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Sailing Smoothly Over the C's of Cost Accounting Standards

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Presentation on theme: "Sailing Smoothly Over the C's of Cost Accounting Standards"— Presentation transcript:

1 Sailing Smoothly Over the C's of Cost Accounting Standards

2 Presenters Jill Frazier Tincher Senior Director University of Miami Cindy Hope Director, Office for Sponsored Programs The University of Alabama

3 Office of Management & Budget (OMB)
OMB Circular A-21 Cost Accounting Standards (CAS)

4 Direct Costs Reasonable Allowable Allocable Consistently Applied

5 Direct Costs Salaries/Wages Fringe Benefits Materials & Supplies
Travel Equipment Subcontract Consultant Student (Training Grants) Patient Care Allocable Reasonable Consistently Allowable These are some examples of direct costs which are allowed on Federal Grants. Direct Costs – The costs that are directly related to your project and benefit the scope of work. These charges should be included in the budget. However, they must meet the test of being a direct cost. Costs must be ALLOCABLE, REASONABLE, ALLOWABLE AND CONSISTENTLY APPLIED. The questions to ask yourself are: \ ALLOCABLE – is it specifically identifiable to the project and incurred solely for the advancement of the scope of work? REASONABLE –is it a cost a prudent person would consider reasonable given the same set of circumstances?. ALLOWABLE – Is the cost not specifically designated as unallowable by regulation and or grant/contract specific award conditions? CONSISTENTLY APPLIED – Is this cost consistently treated with generally accepted accounting? These rules are found in two pronouncements: OMB Circular A21 and OMB Circular A110. principles Administrative or clerical salaries, postage, copying, general purpose supplies and equipment such as computers etc. are not allowable and cannot be included on federal grants UNLESS the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support that is significantly greater than the routine level of such service. Applied

6 Unallowable Costs Always Unallowable Unallowable as Direct Costs
General-Purpose Costs Always Unallowable – A-21, Section J. Provide handout. Unallowable as Direct Costs – do not meet the test of reasonable, allocable, consistent and allowable; therefore, are unallowable as direct costs on a grant or contract. Administrative and General-purpose costs – administrative and/or clerical salaries, postage, copying, general-purpose equipment such as computers, etc. are not allowable as direct costs and cannot be included in proposal budgets UNLESS the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support that is significantly greater than the routine level of such services provided by academic departments. “Significantly greater than routine level” has been defines in OMB A-21 and in the Cost Accounting Standards (CAS) as: 1) Administrative and general-purpose costs for a research project that can be identified as a “Major Project” and when these costs are justified in the budget narrative, or 2) Administrative and general-purpose costs for a research project that is not a “Major Project” but where the particular cost can be justified as unique or extraordinary and bears a direct relationship to the particular project (based on the scientific/technical requirements of the project) and are included in the budget and budget narrative. NIH grant guides states “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 administrative and general purposes as direct costs of the award.” Hand out the A-21 appendix on major project exemption. A-21 appendix specifically states that “major project alone does not justify general purpose costs.”

7 Cost Accounting Standards
Consistency in estimating, accumulating and reporting costs (CAS 501) Spend the money as you proposed in the budget

8 Cost Accounting Standards
Consistency in allocating costs incurred for the same purpose (CAS 502) Administrative costs cannot be charged directly to a federal sponsored project…EXCEPTIONS

9 Exceptions Major Project Non-Major Project

10 Major Project Large Complex Program Extensive Data Collection
Conferences/Symposiums Manual Preparation/Production Geographically Inaccessible Multiple Project-Related Investigator

11 Major Project (Continued)
Examples Scientist/Multi-Institution Collaboration Clerical Supplies, Postage, Duplicating, Network Manual Preparation/Production Word Processor Salary, Network, Printer Supplies, Duplicating and Postage

12 Major Project Does Not Guarantee Exemption
Does Not Guarantee Allowability of All General-Purpose Costs Again, reference the A-21 Appendix hand out. Emphasize that the fact that project falls into a major project category does not mean that the Principal Investigator can request exemption and incur expenses associated with any and all general-purpose expenses. An explanation must be supplied to substantiate the exemptions. In addition, the PI must include the reasons why these costs are above and beyond those costs normally provided for in F&A.

13 Non-Major Project/Line Item
Different Purpose Not a Major Project Warrants some General Purpose Costs Required for the Scope of Work Above & beyond normal level of General Purpose Costs

14 Non-Major/Line-Item (Continued)
Clerical/Administrative Salaries Cannot Be Paid!

15 Cost Accounting Standard
Accounting for unallowable costs (CAS 503) NEVER charge unallowable costs to a federally sponsored project

16 Cost Accounting Standard
Using the same cost accounting period (CAS 504) To develop F & A rate proposal

17 Facilities & Administrative (Indirect) Cost
Government Negotiated Rate Different Rates Function/Program (Research, Instruction, OSA) Campuses On-Campus vs. Off-Campus F&A Waivers F&A is negotiated to help defray the costs associated with the conduct of research (utilities, building maintenance, departmental administration, libraries and general administration). F&A is not collected on patient care costs, capital equipment, alterations and renovations of facilities, rental cost of off-site facilities, tuition remission, scholarships, fellowships, portion of each subgrant and subcontract in excess of $25K. F&A rates are negotiated by campus. Medical and South campus share the same rate. Gables has a different rate. Marine and Richmond share the same rate. There are also on-campus and off-campus rates. Off-Campus rates apply to projects performed in facilities not owned by UM and to which rent is directly allocated to the project. If more than 50% of the project is performed, off-campus, the off-campus rate applies to the entire project. State of FL rates are determined by the State. Private sponsoring agencies should pay the federal F&A rate, but rarely do. There is typically less administrative work and other infrastructure costs needed for private awards. F&A Waivers hurt the University. The administrative costs associated with the F&A rate is capped by the government and negotiated down from the actual administrative costs proposed. The Government does not pay it’s fair share of F&A. When a PI requests a waiver, it decreases the amount of F&A reimbursement.



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