NIH Payment Management System Changes: Transitioning Drawdowns from Pooled Accounts to Subaccounts

Transcription

1 NIH Payment Management System Changes: Transitioning Drawdowns from Pooled Accounts to Subaccounts January 22, 2014 YOUR MISSION OUR SOLUTIONS Huron Consulting Group Inc. All Rights Reserved. Huron is a management consulting firm and not a CPA firm, and does not provide attest services, audits, or other engagements in accordance with the AICPA's Statements on Auditing Standards. Huron is not a law firm; it does not offer, and is not authorized to provide, legal advice or counseling in any jurisdiction.

2 Agenda Payment Management System: NIH Change Overview Institutional Impact On-going Impact: Letter of Credit Draw Transitional Impact: Award Set-Up Transitional Impact: Financial Reporting and Award Closeout Current State Readiness Assessment 2

3 Payment Management System: NIH Change Overview

4 Payment Management System: NIH Change Overview The Basics What is the Payment Management System (PMS)? Centralized, web-based grants payment and cash management system Allows the NIH (and other federal agencies) to disburse, account for, and manage sponsored research funds Operated by Division of Payment Management DHHS How is PMS used? Institutions use PMS for reimbursement of NIH sponsored research expenditures awarded under a Letter of Credit (LOC) payment mechanism 4

5 Payment Management System: NIH Change Overview The Process: Old Institutions to aggregate expenditures requiring reimbursement for LOC awards Institutions request a lump sum draw from PMS Single, aggregate dollar amount (i.e. $4.2 M for the University of Research) Draw requests can be made as frequently as necessary to reimburse institutions for sponsored expenditures and maximize cash flow Large volume institutions make draw requests daily Disbursements (expenditures) are reported in more detail (award by award) on the quarterly Federal Financial Report This quarterly process incorporates a reconciliation of cash draws versus expenditure disbursements 5

6 Payment Management System: NIH Change Overview The Process: New Key Change: Institutions request a draw from PMS based on detailed (award by award) fund requests Dollar draw detailed across awards totaling to the cumulative funds request: $198,134 for Award A $2,066 for Award B $0 for Award C, etc. Totaling to 4.2 M for the University of Research Draw requests can still be made as frequently as necessary as determined by the research institutions sponsored expenditures The quarterly Federal Financial Report will still be required to tie disbursements to cash draws The requirement for the quarterly FFR may be rescinded, but this has not yet occurred 6

7 Payment Management System: NIH Change Overview The Transition Timeline Phase 1: FY Awards with New Document Numbers Starting October 1, 2013, domestic awards with new document numbers New awards (also called Type 1s) Renewals (also called Competing Continuations or Type 2s) This will also include awards issued under a Change of NIH Institution/Division All subsequent non-competing continuation awards will be issued in the subaccounts Competitive revisions and supplements (Type 3) will be issued in the same account as the primary award Drawn via Pooled or Subaccounts 7

8 Payment Management System: NIH Change Overview The Transition Timeline Phase 2: FY All other Awards Starting October 1, 2014, all other award types will be changed over to subaccounts Non-competing continuation (also called Type 5s) Change of NIH awarding agency for a non-competing record (also called Type 8s) During this transition period, Type 5 and Type 8 will be issued as Type 4 (Funded Extension) This is a temporary technical solution so that NIH can separately track obligations and payments for grants that span Federal FYs NIH will return to the standard use of the Types 4, 5, and 8 after the transition. But how will this transition take place? 8

9 Payment Management System: NIH Change Overview The Transition Approach Transitioning from Pooled to Subaccounts mid-project Period: NOAs will be issued as a Type 4 (technical solution) for non-competing continuations (typically Type 5s) The transitional NOA will split the award into two administratively shortened competitive segments Project Period End Date will be changed for the old (Pooled) segment NIH will not issue a revised Notice of Awards for the FY2014 award; change will be reflected in the era commons Project Period End Date will remain the same for the new (Subaccount) segment The Document Number for these Type 4 awards will increase by 1 letter RCA123456A will become RCA123456B (mid Project Period!) 9

10 Payment Management System: NIH Change Overview The Transition Approach An interim FFR (via era Commons) will be required at the end of the Pooled administrative segment Required for all transitioned awards, regardless of SNAP or non-snap awards Failure to timely submit FFR expenditure data for this administrative segment may affect future funding This FFR is necessary for grantees to report unobligated balances from previous FYs (pooled accounts) so those funds can be reobligated to the new subaccount in PMS for the award The FFR balance will be re-obligated in PMS regardless of the carryover authority for the award If the award was not issued with automatic carryover authority, you cannot drawdown or obligate the funds without prior approval and a revised NOA The interim FFR cannot report unliquidated obligations 10

11 Long Term Institutional Impact: Letter of Credit Draw

12 Institutional Impact: Letter of Credit Draw Overview The most obvious and critical functional area to be impacted by the change in federal regulations is the letter of credit draw process. Phase I & Phase II: Awards issued as P awards must now be processed through the Subaccount Payment Method Well said by a major NIH research institution with a daily NIH draw: The LOC draw? You mean the daily quarterly FFR? 12

13 Institutional Impact: Letter of Credit Draw Process Change Considerations There are several business process change opportunities to consider in preparation for the LOC Draw changes. Financial System Flag: Identify those NIH awards that must be drawn via the Pooled method versus those to draw against the Subaccount method Consider using a flag/code in your financial system to distinguish draw types This will most likely require a new draw payment code and impact award set-up Draw Calculation Query/Report: Determine the amount to draw by award and base this amount on actual disbursements (as estimates will no longer serve as a solid basis for the draw amount) Design and build a report out of your financial system to determine the amount disbursed by award since the last draw request 13

14 Institutional Impact: Letter of Credit Draw Process Change Considerations There are several business process change opportunities to consider in preparation for the LOC Draw changes. Draw Calculation Process: Update LOC draw process to confirm and validate reported amounts and make the funds request. Build into the process adjustments for pre-payroll draws, unpaid invoices, etc. Consider developing a report that can easily be manipulated and uploaded into the PMS system to facilitate the process Request the ability/access to upload this report into PMS 14

15 Institutional Impact: Letter of Credit Draw Broader Impacts of Transition In addition to new tools and acute process updates, consider how this federal change will impact your organization on a broader scale. How long will it take to complete each draw request during implementation and once all awards have been transitioned? Recall the concept of a daily FFR Has your institution considered who will take on this new task and how roles and responsibilities will be impacted? Aside from the process of requesting funds. Will your process of allocating cash receipts also need to change? 15

16 Institutional Impact: Letter of Credit Draw Case Study The institution: Mid-size urban medical school in the northeast High concentration of NIH awards and subawards $200M annual NIH expenditures Current LOC Draw process: Three LOC draws per month Amount based on estimates Prior months expenditures used to extrapolate the draws for the current month) Cash is allocated to individuals funds at closeout only Current monthly draw effort: 8 hours Current quarterly FFR effort: 16 hours 16

17 Institutional Impact: Letter of Credit Draw Case Study Preparation Investment (LOC process only): 382 hour investment Create a new LOC Draw Bill Type in the financial system to distinguish new awards Build a business case to move the responsibility for the LOC draw process internal (away from the University Finance unit) Develop a query to determine actuals posting to the GL by award Develop a system-based process to determine upcoming payroll runs by award Estimate the dollar value of unpaid invoices and assess risk Define and test a post-loc draw cash allocation process 17

18 Transitional Institutional Impact: Award Set-up

19 Institutional Impact: Award Set-up Overview & Process Change Considerations These federal changes will result in long and short term impacts to the award set-up function Phase 1: New/Renewal issued awards will be awarded as P awards (Subaccount Payment Methods) Set-up these accounts with your new financial system payment method (i.e. LOC DHHSP) Phase 2: New (second) mini-competitive segments will be issued under the P Payment Method Likely need to create new account for these new administrative segments We do not recommended just updating Payment Method from G to P on existing awards Link the two mini-competitive segments in your financial system (if possible) to help with PI reports and internal financial monitoring Consider transaction based reports. New vs. Continuation funding 19

20 Institutional Impact: Award Set-up Process Change Considerations Phase 1: Award Set-Up Impact for FY14 In October 2013, NIH is placing a "PMS Account Type" indicator on the award under the Fiscal Information header in Section I Use this flag to drive the use of a new Payment Method flag in the GL Example: LOC DHHSP 20

21 Institutional Impact: Award Set-up Process Change Considerations Phase 2: Award Set-Up Impact for FY15 In October 2014, noncompeting continuations will now transitioned as Type 4 New language regarding carry over may be included: Carry over funds will not be available until the final FFR for the Pooled year(s) of the competitive segment is submitted 21

22 Institutional Impact: Award Set-up Broader Impacts of Transition Phase 2: Additional Award Set-Up considerations may come into play during the transition. What will the added resource needs be to address this spike in award set-up activity? Determine the difference in time and effort between setting up a new award as opposed to a non-competing continuation at your institution: Grants management system Financial system Workflow/approvals differences Quality assurance increase Account notification process Central Administration physical file folders 22

23 Institutional Impact: Award Set-up Broader Impacts of Transition Phase 2: Additional Award Set-Up considerations may come into play during the transition. Salary allocations / payroll distribution changes Personnel will need to be moved from one account to another May represent a spike in workload for departments and post-award (approval) Estimate by identifying personnel on all FY15 non-competing continuations What is your institution s impact on outbound subawards? Is your institution able to pay invoices from multiple accounts? Yes? Consider an administrative revision Providing new Account Number on non-competing continuation modification No? Terminate old subaward early and re-issue a new subaward (and new Purchase Order Number, if needed) Other recurring charges Early communication to research community regarding Phase 2 will be key! 23

24 Institutional Impact: Award Set-up Broader Impacts of Transition Phase 2: Impact to your institution As an initial planning step, count number of awards with NCC by month for FY 2015 The number of NCCs by month represents additional responsibilities Setup of new account Salary Allocation Subawards FY 2015 Mechanism Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Total Grant Fellowship Coop. Agreement Total

25 Institutional Impact: Award Set-up Broader Impacts of Transition Advance Accounts (Pre-Award Setups) considerations Phase 1 FY 2014 New/Renewals PI requests Advance Account Proposal score / Institute pay line 90 day pre-award spending; non-billable status Set up account with new payment method (i.e. LOC DHHSP) Payment method may not be editable in financial system Phase 2 FY 2015 Non-competing continuations PI requests advance on a continuation year; possible NIH delays Without NCC NOA, it may be easy to forget to create new account Set up account with new payment method (i.e. LOC DHHSP) Put procedures in place for advance accounts that follow the NIH PMS Subaccount timeline 25

26 Institutional Impact: Award Set-up Case Study The institution: Medium-sized urban university with a medical school in the northeast Federal FY2013 $191M NIH Total Funding 115 New/Renewal 302 Continuation 100 outgoing subawards on accounts that require a new FFR mid-project Grants Management System (GMS) Award Type Setup Action Estimated Setup Time Data Review/Entry Quality Assurance New / Renewal Continuation Create 1 Parentand 1 Child -Edit Child (SNAP) -Create NewChild (Non-SNAP) 45 minutes ~100 Fields 50 Fields 20 minutes ~35 Fields 25 Fields Interface Financial Management System 26

27 Institutional Impact: Award Set-up Case Study Phase 2: Transition Activity Awards set up in GMS using two different LOC types LOC DHHSG (Pooled), LOC DHHSP (Subaccount) New Parent for non-competing continuations Inbound subawards Process case by case according to Prime actions Outbound subawards not re-issuing new subawards for new segment Soft close on accounts that require a final FFR mid-project with an unspent balance less than 25% o Subawards will keep the same PO and a new source will be added to capture the new account Soft close will not be done on accounts with an unspent balance greater than 25% o Subawards will be required to submit a final invoices 27

28 Institutional Impact: Award Set-up Case Study Phase 2: Transition Activity Estimated increase activity by using federal FY 2013 figures 115 New/Renewal => 73 non-competing continuations in FY Continuation => 105 non-competing continuations in FY 2015 Increase of new Award Setups (as opposed to non-competing continuations) Oct 14 Nov 14 Repeat exercise in October 2014 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sept 15 28

29 Transitional Institutional Impact: Financial Reporting

30 Institutional Impact: Financial Reporting Overview The transition to the new federal regulations will impact institutions financial reporting function. Phase I: No immediate financial reporting impact Phase II: For continuations being transitioned to subaccounts in FY15, the FY14 award is the final year in the pooled account and a final FFR is required for the administratively shortened pooled competitive segment The FFR is required 90 days after the end of the administratively shortened segment 30

31 Institutional Impact: Financial Reporting Broader Impacts of Transition The primary financial reporting impact will be the volume spike and institutions should plan for this reporting influx. Determine your population of active NIH funds ending after FY15 Quantify SNAP versus Non-SNAP population Determine the Project Period end date of all administratively shortened competitive segments and the associated FFR due date Quantify monthly increase (Quarterly?) Prioritize based on month Assess the required effort increase against your current FFR workload Determine the average time/effort to complete a single FFR Quantify the current resources need, both personnel and systems Assess the feasibility of completing spike FFRs timely with same resources and organizational structure in place 31

32 Institutional Impact: Financial Reporting Broader Impacts of Transition Financial reporting during the transition Understanding the additional financial reporting requirements is key to a successful transition, ensuring no impediment to research during the second competitive segment Example: Original project period: 7/01/13 6/30/18 Revised project periods: 7/01/13 6/30/15 & 7/01/15 6/30/18 FFR Expenditure Reporting Requirement Standard Process SNAP FFR required at the end of the competitive segment e.g. 6/30/18 Process during Transition FFR required at the end of the first competitive segment AND e.g. 6/30/15 FFR required at the end of original project period e.g. 6/30/18 Non - SNAP FFR required annually at the end of the budget period e.g. 6/30/13, 6/30/14, 6/30/18 FFR required annually at the end of the budget period e.g. 6/30/13, 6/30/14, 6/30/18 32

33 Understanding the Impact: Financial Reporting Impact to your institution As of October 2013: Identify project period end date for the administratively shortened segment of all non-competing continuations NIH FFRs Quantify population by month FY 2015 Administratively Shortened Project End Date Mechanism Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Total Grant Fellowship Coop. Agreement Total Determine appropriate method of prioritization, i.e. Award Type, FFR completion time, resource involvement both central and departmental 33

34 Institutional Impact: Financial Reporting Broader Impacts of Transition Impacts of interim pooled-account financial reporting: Carry over funds will not be available until the final FFR for the Pooled year(s) of the competitive segment is submitted If the original award has automatic carry over: Unobligated balance reported on the FFR will be automatically transferred and authorized in PMS on the new subaccount level If the original award did not have automatic carry over: Unobligated balances will be automatically transferred in PMS but prior approval will still need to be obtained before funds are available for drawdown in PMS at the subaccount level 34

35 Institutional Impact: Financial Reporting Case Study The institution: Top 10 Research University (NSF HERD Survey) $1 Billion sponsored research awarded in FY12 30% of funding from the NIH 18,000 financial reports and invoices submitted annually Current financial reporting process: How many NIH awards are NEW on a monthly basis versus supplements and competing continuations? 35

36 Institutional Impact: Financial Reporting Case Study Preparing and planning FFRs submitted in FY13: 600 Impact of NIH subaccount transition: 350 additional financial reports and closeouts 300 SNAP awards 50 Non-SNAP awards 36

37 Institutional Impact: Financial Reporting Case Study Transition Activity Spike Investment: This university is considering three options to accommodate the transition, weighing the pros and cons to the entire research enterprise 1. Maintain the same fund number 2. Establish a new fund number for the second competitive segment 3. Hybrid of option 1 and 2 Establish new fund number for non-snap population SNAP population maintains same fund number 37

38 Institutional Impact: Financial Reporting Case Study Transition Activity Spike Investment: Option 1 Maintain Fund Approach considerations: Pros No increase to fund closeout population No change to labor distributions, POs, recharge/ intercharge IDs Cons Amount reported to DHHS and drawn at the subaccount level will not match the GL Increased challenges with reconciliation and closeout during overlap of segments This university s reporting process heavily relies on department involvement. To accommodate this method and ensure timely submission: Report off GL and transfer balance to the second competitive segment Report off GL and move balance to department discretionary fund Additional tool/report required to identify when fund has switched from pooled to subaccount 38

39 Institutional Impact: Financial Reporting Case Study Transition Activity Spike Investment: Option 2 Est. New Fund Approach considerations: Pros Ensure expenses charged and posted to the correct fund Enables proper/efficient LOC draws as the expenses tied to each fund GL matches the both LOC pooled & sub Better expense monitoring for depts Cons Significant increase in labor redistributions New recharge/intercharge ID required Close existing POs/encumbrances and open new PO increased cost transfers Increase in fund closeout population Possible solution to minimize impact to departments: Consider creating second fund number prior to the receipt of the NOA, as if Pre Award spending has been granted 39

40 Institutional Impact: Financial Reporting Case Study Transition Activity Spike Investment: Option 3 Hybrid Approach SNAP awards maintain same fund: Report final pooled draw and FFR based on the GL Any balance is brought forward to the next segment or moved to department fund Carry forward of remaining balance is automatic LOC tool must be updated to separate expenditures drawn from pooled account and subaccount Non-SNAP awards receive new fund: No change to FFR process Separate funds are needed to identify the expenditures associated with the pooled and subaccount draw to capture accurate carry forward request As these are generally more complex awards a separate fund number will facilitate reconciliation and reporting Same Pros and Cons for Option 1 and 2 pertain to this approach 40

41 Transitional Institutional Impact: Award Closeout

42 Institutional Impact: Award Closeout Overview As logic follows, those old pooled accounts that will require interim final financial reports will also need to be fully closed in your institution s financial system. Phase I & Phase II: Awards in the pooled group must be federally closed as they are transitioned to the subaccount payment method and should be closed within your institution as well, consistent with institutional practices Phase II: Closing the administratively shortened segment represents a financial only award closeout No final technical, invention or other non-financial reports are required, cross these tasks off your Closeout Checklist at the end of the competitive segment 42

43 Institutional Impact: Award Closeout Broader Impacts of Transition Financial closeout requires the same checks and balances on your General Ledger required of regular closeout: Budget = Expenditures = Pooled Cash Draw Allocation Budget: Your budget on the old account should be set equal to those expenditures reported on the final interim FFR Expenditures: Expenditures posted to the old account should only be equal to those reported on the final interim FFR and other trail out expenditures should be moved to the new account These do not technically qualify as Cost Transfers! 43

44 Institutional Impact: Award Closeout Broader Impacts of Transition Financial closeout requires the same checks and balances on your General Ledger required of regular closeout: Budget = Expenditures = Pooled Cash Draw Allocation Pooled Cash Allocation: Funds applied to the old account should also match the final interim FFR, but should be allocated from the pooled draw to avoid reconciliation confusion This primarily applies to institutions who pool draws and only allocate funds out at closeout or on some other irregular basis Keep it clean if you can apples to apples: Old Pooled Draw to Old Pooled Account The extra man-power and time is starting to add up. 44

45 Preparation for Institutional Impact: Current State Readiness Assessment

46 Hit the Ground Running Current State Assessment Are your systems ready? How will your systems identify the draw method during transition? How will the information in your systems feed into a draw calculation? Are your processes ready? Will you issue all new accounts and how will they be linked? What will the frequency of your LOC draw be? How will you address subaward issuance? Current State Self-Assessment: Are your people ready? Does everyone understand the upcoming change? How will this added workload be accomplished with your existing staff? Do you have training and reference tools ready to train staff? 46

47 Hit the Ground Running Preparing for the Change You likely answered I don t know to at least some of these questions. The good news is that the change is a transition, it is not happening overnight and you can ease into the change. The time is now to prepare your people, systems, and processes will be the real spike in activity. There is still time to be well prepared for this change. 47

48 Questions / Comments? Rob Rubens, Huron Consulting Group rrubens@huronconsultinggroup.com Marisa Zuskar, Huron Consulting Group mzuskar@huronconsultinggroup.com Eddie Serrano, Huron Consulting Group eserrano@huronconsultinggroup.com Sonia Singh, Huron Consulting Group ssingh@huronconsultinggroup.com

49 Payment Management System: NIH Change Overview The Transition Approach 49 Source: