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Module 5: Financial Administration of Sponsored Projects Office of Research and Sponsored Programs The University of Mississippi 100 Barr Hall ~ 662-915-7482.

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Presentation on theme: "Module 5: Financial Administration of Sponsored Projects Office of Research and Sponsored Programs The University of Mississippi 100 Barr Hall ~ 662-915-7482."— Presentation transcript:

1 Module 5: Financial Administration of Sponsored Projects Office of Research and Sponsored Programs The University of Mississippi 100 Barr Hall ~

2 Updated November 2009 Module 5 provides details on the following post-award financial topics: Account Set Up Allowability, Allocability & Reasonableness of Costs Unallowable Costs Special Costing Issues  Cost Sharing  Cost Transfers  Program Income  Regrants  Subawards Account Oversight Account Closeout

3 Updated November 2009 Account Set Up (Show me the money!) Account set up is handled by Accounting, but… A few things must be in place before an account can be set up. ORSP must have:  A fully executed award  A signed Notice of Award (Acceptance) memo  A Transmittal Sheet (with all applicable signatures/approvals)  A detailed budget that corresponds with award budget then…

4 Updated November 2009 Account Set Up (Cont.) ORSP notifies Accounting to set up account by sending:  Notice of Funding memo*  Copy of the fully executed award  Copy of the Transmittal Sheet  Budget *The Investigator is copied on this memo so that (s)he knows that an account is forthcoming. and finally…

5 Updated November 2009 Account Set Up (Cont.) Accounting sets up the account(s)  Participant support costs that do not have F&A charged to them require a separate account  Cash cost sharing requires a separate account Accounting sends a memo to the Investigator with copy to the ORSP The Investigator can begin incurring charges

6 Updated November 2009 So you have your money…now what? Costs that are charged to a sponsored project must be: Allowable and Allocable and Reasonable

7 Updated November 2009 Determining Allowability of Costs

8 Updated November 2009 Determining Allowability of Costs OMB Circular A-21, C.2. provides the following test for determining allowability of costs:  They must be reasonable and  They must be allocable to the sponsored project and  They must be consistently treated and  They must conform to any limitations or exclusions of the federal government or of the sponsor as to the types or amounts of cost items Further…

9 Updated November 2009 Determining Allowability of Costs OMB Circular A-21, Section J, gives an alphabetical list of 50 types of costs/transactions and provides specific policies regarding their allowability. GET TO KNOW THIS SECTION.

10 Updated November 2009 Examples of Generally Unallowable Costs  Advertising, public relations  Alcoholic beverages  Alumni activities  Cash donations  Entertainment  Organized fund raising  General public relations  Lobbying  Memberships in social, dining or country clubs  Memorabilia, promotional materials  Moving costs if employee resigns within 12 months  Certain recruitment costs  Student activities  Certain travel costs (first class airfare, for example)

11 Updated November 2009 Determining Allocability of Costs

12 Updated November 2009 Determining Allocability of Costs OMB Circular A-21, C.4. provides the following criteria for determining allocability of costs: A cost can be allocable as either a direct cost 1 or indirect cost (F&A) 2 A cost is allocable as a direct cost if the goods or services provided are assignable in accordance with the relative benefits received (more about this on the next slide) A cost is allocable as an indirect cost if it is necessary for the overall operation of the institution and conforms with other principles in A-21 1 Costs that can be identified specifically with or directly assigned to the project relatively easily and with a high degree of accuracy 2 Costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project

13 Updated November 2009 Determining Allocability of Costs: Direct Costs A cost is allocable as a direct cost if the goods or services provided are assignable in accordance with the relative benefits received means: It is incurred solely to advance the work under the sponsored project It benefits both the work under the sponsored project and other work of the institution in proportions that can be approximated If a cost benefits two or more interrelated projects in proportions that cannot be determined, the cost may be allocable on any reasonable basis

14 Updated November 2009 Determining Reasonableness of Costs

15 Updated November 2009 Determining Reasonableness of Costs OMB Circular A-21, C.3. provides the following criteria for determining reasonability of costs: “A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved therefor, reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.”

16 Updated November 2009 Special Costing Issues

17 Updated November 2009 Special Costing Issues Cost Sharing Cost Transfers Program Income Regrants Subawards

18 Updated November 2009 Cost Sharing

19 Updated November 2009 Special Costing Issues: Cost Sharing Cost sharing is any cost associated with a sponsored project that is not paid by the sponsor. REMEMBER: Cost-sharing should be included in the budget accompanying the proposal submission only if such arrangements are required or strongly encouraged by the sponsor’s program guidelines. Further…

20 Updated November 2009 Special Costing Issues: Cost Sharing OMB Circular A-110 states that cost-shared costs:  Must be verified from the recipient’s records (actual expenditures must be verified, NOT budgeted expenditures)  Must not be included as contributions for any other federally-assisted project or program  Must be allowable, allocable and reasonable per OMB Circular A-21 (If an expenditure cannot be a direct cost on a sponsored project, it cannot be cost shared on a project)  Must not be paid by the federal government under another award (except where authorized)  Must be provided for in the approved budget when required by the federal agency  And must conform to other provisions of A-110, as applicable

21 Updated November 2009 Special Costing Issues: Cost Sharing Some potential problem areas in cost sharing are:  Effort reporting – make sure all cost-shared effort is reported, along with direct-charged effort  Using the same cost sharing funds on more than one project – not allowed  Subrecipient cost sharing – UM Investigator is responsible for documenting & reporting to Acctg.  Third-party cost sharing – UM Investigator is responsible for documenting & reporting to Acctg.

22 Updated November 2009 Cost Transfers

23 Updated November 2009 Special Costing Issues: Cost Transfers A cost transfer is a direct-charged expense transferred from one account to another after the original charge has posted to the financial records. More…

24 Updated November 2009 Special Costing Issues: Cost Transfers (More) Transfers are allowed for charges incurred within ninety days immediately preceding the date of the transfer request, as long as the department provides adequate justification. Transfers after to the ninety day period are only allowed in extraordinary situations and only upon approval by the Accounting Office. (Accounting must report these transfers to the State Auditor.)

25 Updated November 2009 Special Costing Issues: Cost Transfers (More) Transfers which are normally acceptable:  Correction of error in recording an original transaction in the financial records.  Transfer when prior written approval has been received from the sponsor.  Transfers between accounts funded by more than one funding source for closely related work, provided the project director fully explains and justifies the transfers. And…

26 Updated November 2009 Special Costing Issues: Cost Transfers (More) Transfers which may be allowable, but raise serious questions:  Transfers that bring a project account to zero.  Transfer of salary expense previously certified on activity reports or wage expense previously certified on pay documents.  Transfer of an expense to a general fund account from other funds. And…

27 Updated November 2009 Special Costing Issues: Cost Transfers (More) Transfers which are generally unallowable:  Transfer of an unidentified or unjustified expense to a project account.  Transfer of an expense to a project account if the expense was incurred before or after the project period.  Transfer of an expense to a project account from an account which has a deficit balance.  Transfer processed simply to absorb the remaining balance of an account.  Transfers that do not indicate how the expense is appropriate to the receiving account or do not explain why they were not correctly charged in the first place.  Transfer of an expense that was originally recorded over 90 days previous to the request date, or requested after the project end date.  Transfer of expense to or from general fund accounts after fiscal year end.

28 Updated November 2009 Special Costing Issues: Cost Transfers (More) The mechanism for executing a cost transfer:  All transfers except personnel charges – use the G/L Posting Document  Transfers of personnel charges – use the HR Form 3  In either case, a complete explanation must be attached justifying why the transfer is necessary and why the expense was not charged correctly in the beginning

29 Updated November 2009 Special Costing Issues: Cost Transfers Risks associated with cost transfers:  Excess transfers indicate a lack of internal control at the university  Excess transfers typically lead to audit findings and repayment of project funds to the sponsor  The Investigator should be prepared to justify cost transfers to federal and state auditors Risk is assumed by the PI and his/her Department.

30 Updated November 2009 Program Income

31 Updated November 2009 Special Costing Issues: Program Income Program Income is defined in OMB Circular A- 110 and 45 CFR Part 74 as gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the award.

32 Updated November 2009 Special Costing Issues: Program Income Program income includes (but is not limited to):  Income from fees for services performed (such as laboratory tests)  Income from the use, sale or rental of equipment acquired under sponsored projects  Income from sale of supplies or equipment purchased or fabricated under a sponsored project  Income from the sale of software, tapes or publications  Income from fees from participants at conferences or symposia  License fees and royalties on patents and copyrights

33 Updated November 2009 Special Costing Issues: Program Income All program income generated by federally- funded projects must be reported to the federal government except for, unless the award terms and conditions state otherwise:  Income earned from license fees and royalties (covered by Bayh-Dole)  Income earned after the end of the project It is important to note that all program income is reportable to UM’s Accounting Office.

34 Updated November 2009 Special Costing Issues: Program Income Recipients may retain and use income if allowed by the sponsor by:  Adding it to the available project funds to further the project objectives (this means that program income funds must be expended before sponsor funds)  Financing the non-federal share (cost share)  Deducting from the total cost of the project

35 Updated November 2009 Special Costing Issues: Program Income If the agency does not specify in the award how to account for program income, OMB Circular A-110 automatically applies:  For research projects or programs: Added to funds committed to the project by the Federal awarding agency and recipient and used to further eligible project or program objectives.  For all other projects or programs: Deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of costs is based.

36 Updated November 2009 The UM Policy on Program Income Principal investigators are required to identify and document program income on projects from both federal and non-federal sponsors. Program income from sponsored projects must be correctly used, accounted for, and reported in accordance with the terms and conditions of each sponsored agreement, as well as with all applicable governmental regulations…Program income for each sponsored project must be accounted for in a separately identified account established by the Accounting Office. UM Policy No. ADM.AC

37 Updated November 2009 Regrants

38 Updated November 2009 Special Costing Issues: Regrants A regrant is an internal subaward. It is used when a UM faculty member has been selected to perform a portion of a sponsored project’s statement of work, but the faculty member was not included in the approved budget as program personnel.

39 Updated November 2009 Special Costing Issues: Regrants Costs and cost sharing under regrants are subject to the same terms and conditions as the parent grant.

40 Updated November 2009 Special Costing Issues: Subawards Costs and cost sharing under subawards are subject to the same terms and conditions as the prime award. Some costing issues that are unique to subawards are: F&A is applied only to the first $25,000 of each subaward, regardless of the number of budget periods involved For subawards issued after July 1, 2005, the ORSP Contracts and Grants Accountant creates a purchase order in SAP to encumber the subaward funds also…

41 Updated November 2009 Special Costing Issues: Subawards Subaward invoices should be submitted to the ORSP Contracts and Grants Accountant Both the ORSP and the Investigator must review/approve subaward invoices and sign the Certification for Payments to be Made under a Subcontract form Procurement will not pay a subaward invoice without the signatures of the ORSP Contracts and Grants Accountant AND the Investigator on the Certification for Payments to be Made under a Subcontract form Investigator is responsible for tracking and reporting subrecipient cost sharing and for monitoring the technical quality of the work performed by the subrecipient.

42 Updated November 2009 Account Oversight Account oversight is a collaborative process among: Investigator ORSP Accounting

43 Updated November 2009 Investigator Responsibilities  Provide & document cost sharing  Report & certify effort  Review award account regularly  Monitor costs for allowability, allocability, reasonableness  Authorize expenditures & cost transfers  Monitor encumbrances  Maintain a list of government-titled property  Prepare disclosure form if significant financial conflict of interest develops  Notify ORSP of any rebudgeting  Perform ongoing financial monitoring of subrecipients, if applicable  Authorize payments to subrecipients, if applicable

44 Updated November 2009 ORSP Responsibilities Seek sponsor prior approval for rebudgeting, if required Perform periodic random audit of sponsored accounts Ascertain subrecipient A-133 audit compliance, if applicable Create purchase order to encumber subaward funds Authorize payments to subrecipients (in conjunction with Investigator)

45 Updated November 2009 Accounting Responsibilities Set up and maintain account in UM SAP system Notify Investigator and ORSP of account number Create and maintain procedures for compliance with agency, UM, State and federal financial regulations Prepare and submit invoices/fiscal reports as specified in award terms and conditions Ensure compliance with OMB Circular A-133 audit requirements Ensure that project accounts are properly closed in SAP system Serve as the Office of Record for all financial records related to a sponsored project

46 Updated November 2009 Account Closeout Fixed Price Awards Cost Reimbursement Awards

47 Updated November 2009 Account Closeout: Fixed Price Awards Surplus balance at the end of the project remains available to the Investigator IF all costs for the project have been properly accounted for. Deficit balance at the end of the project is the responsibility of the Investigator/department (unlikely to get additional funds from the sponsor for fixed price awards)

48 Updated November 2009 Account Closeout: Cost Reimbursement Awards Surplus balance at the end of the project: The recipient shall promptly refund any balances of unobligated cash that the Federal awarding agency has advanced or paid and that is not authorized to be retained by the recipient for use in other projects. OMB Circular A-110, Subpart D.71(d)

49 Updated November 2009 Account Closeout: Cost Reimbursement Awards Deficit balance at the end of a project is the responsibility of the Investigator/department

50 Updated November 2009 Resources OMB Circular A-21 OMB Circular A-110 UM Accounting Guidelines and Policies Accounting Department x6538


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