Expenditure Management & Cost Sharing on Sponsored Programs

October 27, 2006

Expenditure Management

Costing Basics

  As a condition of receiving award funds from federal sponsors, OU is required to follow basic government regulations and Cost Accounting Standards (CAS) Agency regulations include the following: - OMB Circular A-21 - 2 CFR Part 215 (formerly OMB Circular A-110) - OMB Circular A-133 - CAS 501, 502, 505, and 506

Circular A-21

   Defines the rules for “Direct” and “Indirect” (Facilities & Administrative) costs Provides principles for determining if costs are allowable, allocable, and reasonable Sets forth standards for Effort Reporting

Circular A-110 (2 CFR Part 215)

     Defines reporting requirements Sets forth acceptable forms of cost sharing Defines procurement standards and procedures Explains when prior approvals are required for revisions to budget or program plans Sets forth accounting standards for equipment

Circular A-133

 Provides the standards for consistency and uniformity in the auditing of states, local governments, and non-profit organizations receiving and expending federal funding

Cost Accounting Standards

 CAS 501, 502, 505 and 506 were developed to create consistency in the following areas: - Estimating, accumulating, and reporting costs ( CAS 501) - Allocating costs incurred for the same purpose in like circumstances (CAS 502) - Accounting for unallowable costs (CAS 505) - Cost accounting periods (CAS 506)

Indirect Cost

 A-21, Section B • Indirect costs are incurred for common or joint objectives and, therefore, cannot be identified

readily and specifically with a

particular sponsored project, an institutional activity, or any other institutional activity. Indirect costs are synonymous with Facilities and Administrative (F&A) costs.

Direct Costs

 A-21, 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.

The Cost Must Be Reasonable

 A-21, Section C3: “A cost may be considered reasonable if the nature of the goods or services acquired, and the amount involved, reflect the action that a prudent person would have taken under like circumstances.”

Cont. Reasonable

 “Prudent Person” Test: • Necessary • Consistent with established institutional policies and procedures

The Cost Must Be Allocable

 A-21, Section C4: “A cost is allocable to a sponsored agreement if (1) it is incurred solely to advance the work of the sponsored agreement; (2) it benefits the sponsored agreement; or (3) it is necessary to the overall operation of the sponsored agreement.”

Allocable Cont.

 “But For” Test: But for this project, this cost would not be incurred.

The Cost Must Be Allowable

    Terms & Conditions A21, Section J State Laws University Policy and Procedures

Procedures for Charging Direct Costs

  Administrative Affairs Guide to Services • http://www.ou.edu/fis/ Purchasing Web Site • http://www.ou.edu/purchasing/home/index.htm

Small Dollar Policy

 University departments may purchase products and services directly from a vendor when the cost of the acquisition is $5,000 or less.

Exceptions- Small Dollar Policy

 1.

2.

3.

4.

Certain purchases, even if $5,000 or less, must be processed through the Purchasing Department: If the purchase involves a contractual document of any kind.

If the purchase involves radioactivity If the purchase involves a laboratory animal Computer Purchases

Cont. Exceptions- Small Dollar Policy

  To the degree University Auxiliary Services (i.e., Printing Services, Physical Plant, Motor Pool) are able to support your needs- they must be utilized.

Mandatory Contracts (i.e., Travel Agencies, Corporate Express)

PAFS Approval!

 ALL charges/expenses on a grant or contract must be sent through PAFS for approval.

• Invoices • Travel Claims • Requisitions • Appointments • JVs

Approval Process

   Department Sponsor must assign a department number Department Sponsor must sign for payment • Cannot sign own reimbursement Dept Sponsor should clarify what budget line item expense should be taken from (i.e.: Participant vs. Supply)

Automatic Billings

     The following are automatic billings to your G & C. If these costs are determined to be unallowable they will be transferred, by PAFS, to a residual or responsible department number Book Exchange Payment Net Printing Services Motor Pool Aramark     Corporate Express Physical Plant Telecommunications Central Mail

PCard Transactions

 If you distribute a PCard Expense to a sponsored agreement you must: • Include a justification/explanation in the “Transaction Notes” field of the PaymentNet system adequate for PAFS to determine allowability. A more detailed explanation is required for non-scientific vendors, such as Target, Wal-Mart, and Corporate Express.

• Department must keep copies of all receipts for PCard Transactions for audit purposes.

Discussion Questions

   Can I order equipment within the last 90 days of my sponsored program?

Can I pay for a lunch/dinner for a meeting with lab personnel working on the project?

My grant is ending and I have some unspent funds, can I purchase some lab supplies for general use in my lab?

Discussion Questions, cont.

5.

6.

7.

What happens if I forget to send an invoice to PAFS first?

What happens if an auditor disallows a cost on my grant?

Can I purchase office supplies on my grant?

Deposits to Sponsored Programs

  Should only be made by Post Award Financial Services Checks the Department receives that are for the grant/contract should be sent to our office to deposit • If the check is refunding, rebating or reimbursing something the grant paid for please include a note with the check with an explanation

Cost Transfers

Cost Transfer

  What is a Cost Transfer?

• After-the-fact transfer of a cost previously incurred Purpose • Allow for reassignment of costs from one dept. number to another

Cost Transfer Policy

  See Attached Policy This policy does not apply to Cost Distributions or account code corrections

Cost Transfer Coding

  Who entered the CT in PeopleSoft • RSP = Research Services • CSP = CCE • T = FSS All cost transfers are imaged in Acorde under FSS Transfers

Cost Transfer Policy

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Types of Transfers

• Error Correction  Typographical error • Pre-Award Costs  Before the grant or contract was set up in accounting system • Closely-Related Accounts   Parent/ Child depts Cost sharing depts

Cost Transfer Policy

 Documentation • Non-Labor     Journal Voucher/Transfer Form Cost Transfer Request (PAFS-1) Copy of the original invoice Copy of appropriate University Financial Report

Cost Transfer Policy

 Documentation • Labor    Cost Transfer Request (PAFS-1) Payroll Expense Transfer Request Form Payroll Extract

Cost Transfer Policy

 Unacceptable Cost Transfers • Undocumented transfers • Inadequately justified transfers  An explanation that merely states “to correct error” or “to transfer to correct dept” is not sufficient • Costs transferred from a Fixed Price Dept in an overrun status to a Cost Reimbursable Dept in an under-run status

Cost Transfer Policy

 Timeliness of Processing • Non-Labor   Transfers need to be processed no later than 90 days after the item posted to the financial statement If requested after 90 days additional justification (PAFS-1, item 7) is required and transfer is subject to approval by the Assistant Director of PAFS or the Executive Director of ORS

Cost Transfer Policy

 Timeliness of Processing • Labor   Transfers need to be processed no later than 90 days after the pay period for which the salary was recorded Previously confirmed labor charges require additional justification and are subject to approval by the Assistant Director of PAFS or the Executive Director of ORS

Red Flags

    Transfers older than 90 days Transfers in the last month of the award or after the award has expired Explanations that raise more questions than answers Frequent transfers from same office

Discussion Questions

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I have a grant that is ending and need to spend the remaining funds, can I do an expense transfer to move expenses to this grant?

Do I need to fill out a PAFS-1 and attach to the JV for copies I made using the department copy machine?

I have a new grant that was just set up. I have been paying expenses, for this project, on the departmental number (some more than 90 days old) can I do an expense transfer to move these expenses to my new grant?

I confirmed labor on grant A, but now decided it should be on grant B, can I do a payroll expense transfer?

Cost Sharing

What is Cost Sharing?

  A-110 defines Cost Sharing as any project or program costs that are not borne by the sponsoring agency Costs could be anything identified in the narrative or budget that will support the project but is not paid for by the sponsoring agency

What is Cost Sharing?, cont.

   Contributed costs must be allowable, reasonable, and necessary to accomplish the objectives of the sponsored agreement during the project period Cost sharing must be verifiable and accounted for to the extent it was committed Cost sharing may not be counted toward more than one sponsored agreement

Examples of Cost Sharing

       Employee time, including fringe benefits Equipment (purchased during the time frame of grant or contract) Travel Supplies & Services Volunteer time or other contributed items Unrecovered F & A Unrecovered Tuition Remission

Types

 Mandatory • Required by the sponsor as a condition of the award  Voluntary • Costs in excess of mandatory requirements • Not required by the sponsor, but will become a legally binding commitment if reflected in the proposal & must be documented

Sources

 Cash • University funds    E&G SRI Funds VPR Match – a separate 1X5 dept will be established • Third party cash contributions    Other externally-funded agreement Program income OU Foundation

Sources, cont.

 In-Kind • The value of non cash contributions provided by third parties • May include donated goods, services, real property, and non expendable equipment

Timing

  Cost share must be expenditures incurred or services rendered during effective award dates Some agencies expect/require cost sharing expenditures to occur at same pace as grant dollars

Documentation

 Cash • Salary/Wages  Signed “Confirmation of Contributed Direct Labor” form • Fringe Benefits  Calculated at OU Negotiated Rates • Goods and Services  Copy of Invoice with paying dept number

Documentation, cont.

 Cash, cont.

• Travel  Copy of Travel Claim or Payment Net Travel with paying dept number • Equipment  Copy of Invoice with paying dept number • Indirect Costs  Calculated at OU Negotiated Rate

Documentation, cont.

 In-Kind • Goods and Non-Expendable Equipment  Signed letter from donor describing items and their fair market values • Services   Signed letter from donor or volunteer describing services performed, time period, rate of pay for job performed, and total amount of contribution Third party employer may include fringe benefits, but not indirect costs

Documentation, cont.

  In-Kind, cont.

• Real Property  Certified, independent appraisal co-signed by University official Donor should be able to provide the basis for determining the valuation for goods, non-expendable equipment, services and real property if required

Undocumented Cost Share

    Treated as unmet cost share May require reduction of reimbursable grant expenses May reduce SRI funds to department May effect future funding

Discussion Questions

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I told Proposal Services about my cost share, why does PAFS need more information?

I was awarded a grant with $X required as cost share. I’ve spent all the grant funds, but cannot meet the cost share funds. Is this okay?

I spent a lot of effort/supplies on the proposal to get this grant. Can I use these expenses as documented cost share?

Departmental Administrators Council

ORS is establishing a Departmental Administrators Council to discuss departmental concerns on sponsored programs. If you are interested in serving on this council please contact Susan Cates at 325-4450 or [email protected]