What Does the PI Need to Know to be an Effective Project Lead?

John Hanold, PhD, Senior Associate Director, Office of Sponsored Programs

Richard Killian, MBA, Manager, Research Accounting, Office of Corporate Controller

The Pennsylvania State University

Mystery:What did the PI know and when?

What’s my balance?What can I buy?What are my reporting obligations?What if the sponsor doesn’t pay?Who accepts financial risk?

The Case of the Ignorant PI

Dr. Hanold, PIMr. Killian, Grant Administrator

Scenario:• PI not aware of budget picture• PI unfamiliar with policies• Sponsor is 120 days past due on

$75K invoice

Project Title: Boeing High-Energy Plasma Physics (AFOSR flow-through)

Year 1 Year 2 Year 3 TOTAL

Salaries PI & Co-PI $ 24,830 $ 34,727 $ 35,769 $ 95,326

Wages 4,845 9,981 14,826

TOTAL SALARIES & WAGES 24,830 39,572 45,750 110,152

Total Fringe 7,523 10,925 11,666 30,114

Supplies 2,000 2,000 2,000 6,000

Travel 2,666 2,667 2,667 8,000

Subcontracts < $25K 20,000 5,000 25,000

Total Other Direct Costs 24,666 9,667 4,667 39,000

Modified Total Direct Costs 57,019 60,164 62,083 179,266

Subcontracts > $25K 35,000 40,000 75,000

Total Direct Costs 57,019 95,164 102,083 254,266

F&A @ 52.4% MTDC 29,878 31,526 32,532 93,935

TOTAL COSTS $ 86,897 $ 126,690 $ 134,615 $ 348,200

Budget

FINANCIAL SYSTEM

INQUIRE OBJCAT BY CATEGORY

Account Name: BOEING PLASMA PHYS Unbudgeted

Sel Catg Budget (B) Encumbrance (E) Actual (A) Income %ACT %A/E

_ INCOM 348,201.00 - 49,126.11 299,074.89 0.141 0.141

Sel Catg Budget (B) Encumbrance (E) Actual (A) Balance %ACT %A/E

_ SALRY 95,326.00 17,107.00 24,830.00 53,389.00 26% 44%

_ WAGE 14,826.00 -

17,000.00 (2,174.00) 115% 115%

_ ALLOT 114,000.00 38,112.17 32,000.00 43,887.83 28% 62%

_ FRNGE 30,114.00 -

8,934.49 21,179.51 30% 30%

_ EQUIP - -

11,000.00 (11,000.00) - -

_ CAPTL - -

- - -

_ OVRHD 93,935.00 -

43,368.59 50,566.41 46% 46%

_ TOTAL 348,201.00 55,219.17 137,133.08 155,848.75 39% 55%

NET - 55,219.17 88,006.97 (143,226.14)

Create Date: 11 / 13 / 2013 Closed Date: 12 / 31 / 2014 40 % Elapsed Days

STATUS: OPEN (Begin to End Date)

NEXT ACCT: 04 - 032 - 7X NP X1290_ FISC YR: 2012 / 2013 CCTR: ________________

NEXT FUNCTION: _____________________________________ (MENU, KEYS, END)

Dr. Hanold noticed from the project’s financial summary an available budget of $155,849, so he requests the following:

• Hire a visiting scientist from Shanghai University, estimated cost $30,000 (7/1/13-6/30/14)

• Schedule a trip to Shanghai to coordinate research plans, estimated cost $6,500 (May 3013)

• Purchase a Mixed Signal Oscilloscope, estimate cost $13,500 (ASAP)

Total Cost: $50,000

What information is the PI lacking?

The PI didn’t have a true picture of the available balance:

• Financial summary not complete • Salary & fringe not fully

encumbered• Sub-awards not paid• Purchase requests exceed

budget

What other mistakes is the PI making?

Was the capital equipment budgeted or approved by sponsor?

Does foreign travel require approval?

Can we hire a Chinese national on a project of this nature?

Is your PI involved in monitoring income?

Can your PI view the income line? Does he or she understand what that means?

Does your PI have any “skin in the game”? Who covers the bad debt in the event of non-payment?

What tools can we use to educate the PI?

• Can your PIs check their balances live?• Are all anticipated costs encumbered?

What controls do you impose on the budgets?

Do you place controls on line items (e.g., equipment, foreign travel, admin time)?

Do you require additional approvals prior to late salary transfers and/or equipment orders?

Can projects be flagged for additional scrutiny (e.g., hiring a foreign national on an export controlled project)?

Is faculty training even possible?How?

What methods do you use at your university for faculty training?

How do you communicate policy changes?

What consequences do faculty members face for non-compliance?

Do sponsors always pay their bills?

When do you get the PI involved if the company isn’t paying invoices?

How do you inform administrative units of serious payment problems?

Do you “flag” sponsors with a history of non-payment? How is this communicated with PIs?

Tools for tracking accounts receivable

• Monitoring Accounts Receivable:– Aging Report– Quarterly Status Report, accounts > 150 days

• Collection process• Management reports: Aging trend &

Dashboard• Black list, sponsors with bad payment history

Is your PI involved in financial risk assessment?

Do you have a way of informing your PI at the proposal stage that a potential sponsor has a history of not paying invoices?

How can you mitigate risk?– Modified payment schedule?– Up front payment requirements?

Are reporting obligations clear?

How do you communicate financial (and other) reporting obligations to your PI?

Is your PI ever involved in preparing special financial reports?– Task based invoicing– Cost center reconciliation

Does your PI understand cost share?

When you have multiple sources of cost-share on a project, who ties them together for financial reporting?

Does your PI have access to this information?

Principal

Investigator

Grant Administrator

Same perceptions & expectations?

IP & publishing rights

Relationship with sponsor and collogues

Scope of work & deliverable schedule

Accurate & timely picture of available funds

PI’s Priorities

Accurate financial reporting and timely closeout

Budget control

Reasonable, allocable & allowable costs during period of performance

Cashflow, billing & accounts receivable monitoring

AG’s Priorities

Common goals

Deliverables

Budget

Financial reportingCompliance

Cashflow