1. 1 Fiscal Compliance Requirements for Sponsored Programs Missouri University of Science and Technology April 7, 2009

2. 2 Learning Objectives To understand: –Compliance requirements related to allowability of costs –Responsibility of Research Administrator and Principal Investigator (PI) –Frequent issues and impact of non- compliance

3. Overview I.Definitions II.Compliance Requirements III.Responsibility IV.Concluding Points V.Frequently Asked Questions (FAQs) 3

4. Definitions Sponsored Award – Activities funded by an external entity for a specific purpose. PI/Co-PI – Principal Investigator. Named by sponsor on award document with responsibility for ensuring compliance. Research Administrator – The individual assisting the PI with the administrative management of an award. 4

5. Definitions Unallowable costs – Costs charged to a project not meeting the requirements. APM – Accounting Policy and Procedures Manual. Codification of accounting policies. BPM – Business Policy Manual. Codification of business and administrative policies. 5

6. 6 Compliance Requirements Who sets the requirements? Office of Management and Budget (OMB) – Oversight agency for the federal government –OMB Circulars – The federal rules for how awards are to be administered. Sponsors – Individual sponsors may have additional requirements APM and BPM – Policies established jointly by Campus and UM System

7. Compliance Responsibilities 7 Department – PI, Research Administrator College – Fiscal Officer, Chair Sponsored Programs Office (OSP) – Pre and Post Award UM System Controller– Compliance oversight and training Auditors – Internal and External Office of Inspector General (OIG) – Final enforcer

8. 8 Compliance Requirements What compliance requirements determine allowability on a sponsored program? –OMB Circular A-21 - Cost Principles for Educational Institutions Allowable Direct Costs + Allocable Facilities & Administration –Specific Sponsor Administrative Guidelines

9. 9 Definitions Direct costs must be: –Identified specifically for a particular sponsored award –Directly assigned with relative ease and a high degree of accuracy –Consistently treated in like circumstances –Supported by documentation

10. 10 Definitions F&A is: –Incurred for a common or joint objective (e.g. utilities) –Cannot be easily identified with a particular award Facilities: depreciation, interest on related debt, operational, maintenance, and library costs. Administration: departmental, sponsored projects, student services, and other general administrative costs.

11. Importance of F&A How are support staff paid? What is the source of funding for the building where my lab is located? How are the utilities paid? How is research infrastructure paid for? Who prepares my financial reports? 11

12. 12 A-21Compliance Reasonable: –Act with due prudence –Consistent with University policies and procedures –Necessary for performance of the sponsored award –Arms length and legal transactions

13. 13 A-21 Requirements Allocable: –Incurred solely to advance the work under the agreement –Benefits the sponsored program in proportions that can be reasonably approximated

14. 14 A-21 Requirements Consistent treatment: –Practices consistent with reporting other costs for: same purposes, or like circumstances Conform to limitations or exclusions: –Sponsor may be more restrictive than A-21 –Specified in the award

15. Allowable Direct Charge? Allowable? No Probably Not MAYBE?YES!! 15

16. 16 A-21 Compliance Certain costs are expressly unallowable: –Alcoholic beverages –Alumni activities –Bad debts –Donations and Contributions rendered –Entertainment –Furnished automobile – personal use –Goods or services for personal use –Housing and personal living –Losses on other sponsored agreements

17. 17 A-21 Compliance Certain costs are unallowable with exceptions: –Contingency provisions –Fines and penalties –Fundraising and investment costs –Lobbying –Pre-agreement costs –Selling and marketing costs –Student activity costs Must be specified in the agreement to be allowable!

18. A-21 Compliance Allowable - Direct charging of F&A costs: –Unlike circumstance must exist –Documentation to support –Include in the budget and agreement –Sponsor approval Approval by sponsor without the above does NOT ensure allowability! 18

19. 19 A-21 Compliance Allowable costs – frequent issues: –Communications (phone, etc) –Federal Express and postage –Administrative Salaries –Equipment - capital and computer –Memberships and/or subscription fees –Materials – office, lab, program –Meetings –Travel Documentation and sponsor approval required

20. Points to Remember Allowability considerations throughout: –Proposal and budget –Monthly Managerial review –Cost Transfers –Cost Sharing –Subaward payments –PI Certification at end of award 20

21. 21 PI Responsibility Be knowledgeable of compliance requirements and restrictions Shares administrative management responsibility with Research Administrator Ensuring all charges are: –Allowable –Authorized –Documented The PI has overall responsibility for an award

22. 22 Research Administrator Responsibility Shares administrative management responsibility with the PI Research Administrator awareness: Compliance requirements Unique restrictions by sponsor Budget Alert PI of potential or known compliance issues Contact OSP for assistance

23. 23 Research Administrator Responsibility Ensure transactions are properly recorded Specific responsibilities include: - Processing expenditures - Providing monthly budget variance reports - Preparing timely cost transfers - Closing of award and deliverables - Ensure documentation exists for all charges

24. Frequent Issues Unallowable costs directly charged to award Lack of supporting documentation Purchases late in the award period Costs outside period of availability Unlike circumstances not set out in sponsor agreement 24

25. 25 Impact of Non-Compliance Questioned or unallowable costs Repayments to the sponsor Fines and/or sanctions Subject to additional external audits Jeopardize future funding opportunities Damage to reputation

26. Checklist for Success Ensure costs are: Authorized in the budget & agreement Meet requirements of allowability Within period of availability Charged timely to project Appropriately documented Make timely and allowable cost transfers 26

27. 27 Frequently Asked Questions The following Frequently Asked Questions (FAQs) address practical application of the requirements.

28. FAQs When should the sponsor be notified? –If any of the following occur: Change in scope or directive Significant change in budget Change in effort of key person specified in award Absence of PI for more than 3 months Reduction of PI time by 25% Obtain a no-cost time extension –Work with OSP to notify sponsor 28

29. 29 FAQs What are some examples of direct costs? –Examples may include: PI salary and benefits Graduate student salary Animal care Lab equipment for the award

30. 30 FAQs Are direct costs always allowable? –No. If they are not included in the authorized budget and set out in the agreement, they are not allowable. –For example, a PI’s salary would not be allowable on an equipment-only award.

31. FAQs Are all items in the awarded budget allowable if the agreement has been approved by the sponsor? –Not necessarily. Unallowable costs should not be included in the budget, unless they have been set out in the agreement as allowable. –The PI is responsible for knowing what is and is not allowable. 31

32. 32 FAQs What are some examples of F&A costs? –Examples may include: General office equipment General and Sponsored Programs’ administrative salaries Library support Utilities Postage Office supplies

33. 33 FAQs Are costs, such as postage, always considered F&A? –No. In certain circumstances, if the cost can be justified as an unlike circumstance it may be allowable as a direct charge. –The costs need to be in the agreement and documentation must support the justification.

34. FAQs When could postage be considered an unlike circumstance? –If the award is for mailing a large volume of manuals to participants, postage may be allowable as a direct charge. –This needs to be set out in the agreement and approved by sponsor. 34

35. FAQs What is another example of an unlike circumstance? –If the project requires meeting and travel arrangements for a large number of participants, some or all of an administrator’s salary may be allowable as a direct charge. –This needs to be set out in the agreement and approved by sponsor 35

36. FAQs What is considered adequate documentation? –Sufficient Documentation should state: the charge is allowable, and the charge directly benefits the related award. –Substantial Documentation (for cost transfers > 60 days old) should address: Who, What, When, Where, and Why? What will be done to ensure this does not reoccur? 36

37. FAQ’s Can funds be spent on items not included in the award, or for more than the award? –Maybe. Per A-110, section 25; changes in the budget must be approved before they take place –Under certain conditions the changes will be allowed. –Work with OSP. 37

38. 38 FAQs If the award is from a non-federal sponsor do the OMB Circulars apply? –Yes. The University requires all awards to be administered consistently and follow the same requirements for federal awards.

39. 39 FAQ What is OMB Circular A-110? These are the administrative requirements for sponsored awards. Common terms are defined, such as award, cost-share, and subrecipient. Requirements for the pre-award, post-award, and closeout process are addressed.

40. 40 FAQ To whom does OMB Circular A-133 apply? - A-133 outlines the responsibilities for: External Auditors – These are the standards for their review of the University's financial statements University – The administrative requirements of federal awards to be followed.

41. 41 Contact Information Paula DeLong Compliance Officer Office of Sponsored Programs 573-341-4134 delongps@mst.edu

42. 42 References Where can I get more information? –OMB Circular A-21OMB Circular A-21 –University Controller’s Office Policies – APM – Section 60APM – Section 60 –Reference Guide for Sponsored ProgramsReference Guide for Sponsored Programs