Transcript CUMC PPT Tutorial File

Columbia University
Medical Center
Training Certification Program For Senior Financial Administrators - Session 6
Session 6 - Cost Accounting
Session 7: Cost Accounting
Part 1: Industry Overview
Direct Costs
F&A Costs
Cost Accounting Standards
Part 2: Columbia University
F&A (ICR) and Fringe Benefits
Significant Costing Policies & Procedures
Service/ Recharge Centers
Session 6
Agenda
Introduction
10 Mins
Goals and Objectives
5 Mins
Industry Overview
45 Mins
Break
15 Mins
Columbia University: Cost Accounting (Part 1)
60 Mins
Break
15 Mins
Columbia University: Cost Accounting (Part 2)
75 Mins
Summary/ Conclusion
15 Mins
TOTAL
240 Mins
Session 6 - Cost Accounting
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Session Objectives
– To understand the cost accounting standards
– To understand compliance requirements in A-21
– To understand direct costs vs. facilities and administration
– To understand the components of the F&A rate
– To understand service/ recharge centers
Session 6 - Cost Accounting
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Part 1
Industry Overview:
Direct Costs
F&A Costs
Cost Accounting Standards
Session 7
OMB Circular A-21
Cost Principles for Educational Institutions
– A. Purpose and Scope
– B. Definition of Terms
– C. Basic Considerations
– D. Direct Costs
– E. F & A Costs
– F. Identification and Assignment of F & A Costs
– G. Determination and Application of F & A Cost Rate
– H. Simplified Method for Small Institutions
– I. Reserved – not in use
– J. General Provisions for Selected Items of Costs
– K. Certification of Charges
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OMB Circular A-21
Purpose
– Used in determining the applicable costs of work performed by colleges and
universities under sponsored agreements.
– Designed to provide that the Federal Government bears its fair share of total
costs.
– Not significantly different from generally accepted accounting principles.
Website link: http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html
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OMB Circular A-21
Definition of Terms
– Major functions of an institution
• Instruction, organized research, other sponsored activities and other institutional
activities.
– Sponsored agreement
• Any grant, contract, or other agreement between the Institution and the Federal
Government.
– Allocation
• The process of assigning a cost, or a group of costs, to one or more cost
objective, in reasonable and realistic proportion to the benefit provided or other
equitable relationship
–
Facilities and administrative (F&A) costs
• 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
Session 6 - Cost Accounting
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OMB Circular A-21
Definition of Terms
– MTDC (Modified Total Direct Costs)
• Consist of all salaries, wages, fringe benefits, materials, supplies, services, travel,
and subgrants/subcontracts up to the first $25,000 of each subgrant/subcontract
(regardless of the period covered by the subgrant/subcontract). Modified Total
Direct Costs exclude equipment, capital expenditures, charges for patient care,
tuition remission, rental costs of off-site facilities, scholarships, and fellowships,
as well as the portion of each subgrant/subcontract in excess of $25,000.
– TDC (Total Direct Costs)
• Include all costs charged to a sponsored program account, excluding Facilities
and Administrative Costs.
Session 6 - Cost Accounting
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OMB Circular A-21
Basic Considerations
– Section C.2 Factors affecting allowability of costs:
• Shall be consistent with policies that apply uniformly to both federally funded and
other activities of the organization.
• Reasonable and allocable.
• Conform to any limitations or exclusions set forth in the circular or award.
• Justification for costs must be adequately documented.
Session 6 - Cost Accounting
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OMB Circular A-21
Reasonable Costs
– Section C.3 Is the cost reasonable?
• A cost is reasonable if it does not exceed that which would be incurred by a
prudent person under the circumstances.
• Is the cost necessary for the overall operation of the University or the
performance of the award?
• Are costs incurred consistent with University policies and procedures?
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OMB Circular A-21
Allocability
– Section C.4 A cost is allocable if:
• It is incurred specifically for the award.
• It benefits the award and can be distributed in reasonable proportion to the
benefits received.
• It is necessary to the overall operation of University, and is deemed to be
assignable in part to sponsored projects.
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OMB Circular A-21
Allocability
– Section C.4.d Direct cost allocation principles
• If a cost benefits two or more projects or activities in proportions that can be
determined without undue effort or cost, the cost should be allocated to the
projects based on proportional benefit.
• If a cost benefits two or more projects or activities in proportions that cannot be
determined because of the interrelationship involved, then the costs may be
allocated or transferred to benefited projects on a reasonable basis.
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OMB Circular A-21
Direct costs
– Section D. Direct Costs
• Direct costs are those costs that can be identified specifically with a particular
project. These charges represent costs necessary to meet the project’s scientific
and technical requirements.
– The relationship between the charge and the science should be “clear and close” and
costs should support the project’s purpose and activity
• SubContract- Contracting for goods and services under a government prime
contract.
– As a subcontract, the transaction becomes subject to additional requirements imposed
on the prime contract by Federal Law as provided by the Federal Acquisition
Regulations and Agency Supplements.
– These additional requirements cover all aspects of the contractual relationship including
the decision to buy, selection of the supplier, pricing the contract, terms of the contract,
quality, payments and even completion and closeout.
Session 6 - Cost Accounting
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OMB Circular A-21
Direct Charging
– Examples of allowable direct charges include:
• Salaries, wages, benefits, of PI, research associate, lab technician, graduate
research assistant, technical staff
• Lab supplies or educational supplies
• Travel
• Equipment
• Consultants
• Tuition & Fees for Grad Research Assistants
• Subcontracts
• Animal purchases and per diems
Session 6 - Cost Accounting
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OMB Circular A-21
Unacceptable Direct Costing Practices
– Assigning charges to the sponsored agreement with the largest remaining
balance.
– Charging the budgeted amount rather than charging an amount based on
actual usage.
– Identifying a cost as anything other than what it actually is, such as
classifying a supply as an item of equipment.
– Charging expenses exclusively to sponsored agreements when the
expense has supported non-sponsored agreement activities.
– Assigning charges that are part of normal administrative support (F&A costs)
for sponsored agreements (e.g., secretarial/ clerical, accounting, payroll).
– Shifting expenses from one grant that’s overspent to another with available
funds.
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OMB Circular A-21
What is an unallowable cost?
– One that is not eligible for reimbursement by federal sponsors.
– Contrast with:
• Permissible by the university
• Allowable by other sponsors
– Unallowable Activities:
• Organized fund raising
• Lobbying
• Commencement and convocation
• General public relations and alumni activities
• Costs for student activities, e.g., intramural activities, student clubs, student
publications, etc.
• Managing investments solely to enhance income
• Prosecuting claims against the federal government
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OMB Circular A-21
Unallowable Expenses
– Advertising
– Alcoholic beverages
– Entertainment
– Fines and penalties
– Housing & personal living expenses
– Memorabilia, promotional materials
– Moving costs if employee resigns within 12 months
– Certain recruitment costs (e.g. excessive size ads)
– Certain travel costs (e.g. first-class)
– Cash donations to other organizations
– “Golden Parachute” severance payments
– Memberships in social, dining, or country clubs and in civic or community
organizations
– Tuition benefits for employee family members
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Facilities & Administrative (F&A) Costs
What are they?
– Allowable costs that normally cannot be assigned to a specific project.
– Examples:
• Building depreciation
• Equipment depreciation
• Supplies
• Administration (Central)
• Administrative & clerical salaries and related fringe benefits
• Postage
• General purpose computer software and office supplies
• Local area network costs
• Memberships & subscriptions
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Facilities & Administrative (F&A) Costs
Special purposes or circumstances- Exceptions for direct charging
– Projects that are geographically inaccessible to normal departmental administrative
services.
– Projects that require making travel and meeting arrangements (conferences &
seminars) for a large number of participants.
– Large, complex programs, program projects, environmental research centers,
engineering research centers, and other sponsored agreements and contracts that
entail assembling and managing teams of investigators from a number of institutions.
– Projects which involve extensive data accumulation, analysis and entry, surveying,
tabulation, cataloging, searching literature, and reporting. For example, if a project
requires substantial mailing expenses in the performance of the project activities or
technical work, postage should be a direct cost of the project.
– Projects that the principal focus includes the preparation and production of manuals,
long reports, books or monographs (Preparing routine progress and technical reports
does not mean the project is a “special purpose or circumstance”).
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Facilities & Administrative (F&A) Costs
Administrative vs. Facilities
– Administrative Cost Pools
– Facilities Cost Pools
(Subject to Cap)
(Uncapped)
• General Administration (Central,
School)
• Building Depreciation
• Departmental Administration
• Interest
• Sponsored Projects Administration
• Operations & Maintenance and
Security
• Student Administration and Services
• Equipment Depreciation
Note: Administrative Cap is 26 points of
the total rate
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Cost Accounting Standards (CAS)
Direct and indirect costs are governed by Cost Accounting Standards
– CAS requires four standards and a disclosure statement
• 501: consistency in estimating, accumulating, and reporting costs
• 502: consistency in allocating costs incurred for the same purpose
• 505: accounting for unallowable costs
• 506: consistency in using the same cost accounting period
• CASB disclosure statement
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Cost Accounting Standards (CAS)
Purposes of CAS
– CAS are federal law and not administrative directives.
– Facilitate comparison of costs among sponsoring agencies and contractors.
– Ensure that costs are accounted for in the same way on proposals and
grants/contracts.
– Ensure that costs are accounted for in the same way from grant to grant
over time.
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Cost Accounting Standards (CAS)
Consistence in Estimating, Accumulating, and Reporting Costs
– Practices Must Be Consistent
Department
to
Department
Grant Proposal
to
Grant Proposal
Grant Proposal
to
Financial Report
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Cost Accounting Standards (CAS)
– Consistency in allocating cost incurred for the same purpose.
– Each type of cost must be allocated once and on only one basis to any cost
objective.
– Costs incurred for the same purpose in like circumstances are either direct
costs only or F&A costs only with respect to final cost objectives.
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Question 1:
Salaries of Glass-Washers
– How would you allocate salaries and supplies of glass - washers who wash
test tubes for seven different sponsored projects?
A) Charge to the project with the most money.
B) Charge all salaries to one project each month and then start over again.
C) Count the test tubes used on each project and figure out the proportional share
to be charged.
D) Charge the expense based on the proportional share of PI’s effort.
E) Charge the expense based on the sq. Footage of glass - washers
bench area.
F) Not chargeable to grant.
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Question 2:
Computer Purchased for Technical Use
– A principal investigator wants to purchase a computer on project A where it is
budgeted. He put through a purchase requisition and a couple of days later he
realizes he can also use it for project B.
– Should he go back and charge project B?
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Question 3:
Photocopying Costs
– Can a PI charge the costs of photocopying research papers and making slides for
use in a technical meeting to the research project?
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Penalties for Noncompliance
– Funds for award may need to be returned to sponsoring agency
– Research on award may be frozen pending investigation
– Funding by sponsoring agency may cease
– Legal ramifications
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BREAK
Session 7 - Cost Accounting
Part 2
Columbia University: Cost Accounting
Facilities & Administration (F&A) & Fringe Benefits
Significant Costing Policies & Procedures
Service/ Recharge Centers
Session 7
Terminologies
– All costs are grouped into a number of pools (categories)
• Direct Costs
• F&A (ICR)
– Facilities
– Administrative
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Terminologies
– Direct Costs:
• Costs that can be identified to a specific project, program, or activity of an
institution.
– Facilities and Administrative Costs (Indirect Costs):
• Costs that cannot be identified to a specific project, program, or activity but
benefit the total institution.
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Terminologies
– Direct Cost Pools include:
• Instruction
• Sponsored Training
• Department Research
• Organized Research (separately budgeted and accounted for)
• Other Sponsored Activities (not research)
• Other Institutional Activities (auxiliaries)
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Terminologies
– F&A Cost Pools include:
• Facilities Cost Pools:
– Building Depreciation
– Equipment Depreciation
– Operation and Maintenance
– Interest
– Library
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Terminologies
– F&A Cost Pools include:
• Administrative Cost Pools:
– General Administration
– Department Administration
– Sponsored Projects Administration
• The government has imposed a 26% CAP on Administrative components
• The cap was imposed for all grantees fiscal years after October 1991. Therefore,
applicable at CU starting in Fiscal Year 1992
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Terminologies
– Distribution Base or what is commonly referred to as the MTDC base:
• The denominator used to compute the F&A rate
– The base includes:
• Salaries, wages, and benefits
• Materials, supplies, and services
• Travel
• Subcontract expenditures up to $25,000 each
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Terminologies
– The Distribution Base excludes:
• Equipment
• Capital expenditures
• Patient care charges
• Tuition remission
• Rental of off-site facilities
• Scholarships and fellowships
• Subcontract expenditures in excess of $25,000
– These items are excluded in order to avoid inequities in the distribution of
F&A costs.
Session 6 - Cost Accounting
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Terminologies
– Facilities and Administrative (F&A) Cost Rate Calculation:
F&A Cost Pool
= Rate
Distribution Base
Session 6 - Cost Accounting
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Terminologies
– Base Year Costs:
• Used as the basis to negotiate new set of F&A rates. The base year is normally
the fiscal year ending prior to the final year covered by the negotiation agreement.
– Columbia current rates run from July 1, 2004 through June 30, 2007,
therefore the future base year will be fiscal year ending June 30, 2006.
Session 6 - Cost Accounting
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CU Facilities & Administrative (ICR) Rates
Columbia’s rates are:
On Campus
61.0%
Off Campus
26.0%
Off Campus Modified
28.8%
Lamont
51.0%
• These rates are predetermined and are applicable for the period 7/1/04-6/30/07.
• On-Campus and Off-Campus rates apply to both CUMC and Morningside
campuses.
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Facilities & Administrative (F&A) Costs
On Campus F&A Rates at Peer Institutions
FY 2003
Brown
56.0%
Chicago
52.5%
Columbia
61.0%
Dartmouth
58.0%
Harvard
63.0%
Johns Hopkins
63.5%
MIT
63.0%
U of Penn
58.5%
Princeton
58.0%
Stanford
58.0%
Washington U
53.0%
Yale
63.5%
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Facilities & Administrative (F&A) Costs
– Proposal Preparation / Submission / Negotiation Process
• MTDC Base Review
• Cost Sharing
• Space Inventory
• O&M Cost
• Equipment Inventory
• Building Depreciation
• Interest on Capital Projects
• Departmental Administration
• Library Costs
• Screening for unallowables
• F&A Rate Calculation
• Proposal preparation / Submission / Negotiation
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F&A Proposal Timeline
– MTDC Base Review
• Review of the Modified Total Direct Cost Base is an ongoing process.
• F&A cost team reviews each new account to determine proper classification
This is an important process since the improper classification of projects as
sponsored research will have a negative impact on the F&A rate.
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F&A Proposal Timeline
– Cost Sharing
• We must identify any mandatory and voluntary cost sharing and add these costs
to the MTDC base.
Cost sharing has a negative impact on the F&A rate.
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Space Inventory
• The most significant step in the proposal process is to conduct a space inventory
survey for the purpose of functionalizing space (i.e. space allocation to research,
training, administration, etc.). Space statistics is the primary driver in allocating
facilities costs pools, therefore it is important that we be as accurate as possible
in functionalizing space, particularly research space.
• The space survey process is started in July/August of the base year and will take
8-10 months to complete.
• We hold training sessions on how to conduct the survey. Instruction packets are
given to each department with a data sheet for each space owned by the
department. We also provide a listing of PI’s and their restricted account
numbers.
• The department must complete the data sheets for each space by annotating:
– Room occupants
– Research projects conducted in the room
• When graduate students occupy space in the room there must be a reasonable
allocation of space based on the funding source of the student.
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F&A Proposal Timeline
– Space Inventory (continued)
• The facilities component of the University’s F&A rate is approximately 50% of the
rate and is most vulnerable to scrutiny by the Federal negotiator.
• It is important that there is adequate documentation to support the
functionalization of the space by room.
• The F&A cost team reviews each data sheet for reasonableness and accuracy.
An important step in this review is to compare occupants effort to space
functionalization.
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Review of the Space Surveys - federal questions:
• Did the University’s space survey definitions comply with the definitions outlined
in OMB Circular A-21?
• Did department personnel understand the space definitions and follow the
University’s procedures? In other words, the space survey instructions must be of
sufficient scope, clear, and complete.
• Is the space study supported by adequate records? Documentation of space
utilization may include:
– A list of occupants for each room
– A list of sponsored research projects conducted in a room or sponsored projects by
principal investigator
– Allocation of some space to non-research activities when students are occupants
• No room 100% research
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Operation and Maintenance (O&M):
• O&M expenses include:
– Utilities
– Janitorial / Custodial services / grounds keeping
– Physical plant administration
– Environmental Health and Safety
– Public safety/security
– Maintenance & repair
• O&M is the single largest component of the rate
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Equipment Inventory (for depreciating assets):
• A wall to wall room by room inventory of all equipment in research intensive
space.
• Equipment linked to space inventory.
• Next inventory expected in early 2006.
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Equipment Depreciation:
• Equipment inventories are required by Circular A-21
• Allocation of equipment depreciation on a room-by-room basis
– More precise allocation than a building-by-building basis or allocation by department
– May provide increased recovery
– Requires defensible equipment inventories by room
• Property Control Manual
– Procedures for the control of equipment owned by Columbia
– Federal government and other sponsors requirements with respect to control over
property
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Building Depreciation:
• Annually, Facilities Management will provide building costs data.
• Controller updates building depreciation database for calculating the building
depreciation expense for FY2006.
• The depreciation allocated to research will be calculated based on the
functionalization of the building.
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Interest on Capital Projects:
• University Budget office provide an updated projects listing for debt financed
projects.
• Interest is calculated for research projects within a building.
• The interest allocated to research is calculated based on the functionalization of
the building.
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Department Administration:
• Developed from information provided by effort reports and review of department
accounts. (e.g. Ledgers 2, 4, 6B, and 6C)
• Department administration is calculated by department, by school.
• Salary and wage and other expenses categories must be consistent with Federal
guidelines. (e.g. must exclude fundraising, alcohol, etc.)
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Library:
• Library costs are allocated based on Full Time Equivalents for:
– Undergraduate students
– Graduated students
– Faculty
– Non-Salaried appointees
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F&A Proposal Timeline
– Screening for Unallowables:
• Every attempt is made to insure unallowable costs are excluded from the cost
pools. Some examples include:
– Entertainment, flowers, liquor
– Fundraising
– Lobbying
– Certain legal costs
– Public affairs
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Facilities & Administrative (F&A) Costs
Flowchart of
Basic F&A Rate
Calculation
CROSS
ALLOCATIONS
F&A
COST POOLS
ALLOCATION
BASES
Building &
Equipment
Depreciation
Space
F&A
ALLOCATED TO
Instruction
DISTRIBUTION
BASE
%
Space
O&M
Sponsored
Research
General
Administration
Departmental
Administration
Sponsored
Program
Administration
%
Instruction
Modified
Total Direct
Cost
Research
Modified
Total Direct
Cost
F&A COST
RATE
=
Instruction
F&A Cost
Rate
=
Research
F&A Cost
Rate
=
Other
Sponsored
Activities
F&A Cost
Rate
MTDC
Other
Sponsored
Activities
%
Other
Institutional
Activities
%
MTDC
Sponsored
MTDC
Other
Sponsored
Activities
MTDC
FTE
Library
Student
Service
Only to
Instruction
Session 6 - Cost Accounting
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F&A Proposal Timeline
– Prepare Proposal Document
• Prepare supporting documentation as required by “Standard Format”
• Proposal must be submitted to the Division of Cost Allocation, New York by next
base year, e.g. December 31, 2006.
• Provide addition materials as requested
• 4-6 month review and negotiation
Session 6 - Cost Accounting
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Facilities & Administrative (F&A) Costs
Key Drivers of F&A Rates
– There are a few well-defined drivers of the F&A rate:
• New Buildings
• Space functionalization- which is the basis for allocating the space-related
components
• Operation & Maintenance - may be the most significant rate component
• Depreciation- for recovering the cost of equipment and buildings
• Interest - properly allocated to buildings
• The research base – volume of sponsored research
Session 6 - Cost Accounting
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CU Fringe Benefit Rates
Federal Rate
– Current negotiated rate
– Type of rate
26.4%
Fixed
– Period
7/1/04-6/30/05
Other Fringe Rates
• 4.1% Additional Fringe - not charged to federal projects
– Recovers fringe costs not included in 26.4% (e.g. Tuition for dependents)
• Fringe charges applicable only to practice plan salary
– A-1
– A-2
16.45% (Pensionable)
1.45% (Non-pensionable)
• Fringe charges applicable to registered students – 8.15%
Session 6 - Cost Accounting
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BREAK
Session 7 - Cost Accounting
Significant CU Costing Policies and Procedures
Most significant policies and procedures that impact sponsored projects:
Columbia Policy Statements
92-1 Segregation of Unallowables
92-3 Administrative and Clerical Salaries
92-4 Office Supplies and Other Admin Expenses
92-5 PI Responsibility for Fiscal Oversight
Other Significant Policies
– Effort Reporting and Cost Transfers
– Cost Sharing
– Overdrafts
– Service/Recharge Centers
Session 6 - Cost Accounting
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CU Policy Statements
Policy Statement on Segregation of Unallowables (92-1)
– Covers costs like alcoholic beverages, flowers, airfare in excess of lowest
available fare
– These costs may NOT be charged directly or indirectly to federal awards
– Although unallowable as charges to federal awards, these may be
reimbursed /paid from other sources if they conform to CU policy
– Use subcode 8500 or individual 85xx subcodes as identified in policy
Session 6 - Cost Accounting
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CU Policy Statements
Policy Statement on Admin/Clerical Salaries (92-3)
– Curtails reimbursement of these costs as direct charges to FEDERAL
awards
– OMB Circular A-21 provides that these costs normally are indirect
– Direct charging may be appropriate under certain circumstances, including:
• Large complex programs that require significant admin support (e.g., Program
Projects)
• Projects requiring extensive data accumulation/analyses, etc.
• Projects geographically inaccessible to normal admin services
• Individuals charged must be those actually engaged in the project
• PI/Admin responsible for insuring that direct charging is appropriate, whether to
Federal OR non-federal projects
Session 6 - Cost Accounting
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CU Policy Statements
Policy Statement on Office Supplies & Other Admin Expenses (92-4)
– Curtails reimbursement of these costs as direct charges to FEDERAL
awards
– OMB Circular A-21 provides that these costs normally are indirect
– Includes costs like office supplies, postage, memberships in prof. societies
– Direct charging may be appropriate under certain circumstances, including:
• When the costs relate specifically to the technical substance of the project
• Where nature of project requires unusually high level of these costs
– PI/Admin responsible for insuring that direct charging is appropriate, whether
to Federal OR non-federal projects
Session 6 - Cost Accounting
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CU Policy Statements
Policy Statement on PI Responsibilities (92-5)
– Requires active oversight of the principal investigator, who is often the only
source to provide distribution of costs
– Encourages the use of administrative staff to handle details, but PI is
ultimately responsible for financial (as well as programmatic) oversight
Session 6 - Cost Accounting
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Other Significant CU Policies
Effort Reporting
Allocation to Function
Research
PI’s Effort
Administration
Instruction
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Other Significant CU Policies
Effort Reporting
– Instituted in early 1970’s – Government wanted reporting that provided a
reasonable comfort level for substantiating salaries charged to research
grants.
– Effort reporting evolved in what you might characterize as a simplistic world
of research. Some thirty years later, the complexity, inter-disciplinary, interrelatedness of research protocols has made the tracking of effort difficult
particularly since PI’s tend to work on several grants as well as other duties.
Session 6 - Cost Accounting
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Other Significant CU Policies
Effort Reporting
– What is Effort Reporting?
– Accounting for salaries and wages
– Certifying effort
• On individual sponsored agreements
• On all other activities (DA, Instruction, PP, Hospital Duty, Cost Sharing)
Session 6 - Cost Accounting
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Other Significant CU Policies
Effort Reporting
– Why Do Effort Reporting?
• Salary and wage charges to sponsored agreements are allowable only if they are
supported by an effort reporting system
Session 6 - Cost Accounting
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Other Significant CU Policies
Effort Reporting
– Who has to do Effort Reporting?
• All employees in Academic departments
– Effort reporting salary is annual compensation for an employee’s appointment whether
time is spend on research, teaching, patient care or other activities
– Excludes compensation from non-university sources (e.g. NYSPI)
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– OMB A-21Requirements
– Columbia utilizes “plan-confirmation” to satisfy A-21 requirements
• A system based upon budgeted workload
• System will reasonably reflect the workload of each employee
• System will account for 100% of the workload for which the employee is
compensated
• System provide for making necessary changes to the budgeted workload
• Annual certification that salaries and wages charged to sponsored agreements or
other categories are reasonable in relation to the work performed
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Effort Definitions:
– Sponsored Activities – research, training, and other activities supported by
grants and contracts from Federal and other sources. Effort is separately
budgeted and accounted for
– Public Service – Harlem Hospital and similar institutions under affiliation
agreements
– Hospital Duty – Effort devoted to patient care at NYPH where effort is part
of base salary
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May 2005
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Other Significant CU Policies
Effort Reporting
– Effort Definitions (continued):
– Private Practice – designated as private practice guaranteed and is part of
base salary
– Instruction - teaching, curriculum development, departmental research.
Departmental research is activity which is neither separately budgeted or
accounted for, and is supported by departmental funds
– Department Administration – Effort devoted to administrative activities that
benefit common or joint objectives of the academic department.
• Maintenance of department records, budgets
• Supervision/guidance of administrative support staff
• Departmental chair or head, etc in administrative matters
• Preparation of grant & contract proposal
Instruction and departmental administration are often funded from the same FAS
accounts, including FAS accounts supporting private practice.
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Department Responsibilities
• Determine initial effort allocation based on assigned workload
• Submit Salary Accounting Form (SAF) indicating salary to be charged to one or
more activities, percentage of effort devoted to the project and period to which
effort is attributable
• Provide breakdown of effort devoted to instruction, private practice and
administration
• Must add to 100%
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Department Responsibilities (Continued)
• Department must monitor workload distributions
• Quarterly monitoring “snapshot” reports provided to dept.
• Department must submit revised salary distribution instructions by submitting an
SAF whenever there is a significant change in workload, including:
• Beginning or end of a sponsored project
• Shift in effort resulting from new awards
• Long term change in effort devoted to one or more projects
• Shift in administrative responsibilities
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Department Responsibilities (Continued)
• Annual Effort Certification
• The effort summary is not intended to be a precise measure of an employee’s
effort distribution, but rather a reasonable estimate
• Certification of an employee’s effort is to be verified by a person who has
knowledge of that effort
– Note: Refer to Effort Certification letter, dated October 18, 2004, for
guidance on required steps.
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Annual Effort Certification Report
• Includes all salary transactions recorded in labor for fiscal year ended June 30,
2004 and any cost transfers affecting fiscal year 2004 submitted through
September 30, 2004
• Effort distribution percentages have been recalculated in consideration of the NIH
caps that limit the amount of salary that can be charged to NIH grants
• Space is provided to record an individual’s effort devoted to lobbying activities
• Cost sharing, whether mandatory (grant required) or voluntary (PI committed),
must be reported.
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Effort Reporting Issues
• Certifying official must have knowledge of effort performed
• Effort reports must be certified and returned in a timely manner
• Overcommitments due to NIH cap and Cost Sharing
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Timeliness of Retroactive Cost Transfers
• Departments have up to 90 days to process
• Salary costs must be transferred within 90 days from the date of the payroll
transaction
– Example: Salary for the month of July may be transferred through the end of October
• Exceptions beyond 90 days require documentation and approval by the
Controller’s Office
• 90-day rule applies to both transfers and clearing suspense accounts
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Retroactive Cost Transfers may NOT be used:
• To expend available funds remaining on a project.
• To avoid a cost overrun by charging another unrelated account.
• To avoid a restriction imposed by law or terms of agreement.
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting
– Acceptable Reasons for a Retroactive Cost Transfer beyond 90 days:
• Transfers between continuation grants and new project number was not
established when cost was incurred.
• Pre-award costs, specifically authorized in writing by the sponsor.
• Pertinent information received from sponsoring agency.
• Impossible or impractical to allocate charges at time of original entry.
• RARE Clerical error
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Effort Reporting / Cost Sharing
– Some sponsored projects require that federal grant funds be matched
proportionately with non-federal funds or that the University participate to
some extent in the cost of the project. In other cases, PI’s volunteer cost
sharing.
– Mandatory cost sharing
• Is mandated by sponsor; requires dept. to fund a portion of direct costs
– Voluntary Committed cost sharing
• Is specifically pledged in the proposal budget or award
• Requires dept. to fund a portion of direct costs
• More complex tracking
– Voluntary uncommitted cost sharing
• Over and above the time which is committed and budgeted for in a sponsored
agreement ( e.g. faculty-donated additional time)
• Documentation is not required
Session 6 - Cost Accounting
May 2005
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Other Significant CU Policies
Grant / Contract Overdrafts
– Occurs when expenditures exceed budget
– Modest overdrafts during life of competitive segment generally
• Permissible on most Federal grants
• Must not interfere with completion of project
– Significant overdrafts must be covered on a timely basis
– Any residual overdraft must be funded within 9 months after end of
competitive segment
• Controller’s Office will transfer any deficit to school
Session 6 - Cost Accounting
May 2005
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What are Service/ Recharge Centers?
Operating units that provide good or services to users principally within
the University community for a fee (e.g. departments and units)
– Types of Service/ Recharge Centers:
• Specialized Service Facilities
– Highly complex or specialized facility
– Material effect on the F&A rate for organized research
– Rates must include both direct and F&A costs
– Example: Animal care
• Recharge Centers
– Not highly “specialized” in nature
– High dollar volume
– Examples: Facilities costs, NMR Facility, Printing and Reproduction DNA,
Session 6 - Cost Accounting
May 2005
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Recharge Centers
Process for establishing a license to operate a recharge center
– Determine need. Does a similar center already exist that can be utilized?
– Prepare projection of costs/revenues
– Determine units of service and calculate a rate per service
• Rates must be set for overall breakeven (or dept funded deficit, but NOT a
surplus)
• Rates must be based on cost, not market conditions
– Factor in depreciation, not cost of equipment to be charged to recharge center
– Submit to Restricted Funds for review and approval
Annual review requirement
– Review and adjustment of rate(s) required annually.
Session 6 - Cost Accounting
May 2005
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Service/ Recharge Centers
Compliance Issues – OIG Findings at Major Research Institutions
OIG audits found that service/ recharge centers:
– Accumulated surplus funds resulting from excess charges
– Inappropriately transferred surplus funds out of operating accounts for
unrelated purposes
– Cost of capital equipment purchases vs. depreciation??
Session 6 - Cost Accounting
May 2005
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Wrap Up
That was all very interesting (???) But what should I take away from this
presentation?
– F&A (ICR) costs are real costs, and the process for documenting and
negotiating them is rigorous
– Make sure to segregate all unallowable expenses
– Salary allocations and effort certification are vitally important
• SAF’s must be processed timely
• Cost Transfers MUST be severely curtailed
• Annual effort certification is a serious matter. Signer must have knowledge of
activities of faculty/staff
– Recharge center finances must be monitored and rates adjusted as
necessary
Session 6 - Cost Accounting
May 2005
Page 88
My Research Joke
This scientist is doing research on how the environment affects a frog’s
ability to jump……
Session 6 - Cost Accounting
May 2005
Page 89
QUESTIONS?
Session 6
COURSE
EVALUATION
Please complete course evaluation form.
Session 7
Session 6