Transcript Presentation to Govt

Cost Sharing
The Double Edge Sword
Dennis J. Paffrath – University of Maryland, Baltimore
Executive Director, Sponsored Programs Administration
[email protected] 410-706-6723
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Pre Award Cost Sharing Issues
 A policy should be put in place so that all parties
involved in research (science and administration) have a
guide as to how cost sharing should be handled
The policy should outline:
 Definitions and terms
 Purpose
 Background
 Procedures, and
 Responsibilities
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UMAB’s Policy
http://www.ord.umaryland.edu/policies_procedures/costshare.html
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Proposal Review
 The Sponsor guidelines need to be reviewed for any cost
sharing requirements. If required, cost sharing is
considered mandatory. If not, cost sharing is considered
voluntary.
 Mandatory is the portion of the University contribution
to a sponsored project that is required by sponsor
 Voluntary is that portion of the sponsored project that
the University and/or non-Federal third parties
contribute to a project at their own initiative.
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Proposal Review
 If either cost sharing type is included in a proposal the
following must be asked:
 Is an internal budget included in the proposal outlining the
costs?
 Are the cost sharing costs directly allocated to the project?
 Are the cost sharing costs listed in the budget allowable by the
sponsor?
 Can F&A be included as cost sharing?
 Has the PI listed cost share in the abstract or technical portion
of the proposal?
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Cost Share Documentation
 Does your university require a cost sharing form to be
completed?
 University of Maryland Baltimore requires:
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Listing of Over-Salary Cap
Cost Share commitments
In-kind cost sharing contributions
Chartstring Information (Peoplesoft account #)
Signatures of PI, Division Chief or Center Director,
Department Chair and Dean
UMAB’s cost share form
http://www.ord.umaryland.edu/policies_procedures/costshare.html
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UMAB’s cost share form
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UMAB’s cost share form
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Award set up
 Who handles the Award set up at your university?
 At UMAB, the pre-award staff sets up the award.
 Review award, if award cut then cost share should also be
reduced
 Companion account is set up along with the main account.
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Post Award Cost Sharing Issues
 Documenting cost sharing
 Special issues with Voluntary Committed Cost Sharing
(VCCS)
 Cost sharing and F&A rates
 Special issues with voluntary uncommitted cost sharing
(VUCS)
 Cost sharing compliance issues and strategies
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Cost SharingOverview
 Cost Sharing, OMB Circular A-110, Section __.23
 Cost sharing reflects the grantee’s contribution to a
sponsored project
 May include cash, property, equipment, and services
 Unrecovered F&A may be included with sponsor approval
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Documentation Basics
 Costs offered in satisfaction of a cost sharing obligation:
 Must be verifiable, i.e., supported by adequate documentation
 Allowable under the applicable Federal cost principles
 Allocable
 Generally may not be paid for by the Federal government under
another award
 No “double counting”
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Documenting Compensation Costs Tendered as
Cost Share
 Understand the capabilities of your T&E system
 Some systems can only allocate actual salary
 Reports may have to be manually adjusted to reflect committed effort expended
but not charged
 Use of “companion” accounts
 Proposal budget is a guide to level of commitment, but is not necessarily
definitive
 Need to educate system users on how account for cost sharing
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Three Types of Cost Sharing
 Mandatory
 Required by the sponsor as a condition of award
 Voluntary committed
 Proposed by the institution but not required by the sponsor
 E.g., proposal promises 30% effort but requests 20% salary support
 Voluntary uncommitted
 Neither required by the sponsor nor proposed by the institution
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Voluntary Committed Cost Sharing Issues
 Investigators may have an incentive to propose cost share –
But
 Too much cost sharing may depress the F&A rate
 There may be inadequate sources of cost share
 Failure to document cost share may create significant liability
 Repayment obligation
 Potential False Claims Act liability
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Financial Treatment of VCCS
 Voluntary committed cost sharing must be tracked and accounted
for
 Budget proposes 30% effort, no salary support requested – 30%
must be tracked as cost sharing
 30% effort commitment, 30% effort provided, grant charged
10% of IBS -- must track the 30% provided
 Compare with voluntary uncommitted cost sharing
 Budget proposes 30% effort and salary support; faculty member
actually provides 50% effort – 20% of the effort need not be
tracked
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F&A and Cost Sharing
 General rule: cost sharing is part of organized research
direct costs and must be included in F&A denominator
 Effect of rule: cost sharing tends to depress the F&A
rate
 Exception: voluntary uncommitted cost sharing need not
be included in the base
 January 2001 OMB memo
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How Indirect Cost Rates Are
Determined
 Organized research F&A rate =
(F&A costs of organized research)
divided by
(Organized research direct costs)
 Example:
F&A costs of $6 million
Organized research direct costs of $10 million
F&A rate = $6 million/$10 million = 60%
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The Effect of Cost Sharing on Indirect
Cost Recovery
 Govt requires that all voluntary committed cost sharing go
into the organized research base:
 $6 million in research indirect cost pool and $10 million in
organized research base results in a 60% indirect cost rate ($6
mill./$10 mill.)
 If $2 million in voluntary cost sharing is added to the base, rate
is 50% ($6 mill./$12 mill.)
 50% times $10 million = $5 million; $1 million in indirects
must be absorbed by grantee
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Voluntary Uncommitted Cost Sharing
 OMB Memorandum M-01-06, January 5, 2001
 No requirement to document or take into account voluntary
effort over and above effort committed in grant proposal
 E.g., Faculty member commits to 20% effort, provides 30% effort but
charges the project 20% of IBS
 10% of the effort need not be reported as organized research
 No impact on F&A rate
 Where and how do you report voluntary uncommitted cost sharing?
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Sources of Compliance Risk
 Inadequate or no procedures
 T&E system limitations
 Departments and centers with multiple cost sharing
obligations
 Are there enough unencumbered sources of support to go around?
 Increases the potential for “double counting”
 Willingness to reduce or waive F&A recovery
 Increases financial pressure on the specific department/center and
the entire institution
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Cost Sharing Audits
 Georgia State University
 Auditors reviewed $8.9 million in costs under a Cooperative Agreement between 2003
and 2004 that required over $4 million in cost sharing.
 Auditors identified significant weakness in GSU’s monitoring of subawardee costs and cost
sharing that resulted in $404,211 of questioned costs.
 Auditors also noted several compliance deficiencies and internal control weaknesses with
respect to maintaining proper documentation of payroll and other direct expenses, as well
as cost sharing.
 New Mexico Highlands
 NSF identified “material” internal control deficiencies including a lack of procedures to
properly track cost sharing
 University of Hawaii
 Inadequate documentation for roughly $1.7M of labor cost sharing contributions
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Compliance Guidance
 Create policies and procedures for documenting cost sharing that are just as
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rigorous as those used to support direct charges
Create a separate account for each project with a cost sharing commitment
Track and report cost sharing on an ongoing basis; don’t wait until the
project is over
Develop systems that can identify Federal flow-through dollars
Ensure that the effort reporting system tracks cost shared salaries
Carefully review proposals with a cost sharing commitment to ensure the
commitment can be met
Require PIs to specifically identify sources of cost share
Monitor the amount of foregone F&A
Contact Information
 For additional information please contact:
Dennis J. Pafrath
Executive Director, Sponsored Programs
Administration
University of Maryland Baltimore
[email protected]
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