Sponsored Project Financial Stewardship

1. Sponsored Project Financial Stewardship Marianne Woods, Ph.D., J.D, Senior Associate Vice President for Research Administration, The University of Texas at San Antonio Cynthia Hope, CPA, Assistant Vice President for Research, The University of Alabama

2. Know Your Institution Who Does What at Your Place? • Structure • Roles & Responsibilities • Policies and Procedures Federal government places primary responsibility with the PI

3. Financial Questions What can I put in the budget? What is this agreement? Can we pay for/do that? Are we done yet? Phase 1 Phase 2 Phase 3 Phase 4

4. What can I put in the budget? • The budget is the financial expression of the scope of work • Must follow not only the sponsor’s guidelines but also your institution’s policies and procedures • Industry standards for accurate pricing/estimation of cost • Federal requirement for Consistency in Estimating, Accumulating and Reporting • From proposing to charging to reporting

5. What can I put in the budget? • Cost Share/Matching • Definition: The portion of the project or program costs not funded by the sponsor (OMB A-110) • Two types of Cost Sharing • Mandatory – Sometimes called matching. An eligibility criterion. • Voluntary – Not required in order to be eligible for an award.

6. Cost Share/Matching (cont.) • Two types of Voluntary Cost Sharing • Committed • JUST LIKE mandatory if proposal is funded • Uncommitted – (VUCS) • “University faculty (including senior researchers) effort that is over and above that which is committed and budgeted for in a sponsored agreement.” OMB Clarification Memo, M-01-06 • Institutional commitment or support

7. Cost Share/Matching (cont.) • You do not put VUCS in the budget • Your institution may not allow Voluntary Committed • NSF now “prohibits” inclusion of voluntary committed in proposals • Zero % effort/salary of PI is de facto commitment! • Exception for equipment grant & similar purpose • Understand your institution’s procedures for accounting for cost share

8. What can I put in the budget? • Facilities and Administrative Costs • (F&A or IDC) • Negotiated rate base is Modified Total Direct Cost • MTDC: Direct costs less equipment, tuition, patient care, long-term space rental, the portion of subcontract costs in excess of $25,000 • Research, Other Sponsored Activities & Instruction or Training Rates • On versus Off-campus rates • Special rates

9. What can I put in the budget? • Collaborators & Other Business Relationships • Subrecipient or Subcontractor • Involved in programmatic decisions • Professional Service Provider / Consultant • Activity is part of its normal business • Competitive environment • Decide which it is on the front-end! • Differing monitoring and reporting requirements • F&A difference (remember MTDC) • Guidance in OMB A-133 B_.210

10. What can I put in the budget? Only include allowable expenses Getting the budget right on the front-end makes life easier on the back-end Understand that the required budget expense categories may not match your system’s categories

11. What is this agreement? $$ The majority of our sponsored research funds originate with federal sources!

12. What is this agreement? • **Typically administered by Advancement/Development Office

13. What is this agreement? • Different Rules Apply to Different Agreement Types! • Administrative requirements differ (A-110 vs. FAR) • Contracts can be very restrictive • Gifts should require no separate accounting or detailed financial reports

14. Can we pay for / do that? Know what rules, terms & conditions apply For example: • Notice of Award • Proposed Budget & Justification • Sponsor Guidelines • Applicable Costing Principles (OMB A-21) • OMB A-110 or FAR • OMB A-133 • University P&Ps • Federal and State Law

15. Can we pay for / do that? -- Organizing the chaos Order of Precedence Award Special Conditions Program Rules Agency Rules OMB Circulars and/or FAR Our Focus Today

16. Can we pay for / do that? - Overarching/General Requirement Factors affecting allowability of costs (OMB A-21, Cost Principles for Educational Institutions) • Reasonable • Prudent person test • Necessary for the performance of the project • Consistent with established University practices

17. Can we pay for / do that? - Overarching/General Requirement Factors affecting allowability of costs • Allocable • Chargeable based on relative benefit received • Proportional benefit • Costs of one project may not be shifted to another

18. Can we pay for / do that? - Overarching/General Requirement Factors affecting allowability of costs • Consistency in Allocating costs incurred for the same purpose • Direct costs vs. F&A (Indirect) costs

19. Can we pay for / do that? - Overarching/General Requirement Consistency in allocating costs incurred for the same purpose • Direct Costs • Identified specifically with a project or activity • Or, can be directly assigned relatively easily with a high degree of accuracy • F&A Costs • Incurred for common or joint objectives

20. Can we pay for / do that? - Overarching/General Requirement Consistency in allocating costs incurred for the same purpose “All costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only with respect to final cost objectives.” (OMB A-21, §C.11.a.)

21. Consistency in allocating costs incurred for the same purpose WHY? Research Rate – Simplified F&A Calculation Numerator Expenses Allocations to Research from: Library Building Depreciation Operation & Maintenance (Utilities) General Administration (Payroll) Department Administration (Dean, Business Mgr.) Sponsored Projects Administration = F&A Rate Denominator Expenses MTDC of: Sponsored Research Agreements University Research Cost Sharing/Matching on Research Agreements

22. Consistency in allocating costs incurred for the same purpose - Exceptions “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.” - NIH Grants Policy Statement Salaries of administrative or clerical staff ONLY allowed as a direct charge for major project (A-21, F.6.b.(2)) Major project examples/guidance A-21 Exhibit C Office supplies, postage, local telephone costs & memberships shall normally be treated as F&A costs Exceptions ONLY for different purpose/circumstances

23. Consistency in allocating costs incurred for the same purpose - Exceptions Major Project as defined in A-21 A project which requires an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic department

24. Major Project Examples • Large complex programs such as General Clinical Research Centers, Primate Center, RCMI, EPSCOR • Projects which involve extensive data accumulation, analysis and entry • Projects that require making travel and meeting arrangements for large numbers of participants • Projects that are geographically inaccessible to normal departmental administrative services • Projects whose principal focus is the preparation and production of manuals and large reports • Individual projects requiring project specific database management, individual graphics or manuscripts

25. Can we pay for / do that? - Overarching/General Requirement Factors affecting allowability of costs • Unallowable costs are not eligible for Federal reimbursement either directly or indirectly • Unallowable Activities ~Fundraising ~ Alumni Activities ~Lobbying ~Public Relations • Unallowable Transactions ~ Alcoholic Beverages~ Advertising ~Fines & Penalties~Entertainment

26. Can we pay for / do that? - Overarching/General Requirement Federal Agency and Program Rules (examples) • NIH Grants Policy Statement http://grants.nih.gov/grants/policy/policy.htm#gps • NSF Proposal & Award Policies & Procedures Guide • http://www.nsf.gov/publications/pub_summ.jsp?ods_key=papp • DEd Education Department General Administrative Regulations (EDGAR) • http://www2.ed.gov/policy/fund/reg/edgarReg/edgar.html

27. Can we pay for / do that?- More Specific What if we did commit to Cost Sharing? • To count toward commitment, must be clearly defined & directly allocated to a specific sponsored project • Same rules apply to cost share as to grant expenditures • Can’t count same cost share $ twice • Can’t use Federal funds to match Federal funds

28. Can we pay for / do that?- Selected Items of Cost (A-21 section J) • Compensation for personal services (Salary) --(OMB A-21, § J.10) • Payroll distribution must meet specific standards • Must reasonably reflect the activity for which the employee is compensated by the University • Must recognize the principle of after the fact confirmation • Must be certified by individual with suitable means of verification (PI/Individual only?)

29. Can we pay for / do that?- Selected Items of Cost (A-21 section J) Compensation for personal services (Salary) • Extra (Supplemental) Compensation (§J.10.d.(1)) May not exceed 100% base salary unless: • Across departmental lines, AND • In addition to regular departmental load, AND • Specifically approved in writing by the agency • Issues with 100% salary charged to sponsored projects • e.g. new proposal submissions

30. Can we pay for / do that?- Selected Items of Cost (A-21 section J) • Equipment (A-21, J.18. Equip and other cap exp.) • Be aware of equipment definition (e.g. >=$5,000 & >= 1 year life) • Be careful of equipment purchased near the end of a grant/contract! • Meetings (A-21, J.32. Meetings and Conferences) • Food - (Remember Order of Precedence) • Tuition (J.45. Scholarship and student aid costs) • Not the same as Tuition Remission (See J.10) • Travel (J.53. Travel costs) • Fly America, Institutional Policies, etc.

31. Can we pay for / do that?- Making Little Changes Cost Transfers • What is the problem? • A cost is originally charged to an account &, therefore, certified for allowability, allocability, consistency, direct benefit, etc. • A cost transfer invalidates that original certification • What makes the problem bigger? • Transfers that clear a deficit off a project • Salary transfers after certification • Inadequate explanation/justification • Late (e.g. 90 days after original charge) • Near end-date

32. Can we pay for / do that?- Making Big Changes Revision of Budget and Program Plans (A-110, Subpart C, § .25) • Research General Terms and Conditions • The recipient must obtain the prior written approval of the Federal awarding agency before making any of the following project changes: 1) Change in scope or objectives (even if no budget revision) 2) Absence (> 3 months or 25% reduction in effort) or change of PI 3) Need for additional federal funds (clearly no Federal liability) 4) Transfer of a significant part of the research (e.g. subagreement) BUT, Agencies supplement the core set with specific administrative requirements.

33. Are we done yet? Close-out • Need for timeliness • Start while the grant is still active • Watch for Notices (e.g. 90 Day End Date Notification) • Is it really time to closeout? Extension should be requested well in advance of end-date. • Sponsors are withholding funding for missing technical reports! • Best Practices • Communicate throughout the life of the project • Review project expenses throughout life of the project

34. Are we done yet? Audits, Reviews, Site Visits • Financial • Compliance • Programmatic (can have financial implications) ALWAYS inform Central Administration

35. Audits, Reviews, Site Visits • OMB Circular A-133 • Site Visits • Desk Reviews • FCTR Transaction Testing • System Reviews • OIG Audits • OIG Investigations • Pre-award Criminal Concerns - Office of the U.S. Attorney General

36. National Coverage This slide was prepared by DHHS for their HHS/OIG concurrent session at NCURA FRA 2011

37. Ongoing and Planned Audits • Compliance with Cost Principles • Admin and Clerical Direct Charging • Cost transfers • Review of Extra Service Compensation • Recharge Centers

38. Auditor’s Concerns • Effort Reporting Transfers • Transfers Non-federal to Federal • Transfers Federal to Federal • Transfers in Excess of $100,000 or 10% budget • Under expenditures

39. Recovery Act Audits • Indirect Costs Claimed as Direct Costs • Compliance with Reporting Requirements • I/C for Extramural Construction and Shared Instrumentation This slide was prepared by DHHS for their HHS/OIG concurrent session at NCURA FRA 2011

40. Extrapolation • Auditors extrapolate findings and apply them to all federal awards awarded to the University This is how universities get Million Dollar paybacks to the Federal Government

41. False Claims Act (FCA) The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government (tax fraud is excepted). The Act prohibits knowingly presenting, or causing to be made or used the following : • A false claim for payment or approval, including a false record or statement • Includes false statements associated with submission of a proposal • Conspiring to commit any violation of the False Claims Act

42. Are we done yet? Discussion