How to run an effective research support operation in an increasingly compliance-driven environment NCURA Region III Harlan Sands, Associate Provost, Administration and Finance, UAB Shandy Husmann, Managing Director, Huron Consulting Group May 12, 2008 1 Overview • Understanding the Current Compliance Environment in Research Administration • Risk Assessment and Management • Principles for Operational Effectiveness • Specific Process Area Approaches - Grant applications - Billing - Collections • Specific things you can do at your institution 2 Overview “ Any organization, whether biological or social needs to change its basic structure if it significantly changes its size. Any organization that doubles or triples in size needs to be restructured. Similarly, any organization, whether a business, a nonprofit, or a government agency, needs to rethink itself once it is more than forty or fifty years old. It has outgrown its policies and its rules of behavior. If it continues in its old ways, it becomes ungovernable, unmanageable, uncontrollable.” - Peter F. Drucker (“Really Reinventing Government, The Atlantic Monthly, Boston; Feb 1995) 3 Research Administrative Environment 2008 and Beyond As compliance concerns rise, are we increasingly understaffed for research administration? • Volume of activity • Complexity • Scrutiny • Demand for accountability • Large investments in facilities • Pressure to maintain/reduce administrative cost • NOW ----- Stable/downward funding levels 4 Research Administrative Environment 2008 and Beyond • Demand for research funding is at an all-time high • Federal funding for research is flat • Competitive grant applications and reporting require increasingly more administrative time and effort • Negotiated formulas to fund Research Administration are insufficient • Will continually expanding administrative burdens make researchers do “less”? 5 Research Administrative Environment 2008 and Beyond Annual NIH Budget1 35 $29.2 B $27.7 B 30 Billions ($) Budgetary Trends1 After expansive growth in the five year period ending 2003, budget levels have flattened thereafter. 25 20 $13.7 B 15 10 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Doubling Era Post-Doubling Era 6 Notes: (1) The American Association for the Advancement of Science (AAAS) When considering inflation, total NIH purchasing power has decreased approximately 13% since 2003. Institutions expanded their research infrastructure in response to this growth and have since been unable to fully utilize the added capacity. Research Administrative Environment 2008 and Beyond 60 35% 50 30% 25% Thousands 40 20% 30 15% 20 10% Applications 10 Applicants 5% Success Rate 0% 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 0 Fiscal Year 7 Demand Trends • Grant applications for 2007 were forecast at 49,000, a 103% increase from the 24,151 applications that were submitted in 1998.1 Due to lack of funding this increase is accompanied by a corresponding drop in success rates. • 34,000 scientists applied for awards in 2006, an 80% increase from the 19,000 in 1998.1 The size of the average competing research grant application has grown 40% since 1998.1 • Based on a recent AAMC survey, research construction has increased by an average of 89,000 square feet per medical school, a 26% growth from 2003.2 Notes: (1) NIH in the Post-Doubling Era: Realities and Strategies, Elias A. Zerhouni, November 17, 2006 (2) Med Schools Add Labs Despite Budget Crunch, Jocelyn Kaiser, September 7, 2007 Compliance Pressures • Increased complexity in contracts/grants fiscal management • Increasing legislative pressure on federal agencies to monitor recipients • High dollar, high visibility settlements • Explosion in “flavor-of-the-month” high-risk concern areas • Increased focus on accountability – Concerns over effectiveness of A-133 audits – Increased number of proactive compliance site visits 8 Compliance Pressures • In addition to flat funding and increasing demand for research, scrutiny by regulators is increasing. OIG’s semi-annual report (4/01/07 through 9/30/2007) for Health and Human Services noted the following: – Since 1996, financial penalties resulting from audits of sponsored research have increased from $237 million to $1.9 billon. – Since 1996, the number of annual criminal convictions of individuals or entities that engaged in improper compliance activities has nearly tripled, to 447 in FY2004. Additionally, there were 262 civil actions. 9 Compliance Pressures • Increased number of false claims/whistleblower (qui tam) suits – Allows an individual who knows about a person or entity who is submitting false claims to bring a suit on behalf of the government – The individual may receive a portion (15-30%) of the damages recovered as a result of the suit 10 Research Compliance In the News Given these constraints, what challenges and consequences are institutions facing? 11 Risk Assessment and Management Striking the Balance Managing the research enterprise starts with a recognition of the tradeoff between compliance and efficiency. Hedonism / Ostrich Approach 13 Police State / Zero Tolerance Determining the Balance for Your Institution Determine your institution’s current level of compliance and efficiency • Define key business processes for research administration Identify and internally rank the highest compliance risks for research administration External sources of these risks include Perform a gap analysis • How does your institution address the greatest risks? • Identify existing controls for maintaining compliance – How strict are these in application? • Evaluate efficiency of these processes. How many errors are discovered compared to the level of satisfaction of the end-user? • OIG Audit Plans • Findings from recent internal audits or A-133 audits • Studying higher education industry news and published audits for findings at other institutions • What percentage of time is being spent on various tasks by grants administrators? • Are controls too stringent or resource intensive for compliance areas of relatively low focus? Arrive at a desired balance among leadership • What level of resources are available to facilitate process and compliance? • Which processes require additional or stricter controls? Which may require fewer or less strict controls? • For each business process, determine which is the greater cost - the realized loss of efficiency or the perceived risk of audit. What is the marginal impact of adding or subtracting a control? 14 Risk Assessment and Management A Winning Approach Research Administration 5 Pillars of Effectiveness ORG STRUCTURE – Are structures aligned with goals? – Are reporting relationships and span of authority clearly defined? 15 BUSINESS PROCESSES – Do current processes promote appropriate controls and efficient operations? – Do redundant processes exist? TECHNOLOGY PEOPLE METRICS – Is technology being leveraged? – Is the operation adequately staffed, and is the staff prepared and trained? – Are appropriate performance measures in place? – Are personnel trained on how to use technology effectively to complete job activities? – Do job activities align with job descriptions? – How are service levels monitored? Org Structure Business Processes Technology Organizational Structure Organizational structures guide the: • Division of activities • Relationships between functions and divisions • Hierarchy of authority • Lines of reporting • Channels of communication VP Research 16 People Metrics Org Structure Business Processes Technology People Organizational Structure Strong Leadership Common Oversights No single head of research, head of postaward administration or head compliance officer, or individuals lack sufficient authority Leaders are not supported by adequate number and diversification of staff Operational roles and responsibilities are spread out among several individuals who do not coordinate their activities Functional duties based upon outdated organizational requirements 17 Best Practices Assign a line responsibility to a VP of Research who has broad responsibility for the entire research enterprise Empower a compliance officer position that is not an operational position Establish a compliance committee that comprises of senior staff that support the compliance officer Clearly delineate roles and responsibilities for all tasks Stop doing things that have little value Metrics Org Structure Business Processes Technology People Metrics Organizational Structure Optimal Degree of Centralization High Degree of Centralization Greater standardization, efficiency, and cost savings More flexibility, local and faster decision-making Low Low 18 Degree of Decentralization High Org Structure Business Processes 19 Efficient Workflows Documented Policy and Procedures Defined Roles and Responsibilities Effective Controls Training and Communication Performance Metrics Business Processes Technology People Metrics Org Structure Business Processes Technology People Metrics Business Processes Efficient Workflows Identifying and addressing existing inefficiencies can provide an immediate benefit to enduser satisfaction and maximize the use of existing resources. Common Oversights Best Practices • Process flows have duplicate or redundant steps • Map all processes to determine which steps are crucial to provide necessary controls while streamlining process flow • Unnecessary delays occur between handoffs from one internal business unit to another • Practices do not match policies and procedures • Match practices to policies and procedures • Identify any delays in the process and reduce through improved communication • Implement paperless solutions where possible 20 Org Structure Business Processes Technology People Metrics Business Processes Effective Controls Proactive Evaluations Reactive Evaluations As needed; Usually in response to – A serious violation, breach, or other major event – New or revised regulations – Changes in technology or business environment Frequency Ongoing; Bi-annual, annual, semiannual, quarterly, etc. Pro More disciplined, preventive approach Fewer ongoing dedicated resources Con Requires more time and coordination Potential to incur substantial costs or face stern consequences • Who is responsible for carrying out these evaluations? Key Questions • Who will use the results? • How will the results be used? 21 Org Structure Business Processes Technology People Technology Common Oversights Consequences Systems are too complicated and not user-friendly Inconsistent use of IT, which hinders the ability to accurately capture and report data Inadequate training for end users Poor configuration or failure to customize software with required functionality and reporting needs Loss of faith in the IT system Development of shadow systems Reliance on obsolete business processes and/or manuals Best Practices Conduct training to bridge the knowledge gap. Determine where mandatory training may be crucial. Identify alternative ways of training, e.g. job aids, online resources, etc. Evaluate and enhance existing system to meet billing/invoicing, query, reporting and other post-award needs. Dedicate sufficient resources that provide end-user support and can address needs for functional improvement. 22 Metrics Org Structure Business Processes Technology People Technology Management of Shadow Systems Shadow Systems are smaller scale replicas of the primary system that are created on an ad hoc basis and often result in duplication of effort. Niche Systems are unique systems that may have overlapping functionalities, but essentially fulfill a distinct business task unmet by the primary system. How to Manage Non-Core Systems 9 Take inventory of all internal systems (core central systems, niche systems, and critical department-based shadow and complementary systems) 9 Understand and document the specific functions and types of data captured within these internal systems 9 Consolidate and identify ways to deploy niche systems in specific areas of post-award research administration 9 Identify latest trends in electronic research administration 23 Metrics Org Structure People Compliance Training Competency Models Resource Levels 24 Business Processes Technology People Metrics Org Structure Business Processes Technology People People Compliance Training 10 High Focus Areas of Compliance Risk 1. Effort Reporting 6. Cost Sharing 2. Cost Transfers 7. Protection of Human Subjects 3. Direct vs. Indirect Cost Charging 8. Protection and Charging of Animal Subjects 4. Recharge Center / Service Center Rates 9. Sub-recipient Monitoring 5. Fixed Price Agreements 25 10. Export Controls Metrics Org Structure People Business Training Areas of Business Risk 1. Billing and A/R Management 2. PI Satisfaction 3. Customer Satisfaction (external) 4. Internal Costs 5. Costing Structure 26 Business Processes Technology People Metrics Org Structure Business Processes Technology People Compliance Training Compliance Training Best Practices • Determine audience and customize training accordingly • Provide multiple outlets for learning – e.g. online tools, newsletters, etc. • Seek institutional support for mandatory training where needed Review annual Office of Inspector General (OIG) Compliance Program Guidance • Send representative group to NCURA conferences • Stay abreast of industry publications 27 People Metrics Org Structure Business Processes Technology People Metrics People Resource Levels Both benchmarking statistics and workforce skill-level should be factored into the appropriate level of staffing 28 Org Structure Business Processes Technology People Metrics People Resource Levels (1) Institutional Benchmarking Is the number of FTEs in line with that of the institution’s peers? Could the institution achieve productivity gains from hiring a more skilled or experienced labor force? 29 Identify peer group of schools with comparable research volume and structure Collect data on staffing levels at peer group institutions Compare staffing level relative to peers (e.g. research expenditures per FTE) (2) Labor Force Characteristics Taken inventory of existing skills and competencies Identify what qualifications are required for various areas of research administration Set competitive wages and benefits to attract and retain high-caliber workforce with minimal turnover Org Structure Business Processes Technology People Metrics Performance Metrics Sample Metrics “Not everything that counts can be counted, and not everything that can be counted counts.” ~ Albert Einstein Contracts & Grants Office 30 Finance Administration Departments/Faculty Number of department or PI inquiries resolved on the first call Monthly unbilled balance Number of days proposals are submitted pre-deadline Number of hours/days to respond to a department or PI inquiry Avg accounts receivable balance ($) Number of days accounts remain in overdraft Average number of hours/days to review and approve proposal Avg days outstanding for accounts receivable Number of active awards past award end-date Average number of days to set up awards Number of active awards past award end-date (+90 days) Number of departmental cost transfers Average number of days to prepare subcontracts Number of late financial reports % of effort forms completed in designated time frame Org Structure Business Processes Technology People Metrics Performance Metrics Tying Performance to Metrics Setting high targets will continue to stretch and improve performance above normal levels. Measure Target Contracts & Grants Offices Number of department or PI inquiries resolved on the first call Number of hours/days to respond to PI inquiry Average number of days to review and approve proposal Number of proposals submitted 3 days or more prior to sponsor deadline 100% 24 hours 1 business day 100% Financial Administration Average number of days to set-up awards 5 business days Monthly unbilled balance 1/12 of yearly invoiced amount Average accounts receivable balance ($) 1/6 of yearly invoiced amount Average days outstanding for accounts receivable 45-60 days Number of active awards past award end-date (+90 days) 0 Number of late financial reports 0 Departments / Faculty 31 Number of days proposals are submitted to OSR in advance of deadline 3 business days Number of days proposals are submitted to administrator in advance of deadline 5 business days Number of days accounts remain in overdraft 0 Number of active awards past award end-date (+90 days) 0 Number of departmental cost transfers TBD % of effort forms completed in designated time frame 100% Pillars of Effectiveness Summary Research Administration Five Pillars to Effectiveness ORG STRUCTURE – Are structures aligned with goals? – Are reporting relationships and span of authority clearly defined? 32 BUSINESS PROCESSES – Do current processes promote appropriate controls and efficient operations? – Do redundant processes exist? TECHNOLOGY PEOPLE METRICS – Is technology being leveraged? – Is the operation adequately staffed, and is the staff prepared and trained? – Are appropriate performance measures in place? – Are personnel trained on how to use technology effectively to complete job activities? – Do job activities align with job descriptions? – How are service levels monitored? Specific Process Area Reviews Specific Process Area Reviews Overview The following slides apply the concepts of this presentation to three sample business processes: Grant Applications Billing Process Collections Process 34 Specific Process Area Reviews Grant Application Process Organizational Structure Evaluate whether structure impacts overall service Business Processes Analyze and map processes to achieve greater efficiencies What are the expectations for local versus central support? Will pre-award personnel be best located in departments or in a central office? Are there any delays in the process that have prevented grant proposals from being submitted? Are Just In Time processes well defined? Is there an effective system for documenting information during grant application that can be eventually transitioned to post award? Technology Find ways to eliminate paper and improve electronic award documentation Are there effective systems for tracking data, such as effort commitments? People Evaluate training Are administrators trained to understand compliance implications of award commitments, e.g. effort, conflicts of interest, human subjects protections, etc. Metrics Develop metrics How many days should be allowed for submission to the grants office? What is the reasonable rate for missing deadline dates? 35 Specific Process Area Reviews Billing Process 36 Organizational Structure Evaluate whether structure impacts overall service Are grants accountants assigned to departments or to specific sponsors? What is the level of satisfaction with this arrangement by end-users? Business Processes Better define processes to minimize time spent preparing invoices. Ensure the proper controls exist for reviewing and approving invoices before sending. What percentage of time is spent by the average grants accountant on invoicing? How many custom invoices are created? Is communication between pre and post award effective in communicating invoicing requirements? What is the review process before submitting invoices? Technology Create a few standard invoicing templates that can serve the needs of a large percentage of sponsors What percentage of invoices can be automatically generated by the grants management system? People Provide training to pre award help reduce administrative burden down the line for post award. Provide training post award to ensure efficient preparation of invoices. Are pre award administrators trained to encourage sponsors to use the standard institutional billing template? Metrics Create metrics that will promote improved cash flow and customer satisfaction with PIs How often is the LOC draw performed? What is an acceptable turnaround time for an invoice? Specific Process Area Reviews Collections Process Organization al Structure Evaluate effectiveness of current structure for managing collections Business Processes Create well defined policies and procedures for managing collections. Consider automating collections to the extent that these methods do not strain relationships with sponsors. Are collections performed by a select person or distributed across the post award office? What is the role of the PI and department resources in collections? Are there a well defined escalation procedures for delinquent sponsors? Are collections notifications automated, or performed directly by grants accountants? Technology Create a standard system report to track A/R Can systems adequately track outstanding A/R? People Communicate the importance of timely collections to the entire post award office Do post award accountants understand the importance of timely collections? Metrics Define metrics that will place emphasis on reducing average days outstanding for A/R What is an acceptable average days outstanding for A/R? 37 Putting it All Together What can you do at your institution? Putting it All Together What are the next steps for improving operations? • Prioritize your biggest needs and highest risk areas Contract Review and Setup Grant Application Cost Sharing Cost Transfers Award Close-outs Subcontract Review and Setup Award Setup Charging Expenses to Sponsored Projects Procurement Financial Reporting Subrecipient Monitoring Effort Certification Billing Processes Deficit Spending Controls Collections Process • Apply a consistent approach and create an action plan to address findings for each of these areas • Prioritize action steps based on perceived impact to the institution • Compliance risk • Operational inefficiency • Resource requirements • Engage “key players” as advocates • Set departmental/unit goals with timelines for completion 39 Putting it All Together What are the next steps for improving operations? • Identify easy to implement solutions that will quickly improve controls or operations • Improve lines of communication, such as setting up recurring meetings between separate offices, establishing expectations for communication or documentation requirements • Reinforce service orientation, while stressing the need for solid controls. • Remove duplicative or overly resource-intensive process steps, especially for areas of lesser compliance risk • Implement major initiatives in the order of priority and as feasible with respect to existing resources 40 Questions? Shandy Husmann, Managing Director [email protected] Harlan Sands, Associate Provost, Administration and Finance [email protected] 41