NCURA Western Regional ConferenceApril 2008

Kathy Lorenzi

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Common examples of at-risk Sponsored Program Activities

1.Sponsored research agreements2.International collaborations3.Equipment and materials purchase and surplus (particularly defense articles)4.Equipment usage5.Material Transfer agreements6.Nondisclosure agreements7.Software licenses8.Contract Services agreements9.Payments to foreign nationals10.Fund transfers to foreign countries11.Equipment shipments to foreign countries for loan or field work12.Information transfers to foreign countries13.Foreign Travel14.Foreign student admissions

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• 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

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You cannot audit your way to complianceCompliance 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

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What is the cost?Legal liability

Personal Jail Time Fines / Penalties

Federal Sentencing Guidelines – Chapter 8, Sentencing of Organizations

Self Disclosure

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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!

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What is the cost?Harm to researcher reputationLoss of credibility of the questioned

work and all past workMay result in terminationNew jobs in research field hard to

find.Tainted students

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What is the cost?Harm to institutional reputation Name in papers – not in a good wayReduction in contracts, grants and awardsReduction in gifts and other contributionMore oversight by federal and state agenciesMore rules / less flexibilityHarder to entice new faculty Harder to keep your best facultyHarder to attract students

What is the Value of your institutions reputation?4/27/2008 9

What is the cost?Loss of public trust

Less public and community supportLoss of confidence on campusCampus moral suffers

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What is the cost?

Export privileges denied

What do you think would happen in this case?

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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

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