WECOME TO “HOT TOPICS”

WECOME TO “HOT TOPICS” • Today’s Presenters: • Becky White • Triva Woodley • Rob Dimmitt • Leslie Vogel • Mike Ludwig

Our Main Attraction… COST SHARING: Auditable vs.Non-AuditableThe Battle of the Century! Becky White

Examples of Auditable… • “In addition to effort requested from the sponsor, PI will spend 10% effort on the project.” • “The University will provide 50% of the equipment cost.” • “The University will provide $5,000 toward the purchase of supplies.” Becky White

Examples of Non -Auditable • “In addition to effort requested from the sponsor, PI will devote a significant amount of effort.” • “The University intends to contribute additional resources to this project including equipment and supplies.” • Can you see the differences? Becky White

The Mega Blockbuster… Form 32Playing at a theatre near you Becky White

Completion of the FORM 32 - type of cost sharing commitment http://www.purdue.edu/sps/xls/form32.xls • Percent effort • Dollar commitment • Percent of sponsor funds • Memo Match Becky White

FORM 32 Memo Match • Always stated on Form 32 under memo match explanation • Third party commitments also are included on Form 32 under memo match. Becky White

And now, for an encore appearance… Memo Match Becky White

Recent A-133 audit • NSF IGERT project was reviewed • Auditor requested documentation of memo match • What is considered appropriate memo match documentation? Becky White

Annual documentation of memo match • Expectations (09/01/05 memo from Lucia & Mike) • http://www.purdue.edu/sps/edprogram/jeff/memomatch.pdf Becky White

Account Management for Cost Sharing only Minors • Source of funds (other; cost share reserve; contributed F&A) becomes a pot of money when managing the account. • http://www.purdue.edu/sps/edprogram/jeff/531-1364-0411.pdf Becky White

Account Management for Cost Sharing only Minors • Focus for BO during the life of the project should be on meeting the mandatory cost sharing commitment. • Need to determine type of cost sharing commitment when assessing overdrafts and balances Becky White

Account Management for Cost Sharing only Minors • If unable to meet the cost sharing commitment, please contact the SPS Account Manager to discuss options. Becky White

Account Management for Cost Sharing only Minors • If cost sharing minor is overdrafted, ALWAYS consider if sponsor funds are available • If commitment is met, any adjustments needed in closing will be coordinated by SPS Becky White

Questions??? Becky White

Voluntary Support Triva Woodley

Online Tools for Processing and Determining Voluntary Support • Fund Classification Guide: • http://www.purdue.edu/sps/pdf/fundguide.pdf • Voluntary Support Application: • http://www2.itap.purdue.edu/sps/vs/ • Voluntary Support Processing Guide: • http://www.purdue.edu/sps/pdf/vsprocessguide.pdf Triva Woodley

NTP…it just makes sense! • Notice to Proceed (NTP) is a tool to get an account set up to incur expenses PRIOR to an official award. • NTP’s can be backed by the Department OR the University. • Let’s look at the differences… • NTP’s = Liability Rob Dimmitt

WHY use an NTP? • Allows expenses to be certified for the project BEFORE an official award is set up. That’s good! • Certification means no Correcting Documents are needed. That’s better! • Certification also means avoiding potential “cost transfer” issues. WOO HOO!! Rob Dimmitt

Cost Transfers….bad…very baaaaaad! COST TRANSFERS Rob Dimmitt

“Why shouldn’t I just charge it to my department funds and move it later?! • Charges are not correctly certified when initially incurred! • This creates extra work! Who wants that? • Increases the Justification needed! • Raises major RED FLAGS with an auditor! (Have you seen auditors with RED FLAGS…not pretty) Rob Dimmitt

QUESTIONS? Rob Dimmitt

Charging Costs • Heeeeeeere’s Leslie! Leslie Vogel

UNLIKE CIRCUMSTANCES • Federal Regulations require that similar costs be treated consistently as either direct cost or indirect costs, in like circumstances. • Therefore, this imposes a requirement on the University to implement institutional decisions to consistently treat certain costs as indirect costs even though at any given time a particular transaction may otherwise legitimately appear to be a direct cost to a sponsored program • i.e. The University’s Cost Study Leslie Vogel

UNLIKE CIRCUMSTANCES • Definition of a direct cost per A-21 • Those costs that can be identified specifically with a particular sponsored project or that can be directly assigned to such activities relatively easily with a high degree of accuracy. • Salaries and Wages of Faculty, technicians, RAs • Fringe benefits • Equipment • Long Distance phone charges • Travel • Materials • Subcontracts • Other direct costs such as consultants Leslie Vogel

UNLIKE CIRCUMSTANCES • Definition of indirect costs per A-21 • Those costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project • Salaries and wages of administrative and clerical personnel • Office supplies (paper, pens, pencils, staplers) • Local telephone charges • Costs associated with providing the general computing environment such as the Purdue Data Network (PDN) or the Engineering Computer Network (ECN) Leslie Vogel

UNLIKE CIRCUMSTANCES • Situations exist (unlike circumstances) where costs that are normally treated as an indirect costs may actually be considered direct costs to the project, meaning that there can be direct benefit shown to the sponsored program. Leslie Vogel

UNLIKE CIRCUMSTANCES • Examples of situations where unlike circumstances may apply • Large complex multi-disciplinary projects that entail assembling and managing teams of investigators from within the institution as well as from a number of institutions • Projects which involve extensive data accumulation and entry, searching literature and reporting • Projects whose principal focus is the preparation and production of manuals and large reports, books (excluding routine progress and technical reports) Leslie Vogel

UNLIKE CIRCUMSTANCES • More situations where unlike circumstances exist • Projects that are geographically inaccessible to normal department administrative services • Off campus site • Individual projects requiring project specific database management; individual manuscript preparation, etc.. Leslie Vogel

UNLIKE CIRCUMSTANCES • When these type of circumstances exist, or other unusual situations exist that can likewise be documented, the cost of items required for the conduct of the project must be budgeted and FULLY justified in the proposal budget justification to the federal sponsor in order to be subsequently charged to the project. Leslie Vogel

UNLIKE CIRCUMSTANCES • Items that are normally considered as indirect costs must be included in the award, or subsequently approved in accordance with the funding agency regulations, in order to be allowable charges to the project. • The University will consider the costs approved if the agency awards the proposed budget in full, or does not explicitly remove the budget line item for those costs Leslie Vogel

UNLIKE CIRCUMSTANCES • Who is responsible • Individuals in the academic departments (PI, Co-PI) are responsible for demonstrating the direct cost-benefit relationship which would reduce the risk of audit disallowance and to enhance compliance with the federal regulations • However, the Dean, Director, or Department head remains ultimately responsible for those costs that are determined disallowable costs to the sponsored program projects in their respective areas Leslie Vogel

Leslie Vogel

Questions, Reaction, Observations? Leslie Vogel

OVER DRAFTS Mike Ludwig

Overdrafts Ever thought this? • “Why does everyone bug me about overdrafts? I will make sure it gets cleared but there are more pressing things today/this week/ this month?” • “I don’t want that account locked because that only creates more work for me that I don’t have time to do?” Mike Ludwig

What happens when a project overdrafts? Notification of the O/D to SPS and Business Office SPS contact BO for okay to lock Lock Account Clear O/D Clear suspense entries SPS review at month end to see if O/D cleared/contact BO SPS prepare “interim” final report SPS prepare final report University resources consumed to fund overdraft Mike Ludwig

What is the cost? (10 min review) (10 min review account history and communicate) (5 min data entry) (30 min identify transactions to clear, ID new source of funds, and prepare document) (20 min identify new source of funds and prepare document) (5 min if cleared/ 15 min if not) (30 min check with BO on “final” estimate and prepare report) (15 min prepare report) • Notification of the O/D to SPS and BO • SPS contact BO for okay to lock • Lock Account • Clear O/D • Clear Suspense • SPS review to see if O/D cleared/ contact BO • SPS prepare “interim final report” • SPS prepare final report Mike Ludwig

What is the cost?(Cont’d) Total…………………135 min. per overdraft Times (X) 15 new overdrafts per day Times (X) 260 work days Times (X) $15/hour Equals = 9000 hours of work/$135,000 9. University resources consumed Average daily overdraft………$1.7 million Interest 4 %................................ $68,000 Mike Ludwig

OK, so we won’t ever be able to stop all overdrafts, right? What can we save through timely clearing of O/D and following account lock guidelines? • Notification of the O/D to SPS and BO • SPS contact BO for okay to lock • Lock Account • Clear O/D • Clear Suspense • SPS review to see if O/D cleared/ contact BO • SPS prepare “interim final report” • SPS prepare final report (10 min review) (10 min review account history and communicate) (5 min data entry) (30 min identify transactions to clear, identify new source of funds, and prepare document) (20 min identify new source of funds and prepare document) (5 min if cleared/ 15 min if not) (30 min check with BO on “final” estimate and prepare report) (15 min prepare report) Mike Ludwig

NOW… what is the cost? Total 135 65 min/overdraft Times 15 new overdrafts per day Times 260 work days Times $15/hour Equals 9000 4500 hours of work $135,000 $ 67,500 • University resources consumed Average daily overdraft $1.7M $.5 million Interest 4% $ 68,000 $20,000 Mike Ludwig

REACTIONS? Mike Ludwig

Cost Allocations Mike Ludwig

N E W S H E A D L I N E S Cornell University Thursday, June 23, 2005 Cornell agreed to pay $4.38 million to settle claims it over billed for NIH grant from 1995 to 2003. It is alleged that Children’s CRC at Weill Medical College used federal grant dollars to pay full salaries of several employees not involved with research. Mike Ludwig

N E W S H E A D L I N E S Mayo Clinic Friday, May 27, 2005 Mayo paid $6.5 million to settle allegations that it misspent millions of dollars in federal research grants over more than a decade. The government contends that, from 1992 to 2003, Mayo routinely took federal money that was supposed to be used for specific research projects, and used it for other projects that were running short of money. That allowed the clinic to avoid refunding unused grant money, as required by law, the government alleged. Mike Ludwig

N E W S H E A D L I N E S Florida International University Tuesday, February 15, 2005 Florida International U. agrees to $11.5 million settlement with Government over grants accounting and accusations that university improperly billed the government for scientists’ time, travel, and administration expenses. A 2003 audit found that the university had not properly documented whether faculty members had spent the percentage of time they had promised to spend on research projects financed by the grants. Mike Ludwig

N E W S H E A D L I N E S Friday, July 2, 2004 $3.3 million settlement involving allegations that Harvard and an affiliated hospital overcharged NIH research and training grants by seeking reimbursement for the salaries of researchers who did not work on the grant. Harvard University Mike Ludwig

N E W S H E A D L I N E S Johns Hopkins University March 12, 2004 $2.6 million settlement of allegations that JHU had knowingly overcharged the Government by overstating the amount of time researchers worked on Federal research projects and in at least one case charging for more than 100% of an individual’s salary. Mike Ludwig

Is Purdue at Risk ??????????? Have you ever heard statements like these about cost allocation: I want to charge 100% of my summer salary to my NSF grant. I’m taking a research leave next semester and want my salary charged to my DOD project. I want to conserve my industrial funds so move all of my grad students over to the new NIH award. My EPA project is expiring soon and if we don’t spend what’s left, I’m going to lose those funds. Can you transfer all of the charges from my other projects for the last two months to EPA account? Mike Ludwig

What should Business Office andSPS staff do? • Know all of the sponsored projects, funds available, end dates, and who is paid from which account. • Analyze the situation; does it make sense that the PI can work 100% on one project when he/she has three other active projects? (Are they REALLY that good?!) • Ask questions, “If you are working 100% during the summer on your NSF grant, then who is supervising the grad students you have working on other projects? Hmmmmmmm?” Mike Ludwig

WECOME TO “HOT TOPICS”