Transcript OMB CIRCULAR A110: Do you know the rules?

OMB CIRCULAR A21:
Making It Work for You
What is OMB A-21?
• A portion of the Code of Federal Regulations,
specifically the Office of Management and Budget
(OMB), that is used in determining the allowable
costs of work performed by colleges and
universities under sponsored agreements.
• Note: These principles are designed to ensure that
the Federal Government bear its fair share of total
costs associated to research.
• http://www.whitehouse.gov/omb/circulars/
When should it be used?
• determining costs applicable to grants, contracts, and other
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agreements with educational institutions.
working with any Federal agencies that sponsor research
and development, training, and other work at educational
institutions
used as a guide in the pricing of fixed price contracts and
subcontracts where costs are used in determining the
appropriate price.
Note: Some costs normally allowed under A-21 may be
unallowable in the specific program application (RFP, PA,
Project Guidelines). Ie: No foreign travel allowed, no
capital equipment allowed.
Four categories of major functions in an
educational institution (Section B-1):
• Instruction
• Research
• Other Sponsored Activity
• Other Institutional Activity
Definitions:
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Instruction
 the teaching and training activities of an
institution
 Sponsored instruction and training means specific
instructional or training activity established by grant,
contract, or cooperative agreement.
Definitions, continued:
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Research
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Organized research means all research and development
activities of an institution that are separately budgeted
and accounted for.
Sponsored research means all research and development
activities that are sponsored by Federal and non Federal
agencies and organizations.
University research means all research and development
activities that are separately budgeted and accounted for
by the institution under an internal application of
institutional funds.
Departmental research means research, development and
scholarly activities that are not organized research and,
consequently, are not separately budgeted and accounted
for.
Definitions, continued:
• Other Sponsored Activity
 Other sponsored activities means programs and projects financed by
Federal and non Federal agencies and organizations which involve
the performance of work other than instruction and organized
research.
health service projects
community service programs
• any of these activities are undertaken by the institution without
outside support may be classified as other institutional activities
Definitions, continued:
• Other Institutional Activity
 means all activities of an institution except:
instruction, departmental research, organized research, and
other sponsored activities, as defined previously
F&A cost activities as defined in this circular
 specialized service facilities as defined in this circular:
including:
 operation of residence halls and dining halls
 hospitals and clinics
 student unions
 intercollegiate athletics
 bookstores, etc…
F&A Rates are Categorized by these Major
Functions of Research:
For WSU the new rates for starting 07/01/07 for each of these
categories are (Calculated as Modified Total Direct Costs)
Research:
On-Campus—49.5%
Off-Campus—26%
Instruction:
On-Campus—55%
Off-Campus—26%
Other Sponsored Activity:
On-Campus—33%
Off-Campus—26%
Other topics addressed in A-21
 Cost Accounting Procedures
Section C: Items 5-12, deal with subjects related
to applicable costs, cost allowances for the
university and non-compliance to the procedures.
 F&A Costs, Negotiation, and Agreement:
Sections E-I relate to:
 the development of Facilities and Administration
policies, rates, allowable costs in F&A
 reporting and auditing standards
F&A Costs:
Facilities and administrative costs (a.k.a: F&A or Indirects) Section E:
 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. F&A costs are those involving resources used mutually by different individuals and
groups, making it difficult to assess precisely which users should pay what share.
 Procedures to Calculate F&A:
Simplified or Other
 Simplified version is for smaller universities.
 As a larger institution, WSU uses Modified Total Direct Costs as the method of calculation
 Section H explains the different methods and defines small and larger university categories.
 What does Indirect Costs (F&A) pay for?
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General Administration Sponsored Projects Administration
Library Expenses
Plant Operation and Maintenance
Depreciation or Use Allowance on Building and Equipment
Student Administration and Services
• Cognizant Federal Agency-Section 11 (a):
 A “cognizant agency" means the Federal agency responsible
for negotiating and approving F&A rates for an educational
institution on behalf of all Federal agencies.
 Cost negotiation cognizance is assigned to the Department of
Health and Human Services (HHS) or the Department of
Defense's Office of Naval Research (DOD), normally
depending on which of the two agencies (HHS or DOD)
provides more funds to the educational institution for the
most recent three years.
 WSU’s cognizant Federal Agency is Department of Health and
Human Services (HHS)
 Reporting and auditing standards-Section B.14:
 Educational institutions that received aggregate sponsored
agreements totaling $25 million or more subject to this
Circular during their most recently completed fiscal year
shall disclose their cost accounting practices by filing a
Disclosure Statement (DS 2).
 Cost adjustments shall be made by the cognizant agency if
an educational institution fails to comply with the cost
policies in this Circular or fails to consistently follow its
established or disclosed cost accounting practices when
estimating, accumulating or reporting the costs of
sponsored agreements.
A-21’s nuts and bolts for a Research
Administrator
• Composition of Total Costs-Section B.1-4
The cost of a sponsored agreement is comprised of the allowable
direct costs incident to its performance, plus the allocable portion
of the allowable F&A costs of the institution
• Direct Costs-Section D
 Direct costs are those costs that can be identified specifically with a
particular sponsored project, an instructional activity, or any other
institutional activity, or that can be directly assigned to such
activities relatively easily with a high degree of accuracy.
 Costs incurred for the same purpose in like circumstances must be
treated consistently as either direct or F&A costs. Where an
institution treats a particular type of cost as a direct cost of
sponsored agreements, all costs incurred for the same purpose in
like circumstances shall be treated as direct costs of all activities of
the institution.
Composition of Total Costs-Section B.2
• Allowability of costs (It’s an ART!)
 Allocable to sponsored agreements described in
A-21
 Reasonable
 Treated consistently in the application of those
generally accepted accounting principles
appropriate to the circumstances
Allocable
• it is incurred solely to advance the work under the
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sponsored agreement
it benefits both the sponsored agreement and other work of
the institution
is deemed to be assignable to the project
• Any costs allocable to a particular sponsored agreement 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.
• Any costs allocable to activities sponsored by industry, foreign
governments or other sponsors may not be shifted to federally sponsored
agreements.
Reasonable
A cost may be considered reasonable if the nature
of the goods or services acquired or applied, and
the amount involved, reflect the actions a prudent
person would have taken under the
circumstances prevailing at the time the decision
to incur the cost was made.
See OMB Circular A-21 Section C.3 for major
considerations involved in the determination of the
reasonableness of a costs.
Treated Consistently
• Costs incurred for the same purpose in like
circumstances must be treated consistently as either
direct or F&A costs.
and/or
• Costs conform to any limitations or exclusions in these
principles or in the sponsored agreement.
Direct Costs-Section D
Are those allowable costs that can be identified specifically within the
performance of the scope of work or are necessary for the completion
of the specific project. They are easily assigned to a specific research
project and paid directly from that project.
Are identified specifically with the sponsored work rather than general
cost of the project. Determining the direct costs from F&A costs should
be of consideration.
Standard Direct Costs:
• Salaries and Wages
• Personnel Benefits
• Materials and Project Specific supplies
• Project Related Travel
• Equipment Purchased for the Project
• Long Distance Telephone Charges
• Project Specific Photocopying
• Other costs can be allocated as Direct but are not as
common. (See Section D)
Major Projects Cost Determination
• Major projects are defined as those requiring an
amount of administrative or clerical support
significantly greater than the routine level provided
by academic departments. Direct charging of
administrative or clerical costs may be appropriate
where a major project or activity explicitly budgets
for administrative or clerical services and
individuals involved can be specifically identified
with the project or activity.
Major Projects Cost Determination
Major program project determination is not as easy as it
sounds. The project must validate the significance of
administrative or clerical support.
The next slides provide some examples of Major Program
Projects consistent with OMB A-21.
Major Project Examples
• Projects that require making travel and meeting arrangements for
large numbers of participants
• Such as conferences and seminars
• Projects whose principal focus is the preparation and production of
manuals and large reports, books and monographs
• Excluding routine progress and technical reports
• Projects that are geographically inaccessible to normal departmental
administrative services
• such as research vessels, radio astronomy projects, and other research
fields sites that are remote from campus
• Individual projects requiring project-specific database management;
individualized graphics or manuscript preparation; human or animal
protocols; and multiple project-related investigator coordination and
communications
Unallowable Costs-Section J
 Donations or contributions.
 Development/fundraising costs.
 Entertainment costs. (shows, sporting events, meals,
lodging, etc.)
 Fines and penalties for violations of Federal, State, and
local or foreign laws and regulations
 Goods or services for personal use (including gifts).
 Housing and personal living expenses of the institution’s
officers (including past officers).
 Individual memberships and subscriptions.
 Interest, fund raising, and investment management costs.
Unallowable Costs, Continued:
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Lobbying costs.
Losses on other sponsored projects
Proposal preparation costs
Recruiting costs that are excessive.
Relocation costs (if employee leaves voluntarily within 12
months of hire).
Selling and marketing costs.
Student activity costs unless specifically allowed in the
sponsored agreement.
Travel costs in excess of commercial coach airfare
Trustee travel and subsistence costs.
What you should remember about OMB A-21:
• Guide to how all costs associated to sponsored
projects are developed, accounted for, and
recorded.
• Determining allowable costs is an ART: Allowable,
Reasonable, and Treated Consistently
• F&A is a negotiated rate through DHHS that entails
many general cost functions of the university.
Discussion:
Is a hammer a direct cost or a general cost under F&A?
Depends on what kind of hammer it is?
If a standard hammer that can be used in the
department for anything, if so it can not be charged
as a direct cost.
If it’s special hammer with capabilities designed
specifically for the project, it can be charged as a
direct cost.
 A PI wants to charge 3 desk top computers
totaling $9,000 on a proposal he’s submitting to
NSF, is this acceptable?
 What does NSF guidelines say? What are
computers considered according to OMB?
 Could these be listed as “Equipment”?
• OMB says:
• "Equipment" means an article of nonexpendable, tangible personal
property having a useful life of more than one year and an acquisition
cost which equals or exceeds the lesser of the capitalization level
established by the institution for financial statement purposes, or
$5000.
• "Special purpose equipment" means equipment which is used only for
research, medical, scientific, or other technical activities. Examples of
special purpose equipment include microscopes, x-ray machines,
surgical instruments, and spectrometers.
• "General purpose equipment" means equipment, which is not limited to
research, medical, scientific or other technical activities. Examples
include office equipment and furnishings, modular offices, telephone
networks, information technology equipment and systems, air
conditioning equipment, reproduction and printing equipment, and
motor vehicles.
• Answer:
• Unless the computer(s) can be dedicated solely to
the project, they can not be charged as a Direct
cost of the project. This would be a cost covered
by F&A.
Further discussion?