Case Studies: Financial Management Sylvie Kwedi Nolna, PhD skwedi@clear-inc

1. Case Studies: Financial Management Sylvie Kwedi Nolna, PhD skwedi@clear-inc.com

2. Acquire an understanding of potential issues in financial management of research Discuss ethical issues in financial management of research Discuss consequences of mismanagement Learning Objectives

3. Case #1: Rebudgeting

4. Case #1: Rebudgeting • MrsMatouke, Research Finance Manager at the University is in charge of managing the budget for a Bill and Melinda Gates Foundation (BMGF) grant recently awarded for a project directed by Prof. Alfred Fetta. • Mrs. Matouke receives an email from the Prof saying he wants all the funds budgeted for graduate students conference travel to be rebudgeted to buy a piece of equipment.

5. Case #1: Rebudgeting • Mrs. Matouke tells Prof. Fettathat she is not allowed to rebudget according to the contract set up with the funder. He does not hesitate to tell her that this is how he always wanted to spend the funds, but he knew BMGF would never approve the equipment he wants to buy since he already has the same equipment but wants a duplicate as back-up.

6. Case #1: Rebudgeting • Ethical Issues • willingness to ignore sponsor policy and to lie in order to get what Prof Fettawants.

7. Case #1: Rebudgeting • Ethical Issues • The following is on the BMGF application cover page: :” I certify that the statements herein are true, complete and accurate to the best of my knowledge. I am aware that any false, fictitious, or fraudulent statements or claims may subject me to criminal, civil, or administrative penalties....”

8. Case #1: Rebudgeting • Consequences of Actions: • The consequences of Prof. Fetta’s unethical action can be termination or suspension of the grant and/or debarment of the university or, more likely, Prof Fetta’s banning from receiving further sponsored funding from BMGF or other donors.

9. Case #1: Rebudgeting • Consequences of Actions: • The university would be linked to Prof’s Fettaunethical action and almost inevitably be tainted by it. • While the university is ultimately responsible to the proper stewardship of sponsored funding, it depends on its employees to act ethically and responsibly.

10. Case #1: Rebudgeting • Consequences of Actions: • If Mrs. Matouke does not report the infraction, then she is acting just as unethically as he did.

11. Case #1: Rebudgeting • Obligations: • Needless to say, Prof Fetta has the responsibility not to act in a fraudulent manner. If he knows that BMGF would not fund certain expenses, it is his responsibility to search for other sources of funding.

12. Case #1: Rebudgeting • Obligations: • MrsMatouke has the responsibility to know what the university is committed to when accepting the award from BMGF. • The university is depending on her and other employees to protect it from exposures and penalties resulting from noncompliance.

13. Case #1: Flying First Class

14. Case #2: Flying First Class • Prof. Makeng, Principal Investigator (PI) on an NIH (US National Institute of Health) grant, has returned from a professional conference, and submitted her travel report and receipts for reimbursement to the department administrator, MrsWonge.

15. Case #2: Flying First Class • MrsWonge notices a receipt for round-trip first class airfare between Douala and Paris and ask Prof Makeng who replies affably. "the travel agent and managed to find a first class ticket for basically the same cost as a coach ticket. I was very lucky"

16. Case #2: Flying First Class • Prof. Makengcontinues "No one's going to complain. Even an auditor wouldn't squawk because it's almost the same price as my ticket to Paris a couple months ago. I was trying to keep the price down, and here I am back in the lab very relaxed and ready to work."

17. Case #2: Flying First Class • Ethical Issues • Prof. Makengneeds to recognize that she is placing her self-interest over and above her responsibilities to the university. She appears to have made a conscious decision to fly first class for a variety of reasons that are not acceptable justification.

18. Case #2: Flying First Class • Ethical Issues • Prof. Makengis not exercising proper stewardship by, at first, being unfamiliar with NIH policy and then, when informed, proposing that her violation be kept quiet.

19. Case #2: Flying First Class • Consequences of Actions • The consequences of one instance of charging inappropriate expenses to an NIH award would likely be a disallowance of the cost. Should there be a pattern of similar activity, the consequences become far more serious. It can result in serious penalities and the exercise of greater financial controls by NIH.

20. Case #2: Flying First Class • Consequences of Actions • There is a possibility that her error would be caught by auditors, but perhaps she could explain it was just an error. The university would have to pay funds back to NIH, but it would unlikely result in any negative consequences for the staff involved.

21. Case #2: Flying First Class • Obligations • The obligations of Prof Makeng, MrsWonge, and the university and all concerned are to be aware of the relevant regulations and policies, and to abide by them.

22. Case #2: Flying First Class • Obligations • The university has the obligation to train its personnel effectively, and employees have the obligation to act in accordance with that training. The university, in accepting the NIH grant, also agreed to exercise proper stewardship over the expenditure of NIH funds. It also has an interest in avoiding negative audit findings that would result in the disallowance of costs.

23. skwedi@clear-inc.com This presentation can not be copied, reproduced, or administered without the expressed permission of CLEAR, Inc.