QUARTERLY BUSINESS OFFICERS MEETINGFEBRUARY 2019

TODAY’S AGENDA

I. Budget Updates (Terry Johnson & Susan Klatt)

II. Employee Self Service Beta (Mike Kaplan & Sam Schrup)

III. HR 2020 (Dan Schropp & Terri Hein)

IV. Internal Audit Findings (Deb Johnston)

V. Proposed FY20 Fringe Benefits Rates (Selina Martin)

VI. F&A Rate and Recovery Distribution (Ted Welter)

VII. Projecting Your Indirect Cost Recoveries (Audra Haddy)

VIII. Other Updates (Selina Martin)

BUDGET UPDATES

TERRY JOHNSON, CHIEF FINANCIAL OFFICER & TREASURER, FINANCE & OPERATIONS

SUSAN KLATT, DIRECTOR, FINANCIAL MGMT/BUDGET & UNIV SECRETARY, FINANCE & OPERATIONS

BUDGET PROCESS – UPCOMING DATES

Date Description

Friday, February 8th FY19 revised revenue & expense projections due to Cathy Hagen

Friday, February 15th Meeting with Pres. Harreld / send updated FY19 material to BRB

Tuesday, February 19th BRB meeting

Thursday, February 21st BRB meeting debrief with Business Officers

Friday, March 1st BI Tool updated with FY20 projections

Monday, March 4th FY20 template available to CBOs

• • • • • March 18 – 22 Spring Break • • • • •

Monday, March 25th FY20 revenue projections due to Cathy Hagen

EMPLOYEE SELF SERVICE BETA

MIKE KAPLAN, DIRECTOR ADMIN SYSTEMS, INFORMATION MGMT, FINANCE & OPERATIONS

SAM SCHRUP, LEAD UX APPLICATION DEVELOPER, INFORMATION MGMT, FINANCE & OPERATIONS

HR 2020

TERRI HEIN, DIRECTOR UI PAYROLL TAX/ACCTG & BUDGET OFFICER, HUMAN RESOURCES

DAN SCHROPP, DIRECTOR UI PAYROLL OPERATIONS, HUMAN RESOURCES

INTERNAL AUDIT FINDINGS

DEBRA JOHNSTON, MBA, CIA, CISA, CFE, ASSOCIATE DIRECTOR OF INTERNAL AUDIT, INTERNAL AUDIT

UI INTERNAL AUDIT TEAM

Debra Johnston, MBA, CIA, CISA, CFEAssociate Director Chad Sharp, MBA,

CIA, CISAAudit Manager

Terry Gromacki, CISAIT Auditor

Josh Johnson, CFEAuditor

VacantPosition

Julie Appleget, CIA, CISAAuditor

VacantPosition

James Pitcher, MBA, CPA

Senior Auditor

Kelsey Petrich, MSAuditor

Kip Druecker, CPA, CISAIT Auditor

Patrice Sayre, M.Acc, CPA, CIA

Chief Audit ExecutiveBoard of Regents,

State of Iowa

Renae MillerDepartmental Admin

FY 2018 AUDIT PROGRESS

SUI ISU UNI TotalAudits: Original Audits Planned 42 15 7 64Added During Year 5 0 2 7

Totals 47 15 9 71

Completed 32 9 7 48In Progress 9 4 2 15Deferred 2 2 0 4Cancelled 4 0 0 4

Totals 47 15 9 71

INTERNAL AUDIT APPROACHES

Risk-based approach used for audit selection and fieldwork testing.

Consider specific requests from the BOR or senior leaders.

Use an established transparent audit methodology based on IIA standards.

Quality Assurance Review last fall = Generally Conforms rating

Business and operational processes, information technology, compliance with various rules/regulations and fraud work.

DEPARTMENTAL AUDITS

1. Financial Management2. Compliance and Internal Controls3. Human Resources4. Information Technology (IT)5. Inventory and Capitalized Equipment6. Revenue Cycle and Funding Streams7. Sponsored Research

FINANCIAL MANAGEMENT

Financial Statement Review

Unmonitored Departmental Budgets

Price-Setting Methodology

Goods or services

Reconciling Cash Collections to Daily Revenues

FINANCIAL MANAGEMENT

Outdated or no Contracts

Timely Reconciliations

Cash Handling Procedures

Oversight and use of Procurement Card

Travel Vouchers – Approved by Supervisor

COMPLIANCE AND INTERNAL CONTROLS

Excessive or Unauthorized Building Access

Segregation of DutiesIncompatible purchasing duties

HUMAN RESOURCES

Time Tracking and Leave Reporting

Staff Training – Various Areas

No Orientation or Termination Checklist

INFORMATION TECHNOLOGY

System Access Controls

Server Vulnerability Scans

Noncompliant Password Protocols

Insecure Websites / Inadequate Website Oversight

Documented Business Continuation and Disaster Recovery Plans

Machine Management

INVENTORY AND CAPITALIZED EQUIPMENT

Capital Equipment Tracking Equipment DisposalNot removed from inventory

Inventory and Supply ManagementInaccurate and missing inventory

Inventory procedures/inadequate monitoring

Unrestricted access to inventory

REVENUE CYCLE AND FUNDING STREAMS

Excessive Charge Lag

Missed billing

Denial Management

Charge Capture – Billing

Hospital late charges causing rework

SPONSORED RESEARCH

Conflict of Interest

Unallowable costs

Research misconduct

ANNUAL RISK ASSESSMENT PROCESS

Conducted Over 70 Interviews Across Campus

Risk Ranked Possible Audits Using the Following Criteria University mission/student or patient impact

Financial loss

Legal or regulatory impact

Complexity of the process or unit

Level of change

Reputational risk

Current control environment

Information technology driven

FY 2019 AUDIT PLANAudits and Reviews Hours PercentBiology 250 1.3%Building Access Security Carry Over 20 0.1%Charge Master Maintenance Process 250 1.3%Clinical Staff Office 250 1.3%College of Engineering 300 1.7%Computer Management 300 1.7%Creative Writing 200 1.1%Department of Earth and Environmental Sciences Carry Over 200 1.1%

Division of Public Safety IT 250 1.3%Facilities Management Bidding Processes 250 1.3%

Family Medical Leave Act 250 1.3%Genetic Counseling 150 0.9%HCIS Cherwell System Carry Over 50 0.3%

Holden Comprehensive Cancer Center 250 1.3%Home Ticket Revenue FY18 Carry Over 20 0.1%

Home Ticket Revenue FY19 100 0.6%

Inpatient Nurse Charges 250 1.3%Institutional Review Boards 250 1.3%NCAA Compliance - Camps and Clinics 100 0.6%NCAA Compliance - Playing and Practice Seasons 40 0.3%

Office of Fraternity and Sorority Life 250 1.3%

Office of the State Archaeologist 250 1.3%Paciolan Ticket System 250 1.3%

Paid Leave 250 1.3%

Payroll 350 1.9%

Pre-Paid Services Carry Over 100 0.6%

Audits and Reviews Hours PercentRadiology Department 250 1.3%

Rape Victim Advocacy Program (RVAP) 250 1.3%School of Social Work Carry Over 40 0.3%

Stanley Museum of Art 250 1.3%Stratajazz 250 1.3%

Student Athlete Academic Services 250 1.3%Student Health and Wellness Carry Over 100 0.6%

Taleo 300 1.7%

Tenant Properties 250 1.3%

UI Health Care Finance 250 1.3%

UI Health Care Infusion Center 250 1.3%

UI Health Care New Product Review Committee 250 1.3%

UI Health Care Post Acute Strategies 250 1.3%

UI Health Care Research Data Security 250 1.3%

UI Health Care Research Laboratory IT Security 250 1.3%

UIHC Emergency Management Carry Over 200 1.1%

UIHC Internet of Things 250 1.3%

UIHC Pharmacy Diversion Controls 250 1.3%

UIHC Processed Stores 250 1.3%

University of Iowa Research Information System (UIRIS) 250 1.3%

University of Iowa Construction Change Orders 250 1.3%

Vulnerability Scanning 250 1.3%

Annual Risk Assessment 450 2.5%

EthicsPoint 300 1.7%Follow-Up Audits 994 5.4%

Unallocated Hours 1,742 9.4%

Subtotal 13,806 74.0%

FRAUD

Be on the Lookout For: Faculty Who Have Their Own Business Significant Change in Behavior Delivery of Goods to Someone’s Home Procurement Card Usage Time and Attendance accuracy Cash Handling (SOD) Diversion of Any Kind of Inventory

FRAUD

FRAUD

ETHICSPOINT

The University of Iowa recognizes its obligation to maintain the highest ethical standards

Policy compliance is a shared responsibility that depends on individuals voicing their concerns

FRAUD TRIAGE COMMITTEE

Josey Bathke

Deb Johnston

Shari Lewison

Selina Martin

Carol Reasoner

Patrice Sayre

Shelley Stickfort

Doug Vance

Lucy Wiederholt

Debby Zumbach

ETHICSPOINT

The Ethicspoint site provides an anonymous, confidential way to report potential issues

The university will address reports promptly and discreetly, sharing facts only with personnel needed to investigate and resolve the matter

ETHICSPOINT

Go to uiowa.edu/ethics for more information

THANK YOU!

For more information on the Office of Internal Audit, please visit our website at https://uiowa.edu/audit/

PROPOSED FY 2020 FRINGE BENEFITS RATES

SELINA MARTIN, UNIVERSITY CONTROLLER, FINANCE & OPERATIONS

FRINGE CHARGE RATES

Fringe PoolFY 2018

Rate(approved)

FY 2019 Rate

(approved)

Clinical Faculty 23.73% 22.60%Non-Clinical Faculty 29.00% 29.90%P&S 38.00% 39.00%SEIU 38.30% 40.50%Merit 60.00% 54.00%Post Grad 23.00% 18.50%Fellowship 7.50% 7.40%House Staff 20.00% 24.00%Temporary 12.00% 12.20%Students 8.20% 7.00%Miscellaneous 4.30% 4.00%

FY 2020 Rate(estimated & published

last year)

23.20%31.00%40.00%41.50%54.50%18.60%8.50%

24.50%12.20%7.00%4.00%

FY 2020 Rate(currently proposed for

rate negotiations)

23.60%31.30%41.20%42.60%53.50%18.00%9.00%

25.00%11.80%6.50%4.20%

+.40%

+.30%

+1.20%

+1.10%

-1.00%

+.50%

-.60%

+.50%

-.40%

-.50%

+.20%

+1.00%

+1.40%

+2.20%

+2.10%

-.50%

-.50%

+1.60%

+1.00%

-.40%

-.50%

+.20%

∆ from 2019 rates

STANDARD FRINGE RATE TREND – 5 MAJOR POOLS

STANDARD FRINGE RATE TREND – 6 MINOR POOLS

F&A RATE AND RECOVERY DISTRIBUTION

TED WELTER, ASSISTANT CONTROLLER, CONTROLLER’S OFFICE – FINANCIAL ANALYSIS, FINANCE & OPERATIONS

FACILITIES & ADMINISTRATIVECOSTS AND RECOVERIES

FACILITIES & ADMINISTRATIVE (F&A)COSTS AND RECOVERIES

40

…… F&A costs are actual expenses that reconcile to the UI audited Financial Statements.

…… F&A recoveries are generated to reimburse the UI for a portion of F&A costs incurred.

……. Effort is made by Central Administration to return the recoveries to where the expense occurred given actual F&A costs exceed F&A recoveries.

F&A RATE NEGOTIATION PROCESS

41

• A formal F&A rate is prepared by the UI and proposed every 3-4 years.

• Proposal prepared in accordance with cost principles defined in Uniform Guidance (formerly OMB Circular A-21)

• Direct Negotiation with Federal Govt.

• Feds review documentation; then perform a site visit

• Walk space; interview PI’s, staff & students

• FY 2021 is base year for next rate proposal

• The approved F&A rate is less than actual F&A rate.

42

University Financial Statements

Operations and Maintenance (F)

Building Depreciation (F)

Equipment Depreciation (F)

General Administration (A)

Departmental Administration (A)

Sponsored Project Administration (A)

Student Service Administration (A)

Interest (F)

Library (F)

Instruction and Dept Research (Inst)

ORGANIZED RESEARCH (OR)

Other Sponsored Activity (OSA)

Other Institutional Activity (OIA)

Exclusions

F&A Cost Groups Direct Cost Groups (Bases)

F&A Rate Calculation

Operations and Maintenance

Building Depreciation

Equipment Depreciation

General Administration

Departmental Administration

Sponsored Project Administration

Student Service Administration

Interest

Library

Inst OR OSA OIA

F&A Cost Groups

Denominator

Numerator

44

Facilities:Proposal

UncappedProposal Capped

Negotiated Rate tilFY19

Negotiated Rate beg.

FY20Building Depreciation (BD) 4.8% 4.8% 4.0% 4.2%Equipment Deprec (ED) 1.9% 1.9% 1.9% 1.6%Interest (Int) .8% .8% 1.8% 0.7%Oper & Maint (O&M) 21.8% 21.8% 16.0% 18.9%Library (Lib) 3.6% 3.6% 2.8% 3.1%

Subtotal Facility 32.9% 32.9% 26.5% 28.5%

Administrative:General Admin (GA) 5.5% 4.9% 5.1% 4.9%Departmental Admin (DA) 19.4% 17.1% 17.3% 17.1%Sponsored Programs Admin (SPA) 4.6% 4.0% 3.6% 4.0%

Subtotal Admin 29.5% 26.0% 26.0% 26.0%

Total F&A Rate 62.4% 58.9% 52.5% 54.5%

FY2017 F&A Rate by Component

45

Total Recoveries $ 79.44

Expenditures $ 113.81

Under Recovery $ (34.37)

* Amounts in millions

FY2018 F&A Recoveries versus F&A Overhead Expenditures

46

College/UnitTotal

RecoveriesLiberal Arts $ 11,224,965 Business $ 183,796 Dentistry $ 942,609 Education $ 369,656 Engineering $ 8,395,283 Law $ 152,463 Medicine $ 44,038,322 Nursing $ 493,023 Pharmacy $ 1,122,659 Public Health $ 9,610,466 Non-Collegiate $ 2,905,961

TOTAL $ 79,439,203

F&A Recoveries Generated by Each College – FY2018

DISTRIBUTION OF F&A RECOVERIES

47

• Effort is made by Central Administration to return the recoveries to where the expense occurred.

• FY18 = $79.4M Distribution

• General Education Fund = $47.3M

• Research Facility Funds = $10.8M

• UIHC = $6.5M

• TTI Plant Fund = $5.3M

• Oakdale Campus = $0.3M

• Clinical Trials = $2.4M

• Other = $6.8M

DISTRIBUTION OF F&A RECOVERIES

48

• With the exception of the deals, every $ of recovery is distributed the same in FY20:

• General Education Fund = 69.39%

• Research Facility Funds = 14.08%

• UIHC = 7.08%

• TTI Plant Fund = 8.99%

• Oakdale Campus = 0.37%

• Hygienic Lab = 0.09%

DISTRIBUTION OF F&A RECOVERIES

49

• FY20 Distribution Current % Change

• General Education Fund = 69.39% 67.07% 3.46%

• Research Facility Funds = 14.08% 15.53% (9.34%)

• UIHC = 7.08% 9.29% (23.79%)

• TTI Plant Fund = 8.99% 7.62% 17.98%

• Oakdale Campus = 0.37% 0.41% (9.76%)

• Hygienic Lab = 0.09% 0.08% 12.5%

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Calculation of UIHC Distribution %

O&M 18.9 UIHC O&M 6,920,040 Total Rate 54.5 Total O&M 33,900,913

O&M % of Total Rate 34.68% UIHC % of Total O&M 20.41%

O&M % of Total Rate x UIHC % of Total O&M = 7.08%

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Questions?

PROJECTING YOUR INDIRECT COST RECOVERIES

AUDRA HADDY, ASSOCIATE CONTROLLER, CONTROLLER’S OFFICE – GRANT ACCOUNTING, FINANCE & OPERATIONS

INDIRECT COSTS

Direct Costs: Costs that are charged directly to a sponsored project. Iacts: 5000-6999.

Indirect Costs/F&A Costs: Costs that are charged to sponsored project based on an F&A rate and cost base. Iacts: 7340-7360.

Indirect Cost Recoveries: The amount of costs recovered as a result of charging F&A costs to sponsored projects. Iacts: 3340-3360.

INDIRECT COSTS

F&A Rate: the percentage of indirect costs charged to a sponsored project Cost Bases for calculating F&A costs: Modified Total Direct Cost base (MTDC): the F&A rate is applied to all direct costs

except for: equipment, capital expenditures, patient care costs, subcontract costs exceeding $25K, student tuition remission, rental costs of off-site facilities, and scholarships & fellowship stipend payments

Total Direct Cost base (TDC): the F&A rate is applied to all direct costs. Total Direct Costs Minus Exclusion: the F&A rate is applied to all direct costs minus

specific exclusions identified by the sponsor.

F&A Rate x Cost Base = F&A Cost = F&A Recovery

INDIRECT COSTS

Each accounting period, indirect costs are charged to grants based on direct costs incurred

Indirect costs are distributed to the UI recovery accounts based on type of award. Most common recovery distributions are General University & Industry Sponsored Clinical Trials:

General University

GEF 67.07%

Research Facilities 15.53%

TTI 7.62%

UIHC 9.29%

Oakdale 0.41%

Hygienic Lab 0.08%

Industry Sponsored Clinical Trials

GEF 19.2%

DSP 14%

Academic Dept 66.8%

INDIRECT COSTS

Direct Cost

Category

Amount(Iacts

5000-6999)

F&A Rate

F&A Amount

(Iacts7340-7360)

Total Costs

Salary & Benefits $100,000 52.5% $52,500 $152,500Supplies $60,000 52.5% $31,500 $91,500Grad RA Tuition $10,000 n/a $0 $10,000Equipment $85,000 n/a $0 $85,000Total $255,000 $84,000 $339,000

ICR Recovery Account

Distribution Rate

Distribution Amount

(Iacts3340-3360)

GEF 67.07% $56,338.80Research Facilities 15.53% $13,045.20TTI 7.62% $6,400.80UIHC 9.29% $7,803.60Oakdale 0.41% $344.40Hygienic Lab 0.08% $67.20Total $84,000

OPTIONS FOR PROJECTING FOR COLLEGIATE UNIT

1. Calculate for each sponsored projectExpected Cost Base x F&A Rate x actual GEF Recovery Rate for each sponsored project

Upside: more precise, bottoms up approach

Downside: potentially very time consuming, may not necessarily result in greater accuracy

2. Estimate MTDC for entire college/department/unit and calculate using average F&A/recovery rate

Expected MTDC x average F&A recovery rate x average GEF Recovery Rate

Upside: less time consuming, easy to adjust quickly

Downside: MTDC may be difficult to estimate

3. Use number provided by central administration

Upside: no additional work by colleges

Downside: will likely result in the least amount of accuracy

4. Use recovery amount from last year and adjust for growth/decline

Upside: high-level approach that uses historical actuals but still factors in new information

Downside: may not reflect changes in recovery rates

5. Many variations of above...

DATA & CALCULATIONS

Calculating IC, TDC, MTDC Indirect Costs (IC) includes all iaccts 73xx

Total Direct Costs (TDC) includes all expenditures minus IC

Modified Total Direct Costs (MTDC) includes all expenditures not classified as IC or Not subject to Not subject to includes all expenditures with 6205, 6206, 6207, 6231, 6260, 6280, 63xx, 6432, 6435, 67xx

Actual F&A cost recovery rate – University wide Current negotiated rate is 52.5%

Current Year effective rate thru Dec 2018 (FY19) - 35.6%

Average GEF recovery rate – University wide Current Year thru Dec 2018 – 60.16%

Actual F&A recovery rates & GEF recovery rate vary by college Available upon request

DATA & CALCULATIONS

Coming Soon:

Monthly ICR Financial Data by Collegiate Unit

Monthly calculated MTDC

OTHER UPDATES

SELINA MARTIN, UNIVERSITY CONTROLLER, FINANCE & OPERATIONS

OTHER UPDATES

Financial Sub-certification 2.0 Committee – February 27th

2019 Business & HR Conference – Tuesday April 30th (new award!)

Topics for next quarterly meeting (March 28th):1. Budget Updates (Financial Management & Budget)

2. Approved FY20 Fringe Benefits Rates (Controllers Office)

3. Updated Credit Card Policy & Security Standards (Treasury Operations)

4. Campus PCI Steering Committee & ISPO Project (Treasury & ITS)

5. Consolidating Professional Liability Insurance for Students (Risk Management)