Slide 1

Revised Subrecipient Monitoring Policies and Procedures

Slide 2

JHU’s Responsibility Under Federal Regulation

Per OMB Circular A-133, a prime recipient of federal funding who passes through a portion of that funding to another entity shall: Advise subrecipients of requirements imposed by Federal laws, regulations, and the provisions of contracts or grant agreements Monitor to ensure that Federal awards are used for authorized purposes in compliance with laws, regulations, and grant terms Ensure that subrecipients meet A-133 audit requirements 2

Slide 3

Subrecipient Taskforce Update

Working group developed proposed changes and circulated amongst the university for feedback Changes are meant to protect both JHU and faculty interests Changes are meant to enhance overall risk management, both regulatory and financial Proposed changes agreed upon: Classification of subrecipient vs. contractor Revised risk assessment procedures and risk ratings for all subrecipients Monitoring procedures for high-risk subrecipients New risk assessment complete and posted on Financial Research Compliance website New procedures are effective as of July 1, 2014 3

Slide 4 New Procedure 1: Contractor vs. Subrecipient Classification

Classifying organizations as subrecipients presents additional compliance burden Enhanced guidance on classification developed Sub vs. contractor Quick Guide 4

Slide 5 New Procedure 1: Contractor vs. Subrecipient Classification Contractor vs. Subrecipient Detailed Guidance

• • • • • • Subrecipient if the entity: Is engaged in substantive programmatic work Participates in designing or conducting the work Is granted some level of programmatic control May seek to publish or co-author results Provides cost sharing Has key personnel • • • • • • • Contractor if the entity: Is providing services in support of the research program Has not participated significantly in the design of the work Is not directly responsible for project results Provides goods and services in the normal operations and markets these to a variety of customers Has little or no independent decision making in the design or conduct of the work being completed Performs work that involves routine or repeated activities Would not seek to publish or co-author results 5

Slide 6 New Procedure 1: Contractor vs. Subrecipient Classification

OMB Uniform Guidance will require classification decisions to be documented During proposal phase or as prospective subrecipients are identified, departments will complete the Subrecipient Determination Form Form must be signed by Principal Investigator Form will be submitted to the Office of Research Administration (ORA) with the Proposal ORA must explicitly approve classification 6

Slide 7 New Procedure 2: Subrecipient Risk Rating

Subrecipients will now be classified as high or low risk High-risk entities are defined as: Foreign Domestic subrecipients without formal compliance audit (A-133) Entities with no prior JHU work history Entities who received less than $1M in Federal funding in either of the last two years The Office of Research Administration will be responsible for risk rating A subrecipient committee has been established to consider changes to risk rating 7

Slide 8 New Procedure 2: Subrecipient Risk Rating

A risk rating database of all JHU subrecipients has been established here: http://finance.jhu.edu/depts/frc/data_files_frc/subrecipientriskrating.xls

Risk ratings are consistent across JHU Excerpt from the database: Subrecipient Number Subrecipient Name Country Name Risk Classification 1009428 SAVE THE CHILDREN 1016996 JOHN SNOW INC 1012576 MALARIA CONSORTIUM 1017654 CITY YEAR INC 1011133 UNIVERSITY OF NORTH CAROLINA USA USA 1022268 BLANTYRE HEALTH RESEARCH Malawi 1013802 UGANDA HEALTH MARKETING GROUP Uganda 1011658 WESTAT CORP 2046718 MAKERERE UNIVERSITY USA Uganda 1005269 ICDDR B USA USA United Kingdom Bangladesh Low High High High Low High High High High High Primary Division 235 235 160 125 160 160 160 160 170 160 Secondary Division Total Expense Non Federal Total Federal 160 None None 115 170 170 None 170 160 170 16,965,234.39 7,942,550.72 6,510,395.75 3,441,219.00 3,115,319.47 3,031,639.63 2,650,166.77 2,325,331.23 2,115,126.50 2,068,572.00 16,965,234.39 7,942,550.72 6,510,395.75 268,369.00 3,172,850.00 262,398.30 2,852,921.17 3,031,639.63 2,650,166.77 2,325,331.23 356,114.31 1,759,012.19 8 1,744,479.00 324,093.00

Slide 9 New Procedure 2: Subrecipient Risk Rating

Once a subrecipient classification has been approved by the Office of Research Administration (ORA), ORA will perform a risk rating In doing so, Research Administration may do the following: For current subs, consult the initial Subaward Risk Assessment Database For new subs, require completion of the "Subrecipient Financial Information Questionnaire” including submission of recent A-133 reports ORA will document and communicate the subrecipient's risk rating to FRC Using the risk rating, ORA will negotiate specific terms and conditions into the agreement consistent with the revised post-award monitoring procedures ORA will notify the department and Principal Investigator of the risk rating 9

Slide 10 New Procedure 2: Changes to Subrecipient Risk Rating

Changes to subrecipient risk rating will be considered by an Institutional Subrecipient Committee who will meet on a quarterly basis to discuss current subrecipient issues Members of the Committee include: JHU Finance Internal Audit Chief Risk Officer Divisional Research Administration and Business Office Personnel Divisional Departmental Representation A form will be developed for requests to change subrecipient risk ratings The form must accompany copies of the most recent subrecipient A-133 report and the latest summary and detailed invoice reviews, and must be presented in person to the Subrecipient Committee The Committee will base their decision on the information provided, taking into account: Nature and size of subrecipient Recent work history Recent A-133 Audit results Results of last summary and detailed invoice reviews 10

Slide 11 New Procedure 3: Enhanced Invoice Review Guidance

Enhanced Invoice Review Guidance

All invoices (high and low risk) Review for standard invoice elements as required by current policy (e.g., cumulative costs, certification etc.) Review for financial accuracy Expense in line with budget category amounts Amounts aren’t round dollars solely based on a percentage of budget Previous expense + Current expense = Cumulative expense for each budget category Column totals equal the amount of individual column amounts in total Fringe cost are in line with salary expense for the agreed upon fringe rate Facilities and Administrative (F&A) costs are in line with applicable costs for the agreed upon F&A rate Certification for Payment and Performance form required for all invoices

Slide 12 New Procedure 3: Enhanced Invoice Review Guidance

Review for Standard Invoice Elements

1. Name of the subrecipient 2. JHU purchase order number 3. Date of the invoice 4. Invoice number and project title 5. Period of performance covered by the invoice 6. Breakdown of costs in accordance with expenditure categories 7. Current period costs and cumulative project costs 8. Cost sharing (if applicable) 9. Program income (if generated) 10. Contact person for invoice questions 11. Certification as to the truth and accuracy of the invoice 11 6 4 1 2 4 3 5 12 10 7

Slide 13 New Procedure 3: Enhanced Invoice Review Guidance

Review for Financial Accuracy

Recalculate fringe Previous + Current = Cumulative Review period of performance Recalculate totals Matching expenditure categories Recalculate F&A No round dollars 13

Slide 14 New Procedure 3: Enhanced Invoice Review Guidance

Certification for Payment and Performance must be completed for all invoices Approval by both Financial Analyst and Principal Investigator is required Form must be included with invoice in order to process payment in SAP Form is located on JHU Finance website. Here is the link: https://apps.finance.jhu.edu/pol icy_procedures/policy/sub/cert_ pymt_perf.docx

14

Slide 15 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

High-risk subrecipients will be required to submit general ledger summary and detailed financial reports along with all invoices Departmental personnel will be responsible for completing a summary comparison of the invoice to the financial reports Every six months, departmental personnel will complete a more detailed review of a subrecipient financial report supporting one invoice, including obtaining supporting documentation for a selection of charges The Certification for Payment and Performance form has been revised to evidence these reviews Problems identified with billings must be resolved and the resolution documented 15

Slide 16 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

Invoice Summary Review (every invoice) eUM Financial System Project Start Date End Date G/L Account Salary & Wages Total Salary & Wages Employee Benefits 10011338 11/1/2013 12/31/2013 Posting Date contractor 11/15/2013 Jacque Ravel 11/30/2013 Jacque Ravel 12/15/2013 Jacque Ravel 12/31/2013 Jacque Ravel Description Pay Period 11/1 - 11/15 Pay Period 11/16 - 11/30 Pay Period 12/1 - 12/15 Pay Period 12/16 - 12/31 Payment 2775.37

2775.36

2775.37

2775.36

11101.46

Ensure totals match Total Employee Benefits Professional Services Total Professional Servicies Travel Total Travel Equipment Total Equipment Supplies Total Supplies Other Direct Cost Total Other Direct Cost Indirect Cost 11/15/2013 11/30/2013 12/15/2013 12/31/2013 NA NA NA NA 11/13/2013 Fedex 11/21/2013 Carolina 12/5/2013 Carolina 12/7/2013 Thermo Scientific 12/13/2013 Grainger 12/17/2013 Airgas 11/13/2013 Fisher Scientific Employee Benefits Employee Benefits Employee Benefits Employee Benefits Postage Plastic Pippets Glass Screw-Cap Vials Phusion RT PCR Kits Chemical Buffer Solution Oxygen 20 CU FT Standard Mini-Centrifuge 933.85

933.84

933.85

933.84

3735.38

0 0 0 0 0 0 43.7

535 526.25

1545 155.8

1069.44

3875.19

1445.15

1445.15

Total Indirect Cost Total Costs - 10011338 11/30/2013 12/31/2013 Indirect Cost Indirect Cost 4721.17

5357.48

10078.65

30235.83

16

Slide 17 New Procedure 4: Enhanced Invoice Review Guidance

Certification for Payment and Performance must be completed for all invoices Form must be uploaded with invoice and subrecipient ledger in order to process payment in SAP If high-risk subrecipient: A summary review is required to be performed and must be documented on the Certification for Payment and Performance Date of last detailed review must also be documented 17

Slide 18 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

Step 1: Invoice Detailed Review (every six months) eUM Financial System Project Start Date End Date G/L Account Salary & Wages 10011338 11/1/2013 12/31/2013 Posting Date contractor 11/15/2013 Jacque Ravel 11/30/2013 Jacque Ravel 12/15/2013 Jacque Ravel 12/31/2013 Jacque Ravel Description Pay Period 11/1 - 11/15 Pay Period 11/16 - 11/30 Pay Period 12/1 - 12/15 Pay Period 12/16 - 12/31 Payment 2775.37

2775.36

2775.37

2775.36

11101.46

Total Salary & Wages Employee Benefits Ensure totals match Total Employee Benefits Professional Services Total Professional Servicies Travel Total Travel Equipment Total Equipment Supplies Total Supplies Other Direct Cost Total Other Direct Cost Indirect Cost 11/15/2013 11/30/2013 12/15/2013 12/31/2013 NA NA NA NA Employee Benefits Employee Benefits Employee Benefits Employee Benefits 11/13/2013 Fedex 11/21/2013 Carolina 12/5/2013 Carolina 12/7/2013 Thermo Scientific 12/13/2013 Grainger 12/17/2013 Airgas Postage Plastic Pippets Glass Screw-Cap Vials Phusion RT PCR Kits Chemical Buffer Solution Oxygen 20 CU FT 11/13/2013 Fisher Scientific Standard Mini-Centrifuge 933.85

933.84

933.85

933.84

3735.38

0 0 0 0 0 0 43.7

535 526.25

1545 155.8

1069.44

3875.19

1445.15

1445.15

Total Indirect Cost Total Costs - 10011338 11/30/2013 12/31/2013 Indirect Cost Indirect Cost 4721.17

5357.48

10078.65

30235.83

18

Slide 19 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

Step 2: Invoice Detailed Review (every six months) eUM Financial System Project Start Date End Date G/L Account Salary & Wages 10011338 11/1/2013 12/31/2013 Posting Date contractor 11/15/2013 Jacque Ravel 11/30/2013 Jacque Ravel 12/15/2013 Jacque Ravel 12/31/2013 Jacque Ravel Description Pay Period 11/1 - 11/15 Pay Period 11/16 - 11/30 Pay Period 12/1 - 12/15 Pay Period 12/16 - 12/31 Payment 2775.37

2775.36

2775.37

2775.36

11101.46

Total Salary & Wages Employee Benefits

Review all transactions for allowability against subaward agreement and relevant OMB Circular

Total Employee Benefits Professional Services Total Professional Servicies Travel Total Travel Equipment Total Equipment Supplies 11/15/2013 11/30/2013 12/15/2013 12/31/2013 NA NA NA NA Employee Benefits Employee Benefits Employee Benefits Employee Benefits 933.85

933.84

933.85

933.84

3735.38

0 0 0 0 0 0 11/13/2013 Fedex 11/21/2013 Carolina 12/5/2013 Carolina 12/7/2013 Thermo Scientific 12/13/2013 Grainger 12/17/2013 Airgas Postage Plastic Pippets Glass Screw-Cap Vials Phusion RT PCR Kits Chemical Buffer Solution Oxygen 20 CU FT 43.7

535 526.25

1545 155.8

1069.44

3875.19

Total Supplies Other Direct Cost Total Other Direct Cost Indirect Cost 11/13/2013 Fisher Scientific Standard Mini-Centrifuge 1445.15

1445.15

Total Indirect Cost Total Costs - 10011338 11/30/2013 12/31/2013 Indirect Cost Indirect Cost 4721.17

5357.48

10078.65

30235.83

19

Slide 20 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

Step 2: Invoice Detailed Review (every six months) eUM Financial System Project Start Date End Date 10011338 11/1/2013 12/31/2013 Sample transactions from ledger and obtain supporting documentation from subrecipient G/L Account Salary & Wages Total Salary & Wages Employee Benefits Posting Date contractor 11/15/2013 Jacque Ravel 11/30/2013 Jacque Ravel 12/15/2013 Jacque Ravel 12/31/2013 Jacque Ravel Description Pay Period 11/1 - 11/15 Pay Period 11/16 - 11/30 Pay Period 12/1 - 12/15 Pay Period 12/16 - 12/31 Payment 2775.37

2775.36

2775.37

2775.36

11101.46

Jacque Rival Appointment Letter Labor Distribution Effort reporting (if available) Timesheets (if applicable) Total Employee Benefits Professional Services Total Professional Servicies Travel Total Travel Equipment Total Equipment Supplies 11/15/2013 11/30/2013 12/15/2013 12/31/2013 NA NA NA NA Employee Benefits Employee Benefits Employee Benefits Employee Benefits 933.85

933.84

933.85

933.84

3735.38

0 0 0 0 0 0 Fedex Invoice 11/13/2013 Fedex 11/21/2013 Carolina 12/5/2013 Carolina 12/7/2013 Thermo Scientific 12/13/2013 Grainger 12/17/2013 Airgas Postage Plastic Pippets Glass Screw-Cap Vials Phusion RT PCR Kits Chemical Buffer Solution Oxygen 20 CU FT 43.7

535 526.25

1545 155.8

1069.44

3875.19

Airgas Invoice Total Supplies Other Direct Cost Total Other Direct Cost Indirect Cost 11/13/2013 Fisher Scientific Standard Mini-Centrifuge 1445.15

1445.15

Ensure all amounts agree between ledger and invoices Total Indirect Cost Total Costs - 10011338 11/30/2013 12/31/2013 Indirect Cost Indirect Cost 4721.17

5357.48

10078.65

30235.83

20

Slide 21 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

How to handle discrepancies identified during invoice reviews: Must be resolved prior to payment Partial payments of invoices are allowable (e.g., withholding questioned costs) Significant discrepancies may indicate the need for a 100% desk audit of the specific invoice or all invoices depending on the nature of the concern Resolutions must be formally documented on the invoice or payment certification form At discretion of departments, results may dictate future invoicing requirements (e.g., submission of timesheets with every invoice) 21

Slide 22 New Procedure 4: Additional Monitoring for High-Risk Subrecipients

Certification for Payment and Performance must be completed for all invoices This should not be completed until all questions about costs have been resolved If high-risk subrecipient: Document the summary review Document that the detailed review has taken place on the Certification for Payment and Performance including the date performed Upload all support into SAP 22

Slide 23

Conclusion

JHU has a different subrecipient risk-profile than our peers JHU is required to advise subrecipients of their responsibilities under federal regulations and then to monitor to ensure they are being met Subrecipients’ issues could have a significant financial impact on JHU and the reputations of its faculty members New procedures around subrecipient classification, risk rating, and invoice review will go into effect on July 1, 2014 More documentation will be required to validate expenditures from high-risk subrecipients 23

Slide 24

Resources

This page contains links to the various resources mentioned throughout this presentation. You can click on the links or copy and paste the links into your web browser.

contractor Vs. Subrecipient Guide:

JHU Subrecipient Policies and Procedures

http://finance.jhu.edu/policyapp/displayGuideContents.do?guideId=SUB

JHU Subrecipients Risk Rating Database:

http://finance.jhu.edu/depts/frc/data_files_frc/subrecipientriskrating.xls