Transcript COST ACCOUNTING PRINCIPLES - University of Washington

COST ACCOUNTING
PRINCIPLES
Office for Nursing Research
Presented by Crystal Welliver
March 19, 2013
It’s MY
research grant.
I can buy what I
want.
Right?
The federal government
dictates what you can spend
federal grant monies on
and how those
charges are allocated.
Getting Started: Definitions
What the heck do all these acronyms stand for?!
OMB? GIM?? <sigh>

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OMB Circular A21: the
Federal Government’s
costing policy for
educational institutions
GIM 23: the costing policy
for sponsored agreements at
the UW
◦ GIM 23 is the UW’s
implementation of OMB
Circular A21;
◦ GIM 23 takes into account
the University’s unique needs
and requirements.
Definitions
OMB: Office of Management
and Budget (falls under the
administration of the White
House)
Circulars: Instructions or
information issued by OMB to
Federal agencies
GIM: Grants Information
Memorandum; published by
the UW Office of Research in
conjunction with OSP
OMB Circular A21: The Basics
How Costs are Allocated
“Establishes the principles
for determining the costs
applicable to research &
development, training, and,
other sponsored work
performed by colleges and
universities under grants,
contracts, and other
agreements with the
Federal Government.”
OMB Circular A21
The rules in A21 are used to
determine which costs are
allowable under sponsored
agreements.
These principles also apply to:
•
institutions under subgrants;
•
cost reimbursement
subcontracts;
•
other awards made to
institutions under
sponsored agreements.

Direct Costs:
expenses that can be
specifically identified
with a particular
sponsored project.
OMB Circular
A21: Direct Costs
Examples:
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These are costs that can
be assigned to such
activities relatively easily
with a high degree of
accuracy.
PI Salaries
Post-Doc Salaries
Subcontracts
Lab Supplies
Specialized Equipment
Fringe Benefits
Travel

Indirect Costs: expenses
incurred for purposes
common to all research
projects that cannot be
identified with and charged
directly to each individual
research project without an
inordinate amount of tracking
& accounting.
OMB Circular
A21: Indirects
Examples:
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Admin. Staff Salaries
General Office Supplies
Scientific Journals
Office Phone
Office Computer
Facility Costs (e.g. custodial
services, utilities)

Exceptions can be made for large
program grants & research
projects that require an extensive
amount of clerical and/or admin
support… more on this later
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Library Costs
OMB Circular A21: Interpretation
Determining Allowability
Guiding Principles
for Allowable Costs
Costs must be:
Allowable
Consistent
Allocable
Reasonable
•
allowable and conform to
any limitations or exclusion
on cost types or amounts
set forth in these guiding
principles or in the
sponsored agreement;
•
allocable to sponsored
agreements under the
principles and methods
provided;
•
reasonable;
•
treated with consistency
by applying generally
accepted accounting
principles appropriate to
the situation.
A cost is allowable if it
is permitted as a direct
cost under the terms of
a specific grant or
contract.
1. Allowable
Unallowable costs include:
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Alcoholic Beverages
Entertainment Costs
Fundraising Activity
First-class Airfare
Employee Morale Costs
More on these later…
A cost is allocable to a
particular grant or
contract if the goods or
services involved are
able to be directly
assigned to the specific
grant or contract.
2. Allocable
Is the cost incurred solely
to advance the work under
a sponsored agreement?
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If yes, charge to that
project.
Does it benefit more than
one sponsored project?
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Charge proportionally
between the projects
(more on this later).
Does the cost benefit the
overall operations of the
UW?
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Charge as an indirect cost.
A cost may be considered
reasonable if:
◦ the nature of the goods or
services
-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.
3. Reasonable
Keep in mind:
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The cost must be able to
withstand public scrutiny.
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How would it look if details
are published in the
Seattle Times?
All costs incurred for the same
purpose, in like
circumstances, are either
direct costs only or F&A costs
only… but cannot be both.
Since certain costs, such as
salaries of administrative and
clerical staff and office supplies are
normally treated as F&A costs,
these costs cannot be charged
directly to federal grants or
contracts unless the circumstances
related to a particular project are
clearly different from the normal
operations of the institution.
4. Consistent
Treatment
Consistency is important
because it:
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ensures that each cost is
allocated only once;
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prevents overcharging;
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prevents double-counting.
So what does all of this mean?
Some costs are ALWAYS allowable
as direct charges.
Some charges are
NEVER allowable.
Others exist in a
gray area and MAY
be allowable…
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Advertising
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Alcoholic Beverages
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Alumni Activities
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Bad Debt
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Commencement & Convocation
Costs
– allowable if for recruitment of
personnel, procurement of goods & services,
disposal of surplus materials, and advertising costs
specifically required by a sponsored agreement.
– charge to a
discretionary budget; (alcohol may be directly
charged to a few sponsored projects if the nature of
the research specifically requires the purchase and
use of alcohol in the research, and the sponsor
explicitly approves the cost).
- Costs incurred for, or in
support of, alumni activities & similar services.
- including losses (whether actual or
estimated) arising from uncollectable accounts and
other claims, related collection costs, and related
legal costs, are unallowable.
Never Charge to
Grants…
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Entertainment
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First-Class Airfare
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Fundraising & Investment Costs
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Goods & Services for Personal Use
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Housing & Personal Living
Expenses for Institutional Officers
- including amusement,
diversion, and social activities and any costs directly
associated with such costs (such as tickets to shows
or sports events, meals, lodging, rentals,
transportation, and gratuities).
–except when cheaper
fares would: require circuitous routing; require
travel during unreasonable hours; excessively
prolong travel; greatly increase the duration of the
flight; result in increased costs that would offset
transportation savings; or offer accommodations not
reasonably adequate for the medical needs of the
traveler.
Never Charge to
Grants…
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Lobbying
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Losses on Other Sponsored
Agreements
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Memberships in Civil, Community
& Social Orgs - The only allowable
- A few lobbying costs are
allowable if specifically related to the performance of
a sponsored agreement.
membership costs are for a membership in business,
technical, or professional organizations.
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Selling & Marketing Costs of
Institutional Products & Services
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Student Activity Costs
- Unless
specifically allowed for in the sponsored agreement,
costs incurred for intramural activities, student
publications, student clubs, and other student
activities are unallowable.
Never Charge to
Grants…
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Administrative & Clerical Salaries Typically unallowable - however, some costs
may be appropriate with justification and
agency approval.
◦ More on this later…
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Cell Phones & Service Charges –
Cell phones must be used exclusively for the
project; unlike circumstances also must exist
in order for these telecommunication
services to be charged directly to a grant or
contract budget.
Sometimes
Chargeable to
Grants…
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Computers - unallowable except where
approved in advance by the agency.
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Consultants - allowable; A consultant is an
individual retained to provide professional advice
or services for a fee but usually not as an
employee of the requiring organization.
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Copying Charges, Routine
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Equipment - allowable as either direct cost
or F&A cost - depending on the intended use of
the equipment.
Sometimes
Chargeable to
Grants…
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Food - allowable when:
◦ (1) provided by a conference grant (for scientific
meetings supported by the conference grant);
◦ (2) provided to subjects under study provided
that such charges are not duplicated in
participant’s per diem or subsistence allowances,
if any;
◦ (3) such costs are specifically approved as part
of the project activity in the NGA.
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Foreign Travel - In most cases foreign
travel is to be listed in the budget or approved
by the agency in advance of the trip. Air travel is
to be on U. S. carrier.
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Insurance - usually treated as an F&A cost.
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Journals & Subscriptions - usually
treated as an F&A cost, may be treated as direct
costs under special or unique circumstances.
Sometimes
Chargeable to
Grants…
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Memberships - usually treated as an F&A
cost, may be treated as direct costs under
special or unique circumstances.
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Office Supplies - Office supplies are
generally not allowable unless you’ve
established unlike or exceptional circumstances.
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Includes toner cartridges, data storage devices
Stipends - Payments made to an individual
under a fellowship or training grant in
accordance with pre-established levels.
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Telephone Costs - Basic phone is
generally an F&A cost.
◦ Toll calls may be a direct cost providing the cost
can be specifically identified to a sponsored
agreement.
◦ Off-campus projects may charge phone rental as
a direct cost.
Sometimes
Chargeable to
Grants…
Salaries, Wages, Fringe
Benefits
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Faculty
Research Associates
Pre-doc and Post-doc Fellows
Technicians, Lab Assistants, Grad
Students
◦ Tuition Remission for Grad Students
Supplies & Materials
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Chemicals
Laboratory Supplies
Computer Software
Drugs
Books
Minor Equipment
Uniforms
Photographic supplies
Tools
Animals
Other Direct Costs
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Travel
Postage
Subcontracts
Radioactive Waste Disposal
Consulting Services
Equipment
Animal Care
Motor Pool
Long distance telephone costs
Freight and Express
Patient Care and Subject costs
Other costs specifically identified and
justified in funded proposals
Costs that are normally indirect may be
charged to non-federally sponsored
agreements if permitted by the sponsors
policies/practices or are otherwise approved
by the sponsor
Off-Campus Projects Only
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Office Supplies
Basic Telephone Services
Facilities Costs - such as rent,
maintenance, security, utilities
The above types of costs should be DIRECTLY charged to sponsored
agreements when they can be specifically identified to the work
performed under those agreements. (GIM 23)
Unlike or Exceptional Circumstances
Pushing the limits of that gray area of allowability!
Unlike
Circumstances:
justifying the
treatment of
normal indirect
costs as direct
costs
GIM 23: Unlike
Circumstances
Costs may be charged as directs only
if they meet the following
requirements:

The project has a special need for the
item or service involved that is beyond
the level of services normally provided.
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The costs can be specifically identified to
the work conducted under the project.
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The costs are specified in the proposed
budget of the sponsored agreement, and
the special circumstances requiring direct
charging are justified in the proposal.
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The sponsoring agency accepts the cost
as part of the project’s direct cost budget.
(That is, the sponsor does not specifically
disapprove the cost in the award or in other
notice it gives to the University.)
GIM 23: Unlike
Circumstances
The following arguments cannot be
used in and of themselves to
demonstrate "unlike circumstances":
•
Sponsor has approved the
allocation of a particular cost
without proper review by the
UW;
•
The department does not have
sufficient F&A cost money
returned to it to support
projects;
•
Sponsor limits or will not pay
F&A costs;
•
Sponsor is willing to pay for the
cost as a direct charge.
How NOT to
Justify Unlike
Circumstances…
Costs which should be
covered by indirect costs
should not be paid out of
direct costs without specific
approval for “unlike
circumstances” from the
sponsor.
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Proposal justifications must
explain the purpose of the
costs in sufficient detail to
enable those responsible for
reviewing the proposed budget
to make a determination of
whether the cost meets the
definition of an “unlike
circumstance.”
Unlike
Circumstances &
Pre-award
Modular Budgets
•
If an application includes
a modular budget, costs
of concern should be
justified as part of the
“Additional Budget
Justification.”
•
This is an internal SoN
requirement and will
save the PI and budget
managers time and
energy later.
Unlike
Circumstances &
Modular Budgets
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Grants with expanded
authority may move
costs between budget
categories without prior
authority - unless such
a move constitutes a
move from indirect to
direct costs.
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Approval must be
granted, either in the
application itself, or a
concurrence letter sent
after-the-fact.
Unlike
Circumstances:
After-the-Fact
Ask five questions to determine
allowability to directly charge
normally indirect costs:
1.
Are there unlike circumstances?
2.
Are the unlike circumstances
documented in proposal?
3.
Are the proposed expenses on the
F&A cost list (GIM 23)?
4.
May the UW re-budget without
sponsor approval?
5.
Are the unlike circumstances
documented and in the postaward budget file?
GIM 23: Helpful
Hints
Administrative Costs & Unlike
Circumstances
Remember:
The salaries of clerical &
administrative staff should
normally be treated as F&A
costs.
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Because these costs are included
in the negotiated F&A rate, direct
charging them to a sponsored
award means we are charging the
sponsor twice for the same cost.
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This is a cost area that is
susceptible to abuse so federal
examiners have targeted this as an
area to review.
Administrative
Salaries and Audits
Salaries of a technical
nature are allowable as
direct costs.
The same with salaries
which involve:
 extensive data
accumulation;
 data analysis;
 cataloging or the
preparation of large
manuals & reports.
Allowable
Administrative/
Clerical Salaries
Responsibilities that fall within
normal departmental administrative
functions cannot be charged directly
to sponsored projects.

The costs of administrative work
such as routine budget
monitoring, filing and other
general office tasks are not
usually considered allowable direct
costs because such work is
common across many sponsored
projects.
See GIM 23 Attachment A for a list
of Job Class codes that are
considered Administrative and
Clerical.
May not be
charged…
Scenarios in which direct
charging of admin. or clerical
staff salaries or expenses may be
appropriate:
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Large, complex programs
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Extensive data accumulation
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Coordinating conferences,
seminars, travel, etc.
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Preparing & producing
manuals, large reports, etc.
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Projects requiring projectspecific database management
Scenarios for
Charging
Administrative
Salaries
To determine whether charging these
costs would be appropriate, remember to
ask:
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Did we explicitly budget for these costs in
the proposal?
Does the proposal include a written
justification (i.e. say why the “normally
indirect” costs are necessary for project
performance)?
Is this a “major project” as defined in the
previous slide (also Exhibit C of OMB A-21)?
-OR-
The Sponsor specifically allows the direct
charging of administrative/clerical costs due to
the type of grant or contract and this is
documented in the funding opportunity
announcement (FOA).
Administrative
Salaries &
Pre-Award
It is the Principal
Investigator’s responsibility
to document the roles, duties,
and effort devoted to a
sponsored project for all
personnel.
Therefore, the duties of any
administrative or clerical
position described in the
justification to OSP should
be reflected in the
departmental record as the
project is carried out.
Post-Award: The
PI’s Responsibility
If charging an administrative/
clerical salary was unforeseen
at the time of proposal but the
need to do so arises after time
of award, the same criteria for
including them in the proposal
budget apply.
The PI/dept. must send an
appropriate justification to
OSP for review and to notify
GCA to add Flag #2.
Post-Award:
After-the-Fact
If an administrative/clerical
payroll title is necessary for
an individual with research or
technical-based effort on the
project, notification to OSP is
required.
Q. If administrative/clerical
salaries were proposed in the
application and the sponsor did not
specifically disallow them in the
award, are they allowable?
A. In most cases the answer is
probably yes. Check with OSP.
Q. What about the treatment of
administrative and clerical costs on
non-federal awards?
A. They are allowable if the sponsors of
those projects do not specifically
disapprove the cost in the award or in
other notices it gives to the University.
Administrative
Salaries – FAQs
Q: Is direct charging small
percentages of
administrative/clerical
effort (salaries) among
several off-campus
sponsored agreements
allowable per OMB Circular
A-21 guidelines?
A: Not generally, A-21 allows
the direct charging for large
complex projects that require
an exceptional level of
administrative support. Small
percentages of effort would
not indicate an exceptional
level of administrative
support.
Items such as office
supplies, postage, local
telephone costs, and
memberships should
normally be treated as
F&A costs.

If you have established
unlike circumstances,
include justifications in
the proposal and in the
post-award budget file.
Other Non-Salary
Administrative
Costs
Distributing Costs Among Grants
There are two methods for allocating an allowable direct cost to two or more
grants.
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Charges split between more than one grant must
be split on the basis of proportional benefit or
other reasonable method.
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The division of the expenditure can not be
split based on available funding or any
other type of synonymous methodology.
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An expenditure that benefited two or more
projects cannot be charged solely to one project
because the other project is almost out of
funding.
Just remember…
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The proportional benefit rule
applies when it is possible to
determine the proportional
benefit of the cost to each
project.
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The cost is allocated
according to the proportion
of benefit provided to each
project.
◦ Example: A department might
allocate the cost of laboratory
supplies based upon the
quantity used (or planned to be
used) on each project.
GIM 23: The
Proportional
Benefit Rule

Auditors carefully review
travel charges that are
split between two or more
projects so as to be sure
that charges are properly
allocated.
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When maintaining the
travel files, it is important
to be clear about how the
trip specifically benefited
each project respectively.
The Proportional
Benefit Rule &
Travel
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The interrelationship rule
applies when it is not possible
to determine the proportional
benefit to each project because
of the interrelationship of the
work involved.
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The cost is distributed on any
reasonable basis because the
proportional benefit cannot be
quantified and identified to the
individual projects.
◦ Example: The cost of lab
supplies might be allocated
based upon the allocation of
employee salaries to each
project.
GIM 23: The
Interrelationship
Rule
Always document the allocation
methodology.
◦ Allocation methodologies must be
documented and auditable.
◦ Documentation should include
support for the specific costs
allocated and indicate how the
allocation methodology is logically
related to the cost being allocated.
◦ This support should be retained by
the department and be made
available for review.
◦ Always remember to document why
measures such as headcount,
square footage or hours directly
relate to the benefit received.
Documenting Split
Charges – Part 1

Allocation methodologies
need to be reviewed when
the project begins and
ends to ensure compliance.
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Allocation methodologies
should be reviewed
periodically to ensure they
are reasonable.

Allocate expenditures on a
routine basis. Do not wait
until the end of the fiscal year
or the end of the grant year to
allocate expenditures!
Documenting Split
Charges – Part 2
Use of Grant Resources
Equipment approved &
purchased on a federal
grant should be used
solely for programmatic
purposes related to the
grant for which it was
purchased.
This means that “minimal
personal use” of laptops,
iPads, iPhones, etc. is not
allowed per federal
regulations.
de minimis Use of
Project Equipment
One more thing…
What happens to
equipment or
supplies when the
grant ends?
It belongs to the
University of Washington.
Case Studies
Dr. Fisher is writing a
proposal and he wants
to include
administrative
personnel to make
travel arrangements for
8 project personnel who
are based in 6 cities
around the world.
It is critical to the
project that the
schedules of these
personnel be
coordinated so that
project personnel can
meet at specific times
and locations.
Should administrative
salaries be included in
the proposal budget?
Case Study #1
Yes, such duties would be considered
above and beyond routine
administrative support.
The PI should describe in the budget
justification how this person’s
activities will relate to the
programmatic objectives of the
project and the percentage of time
spent on this task.
Case Study #1
Dr. Smith asks you
to pick up some
office supplies and
a box of donuts on
your way to a lab
meeting.
She tells you to
submit the
reimbursement
form with the
grant’s budget
number on it.
What do you do?
Case Study #2
Entertainment costs, such as donuts, are
unallowable. Pay for these with a discretionary
fund.
Meals are allowable when:
(1) they are provided by a conference grant (for scientific
meetings supported by the conference grant);
(2) they are provided to subjects or patients under study
provided that such charges are not duplicated in
participant’s per diem or subsistence allowances, if any;
(3) such costs are specifically approved as part of the
project activity in the NGA.
If the office supplies (pens, notepads) are not
specifically allocable to the grant, they are
considered general office supplies and should
not be charged as a direct cost.
Case Study #2
Dr. Johnson asks to
be reimbursed from
his largest grant for
the cost of his cell
phone.
He does not use it for
personal purposes; he
uses it for telephoning
staff in the lab, calls
to potential donors to
his department and
international calls to
co-investigators
associated with all of
his grants.
Should the expense
be charged to his
grant?
Case Study #3
No, this is an inappropriate direct
cost charge because the cell phone is
not specific to one unique research
project.
Case Study #3
Dr. Jones purchases a
much-needed piece
of specialized
equipment for her
research on
hypertension.
When preparing the
purchase request, she
realizes that the
only budget with
enough money is her
grant for research on
sleep disorders.
Because both grants
are funded by NIH,
she charges the
equipment to the sleep
disorder grant.
Is this appropriate?
Case Study #4
No, the purchase must directly
benefit the project it is charged to.
Dr. Jones must charge the
hypertension study, not the sleep
study.
Case Study #4
Dr. Jaffe has a
federally funded
research grant
specializing in
HIV/AIDS research.
The project requires a
large amount of
binders and file
folders to keep track
of hundreds of
subjects and their
records.
Should the office
supplies be purchased
as a direct cost to the
grant or with
indirects?
Case Study #5
Charge as a direct cost on the grant
because the volume is so great and
the data being collected needs to be
kept confidential and separated, an
unlike circumstance for the purchase
of these office supplies exists.
Document this unlike circumstance in
the proposal budget and maintain
documentation in the post-award
grant files.
Case Study #6
Fin