The University of Wisconsin-Madison
Research and Sponsored Programs
Notice 93-3
November 18, 1992

TO: Deans, Directors, and Department Chairpersons and Secretaries
(for distribution to all Faculty)
FROM: Robert W. Erickson, Director
SUBJECT: Financial Responsibility Policy for Extramural Projects

The University of Wisconsin-Madison has recently undergone close fiscal scrutiny in the form of two separate audits. The first was a financial and compliance audit performed by the State of Wisconsin/Legislative Audit Bureau to satisfy the requirements of Office of Management and Budget Circular A-133. The second, which was conducted by the campus Office of Internal Audit, represented an operational audit of non-federal gifts, grants and contracts with primary focus on the functions performed by Research and Sponsored Programs. While the results of the audits were generally favorable, they did identify a definite need to establish who has primary fiscal responsibility and accountability for extramural projects regarding (1) budget overdrafts (2) delinquent payments from sponsors caused by dissatisfaction with the deliverables or other contractual misunderstandings and (3) delinquent payments caused by the financial difficulties of the sponsor, up to and including bankruptcy.

Regarding item (1), the responsibility for promptly clearing budget overdrafts, especially at the end of a project, rests with you as Dean/Director, even though post-award administration is a shared responsibility among Principal Investigators, Department Chairs, yourself, and this office. While this responsibility has been identified in the past, the actual clearance of overdrafts has not always been happening in a timely manner. The campus was criticized in both audit reports for allowing accounts to remain in an overdraft status for an excessive period of time. This has been happening even though your designated representatives receive monthly listings of all accounts in an overdraft status. We will be working closely with the Office of the Provost, Office of Budget Planning and Analysis, and your designated representative in the upcoming weeks to expedite removal of current overdrafts. We do not want to have to revisit this item in the next audit scheduled for 1994.

Items (2) and (3) do not speak to budget overdrafts, but rather to situations where total expenditures exceed the amount of receipts collected, both on Federally and non-federally funded projects. The principal investigator and other project staff are usually the first to become aware of either the sponsorís potential dissatisfaction with project results or the sponsorís financial difficulties. It is extremely important to minimize the financial damage when such facts become known. Spending should be stopped immediately and Research and Sponsored Programs should be notified through your office. While we, along with the Office of Legal Services, will make every effort to alleviate the difficulties, ultimate financial liability for both of these situations, as with the overdraft situation, rests with you as Dean/Director.

In some situations, the only alternative available is the use of indirect cost recoveries to remove the overdraft or to improve the receipt shortfall. In such cases, a subsequent reduction in the annual overhead allocation to your school/college will be made.

We will appreciate a special effort by you, your staff, and principal investigators in your school or college to improve cash management of extramural funds at the University of Wisconsin-Madison. It is extremely important that we comply with State of Wisconsin financial management requirements and that we do not jeopardize our current level of fiscal autonomy.

Please be advised that the Office of Research and Sponsored Programs will be willing to assist you in obtaining any additional data and support you need to fulfill your financial management responsibilities. If you have any questions contact Robert Andresen, Assistant Director at 608-262-2896.

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