CONTRACTS AND GRANTS SAN FRANCISCO STATE UNIVERSITY Report Number 01-43 April 22, 2002 Shailesh J. Mehta, Chair Kyriakos Tsakopoulos, Vice Chair William Hauck Dee Dee Myers Erene S. Thomas Anthony M. Vitti Members, Committee on Audit University Auditor: Larry Mandel Senior Director: Janice Mirza Audit Manager: Michelle Schlack Internal Auditor: Ken Wong Staff BOARD OF TRUSTEES THE CALIFORNIA STATE UNIVERSITY
CONTENTS INTRODUCTION Purpose... 1 Scope and Methodology... 1 Background... 2 Opinion... 3 Executive Summary...4 OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Sponsored Program Administration... 6 Written Policies and Procedures... 6 Service Agreements... 7 Conflicts of Interest... 8 Human and Animal Subjects Research... 9 Pre-Award Controls... 11 Post-Award Controls... 12 Project Expenditures... 12 Project Reporting... 14 Cost Sharing... 15 Separation of Duties... 16 ii
CONTENTS APPENDICES APPENDIX A: APPENDIX B: APPENDIX C: Personnel Contacted Campus Response Chancellor s Acceptance ABBREVIATIONS ACUC CFR CSU EO Foundation FPPC FSR IRB NIH OMB ORSP PI PIA SAM Animal Care and Use Committee Code of Federal Regulations California State University Executive Order San Francisco State University Foundation Fair Political Practices Commission Faculty and Staff Relations Office of the Chancellor Institutional Review Board National Institutes of Health Office of Management and Budget Office of Research and Sponsored Programs Principal Investigator Prison Industry Authority State Administrative Manual iii
INTRODUCTION PURPOSE Our overall audit objective was to ascertain the effectiveness of existing policies and procedures related to the administration of contract and grant activity and to determine the adequacy of controls over the related processes to ensure compliance with relevant governmental regulations, Trustee policy, Office of the Chancellor directives, and campus procedures. Within the overall audit objective and to ascertain that the campus contract and grant program provides for an effective internal control environment, which includes both externally and internally developed policies and procedures, specific goals of our review included determining whether: Certain essential administrative and managerial internal controls are in place, including delegations of authority and responsibility, formation of independent oversight committees, and documented policies and procedures. Federal single audits are performed timely and noted audit findings are timely and sufficiently resolved. Financial interests in sponsors of research are disclosed timely and reviewed for conflicts of interest. Federal and other awards are appropriately expended and such expenditures comply with regulatory agency cost principles regarding allowability, allocability, and reasonableness. Financial, performance, and other project-related reports are appropriately prepared, completed timely, and correctly submitted to sponsoring agencies and organizations. Research activities involving human subjects and live vertebrate animals are properly approved by an independent review committee. Sponsored program proposals are reviewed and approved by authorized personnel prior to submission to awarding agencies and organizations. SCOPE AND METHODOLOGY This review emphasized, but was not limited to, compliance with state and federal laws, Board of Trustee policies, and Office of the Chancellor and campus policies, letters, and directives. Additionally, this review took into consideration fiscal procedures and management systems to ensure that they allow effective coordination of the auxiliary activities with the campus in accordance with sound business practices. The audit review period was July 1999 to date. At San Francisco State University, the office of research and sponsored programs has overall responsibility for sponsored programs pre-award and post-award activities. The San Francisco State University Foundation (Foundation) also performs postaward activities for various contracts and grants. Page 1
INTRODUCTION Our primary focus involved internal administrative, compliance, and operational controls over the management of the sponsored programs. Specifically, we reviewed and tested policies, procedures, and processes for: Documenting policies, rules, regulations, and delegations of authority. Resolving prior single audit issues. Disclosing and managing financial conflicts of interest in sponsors of research. Reviewing and approving human subject testing and animal research. Reviewing and approving sponsored program proposals and indirect cost rates. Controlling, authorizing, and processing expenditures of award funds. Documenting and tracking cost sharing and matching commitments. BACKGROUND As a result of a systemwide risk assessment conducted by the Office of the University Auditor during the last quarter of 1999, the Board of Trustees, at its January 2001 meeting, directed that Contracts and Grants be reviewed. The proposed scope of the audit as presented in Attachment B, Agenda Item 2 of the January 23-24, 2001, meeting of the Committee on Audit, stated that Contracts and Grants includes all sponsored programs, special projects, and activities involving external funding sources (outside of continuing/extended education). As research funding at colleges and universities grew from approximately $15 million in 1940 to $1.3 billion in 1966, it became apparent that federal funding would provide a significant portion of the research budgets of colleges and universities. Beginning with the Department of Defense and the Atomic Energy Commission and expanding to the National Institutes of Health, National Science Foundation, and the National Aeronautics and Space Administration, funding levels increased; and along with those increases, requirements for management and administration of federal research funds also developed and prospered. In the mid-1970s to late 1980s, the Office of Management and Budget (OMB) promulgated the following government-wide policies to ensure proper stewardship of federal research funds: OMB Circular A-21, Cost Principles for Educational Institutions, establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions. These principles are designed to provide that the federal government bears its fair share of total costs, determined in accordance with generally accepted accounting principles, except where restricted or prohibited by law. OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations, sets forth the Page 2
INTRODUCTION standards for obtaining consistency and uniformity among federal agencies in the administration of grants to, and agreements with, the institutions of higher education, hospitals, and other nonprofit organizations. OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, was issued pursuant to the Single Audit Act of 1984, Public Law 98-502, and the Single Audit Act Amendments of 1996, Public Law 104-156. This circular sets forth consistency and uniformity among federal agencies for the audit of states, local governments, and nonprofit organizations expending federal awards. Executive Order (EO) No. 168, CSU and Colleges Auxiliary Organizations Administration of Grants and Contracts in Support of Research, Workshops, Institutes, and Other Special Instructional Projects, dated January 19, 1973, promulgated systemwide policies in the sponsored programs area and, of greater importance, reinforced the need to ensure the fiscal integrity and viability of the auxiliary organizations who, at certain campuses, were responsible for both pre-award and post-award administration activities. The EO also set forth requirements that auxiliary administration activities be performed in a manner which enables the Board of Trustees to satisfy its responsibilities to the state of California, federal agencies, public and private sponsors, the campuses, and the auxiliaries. OPINION We visited the San Francisco State University campus from October 22, 2001, through November 9, 2001, and audited the procedures in effect at that time. In our opinion, the administration and management of sponsored programs provided reasonable assurance that San Francisco State University was in compliance with applicable regulations, California State University (CSU) policies, and other directives. Areas in need of improvement are referenced in the executive summary. Page 3
INTRODUCTION EXECUTIVE SUMMARY The purpose of this section is to provide management with an overview of conditions requiring their attention. Areas of review not mentioned in this section were found to be satisfactory. Numbers in brackets [ ] refer to page numbers in the report. SPONSORED PROGRAM ADMINISTRATION [6] WRITTEN POLICIES AND PROCEDURES [6] Policies and procedures that impact the administration and control environment for sponsored programs were neither complete nor finalized. Proper development, documentation, and communication of written policies and procedures improve internal controls. SERVICE AGREEMENTS [7] Service agreements between the campus and the San Francisco State University Foundation (Foundation) were not current. Maintaining updated service documentation decreases the risk of misunderstandings and inconsistencies between current practice and the intentions of management. CONFLICTS OF INTEREST [8] The campus did not exercise sufficient control over the conflict-of-interest process for principal investigators. Identifying and resolving all potential conflicts of interest limit the exposure to fraud, abuse, and regulatory scrutiny. HUMAN AND ANIMAL SUBJECTS RESEARCH [9] Controls over human subject and animal research were both incomplete and unevenly applied. Adequate controls over human subject and animal research activities decrease the risk of noncompliance with federal and state regulations regarding human subjects and animals in research. PRE-AWARD CONTROLS [11] Internal approvals for sponsored programs were not always timely or properly received by the office of research and sponsored programs prior to award submission. Project proposals receiving required or timely approval decrease the risk of failure to meet the best interests of the university, both programmatically and fiscally. POST-AWARD CONTROLS [12] Page 4
INTRODUCTION PROJECT EXPENDITURES [12] Certain project expenditures lacked sufficient written approval and supporting documentation. Sufficient control over project expenditures decreases the risk that funds will be misappropriated or expended for inappropriate purposes. PROJECT REPORTING [14] Documentation to evidence that interim status and/or final technical reports were submitted to the sponsors was not contained in project files. Adequate documentation to evidence submission of interim status and/or final technical reports decreases the risk of penalties and disallowances for noncompliance with grant and contract terms. COST SHARING [15] Procedures did not ensure accurate reporting of cost-sharing information. Establishing a system to effectively report cost-sharing information reduces the risk of regulatory scrutiny and possible noncompliance with the terms and conditions of the award. SEPARATION OF DUTIES [16] The campus did not always maintain adequate separation of duties over sponsored programs. Adequate separation of duties decreases the risk that errors and irregularities will not be detected in a timely manner. Page 5
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES SPONSORED PROGRAM ADMINISTRATION WRITTEN POLICIES AND PROCEDURES Policies and procedures that impact the administration and control environment for sponsored programs were neither complete nor finalized. We noted that written policies and procedures were not finalized at the time of the audit and did not include the following areas that were administered by the office of research and sponsored programs, human resources, fiscal affairs, and/or other departments involved in contract and grant activities: Processing of project expenditures. Subrecipient monitoring. Post-award servicing activities between the campus and the San Francisco State University Foundation (Foundation). Internal approval authority for the establishment of special project accounts and corresponding project budgets. Internal approval authority and documentation requirements for below-cost reimbursements to the state on contracts and grants. State Administrative Manual (SAM) 20050 states that one symptom of a deficient internal control system is policy and procedural or operational manuals that are either not currently maintained or are nonexistent. The assistant vice president for research stated that a draft was prepared and forwarded to campus management for review and approval prior to the audit. He also stated that the draft is being updated to include the noted items and will be forwarded to the campus president for approval. Failure to develop, document, and communicate written policies and procedures increases the risk that misunderstandings will occur. Recommendation 1 We recommend that the campus finalize the policies and procedures for the noted areas and implement monitoring controls to ensure procedures are timely updated and distributed to responsible personnel. Page 6
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Campus Response We concur. Written policies and procedures have been revised and expanded to address the areas noted. When approved, the office of research and sponsored programs (ORSP) policies and procedures manual and corresponding forms will be issued to responsible personnel, will be posted on the ORSP website, and will be updated as needed. Expected completion date: August 23, 2002. SERVICE AGREEMENTS Service agreements between the campus and the San Francisco State University Foundation (Foundation) were not current. The Foundation provided post-award services for certain sponsored programs awarded to the campus. These services included, but were not limited to, human resources and salary management, expenditure processing, and preparation of federal and other financial reports. Based on the sponsored program (e.g., programs awarded to the campus versus the Foundation), these services were supported by two separate memoranda of understanding documents that had not been updated since mid-1994. For example, the fee for services was not reapproved for subsequent fiscal years; responsibility for ensuring that projects were approved prior to proposal submission and funding was not clearly defined; work order templates were not updated to reflect current signature authorities; and there was no provision for indirect cost reimbursement to the campus. SAM 20050 states that the elements of a satisfactory system of internal accounting and administrative control include an established system of practices to be followed in performance of duties and functions in each of the state agencies. The assistant vice president for research had not seen the service agreements between the campus and the Foundation, since they were implemented prior to his hire, but he was familiar with the process for the Foundation to provide post-award services. Not maintaining updated service agreements increases the risk of misunderstandings and inconsistencies between current practice and the intentions of management. Recommendation 2 We recommend that management update existing service agreements between the campus and the Foundation to reflect the current operating environment and management s expectations for postaward services and indirect cost reimbursements. Campus Response We concur. The agreement between the campus and the San Francisco State University Foundation, Inc. covering awards to SFSU where certain post-award services are provided by the Foundation has been updated (and signed by the appropriate individuals) to reflect the current operating environment and management s expectations. Page 7
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES For awards made to the Foundation, the prior memorandum codifying the responsibilities for the flow of external grant funding to the campus is being replaced by the new office of research and sponsored programs (ORSP) policies and procedures manual. Expected completion date: August 23, 2002. CONFLICTS OF INTEREST The campus did not exercise sufficient control over the conflict-of-interest process for principal investigators. Specifically, Principal investigators were not required to file a disclosure statement of financial interest for applicable federal and nongovernmental projects. Existing campus policy did not include principal investigator disclosure requirements for nongovernmental funding sources. The campus had not implemented a nepotism policy. California State University (CSU) directive, Faculty and Staff Relations Office of the Chancellor (FSR) 86-05(P), Principal Investigator Fair Political Practices Commission (FPPC), Approval List of Non-Profit Organization, dated July 11, 1986, indicates that employees with principal responsibility for research projects funded in any part by a contract or grant from a nongovernmental entity, including nonprofit organizations, are required to file financial disclosure statements. The campus Disclosure of Conflict of Interest for Principal Investigators policy, dated November 29, 1996, states that investigators must disclose significant financial interests at the time of proposal submission and update this information annually or as new interests are obtained during the life of the award. The assistant vice president for research stated that he was not aware of the campus policy regarding conflict-of-interest disclosure requirements for principal investigators and that disclosure forms and procedures are now in place. The director of human resources indicated that although human resources had centrally monitored the recruitment process and employment of staff and administrators to ensure compliance with CSU guidelines, the campus had not developed a written nepotism policy. She also indicated that written nepotism guidelines would be developed and included in the campus web site and existing recruitment guidelines. By not identifying and resolving all potential conflicts of interest, the exposure increases for fraud, abuse, and regulatory scrutiny. Page 8
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Recommendation 3 We recommend that the campus: a. Obtain a disclosure statement of financial interest from principal investigators conducting research projects sponsored by applicable federal and nongovernmental organizations. b. Revise existing policies and procedures to include all applicable disclosure requirements. c. Develop and communicate campus-wide nepotism policies and procedures. Campus Response a. We concur. Disclosure statements of financial interest are being obtained when required for both non-government funding sources and those federal government agencies that require such. Completed effective January 2002. b. We concur. Procedures are in place to ensure that these forms are completed as required by the state and federal policies. Conflict of interest forms and instructions have been revised and posted on ORSP website. Completed effective January 2002. c. We concur. The human resources department has developed and communicated campus-wide guidelines. Completed March 2002. HUMAN AND ANIMAL SUBJECTS RESEARCH Controls over human subject and animal research were both incomplete and unevenly applied. We found that: The campus had not appointed an Institutional Review Board (IRB) chairperson. The campus had not established a training program for persons involved in human subject and animal research. Human subject protocols were not always prepared or properly approved. Specifically, we noted during a review of 15 projects involving human subject and/or animal research that: The former IRB chairperson did not sign the protocol approval form for one project. Approved informed consent forms for one project did not include all of the basic required elements. Page 9
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES A protocol approval form was not on file for two projects that involved a survey on the quality of health care for asthmatic children and one project that received initial approval in 1999. Although the associate vice president of research and sponsored programs approved the protocol approval forms, the IRB did not meet to review two projects that were deferred for additional information and modification of the informed consent forms. The associate vice president of research and sponsored programs routinely approved protocol approval forms, which, based on his overall responsibilities for campus research efforts, created a conflict of interest. Code of Federal Regulations (CFR) Title 45, Part 46, Institutional Review Board (IRB) Membership, 46.107(e), effective August 19, 1991, states that no IRB may have a member participate in the IRB s initial or continuing review of any project in which the member has a conflicting interest, except to provide information requested by the IRB. CFR Title 45, Part 46, Protection of Human Subjects, 46.116, effective August 19, 1991, provides the general requirements for informed consent. National Institutes of Health (NIH) Notice OD-00-039, Required Education in the Protection of Human Subject Research Participants, dated June 5, 2000, states that beginning on October 1, 2000, the NIH will require education on the protection of human research participants for all investigators submitting NIH applications for grants or proposals for contracts or receiving new or noncompeting awards for research involving human subjects. Public Law 99-158, Animals in Research, 495(c)(1)(B), requires scientists, animal technicians, and other personnel involved with animal care, treatment, and use by the applicant have available to them training in the humane practice of animal maintenance and experimentation and the concept, availability, and use of research or testing methods that limit the use of animals or limit animal distress. The coordinator for the protection of human and animal subjects stated that she had recently assumed chairperson responsibilities since no committee member had volunteered for the position. She also stated that during this transitional period and in the summer months, the associate vice president of research and sponsored programs signed a few selected protocols to avoid delays. Regarding principal investigator training, the coordinator stated that all human subject researchers funded by the NIH complete the online NIH training; however, resources were not available to develop a formal training program for other human subject and animal research projects. Inadequate controls over human subject and animal research activities increase the risk of noncompliance with federal and state regulations regarding human subjects and animals in research. Page 10
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Recommendation 4 We recommend that the campus: a. Consult with appropriate campus personnel or governing bodies and timely appoint an IRB chairperson. b. Implement a training program for all persons involved in human subject and animal research. c. Implement procedures to ensure that human subject protocols are completed for all applicable projects and that such forms are reviewed/approved by appropriate personnel. Campus Response a. We concur. The campus has appointed an IRB chair. Completed April 2002. b. We concur. The campus now requires individuals involved in funded, human subject research to complete the NIH human subjects training program before funds from an agency can be spent. A two stage training program will be used for individuals involved in a funded project that involves animals. Expected completion date: August 23, 2002. c. We concur. Procedures have been developed to ensure that no funds will be expended on a funded project that involves human subjects or animals until the post-award grants administrator obtains a properly approved protocol and that these approvals are updated as necessary. Completed. PRE-AWARD CONTROLS Internal approvals for sponsored programs were not always timely or properly received by the office of research and sponsored programs prior to award submission. We noted during a review of 10 recently submitted proposal files and 20 open project files that: Seven projects (five proposals and two open projects) received required internal approvals after the proposal submission date. Nine projects (five proposals and four open projects) did not have a corresponding proposal approval routing form on file. Required internal approvals (e.g., campus president, director of development, chief financial officer) were not received for five open projects. Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions, A2 (d), indicates that each institution in the fulfillment of it obligations should employ sound management practices. Page 11
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Executive Order (EO) No. 168, California State University and Colleges Auxiliary Organizations Administration of Grants and Contracts in Support of Research, Workshops, Institutes, and Other Special Instructional Projects, dated January 19, 1973, states, in part, that the chief fiscal officer of the campus shall review and approve the fiscal aspects of each proposal for funding. The assistant vice president of research stated that to expedite the proposal submission process, the office of research and sponsored programs implemented a prerouting process that did not require documented written approvals. He further indicated that the proposal routing form was altered at one point and due to a clerical error, the signature line for the chief fiscal officer was deleted. Project proposals lacking required or timely approval increase the risk of failure to meet the best interests of the university, both programmatically and fiscally. Recommendation 5 We recommend that controls be strengthened for the timely review and approval of project proposals by appropriate campus and Foundation personnel. Campus Response We concur. Corrective action has already been taken. The routing form has been updated to include only those signatures required and all signatures are obtained by the date of proposal submission. For university development and SFSU Foundation, signatures are obtained via a cover letter for proposals requiring such before proposal submission. Expected completion date: August 23, 2002. POST-AWARD CONTROLS PROJECT EXPENDITURES Certain project expenditures lacked sufficient written approval and supporting documentation. During our review of 92 expenditures, we noted that certain transactions lacked sufficient authorization and/or supporting documentation to ensure proper use of funds. Specifically, we noted that: In eleven instances, payments were made from faxed and photocopied invoices, photocopied receipts, a photocopied stipend form, and an Internet confirmation without certification. In two instances, payments were made from personal credit card statements without receipts to support the charges. In two instances, facility rental payments were made based on a memo from accounts payable and without the principal investigator s approval. Page 12
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES In three instances, a higher authority did not approve the principal investigator s expenses. In nine instances, the principal investigator did not approve invoices that were prepared by the Foundation. In six instances, all responsible personnel did not approve expenditures. In five instances, payments to Head Start delegate agencies were based on photocopied invoices without supporting expenditure documentation. In two instances, purchases of furniture did not receive a waiver from Prison Industry Authority (PIA). SAM 8422.1 states, in part, that if agencies cannot obtain original invoices, the State Controller's Office will accept for payment carbons, dittos, photocopies, or other forms of copies which clearly were sent by the vendor for billing purposes and invoices marked "Office Copy," "Packing Copy," or "Duplicate Copy" only if the following information is placed on the invoice: "This bill has been checked against our records and found to be the original one presented for payment and had not been paid. We have recorded this payment so as to prevent a later duplicate payment." CSU Policy Manual for Contracting and Procurement 224 states that the state and its agencies are required to procure any available goods or services produced by the PIA, unless specifically waived by the PIA. SAM 20050 states that a satisfactory system of internal accounting and administrative controls includes a system of authorization and record-keeping procedures adequate to provide effective accounting control over assets, liabilities, revenues, and expenditures. The accounts payable supervisor indicated that inappropriate approval of payments and the absence of certifying documentation other than original invoices or receipts were oversights. The director of procurement indicated that furniture was purchased without a PIA waiver because the ordering department required specific items and bypassed the procurement department. The Foundation grants and contracts administrator stated that the format of the invoices to the campus had changed during a system conversion and no longer provided for approval signatures; however, all project expenditures are reviewed by the principal investigator and the Foundation grants administrator before payment. The Head Start chief fiscal officer stated that the campus forwards faxes or photocopies instead of original invoices to Head Start. He further stated that Head Start receives original invoices with photocopied supporting documentation from the delegate agencies, but the original documentation will be audited during Head Start s on-site monitoring. Insufficient control over processing project expenditures increases the risk that funds will be misappropriated and/or be expended for inappropriate purposes. Recommendation 6 We recommend that controls be strengthened to ensure project expenditures are appropriate, properly authorized, and fully supported by sufficient documentation. Page 13
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Campus Response We concur. In ORSP, post-award staff have been informed of appropriate policies and procedures related to acceptable expenditure documentation and in obtaining appropriate signatures. Regular auditing of documentation is currently being done by the assistant vice president and will be done in the future by a newly hired compliance officer. In addition, fiscal affairs will strengthen and enforce existing procedures. The following corrective actions will be taken: Internal accounts payable and accounting procedures will be reviewed; Procedures will be amended if needed; and Procedures will be provided to and reviewed with ORSP and fiscal affairs staff to ensure compliance. Expected completion date August 23, 2002. PROJECT REPORTING Documentation to evidence that interim status and/or final technical reports were submitted to the sponsors was not contained in project files. We noted that 5 of 13 (38%) project files reviewed did not contain documentation to evidence that interim status and/or final technical reports were submitted to the sponsor. OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations Financial Reporting, _. 51(a), states that recipients are responsible for managing and monitoring each project, program, award, function, or activity supported by the award. OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations Financial Reporting, _. 71(a), states that recipients shall submit, within 90 calendar days after the date of completion of the award, all financial, performance, and other reports as required by the terms and conditions of the award. The assistant vice president of research stated that principal investigators were responsible for submitting programmatic reports to the sponsors. The Foundation grants and contracts administrator indicated that the Foundation did not require principal investigators to provide evidence of reports submitted to the sponsor. Lack of documentation to evidence submission of interim status and/or final technical reports increases the risk of penalties and disallowances for noncompliance with grant and contract terms. Recommendation 7 Page 14
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES We recommend that campus and Foundation controls be strengthened to include documented evidence that technical reports and other technical deliverables are submitted to sponsoring agencies. Campus Response We concur. The form distributed to the Principal Investigator (PI) that indicates that their project is coming to an end has been modified to include a line indicating the date by which the required reports need to be submitted to ORSP or Foundation. The grants administrator responsible for the project account will monitor for return of the form and a copy of the report. The campus will develop a process to ensure that interim required reports are also submitted to sponsoring agencies. Expected completion date: July 31, 2002. COST SHARING Procedures did not ensure accurate reporting of cost-sharing information. We noted that during a review of six projects with cost-sharing commitments, the campus did not receive cost-sharing documentation for the Year 2 Head Start project. Consequently, financial status reports were completed based on the budgeted cost-sharing amounts rather than the actual expenses incurred to satisfy the cost-sharing commitment. We also noted that the principal investigator did not sign the Notice of Cost-Sharing/Matching Cost Contribution Form nor was a cost-sharing companion account established for the project. OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations, _. 51(a), indicates that recipients are responsible for managing and monitoring each project, program, subaward, function, or activity supported by the award. The campus draft Grants and Contracts Policy and Procedures Manual states that for any grant/contract that requires cost sharing, an account known as a companion account will be created and set up by the office of research and sponsored programs based on the approved Cost- Sharing/Matching Cost Contribution Funds Requirement form. This form should have been completed during the proposal stage. The Head Start chief fiscal officer stated that the campus did not request submission of the in-kind documents for financial reporting purposes. Not establishing a system to effectively report cost-sharing information increases the risk of regulatory scrutiny and possible noncompliance with the terms and conditions of the award. Recommendation 8 Page 15
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES We recommend that the campus strengthen procedures for the submission and accurate reporting of cost-sharing information and the implementation of companion accounts to track cost-sharing commitments. Campus Response We concur. All cost-sharing documentation obtained for Head Start and all other funded projects will be maintained by the campus or San Francisco State University Foundation, Inc. and the appropriate accounting official will report the amount of cost sharing associated with the cost-sharing documentation determined to be allowable by cost principles. Notice of Cost-Sharing/Matching Cost Contribution Form will be obtained from each PI. Companion account requirements are documented in the ORSP Policies and Procedure Manual. Expected completion date: August 23, 2002. SEPARATION OF DUTIES The campus did not always maintain adequate separation of duties over sponsored programs. We noted that research and sponsored programs management also served as principal investigators on various federal and nongovernmental grants. As principal investigators, these individuals performed certain pre- and post-award activities without a one-up approval or review of project activities by other campus management. SAM 20050 states that a satisfactory system of internal accounting and administrative control shall include a plan of organization that provides segregation of duties appropriate for proper safeguarding of state agency assets. The associate vice president of research and sponsored programs stated that within the scope of their responsibilities, he and the assistant vice president of research were delegated the authority to submit project proposals and serve as principal investigators on sponsored programs. He further stated that changes are underway to require additional review and approval of his and the assistant vice president s research activities. Inadequate separation of duties increases the risk that errors and irregularities will not be detected in a timely manner. Page 16
OBSERVATIONS, RECOMMENDATIONS, AND CAMPUS RESPONSES Recommendation 9 We recommend that the campus implement procedures and controls that ensure objectivity and appropriate review of project activities by responsible sponsored program management personnel. Campus Response We concur. Procedures are in place to ensure objectivity and appropriate review (one up) of project activities by responsible sponsored program management personnel. Expected completion date: June 21, 2002. Page 17
APPENDIX A: PERSONNEL CONTACTED Name Robert A. Corrigan Alex Antonio Rose O. Balancio Paul Barrows Linda Blackwood Richard Chen Jeff Dang Arlene Essex Paul Fonteyn Denise Fox Franz Lozano Bruce A. Macher Hind Malouf Meina Saleh Julie Savignano Don W. Scoble Lynn Shimamoto Stephen Smith Falefasa Tagaloa Jean van Keulen Jim Van Ness Anthony Victoria Larry Ware Burkland Wong Greta Yin Title President Chief Fiscal Officer, San Francisco Head Start Grants and Contracts Administrator Funding Information Specialist Coordinator for the Protection of Human and Animal Subjects and Professor, Center for Biomedical Laboratory Science Senior Accountant, Fiscal Affairs Fiscal Operations Manager, San Francisco Head Start Grants and Contracts Administrator, Foundation Associate Vice President Research and Sponsored Programs and Dean, Graduate Division Director, Human Resources Associate Internal Auditor, Business and Finance Assistant Vice President of Research and Sponsored Programs, Professor of Biochemistry Accountant, Fiscal Affairs Accounts Payable Technician, Accounts Payable and Collections Accounts Payable Supervisor Vice President, Business and Finance Personnel Management Coordinator, San Francisco Head Start Director of Procurement Grants and Contracts Administrator Professor/Executive Director, San Francisco Head Start Internal Auditor, Business and Finance Lead Services, Foundation Associate Vice President/Controller, Fiscal Affairs Manager of Trust and Project Accounting, Fiscal Affairs Program Director, San Francisco Head Start