Module 5 Closeouts and Audits of Sponsored Project Funds

1. Module 5Closeouts and Audits of Sponsored Project Funds Sponsored Programs at Penn

2. Closeout of Sponsored Project FundsAgenda • PI & Department responsibilities • Communication • Pre-closeout review • Adjustment period • Freeze/unfreeze grants • Technical & invention reports • ORS responsibilities • Unfreeze requests • Financial & non-financial reports • Disabling accounts SPP # 2126 Interim & Final Financial Reports SPP # 2128 Account Close-out

3. PI and BA Responsibilities

4. Communication • Must occur between • Business Administrator (BA) • Principal Investigator (PI) • Office of Research Services (ORS) and • Sponsor • During the award period, as we prepare for account closeout, and during the closeout process

5. Determining Which Grants are Due to Expire/Freeze • Business Objects Org Summary.rep There is a tab for funds freezing in the next 90 days as well as a tab for Due and Late Reports • Ben Financials Utilize 132.ORG “List of Terminated Grant and Contract Funds” and the 133.ORG”List of Grant and Contract Funds Due to Close”

6. ORG.Summary – Funds freezing in Next 90 days

7. ORG.Summary – Due and Late Reports

8. Pre-Closeout Review • Occurs during the last 90 days of the account • PI and BA meet to review and discuss: • Budgeted vs. Actual expenses and final anticipated expenses • Spending Rate and disposition of remaining funds, if any • Possible need for any adjustments • Possible need for extension to complete project • Possible need for an Advance Account or Account Continuation Request for following year (if salary charges are to continue past end date, this will be necessary)

9. Pre-Closeout Review (cont.) • Subcontract closeout(s), if applicable • Service center charges • Any unallowable expenses on award or other adjustments which still need to be made • Remember • Unallowable expenses should never be charged • Cost transfers must happen no later than 90 days from month end during the award • Cash received on fund or receivable issues • Delays in meeting deliverables or technical report deadlines

10. Pre Closeout Review Issues • Potential Issues • (Revenue) not equal to Expense - Implies Overdraft, Unallowable Object Code Charges • Waywards should be removed - utilizing 115.Org (BEN) Report or Sub budgets/Other orgs chgs/Waywards(Business Objects) Report • Overcharging 5332 Subcontracts above the first $25K per Subcontract as this causes incorrect charging of Indirect Costs.

11. What is the Adjustment Period? • Period of up to 60 days after Account end date • Allows for final review of project activity so adjustments can be made prior to final reporting • 30/31 days: Account End Date + 15 days • 45 days: Account End + 30 days • 60/61 days: Account End + 30 days • 90/91 days: Account End Date + 60 days

12. Adjustment Period (cont.) • Run 134.ORG Report in BEN Financials or Fund Summary in Business Objects • Review the following areas • PBUD/PBIL should be equal • Revenue vs. Expense • Should be equal • If not, requires further review • F&A and Employee Benefits (EB) – Were the correct rates applied?

13. Adjustment Period (cont.) • Review the following areas (cont.) • DOD Cap(where applicable) should only be 35% of Total Costs • Payroll – review accuracy of payments/effort & maintain documentation for any significant administrative/clerical effort • Service Centers –Were the charges handled appropriately • Cost transfers- were transfers over 90 days approved & documented in files • Other direct costs for allowability

14. Final Review Prior to End of Adjustment Period • Review PBIL/PBUD, NOGA and approved carryforward, if applicable • Review subcontracts and respective closeouts • Communicate with ORS Accountant • Outstanding reporting/receivable issues • Determine and address • Unliquidated and unobligated carryovers • All adjustments must be processed by end of the fund adjustment period • Complete all approved, allowable, allocable and appropriate adjustments identified during pre-closeout review

15. Best Practices for Communications • Emails - the subject line of your email should be informative • “Action Fund#, P.I., Description • Examples: • “Closeout 538500, Mendel, 5K23MH024680-03” • “Unfreeze 538000, Frankenstein, 5R01HG012345-05 • One email per fund action • Email ORS Accountant and confirmthe Direct, Indirect, and Total Expenses to report. -This should occur by the end of the adjustment period

16. Freeze/Unfreeze Grant Functionality

17. Freeze Grants Functionality • Tool that allows authorized research administrators and ORS to limit activity against an award • Can be used during life of project and during the adjustment period • Can reduce cost transfers and overruns after the end of the fund project period • Improve timeliness and accuracy of final financial reports

18. Freeze Grants Features • Awards are frozen/unfrozen at fund level • Payroll can be frozen manually prior to the Account End Date • Functionality frozen automatically after Account End Date • New Purchase Orders/Requisitions • Functionalities frozen automatically after Adjustment Period End Date (APED) • Manual Journal Entries • C-forms • Feeder Journal Entries • Payroll

19. Freeze Grants (cont.) • If a fund has ended and, upon review, is in order • Contact ORS to confirm total expense to report and freeze the fund • If fund is not in order and additional corrections/adjustments are needed • Process them before the end of the adjustment period and maintain supporting documentation

20. Unfreeze Grants • If final adjustments to correct errors are not made prior to fund fully freezing • An unfreeze request can be made • Prior to submitting an unfreeze request to ORS • Proposed adjustments should be reviewed for allowability, allocability, appropriateness, and compliance with sponsor and university policies

21. Unfreeze Request (cont.) • Are not necessary to: • Prepare budget journals • Pay already encumbered amounts on an existing P.O. • Unfreeze advance accounts (request an extension of advance/continuation of fund account)

22. Unfreeze Worksheet

23. Unfreeze Grants (cont.) • Submit your request to: • School of Medicine departments • Send worksheet and details (including documentation) to Office of Research Services Support (ORSS) Grant Manager with a cc to ORS Accountant • ORSS will review and, if approved, will forward to Research Services Accountant and cc Assistant Director • All other Schools • Send worksheet and details to ORS Accountant and cc Assistant Director • Unfreeze requests are normally addressed within two business days

24. ORS Responsibilities

25. ORS Reporting Period Tasks • Review Due Reports to determine which reports due • Send email to BA requesting closeout information • ORS Accountant reviews the following; - Terms and conditions of award and sponsor reporting requirements • Review the 734 report in Business Objects (similar to 134.ORG report in Ben Financials) • Check PBUD/PBIL for accuracy • Reconcile EB’s, F&A and Cash • Review 252 report for stale dated checks

26. ORS Reporting Period Tasks (cont.) • Review expenses posted to the fund for allowability • Revenue • 4600, 4620, 478X, 4822, TIF, Program Income & Other Revenue • Review remaining balances or deficits • ORS will communicate any issues identified and request a response from the BA • If the ORS Accountant does not receive a response regarding closeout, the report will be issued by the due date and an email will be sent to the BA providing the totalreported to the sponsor

27. ORS Reporting Period Tasks (cont.) • Overdrafts • ORS will contact department regarding a resolution • If no response is received by report due date, fund will be reported up to award amount and ORS will process journal to transfer resources from departmental fund to grant fund to offset overdraft via object code 4822 SPP # 2129 Chargeback of Overdrafts and Disallowances

28. ORS Reporting Period Tasks (cont.) • Unexpended Balances • Will be reported to sponsor • Carryover will be processed and/or requested as appropriate • Residual cash will be remitted to sponsor according to agreement • Carryovers and/or unliquidated obligations will be determined and handled as appropriate

29. ORS Reporting Period Tasks (cont.) • Final Financial Status Report (FSR) Submission • Financial report will be issued by ORS no later than due date • A copy will be sent to department and a copy will be scanned into the ORS imaging system • ORS will process any closing entries based upon final financial reports

30. Revised FSRs • Only done in rare circumstances • When revising to increase total expenses, most sponsors will only accept revised reports for limited period of time following the end of the award. Some agencies will not accept upward revised FSRs. • When revising to decrease total expenses, there is no time limit. These should be completed immediately upon identification of the need for a revised FSR. SPP # 2137 Revised Final Financial Reports

31. Disabling Funds • How does a fund get Disabled? • ORS runs 717.RA report in BEN Financial weekly • To identify funds that meet disable requirements • ORS runs Business Objects 717 • To identify funds that expired >90 days • If the fund is eligible for disabling ORS checks “Enable” flag • Enters date in BEN Financials

32. Requirements to Disable Funds • Financial Report must be submitted if required-Last FIN Report Filed=Next FIN Report Due • FSRD and FSRI s/b posted reflecting Direct and Indirect Costs reported • PBIL=PBUD=FSRD+FSRI=Total Expenses reported and on the G/L • No Encumbrances can remain • Object Code 1220 Receivable must =0 • Equipment in Object Code 183X/187X must be transferred to School Surrogate Accounts via an Object Code 4826 Equipment Transfer • BRIM (ORS billing system) is reconciled (requires ORS action) • All stale dated checks have been satisfactorily addressed

33. ORG Summary - Analysis of Expired Funds Why isn’t my fund disabled?

34. Miscellaneous - Cost Sharing • “A portion of the project costs that is not funded by the sponsor” • Various Types of Cost Share -Mandatory- Required by the sponsor -Voluntary Committed- Identified in the proposal (a discouraged practice) -Voluntary Uncommitted- Not required by the sponsor or identified in the proposal. -In-Kind sponsor requirement of a non-cash contribution ( ex. Equipment).

35. Miscellaneous - Cost Sharing (con’t.) • Cost Sharing • How is it recorded in our system? • Must be separately accounted - a 5 fund must be established if Cost Share > $10K • How is the fund managed? • Expenses should be recorded and monitored on a timely basis • Revenue entries must be routinely performed • Documentation from agency regarding changes in requirements must be maintained • What needs to be done at closeout? • Mandated cost sharing must be reported to the sponsor SPP #2119 Cost Sharing/Matching Requirements

36. Miscellaneous – Interest Bearing Funds • Interest Bearing Funds • When does a sponsored project fund receive interest? • Monthly basis • How do I know if my fund should be set up as interest bearing? • T&C of award determine • Can I spend these funds? • T&C of award determine • At Closeout, what happens to these funds? • T&C of award determine

37. Miscellaneous – Program Income • Program Income • What is Program Income? • Gross income earned & directly attributable to the sponsored activity • How is Program Income handled? • Additive vs. Deductive • How is Program Income handled at closeout? SPP #2121 Accounting for Program Income

38. Miscellaneous –Record Retention • What do I need to retain? • How long do I need to keep it? • SPP #2132 Record Retention

39. Miscellaneous –Award Transfers • If a PI is planning to leave the University, ORS staff should be contacted as soon as possible to expedite the process “Statement of Relinquishment” or similar document • Required information must be verified • ORS signature must be obtained • Estimated unobligated balance-funds awarded on NOGA for current year only exclusive of any amounts carried over • Not finalizing costs may delay transfer of funds to the next University • Any property being transferred must be addressed

40. Non-Financial Close Out Issues • Final technical and/or progress report • Final invention statement • Final property report

41. Getting Assistance on Closeouts • For financial matters: • Contact ORS accountant or Post-Award Assistant Director • Regarding extensions, requests for budget or other modifications to agreement, or non-financial matters: • Contact your Contract Administrator

42. Questions???

43. Audits Sponsored Programs at Penn

44. Pre-Award Audits • Performed by agency to verify • Accuracy of costs on application • Adequacy of University systems and controls • Usually performed by or at the request of the sponsor • Federal Awards • DHHS is Cognizant Agency • Sponsoring Agency

45. Agency or Programmatic Audits • Performed on Active or Terminated awards • Federal Awards normally a result of a request by the Sponsor • Review by Dept of Health & Human Services (DHHS) • Foundations and Associations • Other

46. Investigative/Criminal Audits • Usually based on allegations of fraud • Misuse of funds on awards including: • Purchasing Card charges • Petty Cash abuses • Audit of how we comply with regulations • If Federal OIG audit • Subpoena powers

47. Internal Audits • University audits projects to • Evaluate system controls • Assess compliance with University and sponsor policies and applicable OMB circulars • Investigate reports of fraud

48. Compliance Audits • Assess compliance with • Sponsor regulations • University policies • Human Subject/Animal issues

49. F&A Cost Proposal Audits • Audit occurs cyclically • During the F&A negotiation process • F&A recovery rates are affected by expenditures • Interviews of PI and BA to determine basis for assigning space to research • Space drives the rate • 32.5 points of 57% rate

50. OMB Circular A-133 Audit • Required annual audit of federal grants & contracts • Performed by independent auditors • Penn: PricewaterhouseCoopers (PwC) • Audit of systems and transactions • Cost Transfers, Effort Reports, Subcontracts, Service Centers, Technical & Financial Reports