OMB Circulars A-21, A-110 & A-133

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Overview: OMB Circulars

 Difference between award types – grants, contracts and cooperative agreements  Purpose of the circulars  What circulars are we reviewing?

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Definition of a Grant

 Purpose is to transfer money, property, services or anything of value to recipient in order to accomplish a public purpose  No substantial involvement anticipated between government and recipient 4/27/2020 3

Definition of a Cooperative Agreement

 Purpose is to transfer money, property, services or anything of value to recipient in order to accomplish a public purpose  Substantial involvement anticipated between government and recipient 4/27/2020 4

Definition of a Contract

 Purpose is to acquire property or services for direct benefit or use of the Federal Government.

  Very restrictive Usually no expectation of cost sharing 4/27/2020 5

Assistance Vs. Procurement

 Assistance – generally, what the proposer wants to do. Awards can be either grants or cooperative agreements  Procurement – generally, what the government buys (can include research). Awards are contracts 4/27/2020 6

OMB Circulars

 Purpose: To give instructions to the federal agencies affected by the circulars; federal agencies are required to implement.

 Federal agencies pass the requirements to institutions  Effect: Set minimum standards for institutions 4/27/2020 7

OMB Circulars applicable to all Awards

 A-21 Cost Principles for Educational Institutions  A-110  A-133 4/27/2020 Grants and Agreements with Institutions of Higher Education: Uniform Administrative Requirements Audits of States, Local Governments, and Non-Profit Organizations 8

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Definitions

Definition of cost is:  An amount paid or required in payment for a purchase; a price  The expenditure of something, such as time or labor, necessary for the attainment of a goal 4/27/2020 9

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Definitions

Definition of principle is:  A rule or standard  A fixed or predetermined policy or mode of action 4/27/2020 10

Definitions

 Cost Principles can be defined as the policy for determining if the cost or expenditure is allowable or not.

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OMB Circular A-21 – Cost Principles for Educational Institutions

 Purpose: Establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions  Determines what costs can be included in the F&A calculation  Remember: A-21 addresses both direct and F&A (indirect) costs as well as specific allowable costs (Section “J”) 4/27/2020 12

A-21 Constantly Changes

  Tighten rules on allowability and allocation of costs  Primary focus on Facilities & Administrative Costs Promote greater standardization in treatment of costs  Also directed primarily at Facilities & Administrative Costs 4/27/2020 13

How is Allowability Determined?

Allowable: Under the agreement, regulations and public laws Reasonable: A prudent person would have purchased this item and paid this price Allocable: They 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 If a cost cannot meet the above criteria, it is NOT ALLOWABLE, no matter what it is for.

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Unallowable Costs – Section J

(Can not be charged against Federal agreement, used as cost sharing or placed in the F&A cost base)  Unallowable Activities (something you do)     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 twelve months Certain recruitment costs 4/27/2020 15

A-21 Revisions, July, 1993

 “The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these 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 of activity. Items such as office supplies, and memberships shall normally be treated as indirect costs.” F.6.b.

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Cost Principles

 “The fact that a cost requested in a budget is awarded, as requested, does not ensure a determination of allowability. The organization is responsible for presenting costs consistently and must not include costs associated with their F&A rate as direct costs.” 4/27/2020 17

Direct and Facilities and Administrative Costs

 Direct Costs: Costs which can be identified specifically with a particular sponsored project or that can be directly assigned to such activities relatively easily with a high degree of accuracy  Facilities & Administrative: Costs incurred for common or joint objectives and therefore cannot be identified readily and specifically with a sponsored project 4/27/2020 18

Examples of Direct Costs

     Salaries and Wages Fringe Benefits Travel Lab Supplies Subgrants and Subcontracts 4/27/2020 19

F&A Costs are Real

 “Any research project must cover two components of costs –  those directly attributed to the project  those incurred for the general support and management of the research 4/27/2020 …If the sponsor of research projects do not fully reimburse the costs, they must be paid from other institutional funds.” *American Council on Education 20

F&A Cost Pools

      Operations and Maintenance Library General Administration Departmental Administration Sponsored Projects Administration Student Services Administration 4/27/2020 21

Consistency is a Problem

 Consistency in estimating, accumulating and reporting costs  Consistency in allocating costs incurred for the same purpose  Should be able to compare proposal estimate with actual costs for any “significant” cost 4/27/2020 22

OMB Circular A-110 Uniform Administrative Requirements

     Purpose Subpart A General Subpart B Pre-Award Requirements Subpart C Post-Award Requirements Subpart D After-the-Award Requirements 4/27/2020 23

A-110 Purpose

“Sets forth standards for obtaining consistency and uniformity among Federal agencies in the administration of grants to and agreements with institutions of higher education…” 4/27/2020 24

OMB A-110 Sections

Subpart A – General   Purpose Definitions    Effect on other issues Deviations Subawards 4/27/2020 25

OMB A-110 Sections

Subpart B- Pre-Award Requirements   Pre-award policies Forms for applying for Federal assistance   Special award conditions Certifications and representations   Debarment and suspension Lobbying 4/27/2020 26

OMB A-110 Sections

Subpart C – Post Award Requirements Financial and Program Management  Standards for financial management systems       Payment Cost sharing or matching Program income Revision of budget and program plans Allowable costs Period of availability of funds 4/27/2020 27

OMB A-110 Sections

Subpart D – After-the-Award Requirements   Close-out procedures Subsequent adjustments and continuing responsibilities  Collections of amount due Appendix A- Contract Provisions 4/27/2020 28

Aspects of A-110

   Effect on Issues  No agency can impose rules that are in conflict with A-110 Deviation  OMB can grant exceptions in unusual circumstances Subcontracts  A-110 applies to any subcontractors performing work under an award 4/27/2020 29

OMB Circular A-110

Uniform Administrative Requirements  Expanded Authorities under OMB A-110 C.25e

 Agencies can waive cost-related and administrative prior approvals  University Sponsored Project Offices can approve    Pre-award costs (up to 90 days prior to award start date) First no-cost extension up to 12 months Carry forward of balance 4/27/2020 30

What’s Important for Me as a Departmental Administrator?

   Cost Sharing Program Income Revision of Budget and Program Plans 4/27/2020 31

Cost Sharing

    Verifiable and not included as contributions on Federal projects Still have to be allowable Provided for in the approved budget “when required by the Federal Awarding agency” Unrecovered indirect costs may be included “with prior approval of Federal awarding agency” 4/27/2020 32

Revision of Budget & Program Plans

  Instructions on how to report deviations from budget and program plans Changes which require sponsor prior approval:     Change in scope Need for additional Federal funds Change in key person specified in the application or award document The absence for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator 4/27/2020 33

Revision of Budget & Program Plans, cont’d.

   The transfer of amounts budgeted for indirect costs to absorb increases in direct costs , or vice versa, if required by the Federal awarding agency.

The transfer of funds allotted for training allowances (direct payment to trainees) to other categories of expense.

Unless described in the application and funded in the approved awards, the subaward, transfer or contracting out of any work under the award. Does not apply to purchase of Materials & supplies, equipment or general support services.

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OMB Circular A-133

   Establishes audit requirements and defines federal responsibilities for implementation and monitoring such requirements for institutions of higher education Institutions receiving more than $500K in Federal Awards require an audit Audits shall normally be performed annually 4/27/2020 35

A-133 Emphasis

    Sets standards for audit consistency and uniformity Identifies compliance requirements Establishes criteria for testing internal controls Tests for reasonable assurance that financial statements are accurate 4/27/2020 36

Audits

 Question: When do you start preparing for an audit?

 Answer: The day you prepare a proposal 4/27/2020 37

Who Audits the University?

 Federal Government – US Dept. of Education is SVSU’s cognizant audit agency  A-133 Auditors  Program Auditors 4/27/2020 38

Key to a Successful Audit

      Organized Files Documentation for expenses Appropriate Approvals Audit Trails (i.e., documentation) Knowledge of policies and regulations If it’s not documented, it didn’t happen….

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Audits

 Document! Document! Document!

 When transfers are required – “Defend the Debit”  Auditors want to know why the award was charged for the expense 4/27/2020 40

A Look at Accusations

 George Washington University – Engineering professor charged with embezzling almost $600,000 in federal grants by directing the money into his own private companies. Also charged with using University money to pay his cousin’s wife for work that she never did. The court case is still pending. Article taken from the Chronicle of Higher Education, 2/4/05 4/27/2020 41

A Look at Accusations

 University of Connecticut engineering professor resigned his tenured position after being accused of spending thousands of hours on his private consulting practice and neglecting his academic work.

 Florida Atlantic University professor resigned following accusations that he used state money to give an edge to a company that he had created to make and sell the same mine-detecting submarine that he was studying at the university.

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A Look at Settlements Associated with Noncompliance

 Northwestern University (~$5M; mischarging Federal Grants, fraud, Time & Effort issues)  Yale University - Tenured Professor forced out for allegedly padding his business travel expenses by approx. $150,000. He has made full restitution and resigned. 1/21/05 article from the Chronicle of Higher Education.

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A Look at Settlements Associated with Noncompliance

 Florida International University - $11.5M for improperly billing the U.S. Dept. of Energy for scientists’ time, travel and administrative expenses. Article taken from the Chronicle of Higher Education, 2/15/05  The Johns Hopkins University - $2.6M to settle claim that scientists had overstated the amount of time they were spending on projects financed by the federal government. Article taken from CHE, 3/1/04 4/27/2020 44

A Look at Settlements Associated with Noncompliance

 University of Chicago ($0.65M; mischarging Federal Grants)  University of Connecticut ($1.3M; training grant issues)  Medical College of Georgia ($10M; theft of research funds related to clinical trials- two investigators with jail time)  University of Minnesota ($32M; program income/clinical trial violations)  Stanford University ($3.1M; unallowable costs) From Gary Thompson – Director of Grant Compliance NIH – through Ann Holmes from University of Maryland 4/27/2020 45

Words to the Wise

 “If you don’t like being audited by an auditor, you will really dislike being audited by an angry auditor.” NCURA 4/27/2020 46

Current Hot Buttons

       Final Reports Cost Transfers Cost Sharing Effort Reporting Departmental Administrative Costs Subrecipient Monitoring Program Income 4/27/2020 47

Additional Resources

 OMB Circulars    http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html

http://www.whitehouse.gov/omb/circulars/a110/a110.html

http://www.whitehouse.gov/omb/circulars/a133/a133.html

 Office of Sponsored Programs, located at 365 Wickes Hall  http://www.svsu.edu/sponsoredprograms 4/27/2020 48

OMB Circulars

 Questions?

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