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Financial Stewardship of Sponsored Project Funds


Financial Stewardship of Sponsored Project Funds ... Certify Time & Effort Submit technical/progress reports ... PI's effort must be certified by the PI ... – PowerPoint PPT presentation

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Title: Financial Stewardship of Sponsored Project Funds

Financial Stewardship of Sponsored Project Funds
  • Presented by the Office for Sponsored Programs
  • Cindy Hope - Director
  • Tammy Hudson - Assistant Director

  • Promote good stewardship of sponsored project
  • Promote understanding of Research
    Administration at UA

Office for Research
  • Office of the Vice President
  • ? Dr. Joe Benson Interim Vice President for
  • gt Office for Sponsored Programs
  • gt Research Compliance
  • gt Technology Transfer
  • gt AIME (Alabama Institute for Manufacturing
  • gt CAF (Central Analytical Facility)

Office for Research
  • Office for Sponsored Programs
  • ? Cindy Hope, Director
  • 1) Office for Sponsored Programs (Pre-Award
  • ? Lauren Wilson, Senior Associate Director
  • ? Carol Hollyhand, Associate Director
  • 2) Contract and Grant Accounting
  • ? Tammy Hudson, Associate Director
  • 3) Cost Accounting and Analysis
  • ? Linda Clemmons, Cost Analyst
  • Staff listings at
  • http// h

Roles Responsibilities (cont.)
  • NOTE Only an authorized official for the
    University can legally bind the University. A PI
    is not a legally binding official authorized by
    the University Board of Trustees!

Roles Responsibilities (cont.)
  • PIs Responsibilities
  • ? Provide Good Sound Research or Programmatic
  • ? Provide Overall Project Management
  • gt Manage all project activities to ensure
    compliance with Federal, State,
    University and sponsor laws, rules, regulations
    and policies
  • gt Manage the project budget (Balance the
    books, monitor spending rate)
  • gt Request Amendments/Modifications through
  • gt Authorize financial transactions of the
  • gt Certify Time Effort
  • gt Submit technical/progress reports
  • gt The Federal Government places the
    primary responsibility for managing a federally
    sponsored project with the PI.
  • Now Available! Report of Budget, Expenditures,
    Encumbrances and Available Balance by PI by Grant

Agreement Types - Source
  • Federal
  • ? There are 26 Federal grant-making agencies
    and over 1000
  • individual grant programs
  • (http//
  • Federal Pass-Through
  • ? Federal requirements apply even though the
    funds provided to the University are flowing
    through a non-federal entity
  • Private
  • State
  • Local

During fiscal year 2007-2008, approximately 77
of the Universitys 31 million in sponsored
research expenditures originated with the Federal
Agreement Types Legal Form
  • Contracts -- Procurement
  • ? Outline specific goals and requirements
  • ? For goods/services to be provided to the
    sponsor by the University
  • ? Procurement relationship
  • ? VERY RESTRICTIVE can have high demands,
    procurement and property clauses, e-Verify, etc.
  • Grants -- Assistance
  • ? For transfer of money, property or services to
    the recipient
  • ? To provide support to accomplish a public
    purpose of support
  • ? Anticipates no substantial programmatic
    involvement of the sponsor
  • Cooperative Agreements -- Assistance
  • ? Similar to a grant
  • ? Substantial sponsor involvement

Agreement Types Legal Form (cont.)
  • Gifts
  • ? Unilateral transfer of funds by a donor
    without restrictions
  • ? Allow the recipient significant freedom
    to manage the project and determine how the
    assets will be utilized
  • ? Do not require deliverables or detailed
  • ? Do not require regulatory oversight
    (animal care, human subjects, bio-safety)
  • ? Do not require separate accounting
    procedures or detailed financial reports
  • ? Administrated by Office of University

Regulations, Policies Procedures- Financial
  • Federal
  • ? Office of Management Budget (OMB)
  • ? Federal Acquisition Regulations (FAR)
  • State
  • ? State law (e.g. bid law), Opinions of State
  • University
  • ? Generally conform to Federal, and always to
    State, guidelines
  • ? Usually more specific and may be more

Regulations, Policies Procedures- Financial -
  • Office of Management and Budget (OMB) Circulars
  • http//
  • ? A-21, Cost Principles for Educational
  • ? A-110, Uniform Administrative Requirements
    for Grants and Other
  • Agreements with Institutions
    of Higher Education, Hospitals and Other
  • Nonprofit Organizations
  • ? A-133, Audits of States, Local Governments
    and Nonprofit Organizations
  • Federal Agency and Program Rules (examples)
  • ? NIH Grants Policy Statement
  • http//
  • ? NSF Proposal and Award Policies and Procedures
  • http//

Regulations, Policies Procedures- Financial -
  • Federal Acquisition Regulations (FARs)
  • ? Regulations applicable to federal
    procurement actions
  • gt For UA, applicable to contracts
  • gt A good website for searching the
  • http//
  • The FAR System is Established for the
    codification and publication of uniform policies
    and procedures for acquisition by all executive
    agencies. FAR .101

Regulations, Policies Procedures- Financial
Federal Order of Precedence
Award Special Conditions Program Rules Agency
Rules OMB Circulars and/or FAR
Regulations, Policies Procedures- Financial -
Federal (cont.)
  • OMB Circular A-21
  • ? Establishes the principles for determining
    costs applicable to grants, contracts and other
    agreements with educational institutions
  • ? Prescribes methods for calculating,
    negotiating and charging Facilities
    Administrative (FA) cost rates (indirect or
    overhead rates)
  • ? Includes four cost accounting standards
  • gt Consistency, Consistency, Consistency

Regulations, Policies Procedures - Financial -
Federal - OMB A-21 (cont.)
  • Factors affecting allowability of costs
  • ? Reasonable
  • gt Prudent person test
  • gt Necessary for the performance of the
  • gt Consistent with established
    University practices
  • ? Allocable
  • gt Benefits the project
  • gt Chargeable in accordance with the
    relative benefit received
  • Proportional benefit
  • gt Costs of one project may not be
    shifted to another
  • gt Be careful of equipment purchased
    near the end of a grant/contract
  • Document, document, document!
  • Enough detail to support the charge
  • Explanation of how the expense benefited the

Regulations, Policies Procedures - Financial
Federal Consistent Treatment
  • Consistent treatment
  • gt Consistency in estimating,
    accumulating and reporting
  • From proposing to charging to
  • Fixed-Price - Payment is not subject to
    adjustment based on cost incurred. Billing(s)
    are not based on actual expenditures
  • ? Residual funds revert to the University
  • gt Beware of falsification in
    proposing/estimating costs
  • gt 25 residual may indicate
  • Change in scope
  • Shift of expenses to department
    or other sponsored agreements
  • gt Not an excuse for inconsistent
    accounting practices!!!

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Factors affecting allowability (cont.)
  • ? Consistency in allocating costs incurred
    for the same purpose
  • ? All costs incurred for the same purpose,
    in like circumstances, are either direct costs
    only or FA costs only with respect to final cost
    objectives. (OMB A-21, C.11.a.)
  • gt Direct Costs
  • Identifiable and assignable to
    a specific project or activity
  • Support the projects purpose
    and activity
  • Included in award budget or
    sponsor approval for re-budgeting
  • gt FA Costs
  • Cannot be clearly identified or
    allocated to an individual project
  • Not identified readily to a
    specific program or activity

  • Direct Costs
  • ? Non-administrative Salaries, Wages, Fringe
    Benefits, such as
  • gt Principal Investigator gt Faculty
  • gt Research Assistant gt Scientist
  • gt Technician gt Post
  • ? Animals and Animal Care Per Diems
  • ? Consultants
  • ? Equipment (Technical Scientific)
  • ? Maintenance/Repair - Scientific Equipment
  • ? Page Charges/Reprints/Reference Materials
  • ? Freight/Other Transportation
  • gt UPS gt FedEx gt Priority Mail
  • ? Rental of Space / Equipment (Non-UA owned)
  • ? Service/Recharge Center Charges
  • ? Subcontracts
  • ? Materials Supplies
  • gt Chemicals (Lab) gt Gases gt Radioisotopes
  • ? Telephone Charges - Long Distance
  • Indirect Costs
  • ?Administrative and Clerical Salaries, Wages,
    Fringe Benefits, such as
  • gt Fiscal Officer
    gt Accountant
  • gt Department Administrator gt
  • gt Administrative Staff officer gt
    Staff Asst.
  • ? Computer Hardware (General Purpose)
  • ? Dues Memberships
  • ? Equipment (General Purpose)
  • gt Copier gt Office Furniture
  • ? Maintenance/Repair - General Purpose Eqmt.
  • ? Meals Refreshments
  • ? Printing
  • ? Postage
  • ? Subscriptions
  • ? Office Supplies
  • gt pens gt pencils gt transparencies
    gt binders
  • gt paper, tablets gt staples gt files,
  • gt computer software (general)

CAS 502, Interpretation (c) - proposal costs are
indirect unless pursuant to a specific
requirement of an existing sponsored agreement
Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • WHY? Research Rate Simplified FA
  • Numerator Expenses
  • Allocations to Research from
  • Library
  • Building Depreciation
  • Operation Maintenance (Utilities)
  • General Administration (Payroll)
  • Department Administration (Dean, Business
  • Sponsored Projects Administration
    FA Rate
  • Denominator Expenses
  • MTDC of
  • Sponsored Research Agreements
  • University Research
  • Cost Sharing/Matching on Research Agreements

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Consistent Treatment (cont.)
  • ? Exception for salaries of administrative or
    clerical staff ONLY allowed for major project
  • gt Major project examples/guidance A-21
    Exhibit C
  • ? Office supplies, postage, local telephone
    costs, and memberships shall normally be treated
    as FA costs Exceptions ONLY for different
    purpose or circumstances (CAS 502)
  • ? ALL exceptions need University approval
    and must meet the following
  • gt Cost are explicitly budgeted, with
  • gt Direct Charge Justification Form

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Consistent Treatment (cont.)
  • Auditors will expect documentation AND to find
    that there are REALLY exceptional circumstances
  • The fact that a cost requested in a budget is
    awarded, as requested, does not ensure a
    determination of allowability. The organization
    is responsible for presenting costs consistently
    and must not include costs associated with their
    FA rate as direct costs. -- NIH Grants Policy

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Factors affecting allowablity (cont.)
  • ? Unallowable costs are not eligible for
    Federal reimbursement
  • either directly or indirectly
  • ? Unallowable Activities
  • Fundraising Alumni Activities
  • Lobbying
    Public Relations
  • ? Unallowable Transactions
  • Alcoholic Beverages
  • Fines Penalties
  • ? Directly associated costs of unallowable
    activities and transactions are also

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Unallowable Costs (cont.)
  • ? OMB A-21, J., General provisions for
    selected item of cost
  • Some items needing special attention
  • (Allowability depends on the facts and
  • gt Equipment (J.18. Equip and other cap exp.)
  • gt Meetings (J.32. Meetings and Conferences)
  • gt Tuition (J.45. Scholarship and student aid
  • UA policy, Tuition, Stipends and Other
    Student Payments at
  • http//
  • gt Travel (J.53. Travel costs)
  • UA policy is applicable
  • Allocability is a typical audit question
    (particularly 100)
  • Fly America Act

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Time Effort (TE) Reporting
  • ? Methodology for documenting salary
  • gt Must reasonably reflect the activity
    for which the employee is
  • compensated by the University
  • gt All individuals who work on a sponsored
    project are subject to TE
  • requirements
  • gt PIs effort must be certified by the PI
  • gt Most research projects should have some
    level of committed faculty effort
  • January 5, 2001 OMB
  • Minimum PI Effort, http//
  • gt Extra (Supplemental) Compensation
    (OMB A-21, J.10.d)
  • May not exceed 100 base salary without
    special permission from the agency
  • http//

Regulations, Policies Procedures- Financial -
Federal - OMB A-21 (cont.)
  • Time Effort (TE) Reporting
  • ? Intense Federal audit scrutiny in this
  • gt Salaries and wages represent the
    largest portion of sponsored project
  • gt New focus on ensuring commitments are
  • gt Issues with 100 salary charged to
    sponsored projects, even in summer
  • e.g. new proposal submissions
  • ? Web based Effort Reporting System
  • http//
  • gt Instructions for using system
  • gt UA Effort Reporting Policies and
    Procedures (including Effort Reporting

Regulations, Policies Procedures - Financial -
Federal - OMB A-21 (cont.)
  • Facilities Administrative (FA) Cost Rate
  • ? UAs Current Federally Negotiated Rates
  • gt http//
  • ? Negotiated rates assume a Modified Total
    Direct Cost (MTDC) Base
  • gt Calculated on a subset of direct costs,
    normally excluding equipment,
  • tuition, the portion of subcontract
    costs in excess of 25,000
  • ? On or Off-campus
  • gt http//

FA costs are real costs of carrying out
sponsored project activities. UA must fund these
costs from other sources when not recovered from
sponsors (i.e., full negotiated rate not charged).
Regulations, Policies Procedures- Financial -
Federal (cont.)
  • OMB Circular A-110
  • ? Sets forth standards for obtaining
    consistency and uniformity among Federal
    agencies in the administration of grants to and
    agreements with institutions of higher education
  • ? Requires Financial and Program Management
  • gt Financial Management
  • gt Property Standards
  • gt Procurement Standards
  • gt Records and Reports
  • gt Pre-award and Closeout Procedures

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Cost Sharing
  • ? The portion of project or program costs not
    funded by the sponsor
  • ? UA Cost Sharing Policies, Procedures and
    Instructions at http//
  • ? 2 types of cost sharing
  • gt Mandatory
  • gt Voluntary - Committed and Uncommitted
  • Committed is treated exactly
    like Mandatory
  • gt To count toward commitment, must be
    clearly defined and directly allocated to a
    specific sponsored project
  • gt Voluntary Uncommitted cost share
  • Defined January 5, 2001 OMB
  • gt Not typically allowed to use Federal
    funds to meet commitment

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Program Income
  • ? Gross income earned by the recipient while
  • the project is active
  • gt Directly generated by a sponsored
    activity/as a result of the award (e.g.
    fees charged to conference participants)
  • ? Treated in one of three ways - (Depending on
    policy, sponsor type, and/or terms and
    conditions of award)
  • gt Additive
  • Increases the amount available to accomplish
    program objectives
  • gt Deductive
  • Deducted from the financial commitment of
    the sponsor
  • gt Matching
  • Used to finance the non-federal share of the

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Program Income (cont.)
  • ? If not deducted from the sponsors
    obligation, must be used to further eligible
    project or program objectives
  • ? Accounted for in accordance with Federal
    and sponsor agreement (separate Fund in Banner)
  • ? A-110, .22 (g), Payment (Cash Management)
  • gt Program Income must be spent before the
    federal funds
  • ? Income earned after the program ends is not

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Revision of Budget and Program Plans
  • ? Sponsor approval for substantial deviations
    (Subpart C, .25)
  • gt Research General Terms and Conditions (1/25/08
    Federal Register)
  • The recipient must obtain the prior written
    approval of the Federal awarding
  • agency before making any of the following
    project changes
  • 1) Change in scope or objectives
    (even if no budget revision)
  • 2) Absence (gt 3 months or 25
    reduction in effort) or change of PI
  • 3) Need for additional federal funds
    (clearly no Federal liability)
  • 4) Transfer of a significant part of
    the research (e.g. subagreement)
  • Not all agencies have implemented! Those that
    do can supplement the core set with agency
    specific, program specific, or award specific
    administrative requirements.
  • gt For example, NSF incorporated effective 7/1/08
    on all new grants and funding increments BUT,
    added a prior approval requirement for
    reallocation of funds budgeted for participant
    or trainee support costs

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Revision of Budget and Program Plans (cont.)
  • ? Understanding the Effects of Re-budgeting
  • gt Re-budgeting between exempt direct cost
    and non-exempt direct costs
  • Re-budgeting to exempt costs
    (e.g. equipment) from non-exempt (e.g.
    salaries) results in a reduction to FA cost line
    which can be re-budgeted
  • Re-budgeting from exempt costs
    to non-exempt costs, requires budget
    change to provide for additional FA cost
  • ? UA Best Practices Budget Procedures for
    Grants and Contracts, found at

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Property Standards
  • Set forth uniform standards governing
    management and disposition of property furnished
    by the Federal Government whose cost was charged
    to a project supported by a Federal award. OMB
    A-110, .30
  • ? UAs Equipment Threshold (5,000 effective
  • ? UAs policy to ensure allocability does not
    allow for purchase of
  • equipment in the last 60 days of the
    project without documented
  • support for allocablity (i.e. it will be
  • ? Property Control Policy Procedure Manual
  • gt http//

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Procurement Standards
  • Set forth standards for use by recipients in
    establishing procedures for the procurement of
    supplies and other expendable property,
    equipment, real property and other services with
    Federal funds. OMB A-110, .40
  • ? All purchases must be made in accordance
    with University's
  • policies and procedures and must also
    comply with funding
  • agency guidelines and be consistent
    with the award budget
  • gt Basic requirements are geared
    towards competition
  • gt Contract provisions (e.g. Debarment
    and Suspension)
  • gt UA PP http//
  • ? Approval signature authority
  • gt Written UA policy coming soon!

Regulations, Policies Procedures- Financial -
Federal - OMB A-110 (cont.)
  • Reports and Records - Set forth the procedures
    for monitoring and reporting on the recipient's
    financial and program performance and the
    necessary standard reporting forms. They also
    set forth record retention requirements. OMB
    A-110, .50
  • ? Monitoring and reporting program
    performance (see .51)
  • ? Financial reporting
  • gt Completed and submitted by CG
    Accounting (not dept!)
  • ? Retention and access requirements for
  • gt UA retains official records centrally
  • Sponsor can hold up ALL of the agencys funding
    to UA for lack of above including
    Technical/Progress report!

Regulations, Policies Procedures- Financial -
Federal (cont.)
  • OMB Circular A-133
  • ? Establishes the audit requirements for
    federally sponsored awards
  • ? Defines prime recipient responsibilities
    for monitoring subrecipients
  • gt Subrecipient or Vendor?
  • Subrecipient versus Vendor Checklist at
  • Effect on budget! Also, Vendor
    (Professional) vs Employee
  • Budget plus Extra Compensation issues
  • gt Roles and responsibilities
  • Subrecipient Monitoring Policy at
  • gt Fed Audit - Univ. Maryland Baltimore Co
    Subawardee Findings
  • Develop a fiscal monitoring plan and
  • Review cost sharing supporting documentation

Regulations, Policies Procedures- Financial -
Federal Other Issues
  • ? Cost Transfers
  • gt What is the problem?
  • A cost is originally charged to an account
    and is, therefore, certified for
    allowability, allocability, consistency, direct
    benefit, etc.
  • A cost transfer invalidates that original
  • gt What makes the problem bigger?
  • Transfers that clear a deficit off a project
  • Salary transfers after certification
  • Inadequate explanation/justification (e.g.,
    to correct error)
  • Late (How far behind are we on account

Regulations, Policies Procedures- Financial -
Federal Other Issues
  • ? Cost Transfers
  • gt Late (continued)
  • HSS Grant Policy Statement re Cost Transfers
  • Generally unallowable but may be necessary to
    correct error, Permissible cost transfers should
    be made promptly after the error occurs but no
    later than 90 days following occurrence unless a
    longer period is approved in advance by the GMO.
  • gt UA requires that all cost transfers be
    accomplished in a timely manner and be supported
    by documentation that fully explains how the
    error occurred and a certification of the
    correctness of the new charge
  • UA Policy and link to Cost Transfer Request
    form http//

Regulations, Policies Procedures
  • And Finally, Close-out!
  • ? Need for timeliness
  • gt Start while the grant is still active
  • gt Is it really time to closeout? Extension
    should be requested well in advance of
  • ? Best Practices
  • gt Communicate throughout the life of the project
  • gt Review project expenses throughout life of the

Best Practices
  • Get it right from the beginning
  • ? Budget Procedures for Grants and
  • gt Budget development, management procedures and
    best practices in one, comprehensive document
  • gt Written with PI, Departmental Administrator,
    Grant Specialist and Grant Accountant in mind
  • gt Found on OSPs Proposal Development web page
  • http//

  • Thank You!
  • Office for Research
  • Office for Sponsored Programs
  • 348-5152
  • http//
  • Cindy Hope, 348-8119,
  • Tammy Hudson, 348-8117,
  • Contract and Grant Accounting, Staff Listing
  • http//
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