1. NCURA Regional Meeting April 27-30, 2008 Allowable Costs – Proposal Development to Project Closeout Presented by: Ralph L. Brown Director of Research Administration Colorado School of Mines Diana Vasquez Senior Business Administrator Microbiology, Immunology and Pathology Colorado State University

2. Goals for this session  Guiding principles  Research award cycle  Best practices  Roles and Responsibilities

3. Audit Industry Focus  Inspector Generals (NIH, NSF, others) performing subject target audits: NSF OIG found  U of Hawaii cost sharing certifications not supported  NMHU cost sharing tracking system inadequate  UPENN non compliant with effort reporting processes: timeliness, and documented verification  Georgia State University - $400,000 unallowed for deficient sub recipient monitoring NIH OIG found:  Yale non compliant with cost transfers, effort reporting and cost allocations – resulted in disallowed funds  DOJ found U Conn non compliant with many research administration practices characterized as “sloppy recordkeeping and poor management of grants” – resulted in $2.5 million disallowed. UConn instituted mandatory training program for all faculty and staff associated with research

4. INTRODUCTION TO OMB CIRCULAR A-21  DEFINES AN "ALLOWABLE COST"  INSTRUCTIONS FOR THE UNIVERSITY TO ALLOCATE FACILITIES AND ADMINISTRATIVE COSTS PROPERLY AND TO CALCULATE THE FACILITIES AND ADMIN RATE  APPLIES TO PROJECT COSTS REIMBURSED BY THE GOVERNMENT AND TO COST SHARING OR MATCHING FUNDS  GENERAL REQUIREMENTS: REASONABLE: ALLOCABLE TO (BENEFITS) THE PROJECT SUPPORTED BY THE GRANT OR CONTRACT TREATED CONSISTENTLY (INCLUDING CONSISTENT TREATMENT AS EITHER A DIRECT OR INDIRECT COST http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html

5. EXAMPLES OF COSTS NOT USUALLY ALLOWABLE  Travel Fly America Act (Handout) First Class Travel  General Purpose Equipment  Paper Towels

6. UNALLOWABLE COSTS Section J of A-21 specifically lists and defines categories of allowable and unallowable costs

7. UNALLOWABLE COSTS  Section J, specific expenses identified as unallowable: Advertising and public relations costs Alcoholic beverages Alumni activities Bad debts Institution-furnished automobiles Donations or contributions Entertainment Lobbying Fines and penalties Goods and services for personal use

8. UNALLOWABLE COSTS (cont’d) Housing and personal living expenses Interest, fund raising and investment management costs Membership in social, dining, country clubs, or civic organizations Selling and marketing Student activities Airfare costs in excess of the lowest available commercial discount airfare (with specific exceptions) Flowers, gifts Parking tickets

9. DIRECT vs. INDIRECT COSTS  What are direct costs? Identified specifically with a particular sponsored agreement and incurred to advance the work under that agreement Assigned to a sponsored agreement relatively easily and with a high degree of accuracy

10. DIRECT vs. INDIRECT COSTS  What are F&A costs (Indirect costs)? Benefit common or joint activities Benefit numerous projects  Cannot readily be identified with a particular sponsored project  Cannot be proportioned to benefit a group of sponsored projects with relative ease or with a high degree of accuracy  (Handout)

11. NORMALLY Indirect costs  Administrative and Clerical Salaries  Office supplies, postage, dues and memberships, local telephones(telephone equipment)  Computers – General Purpose Equipment  A-21 Exhibit C provides for exceptions for charging normally indirect costs if the project is a major project

12. THE COST ACCOUNTING STANDARDS  Originally created as an Act of Congress  Applicable to the Department of Defense  Added to A-21 in 1994  DOD subject to 19 CAS, only 4 were added to A-21

13. CAS 501  Consistency in estimating, accumulating and reporting costs by educational institutions – all institutions must consistently follow established cost accounting practices when estimating (budgeting), accumulating, (accounting), and reporting. Collecting and classifying cost data in an organized and consistent manner Does not prescribe the amount of detail required, but must be able to accumulate and report actual cost at a level which permits meaningful comparison with budgeted estimates, i.e. proposal budgets “chemicals”, but accounting system charges “materials & supplies”.

14. CAS 502 Consistency in allocating costs incurred for the same purpose by educational institutions – requires that each type of cost be allocated only once and on only one basis to any sponsored agreement.  Double counting occurs when the same cost is charged both indirectly and directly if it is incurred for the same purpose.  Telephone equipment costs “normally” charged as indirect charged directly to project

15. CAS 505 Accounting for Unallowable Costs – unallowable costs must be identified and excluded from all claims for reimbursement. Unallowable costs must not be included as either Direct or Indirect costs in the F&A calculation – OR be used as cost- sharing!

16. CAS 506  Cost Accounting Period – institutions must consistently use the same cost accounting period for estimating, accumulating and reporting costs.

17. COST ACCOUNTING STANDARDS EXCEPTIONS  Per OMB A-21 the following three criteria must be met for F&A costs to be directly charged: 1. The costs must be specifically and readily identifiable to a specific project with a high degree of accuracy. 2. The costs are required by the project scope, due to the project’s special purpose or circumstances. 3. The costs must be specifically budgeted as a line item in the proposal budget and justified in the proposal narrative.

18. COST TRANSFERS  Reassignment of costs to a sponsored project from another source of funds can be allowable when: Correcting errors Allocating costs that benefit more than one project Removing over-expenditures to another non-restricted source of funding

19. COST TRANSFERS  RED FLAGS Transfers older than 90 days Transfers in the last month of the award or after the award has expired Round numbers! Explanations that raise more questions than answers

20. COST SHARING The portion of project costs not borne by the sponsor. CRITERIA: The contributions to be cost shared are verifiable by University records. Allowable, allocable, reasonable, and necessary for proper and efficient accomplishment of specific project or program objectives. Federal funds, directly or indirectly, are not used for cost sharing on other federally funded projects, except where authorized by federal statute. Not included as contributions for any other project. Directly identifiable with the sponsored project as outlined in the proposal and be included in the award notice

21. Best Practices  Be familiar with the regulations or at least know where to look for the answer.  Anticipate areas of vulnerability and develop management controls and/or monitoring strategies  Document, Document and Document any exceptions to the Cost Accounting Standards.(Handout)  Tough questions – seek out advice from other colleagues. NCURA, COGR etc.

22. The Research Cycle  Proposal  Award  Performance  Closeout  Audit

23. Responsibilities: PI  Prep of programmatic proposal  Development of project budget  Monitor programmatic and financial performance  Adhere to terms and conditions of award  Final progress report  Financial responsibility and audit

24. Responsibilities: Dept Administrator  Assists and advises PI in the prep of proposal in accordance with sponsor terms, applicable regulations, institutional policies.  Assists PI in compliance with award terms and conditions, regulations, institutional policies  Monitors expenditure of award funds  Coordinates with central offices on reporting  Assists central administration with closeout and audit activities  Disclose apparent area(s) of noncompliance to an appropriate responsible official

25. Responsibilities – Sponsored Programs Office  Review of Proposals for Regulatory and Policy Issues,  Notify post-award administrators of award terms in advance of spending.(handout)  Review accounting transactions based on allowability criteria, terms and conditions and agency guidelines.  Prepare final financial reports in compliance with award terms and conditions.

26. Closeout Responsibilities  Costs must be allowable, reasonable, allocable, and consistent with the terms of the agreement  Departmental Administrator and PI must ensure that all costs are necessary for performance of the project, incurred within the period of performance and charged to the project within the specified period.

27. Questions?

28. Evaluations

29. Thank You!  Ralph L. Brown – Ralph.Brown@is.mines.edu Ralph.Brown@is.mines.edu  Diana Vasquez - Diana.Vasquez@ColoState.EDU