Financial Management of Sponsored Projects

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2. 2 Financial Management Effective financial management: responsible accounting, monitoring and reporting making sure sponsored funds are used for their intended purposes All of us are responsible for financial management and compliance with federal guidelines and project requirements

3. 3 Why is Compliance Important? Sponsored funds are not ours, so we are accountable to sponsors, taxpayers, Congress, etc. Nobody wants to see Mason on the front page of the newspaper related to the inappropriate use of research funds It’s the right thing to do!

4. 4 Areas of Focus by Federal Auditors Allowable Costs Cost Transfers Cost Sharing Effort Reporting Subrecipient Monitoring

5. 5 Areas of Focus by Federal Auditors Federal Government holding recipients of sponsored funding accountable for non-compliance Audit findings may result in fines, reduced future funding, more restrictive award requirements and loss of public trust A-133 audits are no longer enough, Federal Agencies are performing their own audits

6. 6 Federal Policies and Guidelines As a recipient of Federal funding, Mason must comply with Federal guidelines and regulations such as: OMB Circular A-21 OMB Circular A-110 OMB Circular A-133 http://www.whitehouse.gov/omb/circulars/

7. 7 Direct vs. F&A (Indirect) Costs must be classified as Direct or F&A (Indirect) Costs Direct Costs are costs that can be associated with a specific activity with a high degree of accuracy F&A (Indirect) are costs incurred for common objectives and cannot be readily associated with a specific activity

8. 8 Cost Allowability All 3 criteria must apply for a cost to be charged directly to a federal project: 1) The cost must be allowable under both the provisions of A-21 AND under the terms of a specific project 2) The cost must be allocable, meaning it can be associated to a project with a high degree of accuracy 3) The cost must be reasonable, meaning it reflects what a “prudent person” would pay in like circumstances

9. 9 Cost Accounting Standards (CAS) In 1996 CAS was incorporated into A-21 and applied to all university federal grants and contracts Educational CAS requirements 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 period DS-2: Disclosure Statement

10. 10 Disclosure Statement (DS-2) Provides a road map for auditors Outlines Mason’s policies and practices related to cost allocation Examples from the Mason DS-2 “Salaries and fringe benefits of administrative and clerical staff are normally treated as indirect costs” “The costs of office supplies, postage, local (basic) telephone costs, and memberships are treated as indirect costs except when such costs are considered by the University to be unlike circumstances”

11. 11 Exceptions Costs generally considered indirect cannot be charged directly to federally sponsored projects except if the following three criteria apply: 1) The project has characteristics that make it one of “different purpose and circumstance” 2) The cost can be specifically identified with the project with a high degree of accuracy 3) The cost is identified in the budget and approved by the sponsor

12. 12 Unacceptable Practices Rotation of charges among projects Charging projects with largest remaining balance Charging budget, not actual amount Charging projects in advance of when cost is incurred Charging costs part of normal administration directly Describing a cost as something other than what it is: Office supplies as lab supplies Administrative staff as Technical staff

13. 13 Cost Transfer Policy The University Cost Transfer Policy became effective 7/14/06 and addresses transfers to federally sponsored projects Federal regulations require cost transfers be timely and properly documented Cost transfers should be kept to a minimum Monthly review of project transactions will ensure errors are corrected in a timely manner

14. 14 Cost Transfer Policy Cost Transfers over 120 days will only be approved in extenuating circumstances The following are not considered appropriate extenuating circumstances: Absence of PI or Departmental Staff Shortage of staff Lack of experience of staff Administrative oversight

15. 15 Cost Transfer Policy Examples of appropriate extenuating circumstances for greater than 120 day transfers: Award set-up delayed because of late award notice (transfer of costs incurred elsewhere need to be done within 60 days of the establishment of new fund) Failure of another department to take corrective action (submitting department should show documentation indicating continued follow-up efforts)

16. 16 Cost Transfer Policy Journals and reallocations need sufficient supporting documentation or will be disallowed Cost Transfer forms should provide a clear explanation that an auditor unfamiliar with the details can easily understand Regular reconciliation and review of sponsored projects will eliminate the chance for disallowed cost transfers

17. 17 Cost Sharing Cost sharing must be proposed, approved, administered, and accounted for in a consistent and prudent manner. Determine when cost sharing is appropriate Understand workload implications of the cost sharing commitment Accurately record and report cost share expenses

18. 18 Cost Sharing Definitions Cost Sharing is the portion of total project or program costs not borne by the sponsor Mandatory is required by the sponsor as a condition of award Voluntary Committed contributions are reflected in the proposal but not required by the sponsor; binding commitments that must be accounted for Voluntary Uncommitted contributions are not quantified or reflected in the proposal and do not need to be accounted for

19. 19 Costs of Cost Sharing These are real costs! Cost sharing redirects departmental and college resources from teaching or other departmental activities Failure to document cost sharing creates liability and audit risk to Mason Cost sharing lowers the F&A rate

20. 20 Allowable Costs for Cost Sharing Allowable, allocable and reasonable under federal cost principles Supported by adequate documentation Effort commitments cannot exceed 100% The same cost cannot meet cost share requirement on multiple projects Cannot come from a federal award unless approved by the sponsor of both projects

21. 21 Accounting for Cost Sharing All mandatory and voluntary committed cost share must be accounted for Activity Code used with budget and expenditures to record cost share contributions OSP monitors cost share commitments and works with departmental staff to update budgets PI and department administrators must include activity code on funding change forms, POs, etc.

22. 22 Effort Reporting Requirements Effort reporting is mandated by the federal government for recipients of federal funds Federal effort reporting requirements are outlined in A-21 section J10 All salary expenditures on sponsored projects need to be certified Mason uses the Planned Confirmation Method

23. 23 Effort Reporting Planned Confirmation Salary and wage distribution based upon initial estimates; adjustments processed as effort shifts Effort reports include all compensated work Workload must equal 100% Individual or PI provides certification that percentages accurately reflect effort performed Overall system is periodically reviewed

24. 24 Effort Reporting Process Salary expenses should be monitored regularly to avoid cost transfers disallowed for lateness OSP distributes effort reports 3 times per year - 3 months after the end of each term 700-800 effort reports distributed per term Individual faculty and employees are responsible for certifying; PIs certify for GRAs

25. 25 Effort Reporting Process Reports must be returned with original signature to OSP within 3 weeks of receipt After 3 weeks OSP follows-up with PI and Department Administrator; Department Chair and/or Dean will be included if necessary Reports maintained centrally for audit purposes Salary that cannot be certified is considered an unsupported expense and should be removed from the sponsored fund

26. 26 Effort Reporting Key Points 100% effort does not mean 40 hours per week Salary adjustments should not be done to “spend out” sponsored projects PIs and individuals writing proposals should not be paid 100% on sponsored funds PIs need some level of effort charged or identified as cost sharing Salary adjustments should not be made for effort previously certified

27. 27 Effort Reporting Next Steps Activity codes will continue to be established to capture cost shared effort Mason is working with other Banner Schools and SunGard to establish an online effort reporting solution in Banner that should be available by FY08 Continue to work with faculty and staff to provide training on effort reporting requirements

28. 28 Roles and Responsibilities We are all responsible for compliance with Sponsor and Federal guidelines Principal Investigator Departmental Personnel Department Chair/Dean Office of Sponsored Programs

29. 29 Monitoring and Oversight Provide routine review of project expenses Compare actual expenses with budget Minimize the number of cost transfers Provide oversight of subrecipient to ensure technical progress consistent with costs Obtain prior approvals from the sponsor when necessary Talking points: Review and reconciliation of project funds needs to happen by PI or departmental administrator Cost transfers should be exceptions not routine. Red flag for auditors Subrecipient monitoring is an area of focus and one that we need to continue to work on Some areas prior approvals necessary: -change of scope -PI change -change of organization -actions requiring additional funds -change in terms and conditions -preaward costs -extensions of budget periodTalking points: Review and reconciliation of project funds needs to happen by PI or departmental administrator Cost transfers should be exceptions not routine. Red flag for auditors Subrecipient monitoring is an area of focus and one that we need to continue to work on Some areas prior approvals necessary: -change of scope -PI change -change of organization -actions requiring additional funds -change in terms and conditions -preaward costs -extensions of budget period

30. 30 Reporting and Closeout Project reports should be submitted to the sponsor accurately and timely OSP is responsible for financial reports PIs are responsible for technical reports Sponsored funds are generally closed out 90 days after the project end date

31. 31 PI Reports Reports developed based on input from PIs Uses Discoverer to provide tool for monitoring sponsored funds Snapshot of sponsored projects with ability to drill to various levels of detail Training sessions on PI Reports offered monthly

32. 32 Questions Mike Laskofski Assistant Director, Post Award Office of Sponsored Programs mlaskofs@gmu.edu 993-4573