Gareth MacDonald RCUK Head of Assurance gareth.macdonald@bbsrc.ac.uk RCUK Assurance Overview of...

Gareth MacDonaldRCUK Head of Assurancegareth.macdonald@bbsrc.ac.uk www.rcuk.ac.uk/assurance

RCUK Assurance

Overview of RCUK

Funding Assurance Programme

Imperial College

September 8th, 2008

Overview

• Background (rationale & objectives for Assurance)

• Funding Assurance Programme (FAP)

– Why we have it

– What happens

– RC expectations

• Observations on Full Economic Costing

• Over to you…….

Background

• Requirement of the National Audit Office that Research Councils should have

appropriate regularity assurance. (Dipstick Testing resulted from threat of NAO

qualifying RCs accounts on the basis of insufficient assurance).

• Funding Assurance Programme is a major strand of Assurance used in the Chief

Executives statement of internal control presented in the RCs annual accounts.

(Is RC money spent for the purposes as approved by Parliament ?)

• Full Economic Costing & implementation of TRAC necessitated a review of

Assurance mechanisms used by the Councils. (RC funding expected to increase

from £1bn to £2bn by 2010)

• RCUK Assurance charged with taking forward a Funding Assurance strategy for

the Research Councils.

RCUK Assurance:- Objectives

“To develop and manage a new Funding Assurance Programme for the Research Councils”

1. Launch and manage new Funding Assurance Programme (FAP) to reflect the implementation of Full Economic Costing.

2. Develop & implement Quality Assurance & Validation (QAV) process for TRAC in UK universities

Why ?

RC Awards in 2006/07

DI - 43%(£644.7M)

Indirect - 32%(£475.6M)

DA Other 11%(£164M)

DA Estates - 8%(£121.3M)

Exceptions - 6%(£92M)

DI

DA Estates

DA Other

Indirect

Exceptions

Research Grants & Fellowships payments to Imperial College by RC (£m)

Apr 07- Mar 08

BBSRC9.7

EPSRC38.2

ESRC1.4

MRC11.9

NERC2.8

STFC7.2

Total for 2007/08:- £71.2m

Funding Assurance Programme

• Principal pillar of assurance for the Research Councils on grant/fellowship expenditure leading to production of annual Assurance report to Accounting Officers.

• FAP is a management audit. Has the research organisation appropriate procedures in place to assure quality and integrity of research grant administration ? (focus on compliance with Research Councils terms and conditions).

• Endorsed by independent consultants as:

– “A collaborative process that promotes a mutual understanding of the requirements of the RC’s….and HEI’s”

• Remains “light touch”. Top 60 institutions subject to a two day visit usually every 3-4 years.

• Not a duplication of the work of research organisations internal audit.

“To seek assurance for our Accounting Officers on the regularity of expenditure on Research Council funding”

• Is expenditure incurred and recorded in accordance with RC terms and conditions?

• Is there evidence of payment in advance of need?

• More broadly….are Research Council terms and conditions being adhered to ?

FAP:- objectives

FAP:- more detailed issues…

Organisation controls (structure, delegated authority, control environment)

Procedures (how are RC guidelines, T&Cs made available to relevant staff, (PIs, dept. admin staff etc)

Monitoring and reporting of expenditure (transaction listings, use of reports and their distribution)

Staff appointments (including pool staff effort)

T&S controls

Basis on which estimates are included on application forms

Procurement involvement in the purchase of capital equipment

Audit remit & cycle

FAP:- Some general principles

FAP looks for joined up thinking between the numerous parties involved in grant administration (PIs, central admin, departments, HR, Finance, etc.,)

FAP focuses on the control environment. If areas of concern are identified, the question becomes “How did this happen and could it happen again ?”

ROs often welcome FAP visits as a powerful lever to secure compliance within their departments/institutions. Consequently, RCUK Assurance works with institutions where necessary to support and empower research administrators.

FAP has provided an invaluable mechanism for improved (and structured) dialogue with universities on areas of common interest relating to administration.

• RC funding is grant specific. (E.g., Transferring funds from one grant to

another is NOT permitted).

• Costs (including staff) charged to RC grants must be genuine and incurred

in accordance with the relevant terms and conditions.

• Costs charged as Directly Incurred must be supported by an audit record

(invoice).

• All costs related to the project must be reported on the Final Expenditure

Statement, even when above awarded value

• If in doubt…..ask !

• Take the opportunity to raise issues of concern to yourselves:

FAP works best as a two way process !

FAP:- Principles cont.

FAP:-

• FAP seeks evidence of:

– Sound control environment

– Knowledge and application of RCs terms and conditions

– Regularity of expenditure

– Payment vs income analysis

– Robust and auditable costings (Implementation of fEC has resulted in pre-award functions now coming under scrutiny).

• Failure to comply can result in RCs reclaiming funds; in extremis, the whole value of a grant!

FAP:- Pre-visit

– Identify participating Councils (RCUK Assurance,…)

– Agree dates and timetable (2010/11)

– Issue Questionnaire

– Identify sample of files to be examined & departments to be visited

– Request transaction listings, vouchers

– Ensure that all relevant documentation is available for the visit, including departmental files if relevant.

FAP:- The visit

Introductory meeting.

– Finalise timetable

– University overview of high level administrative processes, roles and responsibilities

– Issues from the questionnaire

– Actions arising from previous visits

– Any university issues

• File examination & reconciliation of grant portfolio.

• Notify institution of “surprise files”

• Meetings with internal audit, procurement, departmental administrators, PIs and central administrative staff.

• Concluding meeting at the end of the final day.

Post visit

• Resolve outstanding queries

• Issue draft report

• Final report (action plan when required)

– Gradings:

1. Substantial Assurance

2. Satisfactory Assurance

3. Partial Assurance

4. Unsatisfactory

GradingsAssurance rating Definition

Substantial assurance A sound system of internal control which offers the Research Councils assurance that the grant administration process operates effectively with high levels of compliance with terms and conditions. Evidence of “Best Practice” procedures encountered.

This rating may also be awarded where, in the course of a visit, RCs have examined a significant portfolio of total awards and are satisfied that a high level of assurance can be reported.

Satisfactory assurance A basically sound system of internal control which offers the Research Councils assurance although there are a few weaknesses that have been indentified.

Partial assurance A system of internal control that is satisfactory in part but which contains a number of weaknesses that are likely to undermine the overall level of assurance that can be recorded. This is usually where Councils encounter varying findings across the research organisation and are consequently unable to agree on an overall assurance rating.

Unsatisfactory An unacceptable system of internal control containing fundamental weaknesses. Significant doubts that the research organisation has a clear and well understood environment under which Research Councils funds are administered.

Observations on fEC !

RC Awards in 2006/07

DI - 43%(£644.7M)

Indirect - 32%(£475.6M)

DA Other 11%(£164M)

DA Estates - 8%(£121.3M)

Exceptions - 6%(£92M)

DI

DA Estates

DA Other

Indirect

Exceptions

New World !

• Over two years into the new regime but still challenges

remain….

– Mixed economy of grants

– Preconceptions still prevalent

– RC Commitment to fEC remains

• Re-affirm guidance notes on fEC

• Monitoring of impact

• RCUK fEC Review

Guidance notes…..

No change to basic principles established in 2005 !

• Excellence of research remains paramount

• THEN….resources required to undertake the project (not costs)

• No scrutiny of Estates or Indirect costs

The general message to get the true costs of research intact through peer

review is to justify all costs* sought fully (including PI time)

*Except estates, indirect costs and infrastructure technicians

Grant monitoring

How has FEC affected:

• the time and value requested (and awarded) for different staff categories (investigator, assistant, other)?

• The value of non-labour resources requested (and awarded)?

• numbers and cost of proposals submitted (and awarded)?

• success rates, and whether these can be correlated to other factors like indirect/estates costs, funding mode, thematic area?

• whether there are patterns in cost-cutting (i.e. differences between requested and awarded resources) which can be related to issues such as thematic area, Council, indirect/estate cost etc?

RCUK fEC Review

Purpose:

“To ensure that the change to full economic costs has put universities on track for

delivering long term financial sustainability in research”

Objectives:

• The extent to which the policy objectives relating to sustainability of the science base have been delivered by the introduction of funding based on fEC.

• How the additional funding resulting from both fEC and associated changes have been utilised by Universities

• The operation of fEC Arrangements in HEIs, Research Councils and other funders

• The impact of fEC on interactions with key stakeholders, notably industry, government departments and charities.

RCUK fEC Review

RCUK fEC Review

Terms of Reference

• To review the impact of the revised funding arrangements for research on the sustainability of research in Higher Education Institutions;

• To advise on changes that would enhance the delivery of sustainability;

• To consider, and propose if necessary, changes in the operation of full economic costs in the funding of research;

• To report to the Research Councils UK Executive Group and Universities UK by December 2008.

RCUK fEC Review:- Panel members

• Alan Alexander, (Chair) Member ESRC Council, Accounts Commission for Scotland, ex Chair Scottish Water

• Norman Bennett, Finance Director, Queens University Belfast

• Sir Leszek Borwsiewics, Chief Executive, Medical Research Council

• Ian Cooper, Director of Operations, Royal Society

• Steve Egan, Deputy Chief Executive, HEFCE

• Mike Lant, Manager External Partnerships, Sysgenta

• Anton Muscateli, Vice Chancellor, Herriot Watt University

• John Nielson, Director Science & Research Group, DIUS

• Nicole Perin, Policy Advisor, Wellcome Trust

• Nigel Thrift, Vice Chancellor, Warwick University

• Stuart Ward, Corporate Director, EPSRC

Timetable

• Three meetings in June, Oct and December. Final report due by the

end of 2008.

• Process to be informed by questionnaire issued to all universities

asking for institutional viewpoint on a breath of fEC issues.

• Process will be informed by the QA of TRAC but the review is much

broader in scope.

• The impact of fEC on interactions with key stakeholders,

notably industry, government departments and charities.

RCUK fEC Review

Useful links:

• http://www.so.stfc.ac.uk/jes/RACGandROCG.asp (RC letters on fEC & cross-Council terms and conditions)

• http://www.so.stfc.ac.uk/jes/DualSupport.asp (FAQs on fEC and guidance for peer reviewers)

• http://www.rcuk.ac.uk/assurance (Assurance requirements)

FAP (Strategy)QAV Process

Thank you for your attention !

Any questions ?

Gareth MacDonaldRCUK Head of Assurancegareth.macdonald@bbsrc.ac.uk Tel:- 01793 413 222