Research Compliance Light: A Brief Summary of Hot Topics

1. Research Compliance Light: A Brief Summary of Hot Topics Anne Hannigan, Associate Vice President, Stanford University Ann Pollack, Assistant Vice Chancellor – Research, UCLA NCURA Region VI/VII Spring Meeting April 2007

2. IG Audits A 133 Audits SAS 112 Human Embryonic Stem Cell Research Justice Department Sentencing Guidelines Conflicts of Interest Research Subject Protections Export Control Regulations Research Misconduct Snoring Other?? What Keeps University Officials Up At Night?

3. IG Audits are gaining momentum • HHS audit of Yale subcontract to U Mass Medical School (February 2006) • Major signal about the responsibility to monitor subcontracts • $194K of a $572K award disallowed by HHS • Cost transfers (preaward, accounts in deficit), effort, cost allocation methodology • NIH, DoD and NSF serve Yale with subpoenas (July 2006) • FBI agents visited faculty and staff at home (and at one vacation destination!) to question them • All information related to 47 grants from13 departments (many closed) were subpoenaed • Issues thus far…allocation of research expenses, the reporting of faculty effort devoted to grants, and numerous other matters relating to grant administration. • “Just zero out the grant…” • Whistleblower…? • IG focus is on cost transfers, allocation of expenses, effort, administrative charges and subaward monitoring, conflicts of interest

4. Major Audits: Dramatic increases in the past five years • 2007 ?? • 2006 19 – Yale, Chicago, Columbia, Berkeley • 2005 13 – Dartmouth, Cornell, Mayo Clinic, U Mass • 2004 7 – Harvard, Johns Hopkins, U Washington • 2003 2 – Northwestern • 2002 2 • 2001 0

5. Recent Major Settlements • 2006 $2.5 m: U Connecticut – Service Center Billing Rates • 2005 $4.4 m: Cornell - Grant Money paid to Non-Research Staff • 2005 $6.5 m: Mayo Clinic - Improper Cost Transfers • 2005 $11.5 m: Florida International – Improper Cost Transfers • 2004 $2.4 m: Harvard- Grants Billed for Unrelated Salaries • 2004 $2.6 m: Johns Hopkins - Faculty Effort Reporting • 2003 $5.5 m: Northwestern - Faculty Effort Reporting

6. A 133 Audits • A-133 is intended to be the “single agency audit” upon which other agencies can depend • Performed by external auditors, sometimes with the assistance of internal audit units. • Many universities have had very few A-133 findings: yet government auditors have found major issues in these same universities. • Government agencies have, therefore, stepped up their audit activities

7. SAS 112 • SAS 112 is a new accounting standard that mirrors Sarbanes-Oxley for non-profits and universities • SAS 112 takes effect for audits for periods after 12/31/05 and lowers the threshold at which auditors must make official “findings” • It is likely that universities—with a history of clean audits—will have reportable findings when SAS 112 is implemented

8. Repeated Themes • Appropriate Allocation of Cost • Cost Transfers • Effort Reporting • Subaward Monitoring

9. Human Embryonic Stem Cell Research (hESC) Controversial Limited number of federally approved cell lines Risks relating to use of facilities, equipment, space supported with federal funds on non-federally-approved hESC Major tracking and management issues

10. Justice Department Sentencing Guidelines • Applies to Universities • Requires diligence in establishing standards and internal controls intended to prevent and detect criminal behavior • Fines mitigated by having “Ethics and Compliance” programs in place

11. Seven Requirements of a Compliance Program (from Sentencing Guidelines) • Appointment of a compliance officer to oversee compliance efforts; • Development of ethics and compliance standards, policies and procedures; • Effective education and training as well as communication of university standards, policies and procedures; • Proactive systems to monitor and audit compliance with university standards, policies and procedures and to detect conduct that may violate these standards or may be unlawful; • Publicized disclosure mechanism whereby employees can seek guidance or report possible compliance violations without fear of retribution; • Consistent enforcement of compliance standards through appropriate disciplinary mechanisms and incentives to engage in compliant behavior; • Reasonable and appropriate responses to prevent similar offenses when detected.

12. Conflicts of Interest 2006 - NIH Targeted Site Reviews No instances of intentional noncompliance Concerns about narrow definition of Investigators Concerns about effective reporting of subrecipient’s COIs Concerns about adequacy of reporting COIs to NIH

13. Research Subject Protections: Humans Rising level of frustration among social and behavioral scientists in complying with the federal regulations Local IRBs caught between recognizing the need for flexibility in less than minimal risk research but unable to ignore the regulatory framework for review, approval and monitoring required by federal regulations Fear of FWA being suspended

14. Export Control Regulations • ITAR, EAR and OFAC regulations • Concerns about Deemed Exports • Staying within the Fundamental Research Exclusion • Creating a “technology” plan for the handling and use of export controlled data

15. Research Misconduct • Federal-wide definition • Institutional policy must satisfy the requirements of the many funding agencies that have research misconduct policies • Must ensure that ORI requirements are met

16. Allocation ofResearch Expenses • Split expenses appropriately among accounts at the time of the transaction • Choose a reasonable methodology for splitting expenses and document the way the method was determined • Don’t “park” expenses • If using a clearing account, expenses should be cleared the following month

17. Cost Transfers • Plan ahead for pre-award spending Transfers onto a new account are immediately “suspect” • Cost transfers should be completed within 90 days of discovery (per OMB Circular A110) • Late transfers call into question the quality of the PI review process • Costs maynot be shifted from one other sponsored agreement to another to meet deficiencies caused by overruns, to avoid restrictions, or for convenience (per OMB Circular A110) • Must be well documented

18. Effort Reporting • Insure initial labor allocations are accurate or properly reallocate within the certification time period • Stay aware of effort commitment on the awards • Request prior approval from sponsor when effort on a particular projects decreases by more than 25% from what was proposed

19. Subrecipient Monitoring • Subaward vs. Professional Services • Selection and Pricing Information • Approved subaward proposal and related documents must be on file before proposal is submitted • Is the subcontractor a viable business? • “Fair and Reasonable Price Checklist” on file • Invoice Approvals • Have subrecipients submitted invoices on time? • Do invoices contain the level of detail required in the subaward? • Are costs reasonable/allowable/allocable based on technical progress to date? • Has the PI personally signed/approved the invoices? • Monitoring • Is the PI regularly in touch with the subrecipient about technical progress? • Have subrecipients turned in required reports on time? • Does the subrecipient maintain current human and animal subjects approvals (when applicable)?

20. Other issues or questions?