Cost of Noncompliance(or, why the hair of Research Administrators turns grey at a young age) NCURA Western Regional Conference April 2008 Kathy Lorenzi
Common examples of at-risk Sponsored Program Activities • Sponsored research agreements • International collaborations • Equipment and materials purchase and surplus (particularly defense articles) • Equipment usage • Material Transfer agreements • Nondisclosure agreements • Software licenses • Contract Services agreements • Payments to foreign nationals • Fund transfers to foreign countries • Equipment shipments to foreign countries for loan or field work • Information transfers to foreign countries • Foreign Travel • Foreign student admissions
University of Minnesota – misuse of federal funds - $32M • University of Southern California – Questioned Costs - $400K • East Carolina University – Questioned Costs - $2.4M • UA Birmingham – Clinical Research Billing - $2.4M • Florida International University – Effort Certification and Direct Costs - $11.5M • UC San Francisco – Animal Care Allegations - $92.5K • Harvard / BIDMC Issues (Self Reported) – 3.25M • Johns Hopkins University – Effort Certification - $2.7M • Mayo Foundation – Mischarging federal grants - $6.5M • Northwestern University – Committed Time / Effort - $5M • Boeing – Darlene Drunyan scandal - $615M • Boeing - Various export violations – Millions • Morgan Stanley – violations of narcotics Trafficking Sanctions Regs $3,200 • EMD Biosciences, Inc – illegal export of biological toxins - $904.5K
You cannot audit your way to compliance • Compliance works with the business units to maximize compliance with applicable laws, rules, regulations, policies and procedures • Compliance functions are generally embedded in the business function and are part of the control structure • On-going, daily assurance • Audit is an independent, objective assurance and consulting activity designed to add value by evaluating the control structure • Periodic and after the fact assurance This slide was borrowed from Angela Wishon
What is the cost? Loss of funding (only if you are lucky) • Breach of Contract • Termination costs • People lose their jobs
What is the cost? Legal liability • Personal • Jail Time • Fines / Penalties • Federal Sentencing Guidelines – Chapter 8, Sentencing of Organizations • Self Disclosure
What is the cost? Institutional / Personal suspension or (shudder) Debarment • If suspended, no new awards, contracts from federal agencies or prime contractors for a given period of time. • If Debarred, no more awards, contracts from federal agencies or prime contractors forever!
What is the cost? Harm to researcher reputation • Loss of credibility of the questioned work and all past work • May result in termination • New jobs in research field hard to find. • Tainted students
What is the cost? Harm to institutional reputation • Name in papers – not in a good way • Reduction in contracts, grants and awards • Reduction in gifts and other contribution • More oversight by federal and state agencies • More rules / less flexibility • Harder to entice new faculty • Harder to keep your best faculty • Harder to attract students What is the Value of your institutions reputation?
What is the cost? Loss of public trust • Less public and community support • Loss of confidence on campus • Campus moral suffers
What is the cost? Export privileges denied What do you think would happen in this case?
How do you avoid the cost of noncompliance? Change the paradigm about compliance • Management taking a proactive role. • Anticipate and prevent, not just detect & correct. • Provide guidance and a framework. • Covers much more than internal & external audit. • The goal is to proactively manage risk rather than putting out fires as they occur. • Slide borrowed from Angela Wishon