The Plan for Addressing Harvard's
"Reportable Conditions"   back to top

As many research administrators know, Harvard received over $325 million from the federal government last year to fund research -- about 21% of the University's operating budget. As a funding recipient, Harvard is obligated to comply with federal regulations regarding its accounting and financial management practices.

Each year, external auditors are engaged by Harvard to independently verify our compliance. This year, for the first time, auditors found three "reportable conditions" -- that is, three areas where our actual practices diverge from federal regulations and our own stated policies in a significant way and therefore must be reported to our "cognizant agency," the Department of Health and Human Services (DHHS).

On March 31, 2001, DHHS as well as the twenty-eight other federal agenices from whom we receive funding were notified and the information is now a matter of public record. In response, federal sponsors may demand explanations, conduct further investigations, or even withhold funds until they are confident that our practices and controls are sound.

Here is a synopsis of each of the three reportable conditions, and what grant and lab managers can do to help Harvard comply:

As they have in past years, the auditors also urged more careful and consistent management of the following:

Allowable costs: specifically, not charging general office supplies or photocopying, local telephone calls, postage, professional association dues, or alcohol directly to federal grants;

Sub-recipient monitoring: ensuring that institutions to which Harvard subcontracts federal research follow federal guidelines;

Equipment management: tracking the location, disposition, and useful life of equipment purchased with federal funds, as described in the June 26, 2000 e-News.

Service center costing: properly allocating service department expenses to services provided, setting rates to break even each year.

New Depreciation Useful Lives
for Research Facilities   back to top

In 1997, the Accounting Policies and Procedures Committee, comprising tub-level financial officers, external auditors, and staff from Financial Administration's General Accounting department, developed and adopted a depreciation methodology for Harvard's physical plant, property, and equipment. The full text of the policy is available here on ABLE.

Depreciation is an accounting process that recognizes as an annual expense a portion of the initial cost of a capital item, based on an estimate of its useful life, rather than the whole cost of that item in year one. Accumulated depreciation is also tracked to determine the extent to which the value of these assets has been "used up" or depleted over time.

Harvard's policy governs the useful life, or basis for depreciation, to be used in the development of our audited financial statements and for sponsored research cost recovery, as required by newly enacted federal guidelines (OMB Circular A-21) for sponsored research. The University's depreciation policy contained the following standards for depreciation of research facilities:

The committee was also charged with periodically reviewing estimates of useful lives against actual experience, and to revise the lives when necessary. During the winter of 2001, a panel of Harvard facilities managers was convened by the Office for Sponsored Research and tub personnel and presented with a revised depreciation schedule that combined wet and dry labs into one category and modified some component lives. The tub facilities managers confirmed that the proposed schedule would be closer to their actual building management experience than would the originally adopted component lives.

Based on this review and concurrence from both the financial deans and external auditors, the new lives for depreciation of research laboratory components, effective FY2001, are shown below, and in the revised Schedule F of the ABLE policy cited above.

As discussed with the financial deans, this change in our accounting practices will require a one-time write-off of approximately $1 million in FY2001, to be charged to tub-level balance sheet accounts.

Please address questions to:

John Bain
Office for Sponsored Research
Cost Analysis
john_bain@harvard.edu
495-1520

 

About the e-News   back to top

The Financial Administration publishes this semi-monthly electronic newsletter for users of Harvard University's financial systems, policies, and procedures. Generally, the e-News is published on the 12th and 26th of each month.

It contains:

• updates on projects underway to build or improve University financial systems;
• information about new University financial policies, procedures, and forms;
• reminders about upcoming deadlines and cut-over dates;
• tips and tricks for working more easily or productively.

We welcome questions and suggestions for improvement from readers. If your questions are of general interest, we will answer them in future issues.

Please send comments, questions, or suggestions for improvement by email to us at: fad_communications@harvard.edu

How to Subscribe or Unsubscribe from the e-News

The e-News, including all back issues and an index by topic, is available to anyone with internet access at: http://vpf-web.harvard.edu/training/enews.html. No subscription or password is needed.

When we publish each issue, we send out a notification email to all users of Oracle financials, STAR, the Budget Tools, and the Data Warehouse. Because there are nearly 5,000 users, we compile and maintain this "listproc" in an automated way. The Harvard Data Warehouse and the STAR security module are queried for all registered users. Twice a month, the queries are re-run to pick up new users. Disabled or terminated users automatically drop off. Duplicates between systems are eliminated. As a final step, email addresses are pulled from the HUID system, which is fed by the UIS Telecommunications Directory.

If you do not actively use Harvard University financial systems and find the semi-monthly notification email bothersome, you should ask your local security administrator or financial office to disable your financial system access. This is the only way to get off the listproc.

If you are an active user of Harvard financial systems, but do not receive the notification email, it is likely there is no email address listed for you in the UIS Telecommunications Directory. You can submit an email address, or change it, in three ways:

1. Via the directory coordinator for your department. This contact -- often, but not always, your department administrator -- is responsible for updating directory information throughout the year, whenever staff contact information changes. This info is fed into the online directory and to the telephone operators the next business day.

2. On the update directory page on the UIS web site.

3. FAS faculty and staff should update their records via the FAS Portal. The Portal requires a Harvard University personal identification number (PIN). PINs and supporting documentation are available on the PIN Administation site at www.pin1.harvard.edu.