1. NCURA Regional Meeting April 6, 2009 Allowable Costs – Proposal Development to Project Closeout
Presented by:
Ralph L. Brown
Director of Research Administration
Colorado School of Mines

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

3. 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

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

5. UNALLOWABLE COSTS
Section J of A-21 specifically lists and defines categories of allowable and unallowable costs
OMB Circular A-21 website

6. 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

7. 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

8. 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

9. 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)

10. 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 .

11. 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

12. 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”.

13. 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

14. 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!

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

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

17. 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

18. 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

19. 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

20. 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.

21. The Research Cycle
Proposal
Award
Performance
Closeout
Audit

22. 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
Handout

23. 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

24. 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.

25. 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.

26. Questions?

27. Evaluations

28. Thank You! Ralph L. Brown – Ralph.Brown@is.mines.edu
Web site: