Transcript FastFacts Feature Presentation

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FastFacts
Feature Presentation
06/10/2014
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© 2012 The Johns Hopkins University. All rights reserved.
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Today’s Topic
We’ll be taking a look at…
Revised Subrecipient Monitoring
Policies and Procedures
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Today’s Presenter
Professor Jonathan Links
School of Public Health, Medicine, and Education
Contact: [email protected]
410-516-6880
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Session Segments
Presentation
Jonathan Links discusses the revised subrecipient monitoring
policies and procedures, which includes the new subrecipient vs.
Contractor classification, and the steps used to classify, assess
risk, and closely monitor subrecipient claims/spending.
During the presentation, your phone will be muted.
Q&A
After the presentation, we’ll hold a Q&A session.
We’ll open up the phone lines, and you’ll be able to ask
questions.
Jonathan will answer as many of your questions as time allows.
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Contact Us
If you would like to submit a question during the presentation or if
you’re having technical difficulties, you can email us at:
[email protected]
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Survey
Survey
At the end of this FastFacts session, we’ll ask you to complete a
short survey.
Your honest comments will help us to enhance and improve
future FastFacts sessions.
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How To View Full Screen
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Revised Subrecipient Monitoring
Policies and Procedures
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Agenda
After today’s presentation, you will be able to:
Describe, with regard to subrecipients, what makes JHU different
from our peers and why it requires changes to our procedures
Recognize the risks associated with subrecipients and what can
go wrong
Distinguish between a subrecipient and a Contractor
Describe the rationale for implementing enhanced administrative
monitoring of high-risk subrecipients
Provide support for administrative staff performing enhanced
administrative monitoring procedures within their departments
Effectively manage subrecipient risk
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Subrecipient Monitoring: The Landscape
JHU has unique risk profile compared to peers
In addition to universities, JHU faculty members have significant activity with forprofit/non-profit domestic entities and international organizations
Historically, JHU monitoring procedures have been based on a traditional universityto-university subaward model
For FY 13, JHU had 800 subrecipients and $300 million in subrecipient payment
Only 25% of JHU’s subs are domestic universities
$117 million (or 37% of subrecipient activity) is to foreign organizations
Classification
Domestic University
Domestic Non-University
Foreign
Total
JHU FY13 Expenditure Amount
(federal and non-federal)
$78,115,409.19
$117,390,412.57
$116,955,814.98
$312,461,636.74
Percentage
25%
38%
37%
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FY 10 - 13 Subrecipient Expenditure Growth
FY 13 subrecipient expenditures have increased 30% from FY 12
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FY 13 Subrecipient Expenditures by Sponsor
($ Millions)
84% of subrecipient activity is federally supported
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JHU’s Responsibility under Federal Regulation
Per OMB Circular A-133, a pass-through 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
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Subrecipient Monitoring: JHU Policy and Procedures
JHU remains ultimately responsible and accountable to the prime sponsor
for funds management and compliance by subrecipients
The Principal Investigator is responsible for the due diligence involved in
selecting a subrecipient
The proper classification of an organization as a subrecipient or as a
Contractor during the proposal process is critical to ensure proper
accounting for costs and compliance requirements
Prime recipients are required to advise subrecipients of requirements
imposed on them by Federal regulations
The Principal Investigator is ultimately responsible for ensuring
compliance by reviewing all invoices and the technical progress of work
completed by the subrecipient, before payments are authorized
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Subrecipient Monitoring: Recent Observations and
Trends
We have funding and technical challenges in performing proper oversight
Under prior JHU procedures, subrecipients were treated similarly, regardless
of risk
Standard terms in subaward agreement
Invoice for payment
Increased International Capacity Building Efforts (e.g., USAID Forward
Initiative) drive choice of subrecipients to those with less ability to be A-133
compliant
Recent JHU cases have proven the financial impact could be significant
OMB Circular A-81 spells out our monitoring responsibilities
KPMG is looking for better evidence of financial monitoring during its annual
A-133 audit
Peer organizations have now begun requesting support from JHU for their
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audits
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Risks Involved with Subrecipients
Technical
Subrecipient does not have capability to perform
Subrecipient is not making appropriate progress on research
Scientific misconduct
Financial
Subrecipient bills JHU in excess of its costs or bills for
inappropriate costs
In advance of costs being incurred
Costs not in compliance with federal regulation
Invoices are not based on actual costs
Invoiced costs are misaligned with subrecipient technical
progress
Fraud
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Case Study on Subrecipient Risk: Background
Subrecipient X was a local community-based health organization
JHU entered into four federally-supported cost-reimbursable subawards
totaling $3.8 million
Principal Investigator approved all invoices from subrecipient X
During A-133 reviews, JHU Finance identified financial irregularities:
Invoices did not tie to subrecipient general ledger detail
Indirect costs were charged directly to the award
Unallowable costs were noted on the report from subrecipient financial
system
Internal Audit was asked to review
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Case Study on Subrecipient Risk: Audit Findings
Internal Audit review revealed significant deficiencies:
Lack of understanding about federal law
Unsophisticated accounting systems and personnel
No effort reporting or activity reports
Unsupported indirect cost and fringe benefit rates
Indirect costs charged directly
Insufficient supporting documentation
Invoices not based on actual costs incurred
Review concluded that over $1 million in costs should be disallowed (this
does not include related audit and legal fees)
JHU refunded the federal government without reimbursement from
subrecipient X
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Case Study on Subrecipient Risk: Impact on Faculty
Members
Financial research compliance issues with subrecipient X brought into
question the scientific validity of the research
Independent scientific review was undertaken
Scientific validity was ultimately upheld
Faculty members’ reputations were harmed:
Faculty had been (inappropriately) approving invoices
Faculty were present on site with subrecipient on a regular basis
Faculty members’ projects cost the relevant school over $1 million
Issues related to subrecipient X eventually led to the resignation of one
faculty member
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Subrecipient Monitoring: How to Protect Yourself
Treat subrecipients as business partners
Risk management begins prior to award
Ensure technical and financial capability
Evaluation of technical capabilities and work history
Check references
Do they have a financial system that complies with federal
regulations
Review financial status of the subrecipient
Don’t classify contractors as subrecipients (or vice versa)
Use risk assessment to drive post-award monitoring
More scrutiny around higher-risk subrecipients
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Subrecipient Monitoring: How to Protect Yourself
(Continued)
Understand the nature of the subaward agreement
Cost reimbursable means actual cost
Understand right to inspect records
Proper and thorough invoice review
Accuracy of invoice
Obtain support to validate accuracy of charges
Ensure billings are aligned with technical progress
Remember, trust is the foundation of a relationship, but can also be used to
take advantage – trust, but verify
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JHU Subrecipient Taskforce Initiative
Established subrecipient taskforce to determine how best to protect the
university, including faculty
Goal was to develop new procedures to better manage the risks associated
with subrecipients
Subrecipient taskforce members included:
Chief Risk Officer
Internal Audit
Office of Finance
Divisional Representation (Business Office and Research Administration)
Established a working group within the subrecipient taskforce to:
Identify what makes an organization a subrecipient
Define a risk management matrix
Define additional monitoring procedures for higher risk subrecipients
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Subrecipient Taskforce Update
Working group developed proposed changes and circulated amongst the
university (including faculty advisory groups) 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
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New Procedure 1: Subrecipient vs. Contractor Classification
Classifying organizations as
subrecipients presents additional
compliance burdens
Enhanced guidance on classification
developed
Sub vs. Contractor Quick Guide:
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New Procedure 1: Subrecipient vs. Contractor
Classification
Subrecipient vs. Contractor Detailed
Guidance
Contractor if the entity:
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
•
•
•
•
•
•
•
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
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New Procedure 1: Subrecipient vs.. Contractor
Classification
OMB A-81will 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
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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
Each school’s Office of Research Administration will be responsible for risk
rating, and the ratings will be consistent across the university
A subrecipient committee has been established to consider changes to a
given subrecipient’s risk rating
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New Procedure 2: Subrecipient Risk Rating (Continued)
ORA will notify the department and Principal Investigator of the risk rating
Using the risk rating, the relevant ORA will negotiate specific terms and
conditions into the agreement consistent with the revised post-award
monitoring procedures
Enhanced and standardized financial monitoring will be required for highrisk subrecipients
This will be performed by departmental administrative staff
As enhanced monitoring procedures are meant to protect faculty
members, they should validate that the procedures take place
appropriately
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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
Primary
Division
Secondary
Division
Total Expense Non Federal Total Federal
1009428
SAVE THE CHILDREN
USA
Low
235
160
16,965,234.39 -
16,965,234.3
9
1016996
JOHN SNOW INC
High
235
None
7,942,550.72
-
7,942,550.72
1012576
MALARIA CONSORTIUM
USA
United
Kingdom
High
160
None
6,510,395.75
-
6,510,395.75
1017654
CITY YEAR INC
USA
High
125
115
3,441,219.00
268,369.00
3,172,850.00
1011133
UNIVERSITY OF NORTH CAROLINA
USA
Low
160
170
3,115,319.47
262,398.30
2,852,921.17
1022268
Malawi
High
160
170
3,031,639.63
-
3,031,639.63
1013802
BLANTYRE HEALTH RESEARCH
UGANDA HEALTH MARKETING
GROUP
Uganda
High
160
None
2,650,166.77
-
2,650,166.77
1011658
WESTAT CORP
USA
High
160
170
2,325,331.23
-
2,325,331.23
2046718
MAKERERE UNIVERSITY
Uganda
High
170
160
2,115,126.50
356,114.31
1,759,012.19
1005269
ICDDR B
Bangladesh
High
160
170
2,068,572.00
1,744,479.00 324,093.00
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New Procedure 3: Additional Monitoring for High-Risk
Subrecipients
High-risk subrecipients will be required to submit financial reports along
with all invoices:
Reports should be directly from the subrecipient’s financial system
Reports should include detail on financial transactions
Departmental administrative personnel will be responsible for completing a
summary comparison of the invoice to the financial reports
Every six months, departmental administrative personnel will complete a
more detailed review of a subrecipient financial report supporting one entire
invoice, including obtaining supporting documentation (e.g., receipts) from
the subrecipient for a selection of charges
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New Procedure 3: Additional Monitoring for High-Risk
Subrecipients (Continued)
The Certification for Payment and Performance form has been revised to
provide an opportunity to document that these reviews have taken place
Problems identified with billings must be resolved and the resolution
documented
Faculty member support will be integral in obtaining supporting
documentation from the subrecipients
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New Procedure 3: Enhanced Invoice Review Guidance
Certification for Payment
and Performance forms must
be completed for all invoices
Revised forms document
additional reviews performed
for high-risk subrecipients
Form must be signed by the
Principal Investigator
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
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Conclusion
JHU has a different sub-recipient risk-profile than our peers
JHU is required to advise subrecipients of their responsibilities under federal
regulations, and to monitor to ensure they are being met
Subrecipient issues could have a significant financial impact on JHU and the
reputations of its faculty
Treat subrecipients as business partners and remember that risk
management begins prior to issuing a subaward
Additional monitoring procedures for higher-risk subrecipients are necessary
and will be effective on July 1, 2014
Prevention and early detection are key
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Q&A
We’re going to open the phone lines now!
There will be a slight pause, and then a recorded voice will provide
instructions on how to ask questions over this conference call line.
We’ll be answering questions in the order that we receive them.
We’ll also be answering the questions that were emailed to us
during the presentation.
If there’s a question that we can’t answer, we’ll do some research
after this session, and then email the answer to all participants.
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Thank You!
Thank you for participating!
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Slide 36
Survey
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Your feedback will help us as we plan future FastFacts sessions.
Click this link to access the survey…
http://connect.johnshopkins.edu/fastfactssurvey/
Thanks again!
Slide 37
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.
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