OMB Circulars A-21, A-110 & A-133

1. OMB Circulars A-21, A-110 & A-133

2. Overview: OMB Circulars • Difference between award types – grants, contracts and cooperative agreements • Purpose of the circulars • What circulars are we reviewing?

3. Definition of a Grant • Purpose is to transfer money, property, services or anything of value to recipient in order to accomplish a public purpose • No substantial involvement anticipated between government and recipient

4. Definition of a Cooperative Agreement • Purpose is to transfer money, property, services or anything of value to recipient in order to accomplish a public purpose • Substantial involvement anticipated between government and recipient

5. Definition of a Contract • Purpose is to acquire property or services for direct benefit or use of the Federal Government. • Very restrictive • Usually no expectation of cost sharing

6. Assistance Vs. Procurement • Assistance – generally, what the proposer wants to do. Awards can be either grants or cooperative agreements • Procurement – generally, what the government buys (can include research). Awards are contracts

7. OMB Circulars • Purpose: To give instructions to the federal agencies affected by the circulars; federal agencies are required to implement. • Federal agencies pass the requirements to institutions • Effect: Set minimum standards for institutions

8. OMB Circulars applicable to all Awards • A-21 Cost Principles for Educational Institutions • A-110 Grants and Agreements with Institutions of Higher Education: Uniform Administrative Requirements • A-133 Audits of States, Local Governments, and Non-Profit Organizations

9. Definitions • Definition of cost is: • An amount paid or required in payment for a purchase; a price • The expenditure of something, such as time or labor, necessary for the attainment of a goal

10. Definitions • Definition of principle is: • A rule or standard • A fixed or predetermined policy or mode of action

11. Definitions • Cost Principles can be defined as the policy for determining if the cost or expenditure is allowable or not.

12. OMB Circular A-21 – Cost Principles for Educational Institutions • Purpose: Establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions • Determines what costs can be included in the F&A calculation • Remember: A-21 addresses both direct and F&A (indirect) costs as well as specific allowable costs (Section “J”)

13. A-21 Constantly Changes • Tighten rules on allowability and allocation of costs • Primary focus on Facilities & Administrative Costs • Promote greater standardization in treatment of costs • Also directed primarily at Facilities & Administrative Costs

14. How is Allowability Determined? Allowable: Under the agreement, regulations and public laws Reasonable: A prudent person would have purchased this item and paid this price Allocable: They can be assigned to the activity on some reasonable basis Consistently Treated: Like costs must be treated the same in like circumstances, as either direct or F&A costs If a cost cannot meet the above criteria, it is NOT ALLOWABLE, no matter what it is for.

15. Unallowable Activities (something you do) Lobbying General public relations & alumni activities Student Activities Managing Investments solely to enhance income Unallowable Objects(something you buy, a line item) Advertising Alcoholic beverages Entertainment Fines & penalties Moving Costs if employee resigns within twelve months Certain recruitment costs Unallowable Costs – Section J(Can not be charged against Federal agreement, used as cost sharing or placed in the F&A cost base)

16. A-21 Revisions, July, 1993 • “The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly budgets for administrative or clerical services and individuals involved can be specifically identified with the project of activity. Items such as office supplies, and memberships shall normally be treated as indirect costs.” F.6.b.

17. Cost Principles • “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.”

18. Direct and Facilities and Administrative Costs • Direct Costs: Costs which can be identified specifically with a particular sponsored project or that can be directly assigned to such activities relatively easily with a high degree of accuracy • Facilities & Administrative: Costs incurred for common or joint objectives and therefore cannot be identified readily and specifically with a sponsored project

19. Examples of Direct Costs • Salaries and Wages • Fringe Benefits • Travel • Lab Supplies • Subgrants and Subcontracts

20. F&A Costs are Real • “Any research project must cover two components of costs – • those directly attributed to the project • those incurred for the general support and management of the research …If the sponsor of research projects do not fully reimburse the costs, they must be paid from other institutional funds.” *American Council on Education

21. F&A Cost Pools • Operations and Maintenance • Library • General Administration • Departmental Administration • Sponsored Projects Administration • Student Services Administration

22. Consistency is a Problem • Consistency in estimating, accumulating and reporting costs • Consistency in allocating costs incurred for the same purpose • Should be able to compare proposal estimate with actual costs for any “significant” cost

23. OMB Circular A-110Uniform Administrative Requirements • Purpose • Subpart A General • Subpart B Pre-Award Requirements • Subpart C Post-Award Requirements • Subpart D After-the-Award Requirements

24. A-110 Purpose “Sets forth standards for obtaining consistency and uniformity among Federal agencies in the administration of grants to and agreements with institutions of higher education…”

25. OMB A-110 Sections Subpart A – General • Purpose • Definitions • Effect on other issues • Deviations • Subawards

26. OMB A-110 Sections Subpart B- Pre-Award Requirements • Pre-award policies • Forms for applying for Federal assistance • Special award conditions • Certifications and representations • Debarment and suspension • Lobbying

27. OMB A-110 Sections Subpart C – Post Award Requirements Financial and Program Management • Standards for financial management systems • Payment • Cost sharing or matching • Program income • Revision of budget and program plans • Allowable costs • Period of availability of funds

28. OMB A-110 Sections Subpart D – After-the-Award Requirements • Close-out procedures • Subsequent adjustments and continuing responsibilities • Collections of amount due Appendix A- Contract Provisions

29. Aspects of A-110 • Effect on Issues • No agency can impose rules that are in conflict with A-110 • Deviation • OMB can grant exceptions in unusual circumstances • Subcontracts • A-110 applies to any subcontractors performing work under an award

30. OMB Circular A-110Uniform Administrative Requirements • Expanded Authorities under OMB A-110 C.25e • Agencies can waive cost-related and administrative prior approvals • University Sponsored Project Offices can approve • Pre-award costs (up to 90 days prior to award start date) • First no-cost extension up to 12 months • Carry forward of balance

31. What’s Important for Me as a Departmental Administrator? • Cost Sharing • Program Income • Revision of Budget and Program Plans

32. Cost Sharing • Verifiable and not included as contributions on Federal projects • Still have to be allowable • Provided for in the approved budget “when required by the Federal Awarding agency” • Unrecovered indirect costs may be included “with prior approval of Federal awarding agency”

33. Revision of Budget & Program Plans • Instructions on how to report deviations from budget and program plans • Changes which require sponsor prior approval: • Change in scope • Need for additional Federal funds • Change in key person specified in the application or award document • The absence for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator

34. Revision of Budget & Program Plans, cont’d. • The transfer of amounts budgeted for indirect costs to absorb increases in direct costs , or vice versa, if required by the Federal awarding agency. • The transfer of funds allotted for training allowances (direct payment to trainees) to other categories of expense. • Unless described in the application and funded in the approved awards, the subaward, transfer or contracting out of any work under the award. Does not apply to purchase of Materials & supplies, equipment or general support services.

35. OMB Circular A-133 • Establishes audit requirements and defines federal responsibilities for implementation and monitoring such requirements for institutions of higher education • Institutions receiving more than $500K in Federal Awards require an audit • Audits shall normally be performed annually

36. A-133 Emphasis • Sets standards for audit consistency and uniformity • Identifies compliance requirements • Establishes criteria for testing internal controls • Tests for reasonable assurance that financial statements are accurate

37. Audits • Question: When do you start preparing for an audit? • Answer: The day you prepare a proposal

38. Who Audits the University? • Federal Government – US Dept. of Education is SVSU’s cognizant audit agency • A-133 Auditors • Program Auditors

39. Key to a Successful Audit • Organized Files • Documentation for expenses • Appropriate Approvals • Audit Trails (i.e., documentation) • Knowledge of policies and regulations • If it’s not documented, it didn’t happen….

40. Audits • Document! Document! Document! • When transfers are required – “Defend the Debit” • Auditors want to know why the award was charged for the expense

41. A Look at Accusations • George Washington University – Engineering professor charged with embezzling almost $600,000 in federal grants by directing the money into his own private companies. Also charged with using University money to pay his cousin’s wife for work that she never did. The court case is still pending. Article taken from the Chronicle of Higher Education, 2/4/05

42. A Look at Accusations • University of Connecticut engineering professor resigned his tenured position after being accused of spending thousands of hours on his private consulting practice and neglecting his academic work. • Florida Atlantic University professor resigned following accusations that he used state money to give an edge to a company that he had created to make and sell the same mine-detecting submarine that he was studying at the university.

43. A Look at Settlements Associated with Noncompliance • Northwestern University (~$5M; mischarging Federal Grants, fraud, Time & Effort issues) • Yale University - Tenured Professor forced out for allegedly padding his business travel expenses by approx. $150,000. He has made full restitution and resigned. 1/21/05 article from the Chronicle of Higher Education.

44. A Look at Settlements Associated with Noncompliance • Florida International University - $11.5M for improperly billing the U.S. Dept. of Energy for scientists’ time, travel and administrative expenses. Article taken from the Chronicle of Higher Education, 2/15/05 • The Johns Hopkins University - $2.6M to settle claim that scientists had overstated the amount of time they were spending on projects financed by the federal government. Article taken from CHE, 3/1/04

45. A Look at Settlements Associated with Noncompliance • University of Chicago ($0.65M; mischarging Federal Grants) • University of Connecticut ($1.3M; training grant issues) • Medical College of Georgia ($10M; theft of research funds related to clinical trials- two investigators with jail time) • University of Minnesota ($32M; program income/clinical trial violations) • Stanford University ($3.1M; unallowable costs) From Gary Thompson – Director of Grant Compliance NIH – through Ann Holmes from University of Maryland

46. Words to the Wise • “If you don’t like being audited by an auditor, you will really dislike being audited by an angry auditor.” NCURA

47. Current Hot Buttons • Final Reports • Cost Transfers • Cost Sharing • Effort Reporting • Departmental Administrative Costs • Subrecipient Monitoring • Program Income

48. Additional Resources • OMB Circulars • http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html • http://www.whitehouse.gov/omb/circulars/a110/a110.html • http://www.whitehouse.gov/omb/circulars/a133/a133.html • Office of Sponsored Programs, located at 365 Wickes Hall • http://www.svsu.edu/sponsoredprograms

49. OMB Circulars • Questions?