Description
To ensure that UT and its employees are good stewards of external funds and conduct the financial management of the projects according to sound business practices.
Business Ethics
Responsible Conduct of
Research at UT-Knoxville
Purpose of Training
? To ensure compliance with UT Fiscal
Policies and Federal Regulations for the
proper financial management of agency
funds. This training is required for all
individuals working on federal contracts
subject to FAR 52.203-13.
? To ensure that UT and its employees are
good stewards of external funds and
conduct the financial management of
the projects according to sound business
practices.
Meet Beth!
Beth, has an issue!
“That’s really not my job, is it?”
As a bookkeeper, Beth was uncomfortable with some of the
business decisions being made for a federally sponsored project in
her department.
She was unable to convince a new principal investigator (PI),
named James, that it was his responsibility to make decisions on
allocating costs between sponsored projects. The last time Beth
brought this up, James asked, ?That‘s really not my job, is it??
Now, Beth was in a quandary. What could she do? She decided
to approach her department head and was told not to upset the
work of this important new PI and to ?take care of all the
administrative details? for him so he could focus on the research
work.
What is Beth to do?
Beth knew that she could not make good cost
allocation decisions affecting the federally sponsored
project because she was not involved with or
knowledgeable about the technical work being
performed.
Her job is really to ensure that the PI‘s decisions are
implemented by appropriate entries into the
accounting system. It is also her job to advise and assist
her PI and department head in good business ethics
and decisions.
They have to take responsibility, too!
Beth began to consider how this dilemma
could affect not only her, but also the
University. After much thought, she wrote
three questions:
1. How does my responsibility as a bookkeeper
and James‘ responsibility as a PI, and my
department head‘s responsibility differ in terms
of making sound fiscal decisions?
2. How does responsibility among us three differ in
reporting infractions of the business ethics
policy?
3. What are the major principles and procedures in
UT fiscal policies that this new PI and my
department head are missing?
Beth thought back to the time she had
attended a research team meeting held by
an upstanding department head. He stated
three items that addressed her Questions:
1. Know your responsibility in terms of UT Fiscal
policies and Federal Regulations and then follow
through consistently.
2. Encourage compliance and sound business ethics
on your projects and in your department. This will
help new researchers learn the behavior that is
now expected at major research institutions.
3. Follow the “top ten” financial compliance rules to
protect the University, yourself, and others working
on the projects.
But Beth thought, ?What if this is beyond my job
responsibilities? If I don‘t have the support of
my department head or this new PI, what
could be the consequences to me? I‘ve got to
understand the specifics of this issue because
my job is in jeopardy, as is my personal
reputation—no matter what course I take!?
What should she do???
Wait a minute!
Beth remembered the former department heads
mentioning a Compliance Officer in Sponsored
Projects Accounting who was helpful. ?Maybe
James and my department head will listen to her.?
Beth called the Compliance Officer (CO)and
explained the situation. The CO met with James and
his department head and reminded them of their
financial responsibilities and the business ethics
expected by the Federal sponsor and the University.
She also gave them the list of ?top ten? financial
duties, which they promised to follow.
Beth has scheduled to meet with James on a
regular basis to discuss cost allocation and other
important financial decisions. They both want this
sponsored project to be a success!
This module will focus on
the “top ten” principles
regarding:
Federal Regulations
and
UT Fiscal Policies
? The ?top ten? principles are not
an exhaustive list. You should
proactively read the award
document and / or check with
Sponsored Projects Accounting,
Office of Sponsored Programs or
the sponsor for sponsor-specific
and award-specific financial
requirements.
By the end of this module,
you will be able to:
1. Apply knowledge of the ?top ten? financial
principles.
2. Describe responsibilities of researchers in financial
compliance and business ethics to create a
culture of compliance on sponsored projects.
3. Evaluate the severity of a business ethics violation
and know what to do when one occurs.
4. Identify UT resources for assisting project directors
in financial compliance and business ethics.
Action Objective One
Apply knowledge of the “top ten” financial
compliance principles.
DEFINING THE ?TOP TEN? BEST PRACTICES
Summary of ?top ten? principles
1. Spend the sponsor / donor funds as intended or proposed
2. Become familiar with regulations
3. Review monthly financial ledgers and charges
4. Meet basic costing requirements –reasonable, allowable, fall
within time period of award, and allocable to the technical
work performed
5. Ensure timely financial communications and actions
6. Avoid cost transfers
7. Ensure effort certification and payroll charges are accurate
and timely
8. Closeout sponsored projects in a timely manner
9. Incur charges only during the project period
10. ONLY charge Direct Costs that are NOT normally included in
the F&A rate
Financial Compliance Principles
? 1. Spend as intended
PIs are expected to be good stewards of the sponsors‘ or
donors funds. All funds should be spent in the manner
specified by the donor or proposed in the award from the
sponsor. Deviations may require advance written approval.
Some sponsors require advance written approval for buying
equipment, foreign travel, subcontracting, deviations from
budget, changes in the scope of the technical work, etc.
If you are in doubt, ask someone –your departmental support
staff or business manager, the Sponsored Projects Accounting
office, or the Office of Research/Sponsored Programs. They
can find out for you.
If UT manages the sponsors’ and donors’ funds well, we are
more likely to attract additional funding.
Example
? 1. Spend as agreed
Halfway through his project with the U. S. Department of Agriculture
(USDA), Dr. Jones spends a portion of his project funds on a $7,000
specialized scientific camera and related software. This expenditure
was unexpected and not in the proposal budget, but necessary
because his old camera is broken and cannot be repaired. The new
equipment will provide much better results for the USDA project.
Dr. Jones is able to afford this because he had savings in other areas
of the project, especially travel and supplies.
Questions:
? Is the cost of the camera and software properly charged to the
USDA project?
? Should the PI have obtained prior written approval from the
sponsor?
Give these questions some thought on your own before
moving on to the answers on the next page.
Answers to questions
? 1. Spend as agreed
? Questions:
1. Is the cost of the camera and software properly charged to the USDA
project?
2. Should the PI have obtained prior written approval from the sponsor?
? It is probably OK to buy the camera, and the sponsor will
undoubtedly realize its necessity for the completion of the
project; however, it would be best if the PI checked with the
departmental support staff or business manager, Sponsored
Projects Accounting or the Office of Research/Sponsored
Programs before the camera is actually purchased. They can
read the sponsor and award document rules regarding re-
budgeting and look for any requirement for prior approvals. If
prior approval is required, then they can contact the sponsor’s
Award Specialist for the approval of the PI to purchase the
camera.
Financial Compliance Principles
? 2. Familiarization with regulations
Employees participating in sponsored activities must be familiar with all the rules:
? Specific award document clauses
You can get a copy from your departmental business manager, Sponsored Projects
Accounting, or the Office of Research/ Sponsored Programs.
? Sponsor rules are often listed in the grants policy guides on their web sites
? UT Fiscal Policies on the web http://policy.tennessee.edu/fiscal_policy/
? If your award is from the Federal government or if the award contains any
Federal funds, then the Federal rules in the Office of Management and Budget
(OMB) Circulars A-21, A-110, and A-133 are applicable. They are located at
http://www.whitehouse.gov/omb/circulars/.
? Ask your departmental business manager, Sponsored Projects Accounting or the
Office of Research/Sponsored Programs for assistance, if needed.
Financial Compliance Principles
3. Review of monthly financial ledgers and charges
? Charges appearing on the monthly
financial ledger must be reconciled
to supporting documentation to
ensure validity and accuracy.
? Make sure that the charges are
correct and that they have been
charged to the correct project. The
technical work of the project must
have directly benefitted from the
particular charge.
? If you have questions, take
immediate action by communicating
with your departmental support staff
or business manager and following up
to ensure that the charge is
corrected immediately.
Example
3. Review of monthly financial ledgers and charges
On January 7, Dr. Jones received a copy of the December monthly
financial ledger for his USDA project from the departmental business
manager. While verifying the detailed list of charges, Dr. Jones noticed
a $1,000 charge from Staples. He was positive that the charge did not
belong on his project and immediately sent an email to the business
manager asking her to remove the charge. On February 6, he
received a copy of the January monthly ledger and it appeared the
Staples charge had not been removed.
What should he do?
1. Don‘t worry about it. It is now the business manager‘s responsibility to fix.
2. Send a nice reminder email to the business manager.
3. Complain to the department head about the incompetence of the
business manager.
4. None of the above.
Think about what is right and what is wrong about each answer before you
move on to the answer on the next page.
3. Review of monthly financial ledgers and charges
Answers to questions
1. Don‘t worry about it. It is now the business manager‘s
responsibility to fix.
2. Send a nice reminder email to the business manager.
3. Complain to the department head about the
incompetence of the business manager.
4. None of the above.
4 is the correct answer.
While numbers 1 & 2 are both partially correct, the PI
must do more. The PI must take responsibility to make
sure that the correction is made ASAP. This means the
PI must work with the Business Manager to ensure the
charge is removed immediately. It is critical that the
incorrect charge be removed immediately because
the Sponsored Projects Accounting office has
probably already incorrectly invoiced USDA for this
charge. Complaints to the department head can wait.
Financial Compliance Principles
4. Costing requirements
Employees must ensure that all expenditures on
sponsored projects are:
• Reasonable
• Allowable
• Timely - Fall within the time period of the
award
• Allocable to the statement of work being
conducted using a reasonable
method of cost allocation
• Necessary for the scope of work.
Example –reasonable costs
Dr. Jones is attending a meeting with the sponsor in
Atlanta. His budget includes 3 trips to Atlanta for
himself and the project manager at $200 per trip for
transportation (UT motor vehicle and gas). He
discovers that he can make this trip on the UT plane for
$600 and take his 2 research associates and 2
graduate students, too. This sounds like a good deal to
Dr. Jones because he is still paying $100 per person. He
thinks that the meeting will be a good learning
experience for his post-docs and students.
1. Is this a reasonable cost from the sponsor‘s
perspective?
2. How can Dr. Jones be sure?
3. Does the high-profile nature of a chartered plane
affect the decision?
Think about each one of these questions before you move on to the
answers on the next page.
Answer to Reasonable Costs question‘s
1. Is this a reasonable cost from the sponsor‘s perspective?
2. How can Dr. Jones be sure?
3. Does the high-profile nature of a chartered plane affect the
decision?
ANSWER: The PI should be very, very careful here. Review the
agreement to ensure there is no required approval for altering
trips. This is a situation where it would be a good idea to ask for
the sponsor’s approval in advance even if it is not strictly
required. The sponsor may agree with the PI or not. They may
care more about 3 separate trips to Atlanta than about more
participants. The UT plane certainly attracts more public scrutiny
than commercial transport, so it is even more important to be
sure it is being used with the sponsor’s approval.
Example –allowable costs
4. Allowable Costs
Since the quarterly meeting with his research staff to
discuss the status of his USDA project concludes at
5 p.m., Dr. Jones orders 3 pizzas. Everyone hangs
around an additional hour to eat pizza and
celebrate the end of the semester.
Questions:
1. Is the pizza an allowable cost on the USDA
project?
2. Explain your answer.
Think about each of these questions before you
move on to the answers on the next page.
Answers to allowable costs questions
Questions:
1. Is the pizza an allowable cost on the USDA
project?
2. Explain your answer.
ANSWER: No, the pizza cannot be charged to the
USDA project. Per OMB Circular A-21, Section J (15)
and UT Fiscal Policy FI0205 “Sponsored Grants and
Contracts”, entertainment costs are unallowable
costs.
Example – Timely Charges
Costs within project time period
Dr. Jones‘ USDA project ended on 9/30. An employee is paid on the
biweekly payroll that covered the period 9/20 to 10/3 and is paid on
10/10.
Questions:
1. How much of the employee‘s salary should be charged to the
project?
a. All of it because it is very close to being accurate
and the employee worked really hard on the project.
Also, the department does not want to pay for any of the
employee‘s salary.
b. 11/14 multiplied by the pay amount of $1,000 =
$785.71
c. None of it because it was paid out after the end date
of the project
Think about what is right and what is wrong about each answer
before you move on to the answer on the next page.
Answer to Timely Charges question
Question:
How much of the employee‘s salary should be charged to the
project?
a. All of it because it is very close to being accurate and the
employee worked really hard on the project. Also, the
department does not want to pay for any of the employee‘s
salary.
b. 11/14 multiplied by the pay amount of $1,000 = $785.71
c. None of it because it was paid out after the end date of the
project
The correct answer is b. The portion of the salary expense that
was incurred before the end date of the project is allowable,
regardless of when it was paid.
Example –allocable
A true cost allocation story
Dr. Jones is directing 5 projects with the following sponsors: USDA, NIH, Army,
DOE and Homeland Security. He considers all of his research work to be the
same because he is investigating the same basic problem. Therefore, he
decides to put all of the charges on the USDA project first until it is totally
spent, then move on to the NIH project and fully charge it, etc.
He is shocked one day to receive phone calls from his USDA and Army
technical contacts who are questioning project costs. USDA wants to know
why he spent the entire amount of the award in the first 3 months of a 12
month award. Army wants to know why they have not received an invoice
for any costs even though the quarterly technical report shows that he has
completed 25% of the work.
Dr. Jones realizes that he is in an uncomfortable predicament. Because he
was unwilling to attempt to allocate costs between his projects, he has now
overcharged USDA and undercharged Army, and cannot give them good
answers. He is surprised to learn that they do not consider their work to be
the same, even though he did. He is also surprised to learn that while they
are impressed by his technical work, they are unlikely to give him future
awards if they are not confident about the allocation of costs to their
project.
Financial Compliance Duties
5. Timely financial communications and actions
Employees must ensure that all charges, credits, effort
certifications, and other accounting entries are performed
in a timely manner as specified in fiscal policies.
Principal investigators will ensure that support staff are given
information about charges to sponsored projects
immediately so that accounting entries can be made. This
includes information about who is working on projects,
which projects should be charged for specific costs, and
any changes expected.
Support staff should not make these decisions based on availability of funds or
any funding considerations. Costing decisions should be solely based upon the
technical work that is performed on each project. These decisions must be
made by the PI.
Communication between the PI and support staff is critical.
Financial Compliance Duties
6. Avoid cost transfers
Employees will endeavor to place charges on the correct
sponsored project initially and will avoid using cost transfers
except to correct errors. Errors should occur very rarely.
Cost transfers will not be used to move costs from overspent
projects to underspent projects or for any other reason of
convenience or for funding considerations.
Auditors are very suspicious of cost transfers and may disallow
these costs automatically. They are most critical of excessive
transfers, transfers that occur near or after the end of a project‘s
time period, transfers from an overspent project to an underspent
project, and transfers that do not have adequate
documentation of the benefit of the cost to the project‘s
technical work.
Support staff should not make these decisions based on
availability of funds or any funding considerations. Costing
decisions, including transfers, should be solely based upon the
technical work that is performed on each project. These
decisions must be made by the PI. Documentation of technical
benefits of cost transfers must be provided by the PI.
6. A true cost transfers story
Florida International University paid $11.5 million for disallowed cost
transfers. It is estimated that the true cost to FIU is more than $50 million
after including attorneys‘ fees, consultants‘ fees, loss of future funding,
and loss of reputation.
February 2005
Major finding –cost transfers
• Incomplete cost transfer documentation
• Grant used as a clearing account
• Cost transfers after the end date of the project
• ?The University Controller‘s Office repeatedly protested
practice? (Miami Herald, August 15, 2005)
Financial Compliance Duties – Effort Reporting
7. Accurate and timely effort certification and payroll charges
Salaries represent the largest costs on most sponsored projects; therefore, financial compliance
is critical. Consistent with federal regulations, salaries charged to sponsored projects must equal
actual effort expended by the individual on that project, as documented via the effort
certification process.
• Employees will ensure that effort certification accurately reflects the actual percentage of
work effort devoted to a sponsored project.
As with all costing decisions, support staff should not make these decisions
based on availability of funds or any funding considerations. Costing decisions
should be solely based upon the technical work that is performed on each
project. These decisions must be made by the PI.
• Effort must be certified within 30 days of the sponsored project end date.
• Anticipated changes in future effort percentages are changed in the payroll cost
distribution system promptly. Inform support staff immediately of changes.
• Sponsors may want to give prior approval for significant changes in a PI‘s level of effort,
such as a decrease or increase of 25% or more from the proposal. Some awards contain
minimum effort requirements, such as NIH K awards.
Contact your campus Office of Research/Sponsored Programs or Sponsor if you have questions.
Financial Compliance Duties
8. Timely closeout of sponsored projects
All charges must be finalized on the project within 60 days
of the project end date so final financial reports can be
submitted to the sponsor on time.
PIs will receive an email notification approximately 45 days
before the end date of the award. At that time, the PI
should begin finalizing the costs on the project. Or, the PI
may want to request a time extension from the sponsor. In
any case, the PI should communicate intentions to the
support staff in the department, campus Office of
Research, and campus business office.
Financial Compliance Duties
Sponsored projects may not be used as
an interim funding source when other
awards are late in arriving or when other
sponsored accounts expire.
Inapplicable charges must be charged
to a non-sponsored account. This may be
a discretionary gift account or the
departmental unrestricted operating
account.
9. Incur charges only during project performance dates
Financial Compliance Duties
10. Charge Only Direct costs not normally included in
the F&A rate
Charges for items normally included in F&A recovery
can only be charged to sponsored projects if
specifically approved by the sponsor (either in the
original proposal or post-award approval) These “basic
support” costs normally include:
• Administrative and clerical salaries
• Office supplies
• Basic local telephone service and cell phones
• Routine copying charges
• Memberships, journals, and subscriptions
• Desktop computers
Yale University makes headlines!
Improper cost transfers and effort certification at Yale:
?Yale University paid $7.6 million to the federal
government to settle charges that its personnel
mismanaged grants from 2000 to 2006 by improperly
charging expenses to certain grant accounts before the
grants expired.
Yale, which had been investigated for alleged violations
of the False Claims Act, did not admit wrongdoing as
part of the settlement but said it has since improved its
grant-accounting procedures.?
Financial Compliance Duties
Quick test from Yale University settlement:
?The investigation focused on allegations involving two types of
mischarges to federal grants. Both types arose as violations of the basic
principle that recipients are allowed to charge only ?allocable‘ costs,
which are costs that relate to the specific objectives of that grant project.
The first allegation involved cost transfers and the requirement that costs
transferred to a federal grant account must be allocable to that
particular grant account. The settlement resolved allegations that some
Yale University researchers improperly transferred charges to a federal
grant account that were not allocable. Researchers allegedly were
motivated to carry out these wrongful transfers when the federal grant
was near its expiration date and they needed to spend down the
remaining grant funds.?
Which of our “top ten” compliance principles did Yale allegedly violate?
A: Costs are not reasonable
B: Costs are not allocable to a particular project
C: Cost transfers are made based on funding considerations
D: Cost transfers are not supported by adequate documentation
describing the benefit of the cost to the technical work performed.
Answer!
Quick test from Yale University settlement:
?The investigation focused on allegations involving two types of mischarges to federal grants.
Both types of mischarges arose as violations of the basic principle that recipients of federal
grants are allowed to charge to each grant account only ?allocable? costs, which are costs that
relate to the specific objectives of that grant project. The first allegation involved cost transfers
and the requirement that costs transferred to a federal grant account must be allocable to that
particular grant account. The settlement resolved allegations that some Yale University
researchers at times improperly transferred charges to a federal grant account to which those
charges were not allocable. Researchers allegedly were motivated to carry out these wrongful
transfers when the federal grant was near its expiration date and they needed to spend down
the remaining grant funds.?
Source: Department of Justice press release
http://newhaven.fbi.gov/dojpressrel/2008/nh122308.htm
Answer: Definitely both B and C (and D is implied)
Which of our ?top ten? compliance duties did Yale allegedly violate?
A: Costs are not reasonable
B: Costs are not allocable to a particular project
C: Cost transfers are made based on funding considerations
D: Cost transfers are not supported by adequate documentation
describing the benefit of the cost to the technical work performed
Summary of ?top ten? principles
1. Spend the sponsor / donor funds as agreed
2. Become familiar with regulations
3. Review monthly financial ledgers and charges
4. Meet basic costing requirements –reasonable,
allowable, fall within time period of award, and
allocable to the technical work performed
5. Ensure timely financial communications and actions
6. Avoid cost transfers
7. Ensure effort certification and payroll charges are
accurate and timely
8. Close out sponsored projects in a timely manner
9. Do not incur charges after ending date
10. Do not directly charge costs that are normally
included in the F&A rate
Financial Compliance Principles
UT fiscal policies and campus procedures
The ?Top Ten Financial Compliance Principles? are a foundation for good
financial management and compliance; however, more complete
guidance is in UT Fiscal Policies and campus procedures, such as policies:
FI0205 Sponsored Grants & Contracts
FI0210 Cost Sharing
FI0220 Cost Transfers
FI0230 Subcontract Monitoring
FI0235 Program Income
FI0225 Code of Business Ethics for Sponsored Projects
Additionally, there are policies and procedures relating to purchasing,
travel, and other expenditures affecting sponsored projects.
All project directors and staff involved in sponsored projects must
proactively learn about and comply with these regulations along with
sponsor and award-specific rules. Please contact your campus
research/sponsored programs office, or business office for assistance.
Action Objective Two
Describe the responsibilities of researchers in financial
compliance, business ethics, and creating a culture of
compliance on sponsored projects.
Key Words!
RESPONSIBILITIES CULTURE OF COMPLIANCE
Culture of Compliance
Financial compliance is expected of you!!!
The University expects you:
1. To be personally committed to ensuring proper business ethics
and financial compliance on sponsored projects.
2. To promote a culture of compliance within the University
community so that it is unacceptable to act otherwise. For
example, it is unacceptable to ?play games with the money,
?move charges around to maximize funding, etc.
3. To set the tone of compliance and ensure every graduate
student, PI, project director, and support staff member is
committed to ?doing the right thing.?
4. To ensure that non-compliance is not to be tolerated and if
continued after being addressed, should be reported to
responsible University officials.
Culture of Compliance
“We’ve always done it this way”
However we may have conducted business relating to sponsored
projects in the past, we must be compliant now and going
forward. This may require a big change in perspective, attitude,
and actions for our existing faculty and staff.
These real-life excuses are not valid:
• We’ve always done it this way, so it must be okay.
• I didn’t know I was supposed to do that, so it doesn’t apply.
• This regulation makes no sense, so it is okay for me to ignore it.
• UT systems and processes let me do it, so it must be okay.
• We always move money around on sponsored projects to
maximize funding.
• The PI’s job is to do the technical work and support staff should
take care of all the administrative and financial details.
• My project is special, so it’s okay.
• It’s my project and I can do whatever I like.
• The program manager said it was okay.
• It’s my money, I can use it however I like!
Action Objective Three
Learn to evaluate the severity of a business ethics violation and
what to do when one occurs.
Key Words
EVALUATION • EXAMPLES
Reporting violations
What is your responsibility?
You should report any violations of
business ethics/non-compliance to
appropriate University officials.
This may be a delicate area that
requires judgment on your part.
• How do you measure the severity of
the violation?
• Who do you notify?
• What are your protections if you
report it?
• What are the risks to you if you do
nothing?
Question
Violation of business ethics?
Terry notices a coworker putting a UT pen and
notepaper in her purse . Terry thinks that the coworker
probably did this without thinking and did not intend to
steal UT resources. Terry decides this is probably not a
reportable violation of business ethics.
Is Terry right about this?
Is this a violation of business ethics?
Think about the answer to this question before you
move on to the answer on the next page.
Answer
Violation of business ethics?
Terry notices a coworker putting a UT pen and notepaper in her
purse . Terry thinks that the coworker probably did this without
thinking and did not intend to steal UT resources. At another time,
Terry sees the same person writing an IOU for Petty Cash funds.
Terry decides the IOU issue is probably a reportable violation of
business ethics.
Is Terry right about this? Is this a violation of business ethics?
YES, This is a violation of business ethics.
Mistakes are sometimes made by honest people, like with the
case of the pen and paper. However, they are still UT resources
and should not be misused by constantly being taken. The IOU
being placed in the Petty Cash funds is not only an Ethics issue but
a compliance violation to UT‘s policy on handling funds. Terry
should mention it right away to her supervisor.
Question
Ann, a business manager, is constantly concerned over
charges she is required to post to a grant. Fred, the PI on the
grant, is very respected and brings in a large portion of the
department‘s funding. Fred is aware of how much the
department depends on him. Each time Ann questions Fred
about a charge, he directs her to do what he says, and if the
department doesn‘t like it he will leave taking his research
money with him. Ann talks with the Budget Director about her
concerns and she says to post the charges because they must
keep the PI happy so he doesn‘t leave.
• Should Ann post the charges?
• Is the Budget Director correct in telling Ann to post the
charges?
• Is the PI acting responsibly with the grant funds?
• What should Ann do?
Answer
Ann, a business manager, is constantly concerned over charges she is required to post to a grant. Fred,
the PI on the grant, is very respected and brings in a large portion of the departments funding. Fred is
aware of how much the department depends on him. Each time Ann questions Fred about a charge,
he directs her to do what he says, and if the department doesn‘t like it he will leave taking his research
money with him. Ann talks with the Budget Director about her concerns and she says to post the
charges because they must keep the PI happy so he doesn‘t leave.
• Should Ann post the charges?
• Is the Budget Director correct in telling Ann to post the charges?
• Is the PI acting responsible with the grant funds?
• What should Ann do?
Ann should not post charges she knows are not allowed on the grant. The budget director
should not have allowed the grant funds to be misused. The PI is not applying sound
business practices in his management of grant funds. Ann should report the issue to her
department head.
The department head must ensure that the PI is aware that all funds should be managed
in accordance with the policies and requirements set forth within the award agreement
and UT policy.
The University cannot afford the negative stigma of being found guilty of misusing grant
funds. Plus, it’s the right thing to do even when you don’t think you will get caught!
Question
Violation of business ethics?
A PI regularly asks a departmental business manager to
make excessive and late cost transfers just to spend down
the funds remaining on the sponsored project. In fact,
there is one charge that has already been moved five
times between various accounts.
Is this a violation of business ethics?
Think about the answer to this question before you move
on to the answer on the next page.
Answer
Violation of business ethics?
A PI regularly asks a departmental business manager to make
excessive and late cost transfers just to spend down the funds
remaining on the sponsored project. In fact, there is one charge
that has already been moved five times between various
accounts.
Is this a violation of business ethics?
YES, This is a violation of business ethics.
The business manager should talk to the PI and explain why this
violates UT Fiscal Policy and Federal Regulations. If the behavior
persists, the business manager should report this to the
department head. If it still persists, the business manager should
report this to Internal Audit.
Specifics Regarding Disclosure
What are your protections if you disclose a violation?
The following confidential means of communication are
available for reporting suspected violations:
UT Internal Audit hotline 974-6611
State Audit’s Compliance Hotline 1-800-232-5454
Specifics Regarding Non-Disclosure
What are the risks if you do nothing?
The University could incur significant fees/penalties and suffer a
loss of reputation.
Depending upon the severity of the business ethics violation:
• You could be subject to disciplinary action.
• You could be fired.
• You could be charged with a civil or criminal violation You
could go to jail.
• PIs could also be debarred by a sponsor agency when misuse
of grant funds is the result of violations.
Action Objective Four
Learn about UT resources for assisting researchers in
financial compliance and business ethics.
Key Words
RESOURCES • WHO TO CALL
Resources
Financial compliance issues or Federal regulations:
Office of Research & Engagement
Sponsored Projects Accounting
Business ethics violations or questions:
Supervisor/business manager
UT Internal Audit
State Audit
Summary
We have reviewed some basic financial responsibilities of
project directors from the ?top ten? list of financial principles.
It is the responsibility of everyone working on a grant, in any
capacity, to ensure financial compliance with sponsored
projects and to promote a ?culture of compliance? with
coworkers for the protection of individuals and the institution.
Certification
In order to ensure your understanding of the
business ethics and compliance principles
discussed, you must take the short quiz.
A certification form will be created once you pass
the quiz. You should print and retain a copy of the
certificate.
Thank you!
doc_241726893.pptx
To ensure that UT and its employees are good stewards of external funds and conduct the financial management of the projects according to sound business practices.
Business Ethics
Responsible Conduct of
Research at UT-Knoxville
Purpose of Training
? To ensure compliance with UT Fiscal
Policies and Federal Regulations for the
proper financial management of agency
funds. This training is required for all
individuals working on federal contracts
subject to FAR 52.203-13.
? To ensure that UT and its employees are
good stewards of external funds and
conduct the financial management of
the projects according to sound business
practices.
Meet Beth!
Beth, has an issue!
“That’s really not my job, is it?”
As a bookkeeper, Beth was uncomfortable with some of the
business decisions being made for a federally sponsored project in
her department.
She was unable to convince a new principal investigator (PI),
named James, that it was his responsibility to make decisions on
allocating costs between sponsored projects. The last time Beth
brought this up, James asked, ?That‘s really not my job, is it??
Now, Beth was in a quandary. What could she do? She decided
to approach her department head and was told not to upset the
work of this important new PI and to ?take care of all the
administrative details? for him so he could focus on the research
work.
What is Beth to do?
Beth knew that she could not make good cost
allocation decisions affecting the federally sponsored
project because she was not involved with or
knowledgeable about the technical work being
performed.
Her job is really to ensure that the PI‘s decisions are
implemented by appropriate entries into the
accounting system. It is also her job to advise and assist
her PI and department head in good business ethics
and decisions.
They have to take responsibility, too!
Beth began to consider how this dilemma
could affect not only her, but also the
University. After much thought, she wrote
three questions:
1. How does my responsibility as a bookkeeper
and James‘ responsibility as a PI, and my
department head‘s responsibility differ in terms
of making sound fiscal decisions?
2. How does responsibility among us three differ in
reporting infractions of the business ethics
policy?
3. What are the major principles and procedures in
UT fiscal policies that this new PI and my
department head are missing?
Beth thought back to the time she had
attended a research team meeting held by
an upstanding department head. He stated
three items that addressed her Questions:
1. Know your responsibility in terms of UT Fiscal
policies and Federal Regulations and then follow
through consistently.
2. Encourage compliance and sound business ethics
on your projects and in your department. This will
help new researchers learn the behavior that is
now expected at major research institutions.
3. Follow the “top ten” financial compliance rules to
protect the University, yourself, and others working
on the projects.
But Beth thought, ?What if this is beyond my job
responsibilities? If I don‘t have the support of
my department head or this new PI, what
could be the consequences to me? I‘ve got to
understand the specifics of this issue because
my job is in jeopardy, as is my personal
reputation—no matter what course I take!?
What should she do???
Wait a minute!
Beth remembered the former department heads
mentioning a Compliance Officer in Sponsored
Projects Accounting who was helpful. ?Maybe
James and my department head will listen to her.?
Beth called the Compliance Officer (CO)and
explained the situation. The CO met with James and
his department head and reminded them of their
financial responsibilities and the business ethics
expected by the Federal sponsor and the University.
She also gave them the list of ?top ten? financial
duties, which they promised to follow.
Beth has scheduled to meet with James on a
regular basis to discuss cost allocation and other
important financial decisions. They both want this
sponsored project to be a success!
This module will focus on
the “top ten” principles
regarding:
Federal Regulations
and
UT Fiscal Policies
? The ?top ten? principles are not
an exhaustive list. You should
proactively read the award
document and / or check with
Sponsored Projects Accounting,
Office of Sponsored Programs or
the sponsor for sponsor-specific
and award-specific financial
requirements.
By the end of this module,
you will be able to:
1. Apply knowledge of the ?top ten? financial
principles.
2. Describe responsibilities of researchers in financial
compliance and business ethics to create a
culture of compliance on sponsored projects.
3. Evaluate the severity of a business ethics violation
and know what to do when one occurs.
4. Identify UT resources for assisting project directors
in financial compliance and business ethics.
Action Objective One
Apply knowledge of the “top ten” financial
compliance principles.
DEFINING THE ?TOP TEN? BEST PRACTICES
Summary of ?top ten? principles
1. Spend the sponsor / donor funds as intended or proposed
2. Become familiar with regulations
3. Review monthly financial ledgers and charges
4. Meet basic costing requirements –reasonable, allowable, fall
within time period of award, and allocable to the technical
work performed
5. Ensure timely financial communications and actions
6. Avoid cost transfers
7. Ensure effort certification and payroll charges are accurate
and timely
8. Closeout sponsored projects in a timely manner
9. Incur charges only during the project period
10. ONLY charge Direct Costs that are NOT normally included in
the F&A rate
Financial Compliance Principles
? 1. Spend as intended
PIs are expected to be good stewards of the sponsors‘ or
donors funds. All funds should be spent in the manner
specified by the donor or proposed in the award from the
sponsor. Deviations may require advance written approval.
Some sponsors require advance written approval for buying
equipment, foreign travel, subcontracting, deviations from
budget, changes in the scope of the technical work, etc.
If you are in doubt, ask someone –your departmental support
staff or business manager, the Sponsored Projects Accounting
office, or the Office of Research/Sponsored Programs. They
can find out for you.
If UT manages the sponsors’ and donors’ funds well, we are
more likely to attract additional funding.
Example
? 1. Spend as agreed
Halfway through his project with the U. S. Department of Agriculture
(USDA), Dr. Jones spends a portion of his project funds on a $7,000
specialized scientific camera and related software. This expenditure
was unexpected and not in the proposal budget, but necessary
because his old camera is broken and cannot be repaired. The new
equipment will provide much better results for the USDA project.
Dr. Jones is able to afford this because he had savings in other areas
of the project, especially travel and supplies.
Questions:
? Is the cost of the camera and software properly charged to the
USDA project?
? Should the PI have obtained prior written approval from the
sponsor?
Give these questions some thought on your own before
moving on to the answers on the next page.
Answers to questions
? 1. Spend as agreed
? Questions:
1. Is the cost of the camera and software properly charged to the USDA
project?
2. Should the PI have obtained prior written approval from the sponsor?
? It is probably OK to buy the camera, and the sponsor will
undoubtedly realize its necessity for the completion of the
project; however, it would be best if the PI checked with the
departmental support staff or business manager, Sponsored
Projects Accounting or the Office of Research/Sponsored
Programs before the camera is actually purchased. They can
read the sponsor and award document rules regarding re-
budgeting and look for any requirement for prior approvals. If
prior approval is required, then they can contact the sponsor’s
Award Specialist for the approval of the PI to purchase the
camera.
Financial Compliance Principles
? 2. Familiarization with regulations
Employees participating in sponsored activities must be familiar with all the rules:
? Specific award document clauses
You can get a copy from your departmental business manager, Sponsored Projects
Accounting, or the Office of Research/ Sponsored Programs.
? Sponsor rules are often listed in the grants policy guides on their web sites
? UT Fiscal Policies on the web http://policy.tennessee.edu/fiscal_policy/
? If your award is from the Federal government or if the award contains any
Federal funds, then the Federal rules in the Office of Management and Budget
(OMB) Circulars A-21, A-110, and A-133 are applicable. They are located at
http://www.whitehouse.gov/omb/circulars/.
? Ask your departmental business manager, Sponsored Projects Accounting or the
Office of Research/Sponsored Programs for assistance, if needed.
Financial Compliance Principles
3. Review of monthly financial ledgers and charges
? Charges appearing on the monthly
financial ledger must be reconciled
to supporting documentation to
ensure validity and accuracy.
? Make sure that the charges are
correct and that they have been
charged to the correct project. The
technical work of the project must
have directly benefitted from the
particular charge.
? If you have questions, take
immediate action by communicating
with your departmental support staff
or business manager and following up
to ensure that the charge is
corrected immediately.
Example
3. Review of monthly financial ledgers and charges
On January 7, Dr. Jones received a copy of the December monthly
financial ledger for his USDA project from the departmental business
manager. While verifying the detailed list of charges, Dr. Jones noticed
a $1,000 charge from Staples. He was positive that the charge did not
belong on his project and immediately sent an email to the business
manager asking her to remove the charge. On February 6, he
received a copy of the January monthly ledger and it appeared the
Staples charge had not been removed.
What should he do?
1. Don‘t worry about it. It is now the business manager‘s responsibility to fix.
2. Send a nice reminder email to the business manager.
3. Complain to the department head about the incompetence of the
business manager.
4. None of the above.
Think about what is right and what is wrong about each answer before you
move on to the answer on the next page.
3. Review of monthly financial ledgers and charges
Answers to questions
1. Don‘t worry about it. It is now the business manager‘s
responsibility to fix.
2. Send a nice reminder email to the business manager.
3. Complain to the department head about the
incompetence of the business manager.
4. None of the above.
4 is the correct answer.
While numbers 1 & 2 are both partially correct, the PI
must do more. The PI must take responsibility to make
sure that the correction is made ASAP. This means the
PI must work with the Business Manager to ensure the
charge is removed immediately. It is critical that the
incorrect charge be removed immediately because
the Sponsored Projects Accounting office has
probably already incorrectly invoiced USDA for this
charge. Complaints to the department head can wait.
Financial Compliance Principles
4. Costing requirements
Employees must ensure that all expenditures on
sponsored projects are:
• Reasonable
• Allowable
• Timely - Fall within the time period of the
award
• Allocable to the statement of work being
conducted using a reasonable
method of cost allocation
• Necessary for the scope of work.
Example –reasonable costs
Dr. Jones is attending a meeting with the sponsor in
Atlanta. His budget includes 3 trips to Atlanta for
himself and the project manager at $200 per trip for
transportation (UT motor vehicle and gas). He
discovers that he can make this trip on the UT plane for
$600 and take his 2 research associates and 2
graduate students, too. This sounds like a good deal to
Dr. Jones because he is still paying $100 per person. He
thinks that the meeting will be a good learning
experience for his post-docs and students.
1. Is this a reasonable cost from the sponsor‘s
perspective?
2. How can Dr. Jones be sure?
3. Does the high-profile nature of a chartered plane
affect the decision?
Think about each one of these questions before you move on to the
answers on the next page.
Answer to Reasonable Costs question‘s
1. Is this a reasonable cost from the sponsor‘s perspective?
2. How can Dr. Jones be sure?
3. Does the high-profile nature of a chartered plane affect the
decision?
ANSWER: The PI should be very, very careful here. Review the
agreement to ensure there is no required approval for altering
trips. This is a situation where it would be a good idea to ask for
the sponsor’s approval in advance even if it is not strictly
required. The sponsor may agree with the PI or not. They may
care more about 3 separate trips to Atlanta than about more
participants. The UT plane certainly attracts more public scrutiny
than commercial transport, so it is even more important to be
sure it is being used with the sponsor’s approval.
Example –allowable costs
4. Allowable Costs
Since the quarterly meeting with his research staff to
discuss the status of his USDA project concludes at
5 p.m., Dr. Jones orders 3 pizzas. Everyone hangs
around an additional hour to eat pizza and
celebrate the end of the semester.
Questions:
1. Is the pizza an allowable cost on the USDA
project?
2. Explain your answer.
Think about each of these questions before you
move on to the answers on the next page.
Answers to allowable costs questions
Questions:
1. Is the pizza an allowable cost on the USDA
project?
2. Explain your answer.
ANSWER: No, the pizza cannot be charged to the
USDA project. Per OMB Circular A-21, Section J (15)
and UT Fiscal Policy FI0205 “Sponsored Grants and
Contracts”, entertainment costs are unallowable
costs.
Example – Timely Charges
Costs within project time period
Dr. Jones‘ USDA project ended on 9/30. An employee is paid on the
biweekly payroll that covered the period 9/20 to 10/3 and is paid on
10/10.
Questions:
1. How much of the employee‘s salary should be charged to the
project?
a. All of it because it is very close to being accurate
and the employee worked really hard on the project.
Also, the department does not want to pay for any of the
employee‘s salary.
b. 11/14 multiplied by the pay amount of $1,000 =
$785.71
c. None of it because it was paid out after the end date
of the project
Think about what is right and what is wrong about each answer
before you move on to the answer on the next page.
Answer to Timely Charges question
Question:
How much of the employee‘s salary should be charged to the
project?
a. All of it because it is very close to being accurate and the
employee worked really hard on the project. Also, the
department does not want to pay for any of the employee‘s
salary.
b. 11/14 multiplied by the pay amount of $1,000 = $785.71
c. None of it because it was paid out after the end date of the
project
The correct answer is b. The portion of the salary expense that
was incurred before the end date of the project is allowable,
regardless of when it was paid.
Example –allocable
A true cost allocation story
Dr. Jones is directing 5 projects with the following sponsors: USDA, NIH, Army,
DOE and Homeland Security. He considers all of his research work to be the
same because he is investigating the same basic problem. Therefore, he
decides to put all of the charges on the USDA project first until it is totally
spent, then move on to the NIH project and fully charge it, etc.
He is shocked one day to receive phone calls from his USDA and Army
technical contacts who are questioning project costs. USDA wants to know
why he spent the entire amount of the award in the first 3 months of a 12
month award. Army wants to know why they have not received an invoice
for any costs even though the quarterly technical report shows that he has
completed 25% of the work.
Dr. Jones realizes that he is in an uncomfortable predicament. Because he
was unwilling to attempt to allocate costs between his projects, he has now
overcharged USDA and undercharged Army, and cannot give them good
answers. He is surprised to learn that they do not consider their work to be
the same, even though he did. He is also surprised to learn that while they
are impressed by his technical work, they are unlikely to give him future
awards if they are not confident about the allocation of costs to their
project.
Financial Compliance Duties
5. Timely financial communications and actions
Employees must ensure that all charges, credits, effort
certifications, and other accounting entries are performed
in a timely manner as specified in fiscal policies.
Principal investigators will ensure that support staff are given
information about charges to sponsored projects
immediately so that accounting entries can be made. This
includes information about who is working on projects,
which projects should be charged for specific costs, and
any changes expected.
Support staff should not make these decisions based on availability of funds or
any funding considerations. Costing decisions should be solely based upon the
technical work that is performed on each project. These decisions must be
made by the PI.
Communication between the PI and support staff is critical.
Financial Compliance Duties
6. Avoid cost transfers
Employees will endeavor to place charges on the correct
sponsored project initially and will avoid using cost transfers
except to correct errors. Errors should occur very rarely.
Cost transfers will not be used to move costs from overspent
projects to underspent projects or for any other reason of
convenience or for funding considerations.
Auditors are very suspicious of cost transfers and may disallow
these costs automatically. They are most critical of excessive
transfers, transfers that occur near or after the end of a project‘s
time period, transfers from an overspent project to an underspent
project, and transfers that do not have adequate
documentation of the benefit of the cost to the project‘s
technical work.
Support staff should not make these decisions based on
availability of funds or any funding considerations. Costing
decisions, including transfers, should be solely based upon the
technical work that is performed on each project. These
decisions must be made by the PI. Documentation of technical
benefits of cost transfers must be provided by the PI.
6. A true cost transfers story
Florida International University paid $11.5 million for disallowed cost
transfers. It is estimated that the true cost to FIU is more than $50 million
after including attorneys‘ fees, consultants‘ fees, loss of future funding,
and loss of reputation.
February 2005
Major finding –cost transfers
• Incomplete cost transfer documentation
• Grant used as a clearing account
• Cost transfers after the end date of the project
• ?The University Controller‘s Office repeatedly protested
practice? (Miami Herald, August 15, 2005)
Financial Compliance Duties – Effort Reporting
7. Accurate and timely effort certification and payroll charges
Salaries represent the largest costs on most sponsored projects; therefore, financial compliance
is critical. Consistent with federal regulations, salaries charged to sponsored projects must equal
actual effort expended by the individual on that project, as documented via the effort
certification process.
• Employees will ensure that effort certification accurately reflects the actual percentage of
work effort devoted to a sponsored project.
As with all costing decisions, support staff should not make these decisions
based on availability of funds or any funding considerations. Costing decisions
should be solely based upon the technical work that is performed on each
project. These decisions must be made by the PI.
• Effort must be certified within 30 days of the sponsored project end date.
• Anticipated changes in future effort percentages are changed in the payroll cost
distribution system promptly. Inform support staff immediately of changes.
• Sponsors may want to give prior approval for significant changes in a PI‘s level of effort,
such as a decrease or increase of 25% or more from the proposal. Some awards contain
minimum effort requirements, such as NIH K awards.
Contact your campus Office of Research/Sponsored Programs or Sponsor if you have questions.
Financial Compliance Duties
8. Timely closeout of sponsored projects
All charges must be finalized on the project within 60 days
of the project end date so final financial reports can be
submitted to the sponsor on time.
PIs will receive an email notification approximately 45 days
before the end date of the award. At that time, the PI
should begin finalizing the costs on the project. Or, the PI
may want to request a time extension from the sponsor. In
any case, the PI should communicate intentions to the
support staff in the department, campus Office of
Research, and campus business office.
Financial Compliance Duties
Sponsored projects may not be used as
an interim funding source when other
awards are late in arriving or when other
sponsored accounts expire.
Inapplicable charges must be charged
to a non-sponsored account. This may be
a discretionary gift account or the
departmental unrestricted operating
account.
9. Incur charges only during project performance dates
Financial Compliance Duties
10. Charge Only Direct costs not normally included in
the F&A rate
Charges for items normally included in F&A recovery
can only be charged to sponsored projects if
specifically approved by the sponsor (either in the
original proposal or post-award approval) These “basic
support” costs normally include:
• Administrative and clerical salaries
• Office supplies
• Basic local telephone service and cell phones
• Routine copying charges
• Memberships, journals, and subscriptions
• Desktop computers
Yale University makes headlines!
Improper cost transfers and effort certification at Yale:
?Yale University paid $7.6 million to the federal
government to settle charges that its personnel
mismanaged grants from 2000 to 2006 by improperly
charging expenses to certain grant accounts before the
grants expired.
Yale, which had been investigated for alleged violations
of the False Claims Act, did not admit wrongdoing as
part of the settlement but said it has since improved its
grant-accounting procedures.?
Financial Compliance Duties
Quick test from Yale University settlement:
?The investigation focused on allegations involving two types of
mischarges to federal grants. Both types arose as violations of the basic
principle that recipients are allowed to charge only ?allocable‘ costs,
which are costs that relate to the specific objectives of that grant project.
The first allegation involved cost transfers and the requirement that costs
transferred to a federal grant account must be allocable to that
particular grant account. The settlement resolved allegations that some
Yale University researchers improperly transferred charges to a federal
grant account that were not allocable. Researchers allegedly were
motivated to carry out these wrongful transfers when the federal grant
was near its expiration date and they needed to spend down the
remaining grant funds.?
Which of our “top ten” compliance principles did Yale allegedly violate?
A: Costs are not reasonable
B: Costs are not allocable to a particular project
C: Cost transfers are made based on funding considerations
D: Cost transfers are not supported by adequate documentation
describing the benefit of the cost to the technical work performed.
Answer!
Quick test from Yale University settlement:
?The investigation focused on allegations involving two types of mischarges to federal grants.
Both types of mischarges arose as violations of the basic principle that recipients of federal
grants are allowed to charge to each grant account only ?allocable? costs, which are costs that
relate to the specific objectives of that grant project. The first allegation involved cost transfers
and the requirement that costs transferred to a federal grant account must be allocable to that
particular grant account. The settlement resolved allegations that some Yale University
researchers at times improperly transferred charges to a federal grant account to which those
charges were not allocable. Researchers allegedly were motivated to carry out these wrongful
transfers when the federal grant was near its expiration date and they needed to spend down
the remaining grant funds.?
Source: Department of Justice press release
http://newhaven.fbi.gov/dojpressrel/2008/nh122308.htm
Answer: Definitely both B and C (and D is implied)
Which of our ?top ten? compliance duties did Yale allegedly violate?
A: Costs are not reasonable
B: Costs are not allocable to a particular project
C: Cost transfers are made based on funding considerations
D: Cost transfers are not supported by adequate documentation
describing the benefit of the cost to the technical work performed
Summary of ?top ten? principles
1. Spend the sponsor / donor funds as agreed
2. Become familiar with regulations
3. Review monthly financial ledgers and charges
4. Meet basic costing requirements –reasonable,
allowable, fall within time period of award, and
allocable to the technical work performed
5. Ensure timely financial communications and actions
6. Avoid cost transfers
7. Ensure effort certification and payroll charges are
accurate and timely
8. Close out sponsored projects in a timely manner
9. Do not incur charges after ending date
10. Do not directly charge costs that are normally
included in the F&A rate
Financial Compliance Principles
UT fiscal policies and campus procedures
The ?Top Ten Financial Compliance Principles? are a foundation for good
financial management and compliance; however, more complete
guidance is in UT Fiscal Policies and campus procedures, such as policies:
FI0205 Sponsored Grants & Contracts
FI0210 Cost Sharing
FI0220 Cost Transfers
FI0230 Subcontract Monitoring
FI0235 Program Income
FI0225 Code of Business Ethics for Sponsored Projects
Additionally, there are policies and procedures relating to purchasing,
travel, and other expenditures affecting sponsored projects.
All project directors and staff involved in sponsored projects must
proactively learn about and comply with these regulations along with
sponsor and award-specific rules. Please contact your campus
research/sponsored programs office, or business office for assistance.
Action Objective Two
Describe the responsibilities of researchers in financial
compliance, business ethics, and creating a culture of
compliance on sponsored projects.
Key Words!
RESPONSIBILITIES CULTURE OF COMPLIANCE
Culture of Compliance
Financial compliance is expected of you!!!
The University expects you:
1. To be personally committed to ensuring proper business ethics
and financial compliance on sponsored projects.
2. To promote a culture of compliance within the University
community so that it is unacceptable to act otherwise. For
example, it is unacceptable to ?play games with the money,
?move charges around to maximize funding, etc.
3. To set the tone of compliance and ensure every graduate
student, PI, project director, and support staff member is
committed to ?doing the right thing.?
4. To ensure that non-compliance is not to be tolerated and if
continued after being addressed, should be reported to
responsible University officials.
Culture of Compliance
“We’ve always done it this way”
However we may have conducted business relating to sponsored
projects in the past, we must be compliant now and going
forward. This may require a big change in perspective, attitude,
and actions for our existing faculty and staff.
These real-life excuses are not valid:
• We’ve always done it this way, so it must be okay.
• I didn’t know I was supposed to do that, so it doesn’t apply.
• This regulation makes no sense, so it is okay for me to ignore it.
• UT systems and processes let me do it, so it must be okay.
• We always move money around on sponsored projects to
maximize funding.
• The PI’s job is to do the technical work and support staff should
take care of all the administrative and financial details.
• My project is special, so it’s okay.
• It’s my project and I can do whatever I like.
• The program manager said it was okay.
• It’s my money, I can use it however I like!
Action Objective Three
Learn to evaluate the severity of a business ethics violation and
what to do when one occurs.
Key Words
EVALUATION • EXAMPLES
Reporting violations
What is your responsibility?
You should report any violations of
business ethics/non-compliance to
appropriate University officials.
This may be a delicate area that
requires judgment on your part.
• How do you measure the severity of
the violation?
• Who do you notify?
• What are your protections if you
report it?
• What are the risks to you if you do
nothing?
Question
Violation of business ethics?
Terry notices a coworker putting a UT pen and
notepaper in her purse . Terry thinks that the coworker
probably did this without thinking and did not intend to
steal UT resources. Terry decides this is probably not a
reportable violation of business ethics.
Is Terry right about this?
Is this a violation of business ethics?
Think about the answer to this question before you
move on to the answer on the next page.
Answer
Violation of business ethics?
Terry notices a coworker putting a UT pen and notepaper in her
purse . Terry thinks that the coworker probably did this without
thinking and did not intend to steal UT resources. At another time,
Terry sees the same person writing an IOU for Petty Cash funds.
Terry decides the IOU issue is probably a reportable violation of
business ethics.
Is Terry right about this? Is this a violation of business ethics?
YES, This is a violation of business ethics.
Mistakes are sometimes made by honest people, like with the
case of the pen and paper. However, they are still UT resources
and should not be misused by constantly being taken. The IOU
being placed in the Petty Cash funds is not only an Ethics issue but
a compliance violation to UT‘s policy on handling funds. Terry
should mention it right away to her supervisor.
Question
Ann, a business manager, is constantly concerned over
charges she is required to post to a grant. Fred, the PI on the
grant, is very respected and brings in a large portion of the
department‘s funding. Fred is aware of how much the
department depends on him. Each time Ann questions Fred
about a charge, he directs her to do what he says, and if the
department doesn‘t like it he will leave taking his research
money with him. Ann talks with the Budget Director about her
concerns and she says to post the charges because they must
keep the PI happy so he doesn‘t leave.
• Should Ann post the charges?
• Is the Budget Director correct in telling Ann to post the
charges?
• Is the PI acting responsibly with the grant funds?
• What should Ann do?
Answer
Ann, a business manager, is constantly concerned over charges she is required to post to a grant. Fred,
the PI on the grant, is very respected and brings in a large portion of the departments funding. Fred is
aware of how much the department depends on him. Each time Ann questions Fred about a charge,
he directs her to do what he says, and if the department doesn‘t like it he will leave taking his research
money with him. Ann talks with the Budget Director about her concerns and she says to post the
charges because they must keep the PI happy so he doesn‘t leave.
• Should Ann post the charges?
• Is the Budget Director correct in telling Ann to post the charges?
• Is the PI acting responsible with the grant funds?
• What should Ann do?
Ann should not post charges she knows are not allowed on the grant. The budget director
should not have allowed the grant funds to be misused. The PI is not applying sound
business practices in his management of grant funds. Ann should report the issue to her
department head.
The department head must ensure that the PI is aware that all funds should be managed
in accordance with the policies and requirements set forth within the award agreement
and UT policy.
The University cannot afford the negative stigma of being found guilty of misusing grant
funds. Plus, it’s the right thing to do even when you don’t think you will get caught!
Question
Violation of business ethics?
A PI regularly asks a departmental business manager to
make excessive and late cost transfers just to spend down
the funds remaining on the sponsored project. In fact,
there is one charge that has already been moved five
times between various accounts.
Is this a violation of business ethics?
Think about the answer to this question before you move
on to the answer on the next page.
Answer
Violation of business ethics?
A PI regularly asks a departmental business manager to make
excessive and late cost transfers just to spend down the funds
remaining on the sponsored project. In fact, there is one charge
that has already been moved five times between various
accounts.
Is this a violation of business ethics?
YES, This is a violation of business ethics.
The business manager should talk to the PI and explain why this
violates UT Fiscal Policy and Federal Regulations. If the behavior
persists, the business manager should report this to the
department head. If it still persists, the business manager should
report this to Internal Audit.
Specifics Regarding Disclosure
What are your protections if you disclose a violation?
The following confidential means of communication are
available for reporting suspected violations:
UT Internal Audit hotline 974-6611
State Audit’s Compliance Hotline 1-800-232-5454
Specifics Regarding Non-Disclosure
What are the risks if you do nothing?
The University could incur significant fees/penalties and suffer a
loss of reputation.
Depending upon the severity of the business ethics violation:
• You could be subject to disciplinary action.
• You could be fired.
• You could be charged with a civil or criminal violation You
could go to jail.
• PIs could also be debarred by a sponsor agency when misuse
of grant funds is the result of violations.
Action Objective Four
Learn about UT resources for assisting researchers in
financial compliance and business ethics.
Key Words
RESOURCES • WHO TO CALL
Resources
Financial compliance issues or Federal regulations:
Office of Research & Engagement
Sponsored Projects Accounting
Business ethics violations or questions:
Supervisor/business manager
UT Internal Audit
State Audit
Summary
We have reviewed some basic financial responsibilities of
project directors from the ?top ten? list of financial principles.
It is the responsibility of everyone working on a grant, in any
capacity, to ensure financial compliance with sponsored
projects and to promote a ?culture of compliance? with
coworkers for the protection of individuals and the institution.
Certification
In order to ensure your understanding of the
business ethics and compliance principles
discussed, you must take the short quiz.
A certification form will be created once you pass
the quiz. You should print and retain a copy of the
certificate.
Thank you!
doc_241726893.pptx