UCOP: Jorge Ohy
UCB: John Ellis, Wanda Lynn Riley
UCSD: Stephanie Burke, Mark Cooper
August 27, 2008

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Discuss increased federal agency focus on compliance with time and effort regulations; and the impact of non-compliance experienced by other institutions
Provide background information concerning results of the NSF audits conducted at UCB and UCSD
Provide overview of lessons learned as a result of electronic time reporting system implementation at
UCSD and UCB
Discuss areas of risk and future audit plans

 HHS-OIG issued proposed guidelines for establishing compliance programs for recipients of Public Health Services grants in
November 2005
( http://oig.hhs.gov/fraud/docs/complianceguidance/PHS%20Re search%20Awards%20Draft%20CPG.pdf
)
 The introduction to the proposed guidance highlighted three “risk areas”, including time and effort reporting
(other areas include: Properly allocating charges to award projects; and Reporting financial support from other sources.)

http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html
Section J.10
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The effort reporting system must be “incorporated into the official records of the institution”
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Cannot exist only on personal calendars or as part of informal departmental spreadsheets
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Must be formal, but can be based on “subsidiary records”
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The effort reporting system must “reasonably reflect the activity for which the employee is compensated by the institution”
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Must capture the employee’s “total compensated effort”

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The payroll distribution system “may reflect categories of activities expressed as a percentage distribution of total activities.”
The system must provide for “after the fact” confirmation of the reasonableness of salary allocations to each sponsored agreements
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Salary allocations must be confirmed by the employees themselves or by “responsible persons with knowledge of the work performed
The system will provide for “independent internal evaluation” to ensure its effectiveness

Per the NIH Grants Policy Statement,
Part II, Subpart
A, General —Administrative Requirejments; Revised December 1,
2003: http://grants2.nih.gov/grants/policy/nihgps_2003/NIHGPS_Part7.htm#_Toc54600127
 The sponsor must be notified in writing if the PI or key personnel specifically named in the notice of grant award will withdraw from the project entirely, be absent from the project during any continuous period of three months or more, or reduce time devoted to the project by 25% or more from the level that was approved at the time of award.

Date
February 2003
February 2004
June 2004
April 2005
May 2005
June 2005
February 2006
Institution
Northwestern
University
Johns Hopkins
University
Harvard
University
University of
Alabama at
Birmingham
Mayo Clinic
Cornell
Yale
Settlement
$5.5M
$2.6M
Reason
Researchers spent less time on NIH sponsored projects than they reported.
Faculty time and effort devoted to NIH grants was overstated.
$2.4M
$3.4M
$6.5M
$4.4M
$194K
Unrelated salary costs and other expenses were charged to federal grants.
Research effort was overstated; the
Medicare program was billed for research that was funded by another sponsor.
Research effort associate with other sponsored projects was charged to
NIH grants.
Grant money alleged to support standard care for patients.
Sub award costs not adequately documented.

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Failure to distribute and collect effort reporting forms
Lack of understanding of effort reporting regulations by investigators and administrators
Failure to reconcile effort report data with salary charges
Effort reports are signed by individuals with insufficient knowledge of the work performed

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Failure to include all institutional effort in the effort percentage allocation
Faculty salaries charged 100% to sponsored research
Inaccurate statements of effort on federal projects
Failure to account for unfunded effort
Failure to document and report significant changes in effort
Misunderstanding of effort report form requirements

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NSF Purpose: to evaluate whether the university internal controls were adequate to properly manage, account for, and monitor salary and wage charges to NSF grants in accordance with OMB and
NSF grant requirements. Specifically, to determine if salary and wage charges were allowable, allocable, and reasonable in accordance with federal cost principles.
Scope: 30 of 160 institutions receiving over $1M in
NSF grants annually
Sample selection: all labor charges for a sample of
30 principal investigators per institution. Results to be extrapolated to all institutions in the sample.

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Timeframe: Fiscal Year 2006 NSF Projects Totaling $104M, of which 27% or $28M represented labor charges
Statistical sample: 30 employees with salary and wage costs amounting to $1,194,918
For each salary record selected: PAR reports reviewed for completeness and timeliness, appointment letters or other documents supporting approved salary reviewed; DOPES reviewed; award documents evaluated
Interviews conducted to determine whether:
 labor charges documented were actually incurred
 approximate percentage of effort was reasonably consistent with NSF labor charges
 the type of work performed was consistent with the award scope of work

The PAR report includes four sections:
PAR Section I = calculated effort
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Reviewed by the employee or other responsible official
PAR Section II = actual effort
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Adjustments are made as needed to reflect the actual effort spent on each award
PAR Section III = noted corrections made to Section I PAR data Section I
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Completed by the employee or other responsible official
PAR Section IV = certification
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Validates that PAR information represents a reasonable estimate of the actual effort expended for wages that were direct charged to each sponsored project and each funding source listed on the PAR for the period reported.

UCSD generally has a well established and sound
Federal grants management system. Review of 30 sampled employees found that PAR effort certifications generally supported the FY 2006 salary costs of $1.2M directly charged to NSF grants. However, because
UCSD has decentralized its grant management functions and responsibilities to Academic
Departments, improved internal controls were required to ensure proper oversight and implementation of its
PAR labor effort reporting system

 60 of the 69 PARS representing 64% of total NSF salary charges tested, were certified 5 to 516 days late after the University’s due date or lacked a documented certification date.
 2 of the 23 employees submitting PARs had 6 effort certification reports that were either not signed or did not include the proper confirmation of the reported labor effort on NSF projects.
 4 employees reported 5 to 20 percent of their labor effort as expended on administrative activities not directly benefiting NSF sponsored projects (proposal preparation)
 3 employees improperly charged salaries to sponsored projects exceeding NSF’s faculty salary limitations or UCSD’s incentive award policies.

 UCSD overcharged $35,050 (3%) of salary charges to NSF awards for activities not directly benefiting the sponsored projects and an additional
$16,267 (1%) for salaries exceeding University compensation policies.
 UCSD lacked certifications to support $49,595 (4%) of FY06 NSF salary charges reviewed.
 Late certification or inadequate documentation to determine approval dates for 64% of NSF salary charges reviewed increases the risk that such certifications are not reliable, particularly given that 11 percent of such labor costs were certified more than six months late or were not dated. The significant nature of these control weaknesses raises concerns about the reasonableness and allowability of the remaining $16.5M of FY06 labor charges to NSF grants, and could affect the reliability of the salary portion of UCSD’s other $629M of Federal awards.

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PAR certification date requirements extended.
ECERT to eliminate discrepancies in accuracy and completeness of effort reports.
Sponsored projects to monitor certification timeliness, provide training to departments, and notify department officials when compliance not maintained.
Accountability procedures to be developed. UCSD to notify campus emphasizing the need for accountability and compliance
UCSD to develop guidance for allowable costs and what is included institutional base salary.
UCSD to apply additional personnel resources and work with campus department to ensure knowledge and compliance with the 2/9 th rule.

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UCSD to work with departments to ensure compliance with incentive award allocation procedures.
UCSD Sponsored Projects to develop procedures and guidance for effort reporting and to make these available to the campus
Internal Audit to periodically perform independent, comprehensive reviews of the ECERT system sufficient in scope to meet Federal and NSF requirements on an approximate three to five year cycle.
UCSD to coordinate with NSF program personnel to resolve questioned costs.

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Timeframe: Fiscal Year 2006 NSF Projects totaling $89M, of which
29% or $26.1 represented labor charges
Statistical sample: 30 employees with salary and wage costs amounting to $850,781
For each salary record selected: PAR reports reviewed for completeness and timeliness, appointment letters or other documents supporting approved salary reviewed; DOPES reviewed; award documents evaluated
Interviews conducted to determine whether:
 labor charges documented were actually incurred
 approximate percentage of effort was reasonably consistent with NSF labor charges
 the type of work performed was consistent with the award scope of work

UCB generally has a well established Federal grants management system. Because UCB has decentralized many of its grants management functions to the
Academic Departments, UCB needs to improve its internal controls to ensure proper implementation and oversight of its PAR system.

 4 employees did not have appointment letters or employment contracts documenting the base salary rate used to charge NSF, or charged for more than the amount in the appointment letter
 31 of 56 PARs reviewed were certified 2 to 412 days late for 20 employees, representing 40% of total salaries tested. An additional 13 reports, representing 21% of salary charges, were either not dated, dated prior to the PAR distribution date, or were missing.
 3 employees reported 10 to 20 percent less actual effort worked on NSF grants during interviews than the labor effort certified on their PARs
 2 department administrative employees inappropriately certified NSF labor charges for two employees without “suitable means of verification” to validate the reasonableness of actual work performed.

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UCB did not have adequate documentation to validate the reasonableness of 12% ($103,637) of actual salary costs charged.
UCB inappropriately charged $15,543 (2 percent) for activities not directly benefiting the NSF projects.
The significant nature of these control weaknesses raises concerns about the reasonableness and allowability of the remaining $25M of FY06 labor charges to NSF grants and the salary portion of UCB’s other $221M in federal awards.

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UCB to remind departments to retain appointment letters.
ERS to load salaries directly from PPS, and eliminate discrepancies in accuracy and completeness of effort reports.
Sponsored projects to monitor certification timeliness, provide training to departments, and notify department officials when compliance not maintained.
UCB to develop guidance for allowable costs and what is included institutional base salary.
UCB to work with department representatives to provide guidelines and document that “suitable means of verification” are used to certify employee effort, when the approver does not have first hand knowledge of the work performed.

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Internal Audit to periodically perform independent, comprehensive reviews of the ERS system sufficient in scope to meet Federal and NSF requirements on an approximate three to five year cycle.
UCB personnel with access to ERS will be required to successfully complete mandatory training.
UCB to request coordinate with NSF program personnel to resolve questioned costs.

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UCB to revise policy to include review of the PI committed personmonths in the NSF’s Current and
Pending section as a component of Sponsored Projects administrative review of all aspects of UCB proposals prior to submission to Federal sponsoring agencies.
Also in December 2007, UCB revised its software program to start recording PI person-months commitments in extramural proposals.
UCB to prepare an in-depth curriculum to train SPO personnel, and research administrators, and to perform outreach to UCB faculty and academic units.

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Pilot Implementation – Opportunity to bring transition to ERS “UCSD
ECERT” from PARS with a select group of departments with Business
Leaders serving on implementation team
Departmental Ownership – ECERT coordinators identified for each department to design implementation strategy. New roles for some.
Accountability – Department Chairs and Vice Chancellors must be incorporated in the accountability plan.
Reporting - Data access to the campus should be consistent with existing financial reporting tools and processes
Integration of Effort Reporting with existing budget tracking processes
Still to Come – Consequences, how do we put teeth into the accountability requirements

1)
Need active participation & regular on going communications from VC Research to faculty
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Willingness to change previous decisions made in the early stages of the project
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Have a communication plan
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Campus communications written from a departments point of view

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Document responses to ad hoc campus questions to facilitate consistent response from central ( & don’t reinvent the wheel each time)
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Need dedicated project team lead & a full time staff to develop training materials, test system, handle calls, perform follow up, hold training sessions
Meet regularly with Campus ERS focus group
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If possible get support and advice from other UC campuses who have already implemented ERS
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Need strong IT support assigned to liaise with UCOP IT staff

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Recommend implementation with an initial set of pilot departments
Need a large pilot group from a cross section of campus research departments
Need to develop campus experts outside of central
EFA
EFA Directors / Controller be flexible & attend faculty department meetings
Don’t let the faculty get to you (don’t take the feedback personally!)

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Securing and Accounting for Controlled Substances
Level of Commitment and Effort Reporting
University Administrative and Clerical Salaries
Cost Transfers
Compensation of Graduate Students Involved in NIH
Funded Research
NIH Monitoring of Extramural Conflicts of Interest
Monitoring of NIH Research

A system-wide internal audit of this area is likely, using a common internal audit program across all campuses.