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University of Colorado Denver | Anschutz Medical Campus

University of Colorado Denver
 

Financial Compliance and Training

Reports and Articles


Archive of articles published by Financial Compliance and Training in the University Administrative and Business News:

 

Federal Government Determines Duke University Owes $1.7 Million for Unallowable Administrative and Clerical Costs on Federal Grants  

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) conducted an audit of Duke University’s (Duke) policies and practices for direct charging administrative and clerical expenses to federal grants and contracts.  OMB Circular A-21 indicates that administrative and clerical salaries and expenses are typically considered part of F&A expenses; however, there can be exceptions related to the project.

OIG reviewed a sample of 234 transactions involving salaries and operating expenses, totaling $458,493 and concluded that $28,486 (6% of the total) were unallowable direct expenses per OMB Circular A-21.   In addition, OIG concluded that Duke’s policies and monitoring practices were not adequate to ensure consistent compliance for all federally sponsored projects at Duke. 

Based on their sample and evaluation of policies and processes at Duke, OIG extrapolated their unallowable costs to all of Duke’s federal grants/contracts to estimate that Duke charged approximately $1.7 million in unallowable costs to their federal grants/contracts during a period of time.  OIG is recommending that Duke repay the federal government $1.7 million based on their unallowable sample of $28,486.  The audit demonstrates the impact of audit discrepancies and the importance of strong policies and procedures to ensure consistent compliance throughout the University.  

The University of Colorado Denver |Anschutz Medical Campus is committed to compliance with federal regulations and will continue to monitor federal audits including Duke’s to ensure our policies and procedures are compliant with federal regulations and address audit concerns.  

 

Yale Pays $7.6 Million in Settlements

Cost transfers to federally sponsored projects are one of the most audited items by the federal government. Without sufficient explanation and documentation; cost transfers can result in significant repercussions for a University including fines, settlements, impact on future awards as well as damage to the institution’s reputation. A recent $7.6 million settlement for Yale University with the federal government involved cost transfers and unsupported direct charges.  

“This settlement sends a clear message that the regulations applicable to federally funded research grants must be strictly adhered to,” said Nora Dannehy, acting U.S. Attorney for the District of Connecticut.

Allegations against Yale include:

  • Charges transferred to a project that were not applicable or allocable to that project. The transfers were made near the project end dates and gave the appearance that they were trying to spend down the remaining funds. (Any remaining funds from a federally sponsored project must be returned to the funding agency.)
  • Charges transferred to projects lacked sufficient explanation. (Cost transfers require sufficient documentation explaining how the expense is allocable, allowable and reasonable for the project. Lack of explanation gives the appearance that the expense is not justifiable for the project.)
  • Summer salary transferred to a project when the researchers were performing University duties unrelated to the project during the summer. (Salary charged to a federally sponsored project must reflect the researcher’s actual time and effort dedicated to the project during the given time period.)

Actual findings at Yale totaled $193,779, which resulted in $7.6 million in settlements due to extrapolation.

Our campus cost transfer policy, in line with federal regulations, states that costs transferred to a sponsored project must be allocable, allowable and reasonable for the project and that errors must be corrected within 90 days from discovery, all of which must be documented with the cost transfer transactions. In addition, you shall provide additional explanation in the following instances.      

  • An excessive number of cost transfers may be an indication of poor internal control. It’s important to ensure correct allocation of expenses at the time it’s incurred. You can also reduce the number of cost transfers by setting up pre-award spending accounts with the Office of Grants and Contracts.  
  • Transfers that give the appearance of moving deficits from one project to another. If costs are required to be transferred to another project to reflect correct allocation while the current project is in deficit, additional justification must be provided to explain that the transfer is not because of the deficit.
  • Transfers processed more than 90 days after the discovery of the error are more questionable due to the length of time involved in correcting the expense. Project personnel with fiscal roles are required to review their financial statements on a monthly basis. Therefore, errors should be discovered within 30 days from the transaction date and should be corrected in a timely manner.

The key to successfully completing a cost transfer is to provide sufficient back up documentation explaining how the expense is allocable, allowable and reasonable for the receiving grant and how the error will be prevented in the future. As part of our monitoring responsibilities, the Financial Compliance Office will routinely sample cost transfers to ensure compliance with the campus policy.

 

Student Hourly Time Sheets

If you have a student hourly employee, ensure that you are using the most current PBS Time Sheet to record and certify hours worked.  The latest version of the form is located at http://www.cusys.edu/pbs/forms/downloads/EWR_BiWeekly_Example.xls .  

This time sheet contains compliance requirements per our Internal Audit department including --

  • Listing the funding sources for the work and the percentage paid on each funding source.   The funding sources must be appropriate for the work performed and the percentage must reflect the related effort expended.  If a student is paid on a sponsored project, the salary paid (percentage) on the project must equal the effort worked on the project. 
  • Revised certification statement to ensure –
  • Hours and minutes are accurate for the time worked each day.  All overtime earned or taken as compensatory time was reported and approved. 
  • Funding sources listed are appropriate to pay the hours worked and the percentage of time attributed to each reflects the effort expended on the related activities/sponsored project(s).
  • If applicable, student employee is enrolled in proper number of credit hours according to campus guidelines.

If a student is working and paid on a sponsored project, the time sheet is the record for the federal government of the work provided to the project and must be available for audit purposes.

 

Federal Government Settlements and Audit Results

Within the past couple of years, Universities have settled legal actions with the Federal government related to improper use of federally sponsored project funds.  In addition, the Offices of Inspector General (OIG) have conducted recent audits that have also identified misuse of federally sponsored funds.  The settlements and audits have resulted in disallowed expenses resulting in refunds to the government and assessment of penalties, ranging from $2.4 to $6.5 million. 

Below is a summary of the issues that resulted in audit comments or legal settlements: 

  • Charging unrelated expenses to federally sponsored projects, including –
        • Salary and benefits unrelated to the grants;
        • Proposal preparation costs to a grant.  These costs are considered F&A costs and should not be directly charged to grants;
        • Expenses to a project period that did not benefit from those expenses;
        • Expenses that were incurred after the end date of the grant;
  • Unsupported effort on grants because time and effort reports were not certified;
  • Lack of tracking the University’s committed cost sharing.
  • Undocumented costs charged through the University’s service centers;
  • Undocumented explanations for transferring costs onto a sponsored project from another source;
  • Transferring unrelated costs onto projects to avoid deficits on other projects;
  • Billing Medicare improperly for clinical research;
  • Billing both Medicare and NIH Federal grants for the same services;
  • Using a federal grant program for personal benefit;
  • Lack of requiring Conflict of Interest Disclosures;
  • Misleading Agencies to award grants by overstating the amount of effort that Faculty were able to devote to grants.

 

To ensure the proper stewardship of federally sponsored grants and contracts, we must ensure that all grant activity is in compliance with federal regulations.  The campus has policies that incorporate the federal regulations and provide guidance to departments.  The basic federal requirements ensure that all expenses directly charged to federally sponsored projects are –

  • Allowable, reasonable, necessary and directly benefit the grant/contract;
  • Appropriately charged in proportion to the benefit; and
  • Consistently charged as either direct or F&A costs. 

In addition, expenses should have appropriate documentation to demonstrate the benefit to the grant.  This includes certified electronic Personnel Effort Reports (ePERs), back-up documentations and explanations for cost transfers, procurement card receipts, invoices, and purchase orders (including departmental purchase orders). 

 

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