It’s budget season, as we prepare for the new academic year and begin to review how well this one is going. And we all know what that means. We’re going to be reviewing our sponsored research accounts.
How well are your sponsored research accounts doing? Can you tell at a glance?
The Doctor is In: Giving Your Sponsored Projects a Financial Physical
Many research administrators have multiple responsibilities – that is, they are involved in some aspect of business administration, which makes tracking financial information more difficult. Some research administrators are less comfortable with financial management and prefer pre-award. All of us need quick and easy ways to manage sponsored projects to make sure they are doing well and staying on track.
Three requirements for a successful project to maintain good health:
- University and sponsor guidelines are always followed with regard to purchasing, acquiring and managing equipment, animals, managing personnel, processing expenses, and notifying the sponsor of all changes on the project, etc.
- The principal investigator manages all financial transactions, hiring, purchasing and acquiring of research resources.
- All financial documentation and reporting is established, maintained and performed in a timely manner.
To conduct a financial physical, four factors should be assessed to obtain an assessment of a project’s financial fitness:
- What is the burn rate of the project on a monthly basis, and how is the project spending to date according to plan?
- The burn rate is how much a project spends on average per month (total budget for a year divided by 12). The project may spend more or less in a given month, but when you consider than 70% of research costs are labor related, this is not a bad yardstick to use.
- The most important indicator is spending too slowly. Too much money in the last 90 days is a problem due to the need to request a carry forward, or simply not being able to justify spending excess funds at the end of an award year.
- Is the salary for all research staff matching certified effort for all quarters in the current year?
- Effort can vary at the beginning and at the end of an award, yet we often automatically charge an award the same budgeted amount throughout, so we need to make sure to adjust payroll after a PI has certified their effort to make sure that the award is charged correctly. This has to be done every 90 days.
- Are supplies/expenses hitting the award? Are they allowable and are they being charged to the right account codes?
- Failure to spend an award, or not charge the right account codes can be viewed by the sponsor as not performing the work. The progress report has to match the financials – it’s important to make sure that the supplies and expenses are charged to the right project. In basic science labs, lab personnel need to be informed when new projects start, so they can charge supplies to the right accounts. It’s easy to forget to do this and it costs departments thousands of dollars.
- Has the project met its milestones to date and does the project spending to date match the milestones currently planned?
- This one is straightforward, but key – and it’s why the financial management of sponsored projects is so much fun! This work relates directly to the project outcomes and the science. It’s all got to match and report out together, and be timely.
Of course, detecting any problems, you can address them in a timely manner. Most importantly, identifying issues will allow you to determine systems that will prevent problems from arising in the future.
Most importantly – prevention is the best way to stay healthy, and excellent budgets and tracking and management systems can help keep your projects in the best shape to begin with. We’ll talk more about this in the coming weeks!