Financial Management of
Sponsored Research
Robert Rono, CPA, M.B.A., M.Sc.
Business Official
Moi University College of Health Sciences/
Moi Teaching and Referral Hospital
Did the Hard Work End with the NoA?
• After the Notice of Award (NoA), the real work begins: The
award has been received, negotiated, and accepted
• Review award details against proposal
CAREFULLY READ THE NoA
Gears That Drive and Support Research
Enterprise
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Protection
Award compliance
Project management
Procurement
Intellectual property
Technology transfer
Financial management
Know Regulations and Cost Principles
• To be allowable, costs must be reasonable, be allocable, be
given consistent treatment, and conform to any limitation or
exclusions, types of costs, cost transfers, shared costs
• Office of Management and Budget Circulars:
– A-21: Cost Principles for Educational Institutions
– A-122: Cost Principles for Non-Profit Organizations
http://www.whitehouse.gov/OMB/circulars/
Know Regulations and Cost Principles
(cont.)
• Agency-specific regulations: NIH Grants Policy Statement
(NIHGPS), Section 7
• http://grants.nih.gov/grants/policy/nihgps_2012/index.htm
• USAID Standard Provisions for Non-Governmental Institutions
• Exercise:
– OMB A-21 Section J
Project Costs
• Direct costs can be identified specifically with a particular
sponsored project, an instructional activity, or any other
institutional activity, or they can be directly assigned to such
activities with a high degree of accuracy (OMB Circular A-21).
• Indirect costs (F&A): Costs associated with implementing a
contract or grant that cannot be specifically allocated to a
specific project, grant, or contract. These are costs for
activities or services that benefit more than one project, and
their precise benefits to a specific project are often difficult or
impossible to trace.
• Accurately identify and understand the full cost of research
activities to be able to sustain the research enterprise.
Project Launch: A Key Step in Project
Financial Management
• Best practice—launch/orientation meeting:
Principal Investigator and his/her team; project management
staff, who will include supply chain staff, finance staff, the
compliance officer, the contract specialist, and the human
resources manager
Financial and Contractual Risks in
Sponsored Projects
• Scientific nonperformance/not reporting/ problems with
human subjects protection
• Noncompliance withfunding agency and own institution’s
policies (Proc, HR, Fin GM, IRB) and contractual obligations
• Underbudgeting
• Financial mismanagement (funds used for other purposes/
nonallowable costs)
Financial and Contractual Risks in
Sponsored Projects (cont.)
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Exchange rate risks (international grants)
Cash flow risks
Credibility of institution/PI at stake
Funder not paying as per agreement or under escape clause
Inadequately set up finance management section
Post-Award
• Ultimate role of RA and institution
– Fiscal responsibility: An obligation to successfully perform
and complete a committed task with the committed
funds/grant
• Role of the PI
– Scientific management of the sponsored project
– Financial management of the sponsored project
– Compliance management of the sponsored project
Finance Section Set-Up
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Customized financial management policy
Central or semi-autonomous?
Structure—segregation of duties, qualified staff
Internal control environment: internal audit
Financial management system—CRITICAL!
Statutory reporting/donor reporting/mainstreaming reports to
larger institution
• Audits—donor required, institutional/country required (who
pays? audit fatigue?)
Monitoring Expenditures
• Monitoring requires that:
– Actual expenses are periodically compared with original
budget
– Actual expenses are accurate (i.e. reasonable, allocable,
allowable, necessary, and consistently charged)
– Mischarges are corrected in a timely manner
– Prior approvals are obtained when required
– Subrecipient expenses are monitored
Variance Analysis
• Budget vs. actual expenses
– Actual expenses should be compared at least monthly to the
original budget to ensure:
• You will not end up with a deficit or large balance (a large
balance could indicate lack of progress or that too much
money was awarded)
• Total funds for any cost category have not been exceeded
if restricted on the NoA
Compliance Issues/Responsibilities
• FMS Standards: NIH cannot support the research unless it has
assurance that its funds will be used appropriately, adequate
documentation of transactions will be maintained, and assets
will be safeguarded
• “A grantee’s failure to establish adequate control systems
constitutes a material violation of the terms of the award”
(NIHGPS)
Compliance Issues/Responsibilities
(cont.)
• Compliance with sponsor’s regulations or policies as well as
institution’s policies
• Examples of compliance issues: Timesheets/activity reports,
allowable and nonallowable costs, exchange rates, interest
repayments, auditing requirements, etc.
Financial Reporting
• Varies considerably from funding institution to funding
institution
• Timely reporting is a contractual requirement
• Report allowable expenses in line with budget, with reasons
for overspends
• Use correct exchange rate
• Authority to “sign off” on financial reports
• Use sponsor templates/uploads
• Interim reports/final status reports
• Final report exercise
Audits
• Be aware of OMB A-133 audit requirements and of sponsor
programmatic audit requirements—RIG Pretoria list
• Review the project file once notified of an audit
• Identify a liaison during the process
• Request entry and exit meetings
• Give concise truthful answers
• Know avenues of resolution in case of conflict of interpretation
with auditors
• Keep leadership in the loop
Enforcement Actions
A grantee’s failure to comply with the terms and conditions of an
award may cause NIH to take one or more enforcement actions,
depending on the severity and duration of the noncompliance
• Modification of terms of award (more stringent)
• Suspension, termination, and withholding of support
• Other actions (e.g., suspension, disbarment, civil action)
• Recovery of FUNDS
Foreign Organization System (FOS)
Review
• Documentation forwarded in advance by NIAID/NIH contractor:
– Foreign Organization Systems (FOS) Review document in
English
– Tentative site visit agenda
– List of documents to be kept ready for the visit
• One-week visit
• Primarily work with the administration, HR, and accounting and
finance staff to conduct the FOS review
• Meeting with the PI at the beginning of the review to brief
him/her about the visit objectives and again on the last day to
discuss the final FOS and recommendations, if any
Issues of Financial Interest in
Sponsored Projects
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Indirects—real cost, rates, expenses, distributions
Institutional base salary—research, teaching, care, consult
Consolidated financial reporting—local standards/IFRS/GAAP
Prior approvals—rebudget, capex, international travel
No-cost extensions/supplements—budgets, justification
Cost transfers, overruns, accelerated or delayed expenditure
IRB fees—not allowed on NIH grants, timing of payment,
indirect support
Issues of Financial Interest in
Sponsored Projects (cont.)
• Pre-award costs: A grantee may, at its own risk and without
NIH prior approval, incur obligations and expenditures to
cover costs up to 90 days before the beginning date of the
initial budget period of a new or renewed award
• Pre-award costs are allowable only if such costs:
– Are necessary to conduct the project, and
– Would be allowable under the grant, if awarded, without
NIH prior approval (NHGPS)