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Introduction to Post Award Research Administration Ted Mordhorst, CRA Lily Gebrenegus, CRA Assistant Director for Post Award Financial Compliance University of Washington Research Accounting & Analysis A Division of Financial Management Assistant Director, Campus Services University of Washington Grant and Contract Accounting A Division of Financial Management Course Objectives Our objective is to provide you with a foundation upon which to grow as you are engaged in the daily activity of facilitating cutting edge research, discovery and the education of our next generation of scientists. Learning Objectives Identify who is involved and their responsibilities Describe the regulatory environment and how it is structured Identify the various types of agreements that fund projects Distinguish the types of costs incurred and apply the regulations to determine allowability Recognize a few of the more complicated concepts involved in research administration. Who are Sponsors? Federal Government Departments Agencies Independent Agencies State Government Foundations and Non-Profit Organizations Industry Large Entities (over 500 Employees) Small Entities (under 500 Employees) Stewards, Not Owners Financial resources are entrusted to the University for use in research, instruction, and public service. Management of the resources must be able to withstand public scrutiny. Team: Departmental Principal Investigator (PI) Department Administration Chief Administrative Officer/ Chief Financial Officer/ Management Service Officer Fiscal Managers Personnel and Payroll Purchasing Research Assistants Students Team: Central Administration Office of Research Office of Sponsored Programs (OSP) Human Subjects Division (HSD) Research Accounting and Analysis Grant & Contract Accounting (GCA) Management Accounting & Analysis (MAA) Equipment Inventory Office (EIO) UW Tech Transfer Institutional Animal Care & Use Committee Internal Audit Financial Accounting Purchasing Financial Services eCommerce Payroll Travel Student Fiscal Services Graduate School Human Resources Research Administration is a Balancing Act The research administrator seeks a balance of interests that recognizes the shared responsibilities throughout the institution. Research administrators balance facilitating the research, teaching, and public service activities of faculty, students and other investigators while accommodating the priorities and expectations of the institution, governmental entities, sponsors and the public all the while maintaining stewardship of extramural funding. Roles and Responsibilities GIM 2 Fiscal Responsibilities on Grant and Contract Accounts (Post Award) Grants and contracts are awarded to the University; not to individual investigators or departments. Responsibility is shared within the institution by the investigator, his chairman or director, dean, and the Grant and Contract Accounting Office. Roles and Responsibilities Principal Investigator (PI) Develops an over-all plan for the commitment of grant and contract funds Initiates expenditures Supervises expenditure Assumes accountability for deficits or disallowances Chairman, Director, Dean Establishes systematic procedures in the college for supervision of grant and contract accounts Provides reasonable coordinated administrative support Consults with principal investigator concerning the resolution of deficits or disallowances Roles and Responsibilities Grant and Contract Accounting Provides principal investigator/administrator with information about any special terms, conditions, or limitations of the award. Consults on specific questions about the propriety of a given expenditure, on budget monitoring techniques, etc. Monitors certain types of grant -related transactions on a sampling basis. Provides required fiscal reports to sponsoring agencies. Award Lifecycle Award Step Identify Funding Prepare Proposal Review & Submit Proposal Negotiate & Accept Award Set Up Award Perform Work Financial Management Technical Reporting Monitor Activity Invoice & Collect Payments Monitor Accts Receivable Close-out Award Responsible Party Principal Investigator (PI) PI & Departmental Staff PI & Office of Sponsored Programs (OSP) OSP & PI Grant & Contract Accounting (GCA) PI PI, Departmental Staff & GCA PI PI & Departmental Staff GCA GCA & Departmental Staff PI, Departmental Staff & GCA Know Your Sponsor and Award Details Learn How to Apply the Rules: Award Terms Departmental Policies Accounting & Financial Policies University Policies & Procedures NIH - GPS Sponsor Policies A-21 A-110 FARs Federal Policies and Governmental Law Regulatory Compliance U.S. Department of Health and Human Services (DHHS) Defense Contract Audit Agency (DCAA) Office of Naval Research System Reviews Other Agencies Federal State County Private Grant & Contract Accounting (GCA) Internal Audit Federal Regulatory Compliance: OMB Circular A-110 Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education and Other Non-profit Organizations I. II. III. IV. V. VI. Financial and programmatic management Cost sharing Program income Property standards Procurement standards Reporting and Records Retention Sets forth standards for obtaining consistency and uniformity among Federal agencies. OMB Circular A-21, “Cost Principles for Educational Institutions” Establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions (Direct and F&A) Prescribes methods for the determination and application of Facilities & Administrative (F&A) rates Contains general provisions for selected items of cost OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations” Sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of States, local governments, and nonprofit organizations expending Federal awards. Requires an annual audit of the non-federal entity as a recipient of federal funding. Federal Acquisition Regulations (FAR) Is the procurement manual for federal purchases. Provides administrative requirements for Federal contracts. Grants Information Memorandum Grants Information Memoranda(GIM) Statements of UW policy related to grant and contract issues. Explain how the UW interprets and applies regulations applicable to grants & contracts. Link: http://www.washington.edu/research/osp/gim/ Formal Agreements Types of Agreements: Assistance Agreements: Grant Cooperative Agreement Procurement Agreements: Contract Assistance Agreements Grant Used to transfer money, property, services, or anything of value to recipient in order to accomplish a public purpose. The idea originates with “performer”. No substantial involvement of the sponsor is anticipated during performance of activity Cooperative Agreement Differs from a Grant in that: The idea may originate with “performer” Substantial sponsor involvement is anticipated. Procurement Agreements: Contract The issuer determines that a procurement contract is appropriate Usually the purpose is to acquire property or services for direct benefit or use of the issuer Idea originates with the issuer Purchase Orders Short duration Specific item Contract Types Cost-reimbursable Contract Fixed Price Contract Time-and-Materials Contract Labor-hour Contract Plus variations of each of the above Cost-Reimbursable Contracts Procurement of non-commercial items, where the specifications are unknown or indefinite. Issuer generally imposes tighter controls. Little incentive for contractor to control costs. May include significant administrative controls. Fixed Price Contracts Procurement of supplies or services when specifications are fairly well known; therefore, costs can be fairly accurately estimated. Contractor has incentive to control costs. Minimum administrative burden for the contractor. Preferred method of contracting by the government. The Budget Provides the framework for financial compliance We create a budget(s) number for an award to accumulate costs associated with the project. Set up the budget attributes and allocate the budget in the financial system Direct cost object codes Facilities and Administrative costs Total Costs A-21, section C.1. The cost of a sponsored agreement is comprised of the allocable direct costs incident to performance of the project, plus the allocable portion of the allowable F&A costs of the institution…. Direct Costs - Usual Salaries Benefits Project Supplies – e.g. paper, pencils for a survey project Equipment – i.e. Spectrometer Telephone Toll/Long Distance Consultants Subcontracts or Subawards Patient Care Services – e.g. analytical, shop Direct costs - Services Internal UW services are often charged by a cost or recharge center. Cost Center - charge less than $175,000 annually to federally sponsored programs AND less than $1,000,000 in total charges. Recharge Center - charge more than $175,000 annually to federally sponsored agreements OR more than $1,000,000 in total charges. Facilities and Administrative Costs (F&A) Costs that are incurred for common or joint objectives, and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity Examples of F&A Costs: Salary of Department Administrator Building utility and maintenance costs President and Provost offices Facilities and Administrative Costs (F&A) F&A costs (previously called Indirect costs or overhead) are charged to budgets as a percentage of direct costs. The percentage rate is negotiated with the federal government or a rate specified by the sponsor. Facilities and Administrative Costs (F&A) F&A charges are calculated automatically by the system and added to the expense total daily F&A charges need to be verified periodically for accuracy. Costs- Direct or F & A? Salaries of a computer technician? May be allowable if activity is directly related to the objectives of the funded project and over and above their normal responsibilities. If the activity is general support for the unit or area their salary would be more administrative in nature and normally not allowable as a direct cost Employee benefits? Benefits related to direct salary charges to the project are allowable Telephone? The monthly cost of a phone line and equipment is generally considered an F&A cost and therefore not normally allowed as a direct cost. Long distance phone call charges may be allowable as a direct cost when they can be specifically identified as supporting the sponsored activity Costs- Direct or F & A? Laptop for the Professor? Allowable with specific sponsor approval Scientific equipment? Allowable with the prior approval of the sponsoring agency Chemical supplies? Chemicals and other lab supplies the consumption of which can be specifically identified with a sponsored project are allowable as a direct cost Photocopy costs? If specifically identifiable as supporting the sponsored project are allowable Samples used in the lab? Allowable if they can be identified with a specific sponsored project The Basics Program announcement: Request for Proposals (RFP) – Federal Register Topic: Effects of Fertilizers on Dogs Three year project Awards of up to $150,000 per year New project The Basics – Budget Elements What are the budget elements? Salary Benefits Supplies and Services Travel Stationery supplies Vivarium (animal care & use) charges Laboratory testing Equipment F&A A-21: Core Requirements Reasonable Consistent Allocable Allowable Attributes of an “Allowable” Cost An allowable cost must be: REASONABLE: A prudent business person would have purchased this item at this time and paid this price. ALLOCABLE: It can be assigned to the activity on some reasonable basis. CONSISTENTLY TREATED: Like costs must be treated the same in like circumstances, as either direct or F&A costs. Reasonable “A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved, 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.” Allocability A cost can be allocable as a direct or an indirect cost Direct cost if the goods or services provided are assignable in accordance with the relative benefits received…. Incurred solely to advance the work under the sponsored agreement It benefits both the work under the sponsored agreement 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 definitively determined, the cost may be allocated on any reasonable basis As a Facilities & Administrative (Indirect) cost: if it is necessary for the overall operation of the institution (and conforms with the other principles in A-21) Examples: Allocability of Costs Travel by PI to conference (not related to specific project)? Generally allowable when directly related to the sponsored project and not specified as unallowable by the sponsor. Some non-federal sponsors specifically disallow travel to conferences Salary of research technician? Generally allowable Salary of administrative assistant? Generally unallowable. Considered a Facilities and Administrative cost Proposal preparation costs? Generally unallowable Consistency Four Cost Accounting Standards CAS 501: Consistency in estimating, accumulating, and reporting costs CAS 502: Consistency in allocating costs incurred for the same purpose CAS 505: Accounting for unallowable costs CAS 506: Cost accounting period REVIEW Introduction to Post Award Research Administration Course Objectives Learning Objectives Who are the sponsors Internally who is involved and their roles & responsibilities Regulatory environment Types of Agreements Direct & F&A Costs A-21: Core Requirements Reasonable Consistent Allocable Allowable Allowable Generally, it is not the type of cost that determines allowability, it is the purpose and circumstance of the expenditure. A direct cost must be necessary for performance of the project and consistent with the institution’s practices A cost may be allowable but only as an indirect (F&A) cost, not a direct charge, e.g. proposal preparation A cost may be “expressly” unallowable under the terms of the agreement, i.e. it is always unallowable as either a direct or indirect. Unallowable Costs (Cannot be charged against Federal agreements, used as cost sharing or placed in the F&A cost base) Unallowable Activities (Something you do) Organized fund raising Lobbying General public relations & alumni activities Student activities Managing investments solely to enhance income Unallowable Objects (Something you buy, a line item) Advertising Alcoholic beverages Entertainment Fines & penalties Moving costs if employee resigns within 12 months Certain recruitment costs Examples: Allowable Versus Unallowable Costs Meal expense on campus, no documentation of business purpose? The purpose must be related to the sponsored project and usually must include the dissemination of Technical information Travel expense of Dean and Spouse? The cost for the Dean may be allowable but the cost of the spouse travel is generally unallowable Alcohol served at a business function? Generally unallowable on a sponsored agreement. If the sponsor specifically approves, the funds for the purchase of the alcohol must be placed is a 64-XXXX sub-budget and the alcohol purchases made from that discretionary budget Membership in airline courtesy club? Generally unallowable Audit Perspective How do I know that the cost belongs to this specific project? Was the cost included in the budget? Is it generally allowable according to A-21? Is the cost reasonable as a direct charge to this project? Was the cost charged directly to this project? Timing of the cost relative to the project period Costing Decision Process Principal Investigator initiates expense or has delegated authority to individuals associated with the project that have sufficient expertise to determine: Is the cost essential to performance of the project? Is the cost a benefit to the project? Is there a technical basis to support the cost? Is there every expectation that the cost will be used for the purpose intended? The Costing Decision Process Departmental Grant Administrator reviews cost to determine: Do the services or materials meet the sponsors rules for allowable expenses? Do the proposed costs exceed any budget category limitations? If using federal funds, is the vendor or subcontractor debarred or suspended? Is there a sufficient budget balance? Is it normally a direct or F&A expense? If needed, request assistance. Expense Allowability Flow Chart Is it an expense? Is it legal? Is it permissible? Is it for an allowable activity? continued NO (receipts, etc.) NO (illicit drugs, etc.) NO (parking tickets, etc.) NO (fund raising, etc.) Use alternate procedures. Don’t do it or you may go to JAIL! Pay for it yourself or don’t do it. Use an unallowable object code and/or charge it to a nonsponsored account. Flow Chart (continued) continued Is it an allowable object? NO (alcohol, fines, etc.) Is it for a sponsored project? Permissible by agency? YES Use an unallowable object code and/or charge it to a non-sponsored account. NO Use a non-sponsored budget NO Use a non-sponsored budget. Charge it to: Sponsored Research Account Allowable Object Code Food for Thought If a cost is not “unallowable” by mention, it is not necessarily “allowable” by inference. Just because an item is in the approved budget doesn’t necessarily mean it is an allowable cost. EFFORT REPORTING Personnel Costs Personnel costs include salaries/wages and fringe benefits and associated F&A. Make up the largest expense category charged to grants & contracts. Allowable Personnel Costs The apportionment of employees' salaries and wages which are chargeable to more than one sponsored agreement or other cost objective will be accomplished by methods which will1) be in accordance with Sections A.2 and C; 2) produce an equitable distribution of charges for employee's activities; and 3) distinguish the employees' direct activities from their F&A activities. Allowable Personnel Costs Reference: OMB Circular A-21, J10 Requires certification of payroll costs charged to federally sponsored agreements. The process, must recognize the principle of after-the-fact confirmation or determination so that costs distributed represent actual costs, unless a mutually satisfactory alternative agreement is reached. After-the-Fact: Activity Records At the UW, we have two after-the-fact effort certification processes: The Faculty Effort Certification (FEC) process applicable to all faculty paid from sponsored awards. The Grant and Contract Payroll Certification Report(GCCR) for non-faculty personnel paid from sponsored awards University policy on faculty effort is found in GIM 35 SUBAWARDING Subgrant, Subcontract, or ? SUBAWARD OR SERVICE Characteristics indicative of a payment for goods and services received by a vendor are when the organization: 1) 2) 3) 4) 5) Provides the goods and services within normal business operations; Provides similar goods or services to many different purchasers; Operates in a competitive environment; Provides goods or services that are ancillary to the operation of the Federal program; and Is not subject to compliance requirements of the Federal program. SUBAWARDS Subawards are issued and monitored in the Office of Sponsored Programs (OSP) Documentation retained in Department files Endorsement from organization’s business office. Budget, justification, scope of work statement included in the proposal. Technical reports Cost Sharing A-110: Post Award COST SHARING Cost Sharing (or Matching) is the portion of the cost of a project not borne by the sponsoring agency Types of cost sharing: Mandatory (M) Committed (Voluntary) (R ) Voluntary – Not recorded Cost Sharing A-21/CAS considerations All costs of a project must be classified consistently, regardless of the funding source Cost sharing can have a significant impact on the F&A rate, auditors and negotiators want institutions to capture all cost sharing, mandatory and committed Funding agency requirements Commitments made in a research proposal become a condition of the award, whether or not the cost sharing was required (mandatory) Cost Sharing What Can be Used as Cost Share? Cash Expenditures Third Party In-Kind Contributions Unrecovered F&A costs (can be used if agency has approved) Volunteer Services: IF a necessary and integral part of the project Other employee services Donated supplies (must be reasonable and at fair market value) Cost Sharing Considerations Cash and third party in-kind contributions must meet all the following criteria: Are verifiable from the recipient’s records Cannot be used as cost sharing on other federal projects Are necessary and reasonable for accomplishment of project objectives Are allowable under the cost principles Are not paid by the Federal government under another award Are provided for in the approved budget when required by Federal agency Conform to other provisions of A-110, as applicable Potential Problems Associated with Cost Sharing Can we demonstrate to the funding agency that the cost sharing commitment has been fulfilled? Do we track cost sharing on a project-by-project basis? Are we treating cost sharing consistently with other project costs, i.e., classify it as organized research? Are we overstating our F&A rate by not capturing cost sharing? Potential Problems Associated with Cost Sharing Do effort reports capture cost shared effort (both mandatory and voluntarily committed)? The Faculty Effort Certification (FEC) reports do capture faculty effort cost share. Non-faculty effort cost share is captured using the Non-FEC cost share report. Are the same cost sharing funds used to meet the matching requirements on more than one project? Generally an expense may only be claimed as cost share one time for one award. Do we recover cost sharing expenditures through our F&A rate? Cost shared expense go into the research base for F&A rate determination and therefore are not recovered in the F&A rate. The F&A rate is applied to all research base costs on a Modified Total Direct Cost (MTDC) basis Cost Sharing-Recurring Issues Documentation Certifications Accounting Systems Sub-Recipient Monitoring Program Income A-110: Program Income Recipients must account for income related to projects financed by the federal government Recipients may retain and use income if allowed by agency by: Adding to the project to further the objectives Financing the non-federal share Deducting from the total cost of the project Program Income If agency does not specify in award: 1) Support research - added to project 2) All others - deducted from the cost of the project No obligation to government for income earned after end of project Costs for generation of income may be deducted from gross income No obligation to government for income earned from license fees and royalties Set up in a sub-budget Subject to terms and conditions of the award. Should be expended prior to expenditure of award funds. No funds remaining at the end of the project. Cost Transfers OMB Circular A-21 Any costs allocable to a particular sponsored agreement under the standards provided in this Circular may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience. Cost Transfers Purpose Allow for reassignment of costs to a sponsored program from another source of funds (account) Policy Written justification and approval needed for reassignment of expenses Cost Transfers are appropriate if the transfer is for: 1) 2) 3) correction of error charges benefit more than one program (distribution of costs based on benefits received) programs involve closely related work UW Cost Transfer Policy is contained in GIM 15 Cost Transfers Cost Transfers are not Appropriate if the transfer is: 1) 2) To reduce overruns if transfer is from one federal program to another; For reasons of convenience Transfers should be processed: 1) 2) 3) In accordance with institutional policies and procedures, inclusive with conditions cited in the award; In a timely manner; and For older transfers, high level approval sometimes required. Other Items A-110: Budget and Program Changes Budget and Program Plan Revisions Deviations must be reported and prior approval requested Prior approval required in non-construction awards as follows: Change of Key Personnel Absence of 3 months or 25% reduction in time of P.I. Additional funding Transfer of F&A to direct or vice versa Inclusion of costs requiring prior approval in Circulars Transfer of funds allotted for training Sub awards Change of scope A-110: Budget and Program Changes No other prior approvals can be imposed Agencies authorized to waive approvals except for: Change in scope of work Additional funding Transfers may be restricted if award is $100,000 or more and transfer exceeds 10% of approved budget Principal Investigator Transfer Options during the term of an award If both institutions and the sponsor agree, the award may be transferred to the new institution Institution may nominate replacement P.I., subject to sponsor approval May subcontract portion of work to PI’s new organization Request termination of award Departmental Monitoring Continuous Oversight Technical Progress Financial Status Departmental Fiscal Support Tools Online Systems Web-based applications Data downloads Items Requiring Special Monitoring Salary Limitations Effort Reporting Cost Sharing/Matching Program Income F&A Costs Fabrication Patient Care Costs Alterations/Renovations Payment to Students and Fellows Current Hot Buttons Final Reports Cost Transfers Cost Sharing Effort Reporting Departmental Administrative Costs DS-2 Compliance Subrecipient Monitoring Program Income . . . and they lived happily ever after? Summary Take a proactive approach to fund management. It is imperative that all parties work as a team. Proper fund management involves – Adhering to institutional and sponsor guidelines and regulations, – Establishing a proper financial accountability structure, and – Ensuring proper financial management with attention to the integrity of data. In Conclusion Resources OMB A-21 & OMB A-110 http://www.whitehouse.gov/omb/circulars_default/ CFR – Code of Federal Regulations http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&tpl=%2Findex.tpl FAR – Federal Acquisition Regulations http://acquisition.gov/comp/far/index.html Grants Information Memorandums (GIMs) http://www.washington.edu/research/osp/gim/ Office of Sponsored Programs http://www.washington.edu/research/main.php?page=osp Grant & Contract Accounting http://www.washington.edu/research/gca/office/index.html