# Presentation: 549568

##  Avoiding Risky Business  

** ****Avoiding Risky Business****  **
**Kathleen J. Shino, M.B.A.**
** ****NIH SBIR/STTR Specialist**
** **
**NIH SBIR/STTR Conference, Cleveland Ohio**
**July 13, 2006**

**Federal Grants Management Compliance**

## Overview

- Roles and Responsibilities
-  Eligibility for SBIR and STTR
- Application Process
-  Award Actions
-  Post Award Requirements
-  Compliance Basics

## NIH Staff Roles 

*Grants Management Officer*
- $$ - awards, compliance, prior approvals
*Grants Management Specialist*
- Day to day grants portfolio management
*Program Official*
- scientific, and/or technical aspects of grant
*Scientific Review Administrator** (*SRAs)
- Manages the activities of Scientific Review Groups

##   NIH Staff Serve as a 	Resource to Grantees

- 	Prior approval items (NIH prior approval required)
- Grants Management - review for compliance with policies and regulations
- Program Official - change in scientific scope
- Noncompetitive applications (Annual progress report)
- Grants Management - review for compliance
- Program Official - review scientific progress
- Closeout of terminated projects (Final reports)
- Grants Management - responsible for receipt of all close-out documents
- Program Official - review final scientific progress report

## Grantee Institution

- The award is made to the *institution*, not an *individual*
- The Institution Official (I0):
- Is legally responsible for the proper conduct and execution of the project
- Provides fiscal management of the project
- Provides oversight on allocation decisions
- Ensures compliance with Federal laws and regulations, and NIH policies and procedures

## Principal Investigator (PI)

- Responsible for the scientific and/or technical aspects of the grant
- Day-to-day management of the project
- Responsible for the scientific conduct of the project and to provide the required progress reports

## Small Business Innovation Research                 Small Business Technology Transfer Research  

- See NIH SBIR/STTR website
- http://grants1.nih.gov/grants/funding/sbir.htm
- Phase I – Feasibility/design
- Normally from 6 months (SBIR) to 1 year (STTR)
- Normally up to $100,000 Total Award (DC+IDC+Fee)
- Phase II – Full R&D continuation of Phase I
- 	Only Phase I awardees eligible for for Phase II
- Normally up to Two Years and $750,000 Total Award
- Phase III – commercialization- no SBIR funding

**Notes:**
Read program description from Solicitation – The Small Business Innovation Research (SBIR) program is a set-aside program (2.5% of an agency's extramural budget) for domestic small business concerns to engage in Research/Research and Development (R/R&D) that has the potential for commercialization. The SBIR program was established under the Small Business Innovation Development Act of 1982 (P.L. 97-219), reauthorized until September 30, 2000 by the Small Business Research and Development Enhancement Act (P.L. 102-564), and reauthorized again until September 30, 2008 by the Small Business Reauthorization Act of 2000 (P.L. 106-554).
Mandated program for all federal agencies with R&D budgets exceeding ($            ) Legislation contained in the SBA authorization extended through 2008– this isn’t going away!
Set aside for SBIR program currently at % 
Set aside for STTR program currently at %     which will increase in FY2004 to %
Explain the NORMALLY section, and how to document exceptions, -more later in slides
Commons initiative targets for SBIR/STTR programs
NIH pays for Phase I and Phase II, not Phase III unless contracted to purchase end product

## SBIR/STTR Eligibility

- For-profit U.S. business firm
- 51% U.S. owned by individuals* & independently operated
- Small Business Concern (SBC) located in the U.S.
- 500 or fewer employees, including affiliates
- *See SBA regulations for SBIR & STTR ownership

**Notes:**
Each entity submitting an SBIR/STTR grant application must qualify as a small Business concern (SBC) as defined by the Small Business Administration.
Eligibility is determined AT THE TIME OF AWARD 
Assessment will be made of several factors:
Whether or not it is independently owned and operated
 whether or not it is an affiliate of a larger organization whose employees when added to the those of the applicant organization, exceed 500 employees
Applicants may have the SBA certify their eligibility at any time, and when you can’t determine eligibility, you may protest the application and request that the SBA determine eligibility ---that’s for another presentation.

##    SBIR/STTR  

- Eligibility determined at time of award
- All project activities in U.S.
- “Normally Not-To-Exceed” levels (NTE)
- Project period
- SBIR R43  request 12 months budget period if:
**Animals**
**Human subjects** involvement
**Third party** (consortium/contracts)

**Notes:**
Any foreign component must perform all activities in US.  Foreign travel for conferences is allowable.  Exceptions may RARELY be made for foreign involvement – NCCAM example.

Funding However, applicants may propose longer periods of time and greater amounts of funds necessary for completion of the project. 

Negotiation of time (up to 12 months) is simply to preclude the necessity of a No Cost Extension.
We can allow additional time, but no additional funds above the CRL.  
Explain NORMALLY NOT TO EXCEED language for funding and project periods.
Funding levels and some other strictures may be exceeded if the reviewers have approved the requested level.  DOCUMENT THE FILE.  Jo Anne Goodnight tracks these in IMPAC, and SBA has officially granted a waiver to NIH to allow funding above the ‘cap/ceiling’  See SBIR GMAC website for memo from SBA to NIH.(Maurice Swinton to Jo Anne Goodnight.

## SBIR and STTR

- New Applicant Organizations need:
-  Tax Identification Number**
-   DUNS **
- Human Subjects –  FWA/SPA (SBC)
- Animal Assurance for grantee (SBC)
- ** Required for SF424R&R submission

-  Annual Reporting required:  Misconduct in Science to the Office of Research Integrity (ORI)

## SBIR Requirements  

-  P.I. primarily employed by SBC _>_50%
- Don’t confuse employment w/Time and Effort
- PI employment is rarely negotiable
- Phase I third party involvement
- Normally NTE 33% of total award amount
- Includes consultants & consortia
- Does not include ‘fee for service contracts’
- May exceed 33% if requested, justified, and approved by reviewers and program
- Justify in the application deviations from SBA guidelines in funding levels & project period

## SBIR Requirements Phase II

- Commercialization Plan required for All Phase II applications
- Phase II (R44)
- PI employment 51% by SBC
- Third party costs normally NTE 50%
- Total amount awarded normally NTE $750,000 (D.C., F&A + fee) for two years

## STTR  Phase I and II

- Single Research Institution Minimum 30%
- STTR budget page and letter from RI required
- Small Business  Minimum 40%
- Principal Investigator
- Minimum 10% time & effort
- Must have formal agreement with SBC
-  Commercialization Plan for Phase II

**Notes:**
Deviations from the %(based on total amount requested) requires that the grantee specifically request and justify participation in exception to the normal $/% calculation, but certify that the PARTICIPATION in the research activities remains within the 40/30% required minimum levels.

This must be approved by peer reviewers, program officials and the GMO must concur for a single case deviation.  A copy of the event memorandum must be retained in the grant file.

## Types of Costs http://www.arnet.gov/far/loadmainre.html

**Indirect Costs/F&A Costs**:
- Not Easily Identified With A Specific Project
- Fringe Benefits, Overhead, Exec. salaries
**Direct Costs**
- Easily Identified With A Specific Project
- Direct Salaries & Wages
- Materials & Supplies
- Consultants & Subcontracts
**Unallowable Costs**** -- **Government will not reimburse!

## Percentage Calculations

- Work Performance (Research Activities)
- Normally based on total award amount
- Explain in budget justification for exceptions
- Fee/profit (NTE 7%)
- ONLY for SBIR/STTR grantee (SBC)*
- Based on total DC + F&A
- Grantee justified in application?
- *All other mechanisms prohibited from fee/profit on grants

## SBIR & STTR Fee/Profit

- Fee must be requested in application
- May not exceed 7% of total costs (direct and indirect) requested for NIH grants
- Fee must be justified in the application
- Based on profit margin consistent with   all projects of similar scope, regardless of source of funding.**   **

##  Phase I Applications and Indirect Cost Rates (ICR)

- PHASE I – If you have a *current *_negotiated ICR agreement_, request the ICR stated in the agreement
- PHASE I – If no current negotiated ICR agreement, indirect costs funded cannot exceed 40% of total direct costs.
*NIH does not negotiate ICR for Phase I SBIR or STTR awards.*

##    Phase II Applications and   Indirect Cost Rates (ICR)

- If you have a current _negotiated ICR agreement_; use the ICR stated in the agreement.
- If you do _not_ have a current negotiated ICR agreement; _and_ your proposed indirect costs exceeds 25% of total direct costs, rates must be reviewed by DFAS.  Award  will restrict indirect cost recovery to 10% of Salaries & Wages until DFAS review is complete.
- PHASE II - If proposed indirect costs are 25% or less of total direct costs, you do not need to provide supporting documentation or negotiation

## Questions about Indirect Costs?

- NIH Division of Financial Advisory Services (DFAS)_ _
- http://oamp.od.nih.gov/dfas/rates.asp
- Ruth Bishop, Branch Chief
- Ph: (301) 496-2444

## Award Actions

Federally funded 
Science with Strings Attached

- Federally funded** **
**Science with Strings Attached**

## Notice of Grant Award (NGA)

- A legally binding contract with the government
- Official notice that an award has been made
- Includes
- Funding level (amount available for project)
- Periods of support (Project and budget period)
- Terms and conditions (Restrictions/requirements)
- NIH contact information – Who do you call first?
- Program Official for Scientific issues
- Grants Management Specialist for administrative issues

## Standard Terms and Conditions  Expanded Authorities

- Carryover
- The authority to expend funds from the previous budget period
- Streamlined Non-competing Award Process (SNAP uses PHS 2590 forms) (Phase II)
- Eliminates need for annual submission of budget with progress report and annual submission of Financial Status Report (FSR)

## Expanded Authorities

- All NIH awards are under EA, which means:
- 90 day pre-award cost authority at grantee’s own risk
- Reasonable rebudgeting authority
- _>_ 25% of total award
- May change consortium participant
- May automatically extend project period

## No-cost Extensions

- Grantee may extend (without additional funds) the final budget period of the project up to 12 months  (one-time only).
- If registered in Commons grantees can enter a first NCE through the Commons (up to 90 days before the end date of the award).
- No revised NGA for first, on-time extension

## Other Terms and Conditions*

- Restrictive terms - may specify required action on the part of the grantee to remove restriction   (e.g., IDC rate negotiation, human subjects)
- Close-out reporting requirements
- Included in the Final year Notice of Grant Award (NGA)
- Financial, invention and final progress report
- *Strings – see Section IV of your NGA

## Grantee Acceptance

**  **The grantee indicates acceptance of the terms and conditions of the award by drawing down funds against the grant from the Payment Management System.
**DHHS Division of Payment Management**
**http://www.dpm.psc.gov**

## Post Award* 

**NIH prior approval requirements**
**Close-out (termination)**
*** More Strings**

## Prior NIH Approval Required

- Change of PI and other Key personnel named in Notice of Grant Award
- Change of Grantee Organization
- Change of Scope

##    Actions Likely to be Considered a Change in Scope

- Change in the specific aims from those approved in the competing application
- Substitution of one animal model for another
- Any change from the approved use of animals or human subjects
- Shifting the research emphasis from one disease area to another
- Adding new subcontract

## Changes - Prior Approval Required!

- Notify the NIH (Grants Management Specialist) immediately if any of these apply or will apply to your business:
- Successor-in-interest
- Name change
- Merger

##   Changes – Prior Approval Required!

**   **The following changes involving the Principal Investigator or other key* personnel should also be promptly reported:
- Withdrawal from the project entirely
- An absence of three months or more
- Reduced time devoted to the project by 25% or more
- *Key personnel named in the Terms of Award

##  Submitting prior approval requests to NIH

- Requests for project changes that require NIH approval must be submitted in writing and signed by the Institution Official (IO) to the Grants Management Officer (GMO)
- An e-mail request is acceptable
-   Sent through the IO to the awarding institute GMO and Program Official**    **

## 2nd No-cost Extensions (NCE)

- Requests submitted after the project period has expired or extensions *beyond the initial 12* month extension require NIH prior approval
- 2nd NCE (or late) request should include:
- Length of the request
- An estimate of funds remaining for project
- A brief progress report and the goals to be attained during the extended period
- If the request was submitted late, state the reason for the late request
**If approved, a revised NGA will be issued**

## Close Out Requirements

**Due ****within 90 days**** of the end of the project period to the awarding Institute:**
**Final Progress Report**** (no form, format included in final Notice of Grant Award terms!)**
**Final Invention Statement**** - Form HHS 568**
**Final Financial Status Report**** – SF 269A or SF 269**
- Refer to the terms and conditions on the final Notice of Grant Award (Section IV)

## Compliance

**Internal Controls**
**Close-out**
**Compliance Basics**
** **

## Why is Compliance Important?

- It strengthens the relationship of trust that exists between sponsor and recipient
- It suggests a presence of the stewardship necessary to properly safeguard the Federal investment in biomedical research
-  Compliance Program Guidance for Recipients of NIH Research Grants
-  http://grants.nih.gov/grants/compliance/compliance.htm

## Compliance is......

- The effective management of public funds to maximize research outcomes
- The avoidance of fraud, institutional mismanagement, and poor management of Federal funds

## Internal Controls

- Are budgetary controls in effect to preclude incurred expenses/obligations from exceeding total awarded funds or budget cost categories?
- Is there a separation of duties (record keeping/ cash receipts/ cash payments)?
- Are all accounting entries adequately documented? (Journal + Chart of Accounts?)

## Internal Controls Capability

- The grantee must have
- a job cost accounting system,
- an adequate timekeeping system,
- must segregate direct and indirect costs.
- Must have written policies & procedures
- _[Federal Financial and Business Management Systems    Sample Policies and Procedures](http://www.niddk.nih.gov/fund/crfo/ffbms/)_
- http://www.niddk.nih.gov/fund/crfo/sbirsttr.htm

## Compliance Basics

- Do the right thing...from the start!
- Keep your policies current with Federal requirements
- Develop a continuing training program
- Perform risk assessments and implement appropriate internal controls
**COMMUNICATE, COMMUNICATE, COMMUNICATE!**
**	****With your employees and with NIH  **

## Who is Accountable for Compliance?

- The Company is accountable for the finances and the administration of the grant
- The PI is accountable for the research
- The PI makes allocation decisions
- The Company exercises oversight on allocation decisions

## Types of Compliance Issues

- Misuse of funds
- Unallowable costs
- Allocation of costs
- Accelerated expenditures
- Large unobligated balances
- Cost transfers
- Financial Conflict of interest

## Common Contributors to Compliance Problems

- Lack of understanding of roles and responsibilities of institutional staff
- Inadequate resources
- Outdated or nonexistent policies and procedures
- Inadequate staff training and education
- Inadequate systems
- Perception that internal control systems are not necessary

##  NIH External Compliance Activities

- Institutional compliance process
- Technical assistance
- Corrective action process
- Settlement process
- Outreach
- Educational seminars
- National and regional meetings
- NIH Regional Seminars
- Proactive Compliance Site Visits
- Targeted Site Reviews (FCOI)

## So...What do Grantees Need to Comply with?

**Code of Federal Regulations (CFR)**
- 42 CFR Part 52 – Grants for Research Projects
- 	http://www.access.gpo.gov/nara/cfr/waisidx_03/42cfr52_03.html
- 45 CFR Parts 74 and 92 – Public Welfare, Administrative Requirements
- (74)  http://www.access.gpo.gov/nara/cfr/waisidx_04/45cfr74_04.html
- (92) http://www.access.gpo.gov/nara/cfr/waisidx_04/45cfr92_04.html
- 45 CFR Part 46 – Public Welfare, Protection of Human Subjects
- 	http://www.access.gpo.gov/nara/cfr/waisidx_04/45cfr46_04.html

## So...What do Grantees Need to Comply with?

**OMB Circulars - **http://www.whitehouse.gov.ombcirculars/
**Administrative Requirements or Standards:**
** **
**A-102**:  Uniform Administrative Requirements for Grants and Cooperative Agreements awarded to State and Local Governments and Indian Tribes
**A-110**:  Uniform Administrative Requirements for Grants and Agreements awarded to Universities, Hospitals, and Other Non-Profit Organizations  (& for-profits at NIH)
**These include pre-award and post-award requirements**

## So...What do Grantees Need to Comply with?

** **
**Cost Principles: **Applicable OMB Circulars and CFRs
**A-21**: Cost Principles for Educational Institutions
**A-87**: Cost Principles for State and Local Governments and Indian Tribes
**A-122**: Cost Principles for Non-Profit Organizations
**45 CFR Part 74, Appendix E**: Principles for Determining Costs Applicable to Hospitals
**48 CFR Subpart 31.2 (Federal Acquisition Regulation) ** Applicable to For-profit organizations

## So...What do Grantees Need to Comply with?

**Audit Requirements**:  Applicable OMB Circular and CFR
**A-133**:  Audits of States, Local Governments, and Non-Profit Organizations
**45 CFR Part 74.26**:  Audits of For-Profit and
- Foreign Organizations

## So...What do Grantees Need to Comply with?

- NIH Grants Policy Statement
- 	http://odoerdb2.od.nih.gov/gmac/nihgps_2003/index.htm
- Notice of Grant Award
- NIH Guide to Grants and Contracts
- (for new requirements)
- 	http://grants.nih.gov/grants/guide/index.html

##   NIH Enforcement Actions

- Special terms and conditions of awards
- Loss of carryover authority
- Cost disallowances
- Exclusion from Expanded Authorities
- Suspension/termination of award
- Opportunity for improved grantee systems and policies to assure compliance

## Financial Conflict of Interest(FCOI)

*Expectation:**  *Companies must establish written policies and procedures to address financial conflict of interest for their investigators.  These standards are designed to ensure that investigators maintain research objectivity in the design, conduct, analysis and reporting of research funded under grants.

## Financial Conflict of Interest

**	**Identified a conflict of interest?  You must:
- Notify Chief GMO to assure that the conflicting interest is being managed, reduced, or eliminated
- Provide additional information, if requested
- FCOI must be addressed in consortium, consultant and employee contractual agreements
- See NIH Guide: _[http://grants2.nih.gov/grants/guide/notice-files/NOT-OD-OO-040.html](http://grants2.nih.gov/grants/guide/notice-files/NOT-OD-OO-040.html)_
****COI regulations exclude Phase I SBIR and STTR awards!**

## Reminder!   

- All SBIR/STTR recipients must register with SBA Tech-Net for reporting purposes
- http://tech-net.sba.gov
- SF424R&R applications – See the new forms and application instructions for SBIR & STTR http://grants.nih.gov/grants/funding/424/index.htm
- Register NOW with Grants.gov *and* eRA
- http://era.nih.gov/ElectronicReceipt/preparing.htm#4

## NIH Grants Information Sources

- Provides terms of award and agency contacts
- Frequently Asked Questions
- _http://www.grants.nih.gov/grants/funding/giofaq.htm_
- Grants Information
- _grantsinfo@nih.gov_ *(contact email address)*
- NIH Grants Policy Information
- _[ ](http://grants.nih.gov/grants/policy/nihgps_2001/)__http://grants1.nih.gov/grants/policy/policy.htm_

- NIH Grants Information Sources

## QUESTIONS??

** **_** **__**E-mail: **__[sbir@od.nih.gov](mailto:sbir@od.nih.gov)_
**Thank You!**
**Kathleen J.  Shino, M.B.A.**
** ****NIH SBIR/STTR Program Specialist**
**Voice: 301 435-2689  Fax: 301 480-0146**
**Email:  shinok@mail.nih.gov**

**QUESTIONS??**