Financial Monitoring: An Organizational-Based Approach

1. Financial Monitoring: An Organizational-Based Approach NCURA FRA Conference March 2013 David Clark and James Reisert

2. Agenda • Introductions • Objectives • Overview of Financial Monitoring • Key Controls for Financial Monitoring • Possible Financial Monitoring Structures • Best Practices Discussion • Questions

3. Key Construction Activities Introductions

4. Introductions David Clark, CIA, CFE, CRMA Manager Baker Tilly James Reisert Director, Sponsored Programs Financial Operations Georgetown University

5. Key Construction Activities Objectives

6. Objectives • Identify the various types of organizational support models within research institutions. • Describe key controls or practices for financial monitoring on research awards. • Provide feedback and ideas for how to strengthen financial monitoring resources.

7. Key Construction Activities Overview of Financial Monitoring

8. Need for Financial Monitoring Financial monitoring processes should be designed to provide oversight into the progress of a research award and help to ensure that costs recorded and charged to sponsored awards are within the related guidelines for a project, which may include: • Federal regulations (CFR, OMB Circulars, FAR, etc.) • Sponsor terms and conditions • Specific award terms and conditions • Institutional policies

9. Items to Review Financial monitoring should include reviewing a specific account and related costs to determine: • Nature or type of cost • Business purpose • Allowability, allocability, and reasonableness • Budget availability and progress

10. How is Monitoring Completed? Institutions have created a variety of ways to be able to monitor costs and financial progress on awards, including: • System alerts or flags • Dashboards • Budget progress/performance reports • Manual account/cost review(s)

11. Who is Responsible for Monitoring? Principal Investigators (PIs) are ultimately responsible for the costs charged to a particular research award, but the activities involved in financial monitoring are often shared across several positions in an institution, which may include: • Research staff • Sponsored Programs/Projects Office • Finance/Accounting • Travel department • Procurement • Academic departments/units

12. Key Construction Activities Key Control Considerations for Financial Monitoring

13. How will Monitoring Responsibilities be Structured and Assigned? The success of financial monitoring willdepend on the processes and individuals involved. Key considerations include: • Who will perform monitoring? • When is monitoring completed (i.e., preventive or detective control)? • How often will monitoring be performed? • How will monitoring be documented? • What will be monitored (e.g., overall budget, specific costs, budget remaining)? Discuss: Who sets the accountabilities/processes for financial monitoring at your institution?

14. Methods of Procurement Controls, and related monitoring responsibilities, may differ depending on the method of procurement or value of the cost. Control considerations may include: • Spending limits and/or policies for each method of procurement • Procurement Cards • Purchase Orders • Expense Reimbursement • Approval/review process

15. Types of Cost Additionally, the nature of the item being purchased may require additional controls or review procedures be a part of the financial monitoring process: • Capital Equipment • Computers • Facilities or rent expenses • Indirect costs (or F&A rate application) Discuss: Does your institution have specific processes for selected cost items? • Small Equipment Purchases • Salaries (especially for administrative positions) • Subrecipients

16. Key Construction Activities Possible Financial Monitoring Structures

17. Centralized Financial Monitoring Structure Financial monitoring responsibilities are housed within one (or a small grouping of) centralized office(s) that oversees all awards. Employees would typically be under the direction of a senior university leader (such as the CFO or Vice President for Research). • Benefits: Centralized function, consistency, documents readily available for audit purposes • Challenges: Lack of communication with PIs in departments, lack of detailed project knowledge

18. Decentralized Financial Monitoring Structure Financial monitoring responsibilities are located within each academic department. • Benefits: Dedicated resources in each department with specialized knowledge of areas of research specific to the department , closer working relationship with PIs • Challenges: Lack of consistency across departments, separate policies and procedures

19. Hybrid Financial Monitoring Structure Financial monitoring responsibilities are divided between a centralized research monitoring office and individual departmental offices or assigned to service centers responsible for a subset of research areas. • For example, departments may be responsible for monitoring charges to their awards, while the centralized monitoring office may review quarterly reports prior to submission to federal agencies. • Benefits: Workload is shared, two layers of control • Challenges: Lack of consistency, confusion over roles and responsibilities

20. Georgetown’s Financial Monitoring Structure • Description • Successes • Challenges

21. Key Construction Activities Best Practices Discussion

22. How will Monitoring Responsibilities be Assigned and Structured? - Revisited The success of financial monitoring willdepend on the processes and individuals involved. Key considerations include: • Who will perform monitoring? • When is monitoring completed (i.e., preventive or detective control)? • How often will monitoring be performed? • How will monitoring be documented? • What will be monitored (e.g., overall budget, specific costs, budget remaining)?

23. Best Practices to Consider – Process Controls Many institutions are currently working to establish some form of a Hybrid model for financial monitoring that allows for appropriate levels of oversight and support while responding to ever increasing costs for compliance and resource reductions. Some practices identified include: • Financial activities above a certain dollar threshold or specific cost types go through a standardized review process • Roles and responsibilities and policies and procedures are clearly defined and communicated throughout the university research community • Leveraging of service centers to streamline decentralized operations and maximize resource effectiveness

24. Best Practices to Consider – Involve the Researchers Regardless of the financial monitoring model in place, a consistent best practice is achieving participation and accountability from the project PI and leveraging systems or processes to provide accurate information for review on a routine basis. • Establishing clear responsibilities and expectations for all researchers, especially PIs • Routine financial review by PIs, to potentially include certification of costs incurred • Focus on availability and accuracy of information for decision making • Provide training for all employees involved in financial monitoring

25. Best Practices to Consider – Seek Advice It may also be helpful to consider external resources beyond those involved in the financial monitoring program to identify opportunities that may not be visible from “in the weeds.” • Leverage industry organizations and information available, such as NCURA, SRA International, COGR, etc. • Consult with peers from other institutions and be willing to share stories, challenges, and successes. • Invite internal audit to perform a review or provide insight

26. Contact Information David Clark, CIA, CFE, CRMA Manager Baker Tilly 703.923.8343 david.clark@bakertilly.com James Reisert Director, Sponsored Programs Financial Operations Georgetown University 202.687.2313 jlr23@georgetown.edu

27. Any Questions?