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Understanding F&A Costs Date Presenter Name Presenter Phone Number Presenter E-mail.

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1 Understanding F&A Costs Date Presenter Name Presenter Phone Number Presenter E-mail

2 2 A-21 Definition A-21 definition of F&A costs “F&A costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity”

3 3 Definition Facilities & Administrative costs is an easy mechanism for charging a sponsored project an added cost for facilities used and administrative costs –Some costs are too difficult or too time consuming to account for on an individual project basis –This is a shortcut accounting method for general instead of project-specific costs –Actual project direct costs multiplied by a predetermined percentage rate

4 4 Regulatory guidance OMB Circular A-21 –Direct costs and F&A cost –Identification & assignment of F&A cost To determine UT’s F&A rate, the nature of our costs are evaluated and classified in prescribed cost pools for facilities costs and administrative costs –Determination & application of F&A cost rates

5 5 Direct versus F&A costs Direct costs –Salaries, staff benefits, supplies, long-distance phone calls, travel, equipment, subcontracts –Exception to “basic support” costs Due to nature of project technical work F&A costs –Facilities costs Bldgs, equip, electricity, library –Admin costs “Basic support” costs

6 6 Expenses included in F&A Facilities –Buildings –Sidewalks –Electricity / fuel –Equipment –Library –Security –Custodial Administrative –Department clerical & admin staff salaries –Research & business offices –Basic office supplies & expenses –Portion of other admin costs – Dept Head, Dean, system charge, etc.

7 7 F&A facts Federally-approved rate applied to a specified cost base Matrix of rates in effect Reimbursement for expenses already paid by UT to support research –These are real costs! Predetermined F&A rates to be used prospectively Fixed rate for the life of the sponsored project –This is really important!

8 8 Matrix of F&A rates Campus Function –Instruction –Research –Other sponsored Activities Location –On-campus –Off-campus Award year –Same rate for life of project This is a requirement of OMB Circular A-21

9 9 Current rates in effect FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08BASE KNOX INSTRUCT ON-CAMPUS45.0 48.0 MTDC KNOX INSTRUCT OFF-CAMPUS26.0 KNOX RESEARCH ON-CAMPUS43.0 45.0 46.0 47.0 KNOX RESEARCH OFF-CAMPUS23.0 24.7 26.0 KNOX OTHER SPONSORED ACTIVITY ON-CAMPUS39.0 40.0 32.0 KNOX OTHER SPONSORED ACTIVITY OFF-CAMPUS24.5 25.0 24.0 KNOX IPA AGREEMENTS 6.2 TULL INSTRUCT ON-CAMPUS35.0 34.8 31.7MTDC TULL INSTRUCT OFF-CAMPUS26.0 TULL RESEARCH ON-CAMPUS50.5 50.3 50.0 TULL RESEARCH OFF-CAMPUS26.0 MHD RESEARCH ON-CAMPUS18.0 IPA AGREEMENTS 7.0 CHATTANOOGA ON-CAMPUS48.0 47.0 45.045.5 SAL & WAGES CHATTANOOGA OFF-CAMPUS16.8 13.1 MARTIN ON-CAMPUS39.0 44.0 SAL & WAGES MARTIN OFF-CAMPUS14.1 16.0

10 10 Current rates in effect MEMPHIS INSTRUCT ON-CAMPUS36.0 36.1 37.0 MTDC MEMPHIS INSTRUCT OFF-CAMPUS30.0 29.0 26.0 MEMPHIS RESEARCH ON-CAMPUS42.542.0 43.0 46.0 MEMPHIS RESEARCH OFF-CAMPUS23.6 24.4 26.0 MEMPHIS OTHER SPONSORED ACTIVITY ON-CAMPUS30.0 28.2 39.0 MEMPHIS OTHER SPONSORED ACTIVITY OFF-CAMPUS22.0 23.8 23.9 MEMORIAL RES CTR ON-CAMPUS37.0 36.8 MTDC MEMORIAL RES CTR OFF-CAMPUS 26.0 AG EXPERIMENT STATION-ON-CAMPUS31.5 30.5 35.0 MTDC AG EXPERIMENT STATION-OFF-CAMPUS31.5 30.5 22.0 AG EXPERIMENT STATION-IPA AGREEMENTS 3.0 AG EXTENSION SERVICE-ON CAMPUS14.0 15.0 MTDC AG EXTENSION SERVICE-OFF CAMPUS14.0 12.6 AG EXTENSION SERVICE-IPA AGREEMENTS 2.0 IPS ON-CAMPUS29.0 28.8 28.0MTDC IPS OFF-CAMPUS21.0 22.0 VET MED INSTR ON-CAMPUS35.0 34.8 ***MTDC VET MED INSTR OFF-CAMPUS 26.0 ****Beginning FY 06 VET MED RES ON-CAMPUS45.0 44.8 45.0 instruction should VET MED RES OFF-CAMPUS 26.0 use Knoxville rates VET MED IPA AGREEMENTS 4.0

11 11 Frequency of computation Computer program is executed monthly during the month-end closing process –This normally occurs on the 3 rd or 4 th business day of the following month

12 12 Basis of computation Expenditures that posted to the WBS Element for the month Attributes present on CJ20N for the WBS Element –Control tab - Costing sheet and Overhead key –Cust enhancement tab - F&A box of 5 attributes

13 13 CJ20N Control tab Costing sheet –Budget entity 01 is Knoxville –Source of funds F is Federal –Base M is MTDC Overhead key –Budget entity 01 is Knoxville –Function R is Research –Location N is on-campus –Rate agreement year 02 is 2002 These attributes are critical because they actually control the F&A postings

14 14 CJ20N Customer enhancement tab These attributes are for informational purposes only – they don’t actually control the F&A and F&A cost sharing postings –Audited base –Audited rate % –Allowed base –Allowed rate % –Location

15 15 Audited versus allowed The audited rate and base are predetermined based on UT’s F&A rate agreement with the Federal government The allowed rate and base are those specified in the individual award document or sponsor rules For most sponsored projects, the sponsor allows us to charge our audited rate –If not, it’s called F&A cost sharing

16 16 Cost bases Modified Total Direct Costs (MTDC) base Salaries & Wages (S&W) base Total Direct Costs (TDC) Other –Participant support costs

17 17 MTDC base MTDC is Modified Total Direct Costs Definition: –Total direct costs minus certain modifying cost elements –Modifiers mandated by Federal government MTDC is the most common audited base and is specified by the Federal government in F&A rate agreements with large research institutions –All of UT except for Chattanooga and Martin which use Salaries & Wages base

18 18 Modifiers Memorize these cost elements –461000 Equipment –All of 444000 Grants & Subsidies (includes 444100 Student Fees) –482100 Subcontracts > $25,000 –441300 Real Estate Rental –Patient Care costs (Memphis) Several different cost elements

19 19 Subcontracts modifier (These rules apply to each subcontractor for the life of the project) Cost element 481100 –Subcontracts up to $25,000 Does incur F&A costs Cost element 482100 –Subcontracts greater than $25,000 Does NOT incur F&A costs

20 20 MTDC computation example

21 21 S&W base S&W is Salaries and Wages Definition: –Just salary cost elements make up the base S&W is the audited base specified by the Federal government in F&A rate agreements with small educational institutions –UT’s Chattanooga and Martin campuses

22 22 S&W computation example

23 23 TDC base TDC is Total Direct Costs Definition: –All direct costs are included in this base TDC is never an audited rate specified by the Federal government in F&A rate agreements with educational institutions –But it is a common allowed base State of Tennessee agencies use it

24 24 TDC computation example

25 25 Other bases Other bases may be defined and used by specific sponsors Other bases are never an audited rate specified by the Federal government in F&A rate agreements with educational institutions Example – participant support costs

26 26 Participant support costs This F&A base is sometimes an allowable base used by Federal agencies for that portion of the award costs directly supporting participants –May include various types of costs such as housing, motor pool, supplies, etc. –These costs must be collected separately in a WBS Element so that the correct F&A costs can be computed and posted

27 27 Participant support costs computation example

28 28 F&A posting Audited F&A costs are debited to the sponsored project WBS Element using cost element 501000

29 29 F&A cost sharing Definition: –The difference between our audited rate and what the sponsor will allow Must be negotiated & approved in advance by campus / unit research office Most sponsors will pay our audited rate F&A cost sharing should be minimized –A portion of collected F&A is returned to college / unit that generated it –This is reimbursement for actual costs that UT has already spent

30 30 F&A cost sharing attributes Attributes are located in IRIS on CJ20N –Cust enhancement tab –Settlement rule and settlement parameters Can be complicated to set up correctly

31 31 Allowable F&A attributes If there is a difference between the audited rate and base and the allowed rate and base, then F&A cost sharing is indicated These attributes are for informational purposes only – they don’t actually control the F&A and F&A cost sharing postings

32 32 Settlement required attribute In IRIS, cost sharing is accomplished by a process known as “settlement” The “settlement req” attribute must indicate whether or not there is an active settlement rule on the WBS Element

33 33 Menu path to settlement The settlement parameters and settlement rule are attached to the WBS Element

34 34 Settlement rule The settlement rule shows the percentage of F&A costs to be cost shared In this example, 92.89% of the F&A costs must be cost shared to get to the allowed rate of 3.2% –45% *.9289 = 41.8 –45% - 41.8% = 3.2%

35 35 Settlement parameters The settlement parameters control the type of settlement to be done Get here via menu path Goto > Settlement parameters

36 36 F&A cost sharing posting F&A cost sharing is credited using cost element 501990 in an amount sufficient so that the net F&A charge is equal to the amount or % allowed by the sponsor

37 37 Importance of posting gross amounts UT records the gross amounts for F&A costs and for F&A cost sharing in separate cost elements –Fully cost the project –Monitor cost sharing for management purposes –Easily report cost sharing to sponsors –Cost sharing must be quantified for F&A rate proposals

38 38 F&A costs and F&A cost sharing posting example Gross F&A costs Gross F&A cost sharing Net F&A costs allowable

39 39 Posting exception for TDC base IRIS is unable to charge the audited base and net down to a TDC base Solution: –Charge the allowable rate using TDC base Implications: –Overstates F&A costs –Overstates F&A cost sharing –Net F&A amount is correct

40 40 TDC posting example Here’s how we wish we could post it Here’s how we actually post it

41 41 F&A overspending Sometimes, a PI may over or under spend a project because only the direct cost budget variance was reviewed –Spending differently than the budget may cause this if differences are between F&A and non-F&A bearing cost elements –See the example on the next slide –IRIS reports ZFM_WBS_SUMMARY and ZFWBS012 calculate amount left to spend taking this situation into account

42 42 F&A overspending example

43 43 Training classes 1 Overview of Accounting for Sponsored Projects 2 OMB Circulars & Cost Accounting Standards 3 Understanding F&A Costs 4 Direct Costing 5 Cost Transfers & Closeout 6 Cost Sharing 7 Subcontract Monitoring 8 Advanced Topics 9 Invoicing, Reporting & Cash Receipts 10 Sponsored Projects Reports in IRIS Other – IRIS reporting for sponsored projects


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