Transcript OMB Circulars & Cost Transfers James Trotter, SPA Director Charlie Resare, Subrecipient Monitor Sponsored Projects Administration.

OMB Circulars &
Cost Transfers
James Trotter, SPA Director
Charlie Resare, Subrecipient Monitor
Sponsored Projects Administration
Audience
This course is intended for “department
administrative staff”—including department
administrators, division managers,
department fiscal managers, department
effort coordinators, etc.
Introduction
The federal Office of Management and
Budget (OMB) has issued a number of
circulars to define the principles and
standards for sponsored projects funded
by federal agencies.
These Circulars are instructions directed to
the agencies but they must still be
followed by recipient institutions.
Part 1
OMB Circulars
•Office of Management
& Budget
OMB Circulars
The federal Office of Management and
Budget (OMB) has issued a number of
Circulars to define the principles and
standards for agreements between federal
agencies and research institutions. A clear
grasp of the central principles of these
Circulars is essential for effective
sponsored project management. .
Introduction
The first part of this session will examine the
three circulars most significant to
sponsored projects at OHSU:
• A-21
• A-110 (2 CFR Part 215)
• A-133
The Code of Federal Regulations (CFR)
spells out each agency’s implementation
of these circulars.
Introduction
 A-21 defines the cost principles applicable to
grants and contracts at educational institutions.
 A-110 sets forth standards for consistency
among federal agencies in the administration of
grants to and agreements with institutions of
higher education, hospitals, and other nonprofits.
 A-133 sets forth standards for consistency in
audits of organizations spending federal awards.
Introduction
The Sponsored Projects Administration
(SPA) website provides a link to the
complete text of each OMB Circular:
http://www.ohsu.edu/research/rda/spa/federal.shtml
A-21 Topics
Direct vs. Indirect (F&A) Costs
Allowable vs. Unallowable Costs
Effort Reporting
A-21 Topics
Direct Costs are costs that can be directly
associated with a particular sponsored project,
an instructional activity, or any other institutional
activity.
Examples of Direct Costs:
• Principal Investigator salary
• Lab supplies
• Scientific equipment
A-21 Topics
Indirect Costs (Facilities & Administrative) are
costs that are incurred for common or joint
objectives and cannot be specifically identified
with a particular sponsored project, instructional
activity, or other institutional activity.
Examples of Indirect Costs:
• Libraries
• Maintenance
• Research Administration
A-21 Topics
Allowable Costs
• Must be reasonable
• Must be allocable
• Must be treated consistently
“Prudent person” test
A-21 Topics
Section J specifies which costs are
allowable and unallowable as both direct
and indirect costs.
Examples of Allowable Costs
• Equipment, Professional Services, Transportation
Examples of Unallowable Costs
• Alcohol, Entertainment, Lobbying, Marketing
A-21 Topics
Time and Effort Reporting
The purpose of an effort reporting system is
to provide a reasonable basis for distributing
salary charges among direct and indirect
activities.
OHSU uses a semi-annual, after-the-fact
effort reporting system.
A-110 Overview
2 CFR Part 215 (formerly OMB Circular A-110)
Uniform Administrative Requirements for
Grants & Agreements.
“This circular sets forth standards for obtaining
consistency and uniformity among Federal
agencies in the administration of grants to and
agreements with institutions of higher
education, hospitals, and other non-profit
organizations.”
A-110 Topics
 Financial Management Systems
 Cost Sharing
 Program Income
 Reports and Records
 Termination and Enforcement
 Close-Out Procedures
A-110 Topics
OHSU is accountable to sponsoring agencies and
must demonstrate that appropriate financial
management systems are in place.
A-110 requires institutions receiving federal
assistance to maintain “[e]ffective control over
and accountability for all funds, property and
other assets. . . and assure they are used solely
for authorized purposes.” (Subpart C.21.b.3)
A-110 Topics
Cost Sharing is the portion of project costs
not borne by the Federal Government
Cost Sharing can include:
• Cash (from recipient)
• Academic year effort (from recipient)
• Third party In-Kind Contributions (from
outside the recipient organization)
A-110 Topics
Cost Sharing must be more than a token
amount (i.e., typically more than 1% of
project costs).
Cost Sharing represents institutional
commitment to the project.
A-110 Topics
Mandatory Cost Sharing is required by the sponsor
as a condition of making the award.
Voluntary Cost Sharing is not required by the
sponsor but may become legally binding as a
commitment reflected in the proposed budget.
Committed (eg, over salary cap)
Uncommitted (not tracked by OHSU)
A-110 Topics
Acceptable Cost Sharing must be:
Verifiable and documented in recipient
records
Not included as matching for any other
federal projects, nor paid from other federal
awards
Necessary and reasonable
Allowable under applicable cost principles
Appropriate to all OMB Circular A-110
provisions
A-110 Topics
Program Income applies to funds earned
during a project period.
Program Income includes:
Registration fees for a training or conference
award
Products or materials purchased on an award
and sold after research has been conducted
Sale of information produced or acquired
under the award
A-110 Topics
Program Income may be:
• Added to funds committed to the project
• Deducted from total project allowable costs
• Applied to non-federal share of project costs
Recipient has no obligation to the Federal
Government for funds earned after the
project period unless the agency’s
regulations or terms and conditions
provide otherwise.
A-110 Topics
Property Management applies to property
purchased under Federal awards, such as
land, structures, equipment.
Exempt property is that on which the title
vests with the recipient upon acquisition
with no further obligations.
A-110 Topics
Property Management systems must:
• Conduct a physical inventory every two years
• Safeguard against damage, loss, and theft
• Provide adequate maintenance
• Maintain insurance
• Sell competitively at highest return, when
authorized
A-110 Topics
Reports & Records:
A-110 sets forth procedures for monitoring
and reporting financial and program
performance and the required reporting
forms, including requirements for record
retention.
A-110 Topics
Award recipients are responsible for:
 managing and monitoring each project,
program, function and activity supported by
the award.
 ensuring that sub-recipients have also met all
audit requirements.
A-110 Topics
Technical reports must be completed not
more than quarterly and not less than
annually.
Reports must contain:
• Comparison of actual accomplishments with
set goals for the period
• If applicable, reasons that goals were not met
• Explanation for any cost over-runs or high unit
costs
A-110 Topics
Award recipients must notify the awarding
agency whenever events occur that have
a significant impact on the project or
program, or when problems, delays or
adverse conditions materially impair the
ability to attain program objectives.
A-110 Topics
Financial Status Report (FSR) is required
on any federally sponsored project.
SPA submits financial reports to sponsors.
SPA Senior Financial Analyst sends
copies of reports to departments for review
(eg, End Date Memo, etc.).
A-110 Topics
Financial records, supporting documents,
statistical records and all other records
must be retained for three years from the
date of final report, except when:
• Litigation requires retention until matters have
been resolved.
• Records are transferred to the agency, in
which case retention requirements end.
• Other record retention requirements apply.
A-110 Topics
With agency approval, copies can be
substituted for original records.
Electronically imaged records may be
substituted for original records provided
the institution establishes appropriate
procedures.
A-110 Topics
Access to records is allowed to the
agency, the inspector general and the
comptroller general.
Agencies may not limit public access to
the recipient’s records without justification.
A-110 Topics
Types of Award Termination:
• By the awarding agency
• By the awarding agency with recipient
consent
• By the recipient
Types of Enforcement:
• Remedies for non-compliance
• Hearings and appeals
• Suspension and termination
• Debarment
A-110 Topics
Close-Out Requirements:
• All reports submitted within 90 days
• Prompt payment by awarding agency
• Recipient refund of unobligated cash
advances
• Accounting for real and personal property
• Agency right to recover disallowances
A-133 Overview
Effective July 1, 1992 (revised June 24, 1997), A133 “sets forth standards for obtaining
consistency and uniformity among Federal
agencies for the audit of … non-profit
organizations expending Federal awards.”
A-133 requires an annual external audit of all nonfederal entities expending $500,000 or more
annually in Federal funds.
A-133 Overview
A-133 defines the requirements of an audit
and explains the responsibilities of the
institution, the agency and the auditor
A sample of Federal awards and their direct
cost transactions is selected and
examined to determine if expenditures and
procedures were appropriate.
A-133 Topics
At OHSU, departments become involved in
annual A-133 audits when SPA requires
information on source documentation.
Part 2
Costing &
Cost Transfers
Costing &
Cost Transfers
Project costs get charged to accounts according to
accepted principles, policies and federal
regulations. Occasionally expenses need to be
moved between research projects, expenditure
types, or differing funds at OHSU. These are
called cost transfers, and are allowable only with
proper justification, documentation, and approval.
The next part of this course moves step-by-step
through general cost accounting standards and
the stages involved in a cost transfer.
Charging Direct Costs
Sponsor funds must be available
Costs are allocable to the project
Costs are reasonable
Costs are allowable
Like costs are treated consistently
Allocable
To be allocable as a direct cost, the
expenditure must benefit only one project,
or must be easily and proportionally
assigned to multiple projects that benefit.
Reasonable
To be reasonable, costs must pass the
“prudent person test”.
Would the local press make a story out of
the costs you are charging to taxpayer
funds? If so, you might want to think
again.
Allowable
For costs to be allowable on a federally
sponsored award, “they must conform to
any limitations or exclusions set forth in
these [federal] principles or in the
sponsored agreement as to types or
amounts of cost items” (OMB Circular A21, C.2.d).
Consistent
“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.” (OMB
Circular A-21, D.1)
Consistent
Certain items are generally considered
“indirect” (F & A) costs—unless a direct
relationship to a specific sponsored project
can be established, such as:
• Salaries of departmental staff
• Office supplies
• Telephone expenses
• Photocopying and postage
• Etc.
Cost Transfers
Cost Transfer:
the process for moving an item of
expenditure between sponsored projects,
expenditure types, or different types of
funds.
Cost Transfers need justification,
documentation, and approval.
Cost Transfer Overview
 Rules governing Cost Transfers
 Necessary approvals
 Walk through of OHSU Adjustment Form
 Cost Transfers and Audits
 Strategies for Prevention of Cost Transfers
 Examples
Avoid the Need
All project costs should be appropriately
charged to accounts according to
accepted accounting principles as well as
OHSU policies and the regulations
applicable to sponsoring agencies.
Ideally, completed transactions should not
need correction.
Transfer When Needed
However, in certain circumstances, changes
are required to move expenses:
• Between projects
• Between expenditure types
• Between different types of funds
Cost Transfers need all of the following:
• Justification
• Documentation
• Authorization
Federal Requirements
 The Federal Government questions the propriety
of Cost Transfers on federally funded projects.
 Cost Transfers can cast doubt on a grantee’s
accounting system and internal controls.
 The Government expects documentation and an
authorization process for all Cost Transfers on
federally assisted projects.
Federal Requirements
Under no circumstances may a Cost
Transfer be made with the sole intent of
using up the unexpended balance in a
federal account.
Under no circumstances may an expense
be ‘parked’ on one federal project while
awaiting the award/set up of the ‘correct’
project.
SPA Procedure
SPA reviews the OHSU Adjustment Form for:
Allowability
Acceptability
Propriety of charges
If the request does not meet these criteria, it
will be returned to the PI.
If the request is approved, SPA forwards the
form for processing.
Acceptable Reasons
Correction of error—but be more specific.
Charges benefit more than one program
(distribution of costs based on benefits
received).
Programs involve closely related work.
Unacceptable Reasons
To reduce overruns if the transfer is from
one federal project to another
For reasons of convenience
To use unspent money in a project
Because the bookkeeper was on leave,
etc.
Walk Through of Form
Make Cost Transfers using the OHSU
(“Transfer Between”) Adjustment Form:
http://www.ohsu.edu/xd/about/services/financialservices/forms/upload/JE_FOMOPPL_POETA_
Adjustment_Form.xlsx (link needs correction)
Online instructions to this form:
http://www.ohsu.edu/xd/about/services/financialservices/forms/upload/JE_Guidelines_CFS.pdf
Audits
Cost Transfers can be a “red flag” to
auditors.
Auditors examine:
• Frequency
• Justification
• Remedies
Audit Questions
 Are Cost Transfers supported by
documentation which adequately explains
and justifies why the transfers were made?
 Are Cost Transfers caused by work which is
supported by more than one funding source?
 Are there Cost Transfers between projects
which are in an overrun condition to those
with unexpended balances?
Cost Transfer
Case Study #1
An OHSU employee transfers expenses
from one account to another and
annotates the cost transfer “to correct an
accounting error”.
Is this an appropriate justification?
Why or why not?
Case Study #1
Answers:
If it was an accounting error, the transfer must be
supported by documentation that fully explains
how the error occurred and a certification of the
correctness of the new charge by a responsible
organization official.
Transfers made solely to cover cost overruns are
not allowable.
Cost Transfer
Case Study #2
You are asked by a PI to stop at an office supply
store on your way to work and pick up a few
items. The PI also asked you to get donuts for
the lab meeting that morning.
When you arrive at work, the PI tells you that all
the items should be charged to the grant. Your
Department Administrator tells you that these
purchases must come from departmental funds.
Why?
Case Study #2
Answers:
If the supplies are not specifically allocable
to the grant, they are considered general
office supplies and should not be charged
as a “direct” cost to the grant account.
Entertainment, such as food, is unallowable
under the provisions of A-21.
Cost Transfer
Case Study #3
Dr. Miller purchases a much needed piece of
specialized equipment for her research on
hypertension. When preparing the purchase
request, she realizes that the only account with
enough money is her grant for research on sleep
disorders. Because both grants are funded by
NIH, she charges the equipment to the sleep
disorder grant.
Is this acceptable?
Case Study #3
Answer:
The purchase must directly benefit the
project it is charged to. Dr. Miller must
charge the hypertension study, not the
sleep study.
Cost Transfer
Summary
Cost Transfer is the process of moving an
expenditure between research projects,
expenditure types, or different types of
funds.
Cost Transfers should be an exception,
not a standard means of operating.
Cost Transfers need justification,
documentation, and approval.
OMB Circulars &
Cost Transfers
Questions?