auto approval amounts. Accurate and timely billing is dependent on system and process structure

23. 23 Researchers can only use valid grants when purchasing services – increasing compliance with grant availability when requesting services from different shared facilities. Researchers are forced to choose only available, designated grants

24. 24 Service Center Management electronic systems can be used by Lab Members and Service Center Personnel to track project request overview, payment information, collaboration between service centers, and project request details Tracking services rendered through an electronic system increases efficiency

25. 25 Service Center Personnel review and bill for charges that consolidate all the requests over a given time period. Grants without funds available or that have expired will raise flags. Service Center Personnel or Financial Administrators can approve charges and immediately send to the institutional ERP (PeopleSoft, SAP, Oracle, etc) system to ensure compliance

26. 26 Institution Administrators, Service Center Personnel, and even PIs can run reports with a touch of the button when the same tool is used to capture all of the data at every step in the process and all data is stored in the same database. Reviewing usage, monitoring revenue generated, and tracking how grant money is spent is invaluable to institution administration

27. 27 Info gathering Understand current core workflow Review gathered information Schedule biweekly meetings Address any questions Core completes template Core review Demonstrate modeled functionality Gather feedback on further changes (distinguish must- haves / need-to- haves) Go-live Core is opened up to accept users Core staff notifies users (e-mail, intranet, etc.) iLab conducts customer training sessions as needed Implementation Training 1 Provide login credentials Initial training on iLab workflow Review manual and other available resources Kick-off Explain iLab system to Cores Set expectations for implementation Provide information gathering template Training 2 Further training on iLab system Tweak configuration as necessary Training 3 Further training on iLab system Tweak configuration as necessary Training 4 Further training on iLab system Tweak configuration as necessary iLab creates core site iLab incorporates feedback Core tests and learns iLab iLab provides support 2 weeks~1 week2 weeks ~12 week implementation process per core to get up and running iLab usually works with to 3 to 5 cores per ‘wave’ concurrently During wave 1, iLab works with the institution technical and finance teams to integrate with ERP (SAP, Oracle, PeopleSoft, etc) systems

28. SUMMARY OF BEST PRACTICES 6 28

29. Best Practices for Service Centers – Invoice Promptly! – Analyze Revenue and Expenditures at least Quarterly – Re-visit Assumptions to Validate against Actual Trends – Consider charging external users a higher rate that includes indirect cost recovery – Never discriminate against federal awards by charging lower rates to users charging non-federal funding sources – Never provide free service to any users – Work with the scientific director and technical staff to consider all billable milestones – Uncollectable A/R is not an allowable cost and must be excluded from your cost analysis 29

30. CONCLUDING DISCUSSION QUESTIONS AND ANSWERS 7 30

31. 1.Is it allowable to offer a discount for high-volume users?  Yes, if incremental costs are not higher for high-volume usage and the rates are offered to everyone. Central University Office should make final call on this. 2.Equipment maintenance costs—can I charge a fee that would go towards “self- insurance” of possible maintenance costs?  No, you can budget likely maintenance costs to happen in the upcoming year. The Service Center staff and Department Business Manager should weigh in on this. 3.Can a service center include direct charging of Administrative staff? What about part of an FTE?  Yes, if the service center needs administrative costs to administer the service center; no, if the department is looking for a new source of funds. Internal Audit should test this. 4.How is it OK to charge external users a rate above the actual cost?  Yes, it is common to charge a premium to external users because internal rates may not include full costing. The excess revenue would be a School or College decision how to treat. 31

32. 5.Is there a dollar threshold for establishing a service center?  Not required, but a good practice to define an SSF from a recharge center. This would be a Central Office decision to incorporate into the policy. 6.Is it better to include equipment depreciation in service center rates, or recover it via the Institutional F&A rate?  For A-21 institutions, the costs must be classified by cost objective 7.What is the difference between a service center and an allocation of costs?  A service center provides a unique service, where an allocation of costs is typically a recharge center like glass washing or shared supplies. This would be a departmental decision to choose to have a recharge center, but a University decision to decide whether it meets service center criteria per your institutional policy. 8.Can F&A be charged to service center fees when they are incurred by a grant?  Yes, service center costs are included in modified total direct costs (MTDC) and because so are eligible to be charged with F&A costs on top of the service center fees when charged to a sponsored award. SSF charges are not MTDC. 32

33. 9.Can you charge cell phones as a direct-cost to a service center?  Yes, if the cost is reasonable, allocable to the service center, necessary to carry out some function of the service center and conforms to your institutional policy. The department administrator should make the initial ruling but the Central Office would have final say. 10.How often must we review rates? Can we re-price during a fiscal year?  Annually and yes, if there is some event that changes the costing structure. This should be in the University Policy. 11.How do you handle charging student training on scientific equipment so not to discriminate against users charging federally sponsored awards?  Someone has to pay for their use of equipment if training is paid for by individuals with sources of funding. The Service Center should understand this well to be compliant. 12.Who should have oversight of service centers?  Everyone! 33

34. Contact Information:  Sriram Gollapalli, (617) 575-9774, sriram.gollapalli@ilabsolutions.comsriram.gollapalli@ilabsolutions.com  Joe O’Brien, (617) 251-5196, jobrien@attain.com@attain.com  Brian Squilla, (215) 603-6609, brian.squilla@jefferson.edubrian.squilla@jefferson.edu 34