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What Departmental Administrators Need to Know about Post-Award and Cost Analysis Schedule for the Session Agenda Schedule for the Session Format for today’s session, content mini case studies The Facilities and Administrative Rate The Root of All Intrigue Schedule for the Session

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schedule for the session3
Schedule for the Session
  • Format for today’s session, content mini case studies
  • The Facilities and Administrative Rate
    • The Root of All Intrigue
schedule for the session4
Schedule for the Session
  • The Regulations Governing Financial Compliance
    • OMB A-21, OMB A-110, Cost Accounting Standards
schedule for the session5
Schedule for the Session
  • Effort Reporting/Cost Sharing - Matching
  • Cost Transfers
schedule for the session6
Schedule for the Session
  • The Ultimate Test: The A-133 Audit and Other Audits
  • Questions & Answers
the root of all intrigue r r 12 n 1 12 r
The Root of all Intrigue:

R_________________________

R12n112R

slide9
Financial Compliance is multifaceted and should have a wide impact on how we think about every single transaction we post
slide10

Compliance touches everything - let’s begin with looking at the mechanics of the Facilities and Administrative Rate (F&A) as much of compliance has a basis here

the f a rate calculation sets the stage for today s discussion
The F&A rate calculation sets the stage for today’s discussion
  • The F&A Organized Research Rate is expressed as a percentage:Indirect costs of research = F&A%Direct costs of research
the f a rate calculation sets the stage for today s discussion12
The F&A rate calculation sets the stage for today’s discussion
  • =$125 million in unrestrictedincome to Harvard annually
  • = $85 million in unrestricted to UNC Chapel Hill annually
a direct cost is one that
A “Direct” Cost is one that
  • Can be identified specifically with a particular
    • sponsored project
    • instructional activity or
a direct cost is one that14
A “Direct” Cost is one that
    • other institutional activity with a high degree of accuracy
  • PI salary, lab supplies, and scientific equipment are examples of direct costs
conversely an indirect cost is
Conversely, an “Indirect” cost is
  • Incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, instructional activity or other institutional activity
conversely an indirect cost is16
Conversely, an “Indirect” cost is
  • Examples: library, facilities,maintenance, ResearchAdministration, Cost Analysis
a 21 provides definitions of the activities
A-21 provides definitions of the activities
  • Organized research = R&D activities that are separately budgeted and accounted for to perform data collection, analysis, evaluation, and reporting in the context of hypothesis testing;
a 21 provides definitions of the activities19
A-21 provides definitions of the activities
  • examples: wet and dry lab research
    • R01
    • Program project grants
a 21 definitions
A-21 definitions
  • Other sponsored activity = programs financed by federal and nonfederal agencies involving work other than research or instruction; examples:
a 21 definitions21
A-21 definitions

- publications, conferences andsymposia

- travel programs, preservation/maintenance/cataloging of collections, archives,equipment grants, public presentations

a 21 definitions22
A-21 definitions
  • Instruction = all teaching and training activities of an institution
  • Departmental research = research funded with departmental funds not separately budgeted and accounted for; example:
a 21 definitions23
A-21 definitions
  • research funded with University funds
  • research funded with gift money
  • for A-21 purposes, Instruction & Departmental Research are classified together
the question to be answered with the a 21 function code is
The question to be answered with the A-21 function code is:
  • What are we using the funds for?
  • Not, what is the source of the funds?
  • These can be different!!
as you can see
As you can see:
  • Each direct function has a rate:
  • Org Res Rate = F&A of research
  • direct costs of research
  • Instruction = F&A of instruction
  • direct costs of instruction
as you can see28
As you can see:
  • Other Sponsored Activities =
  • F&A of other sponsored
  • DC of other sponsored
  • Other Institutional Activity = F&A of OIA
  • DC of OIA
f a costs
F&A Costs

Methods of Distribution Within Universities

  • All F&A recovery goes directly to Dean/Division for Internal Distribution
f a costs32
F&A Costs

Methods of Distribution Within Universities

  • F&A recovery goes to Departments based on Research Volume
f a costs33
F&A Costs

Methods of Distribution Within Universities

  • Percentage of F&A recovery goes to Central Administration and then Departments receive a certain percentage of each research project’s F&A recovery
  • Other Non-formulaic ways
how do we collect f a recovery cash management
How do we collect F&A recovery?Cash Management

Types of Sponsor Reimbursement:

  • Cash with award - Cash is sent when the award is given to the Institution
how do we collect f a recovery cash management35
How do we collect F&A recovery?Cash Management

Types of Sponsor Reimbursement:

  • Letter of Credit - Reimbursed by the Federal Reserve Bank for expenditures during the month
how do we collect f a recovery cash management36
How do we collect F&A recovery?Cash Management

Types of Sponsor Reimbursement:

  • Automatic Payments - Cash automatically received on a monthly/quarterly (etc.) basis
how do we collect f a recovery cash management37
How do we collect F&A recovery?Cash Management

Types of Sponsor Reimbursement:

  • Billings - Payment received after invoice is sent to the sponsor based on expenses or deliverables
omb circular a 21
OMB CIRCULAR A-21

COST PRINCIPLES FOR EDUCATIONAL INSTITUTIONS

UNIVERSITY

omb circular a 2139
OMB Circular A-21
  • Guidelines are both specific to certain costs applicable to sponsored research (e.g. - direct costs) and general (open to interpretation) in other areas such as Facilities & Administrative (F & A) costs
omb circular a 2140
OMB Circular A-21
  • Successful applications of these cost principles requiresdevelopment of mutual understanding between representatives of universities and of the Federal Government as to their scope, implementation and interpretation
omb circular a 21 section a
OMB Circular A-21Section A
  • Section gives the objectives of the Circular, general guidelines for the institution and the Government, and the application guidelines (what types of sponsored research this Circular applies to)
slide42

OMB Circular A-21Section B

  • Definitions of terms :
    • Instruction
    • Organized Research
    • Other Sponsored Activities
    • Other Institutional Activities
omb circular a 21 section c
OMB Circular A-21Section C
  • Basic Considerations - Allowable direct cost and its share of allocable F&A costs
    • Allowability of Costs
    • Reasonable Costs
omb circular a 21 section c44
OMB Circular A-21Section C
  • Basic Considerations - Allowable direct cost and its share of allocable F&A costs
    • Allocable Costs
    • Guidelines for credits, limitations and unallowable costs
omb circular a 21 section d
OMB Circular A-21Section D
  • General guidelines on the definition of direct cost
    • Identified specifically with a sponsored project, an instructional activity, or any other institutional activity
omb circular a 21 section d46
OMB Circular A-21Section D
  • General guidelines on the definition of direct cost
    • Application to sponsored agreements
omb circular a 21 section e
OMB Circular A-21Section E
  • Facilities & Administrative Costs
    • Definition of F&A costs
    • Cost Groupings
    • Distribution Methods
    • Order of Distribution
omb circular a 21 section f
OMB Circular A-21Section F
  • Definitions and Distribution Methods
    • Facilities Costs:
      • Depreciation and Use Allowances
omb circular a 21 section f49
OMB Circular A-21Section F
  • Operations & Maintenance
  • Interest on Debt
omb circular a 21 section f51
OMB Circular A-21Section F
  • General Administration
  • Departmental Administration
omb circular a 21 section f52
OMB Circular A-21Section F
  • Sponsored ProjectAdministration
omb circular a 21 section f53
OMB Circular A-21Section F
  • Student Administration & Services
omb circular a 21 section g
OMB Circular A-21Section G
  • Determination and Application of F&A Costs Rate(s)
    • F&A Cost Pools - further clarification
    • Distribution Basis (Modified Total Direct Cost-MTDC)
omb circular a 21 section g55
OMB Circular A-21Section G
  • Determination and Application of F&A Costs Rate(s)
    • 3 Types of Rates - Predetermined, Fixed with Carry-forward, Provisional & Final Rates
omb circular a 21 section g56
OMB Circular A-21Section G
  • Determination and Application of F&A Costs Rate(s)
    • Limitation of 26% administrative allowance
omb circular a 21 section j
OMB Circular A-21Section J
  • General Provisions for selected items of Cost (see attached)
  • Provides principles to be applied in establishing the allowability of direct and F & A costs
omb circular a 21 section j58
OMB Circular A-21Section J
  • Differences between Circular and Research agreement - the agreement governs
omb circular a 21 section k
OMB Circular A-21Section K
  • No F&A cost proposal will be accepted without a certification as to the allowability of all costs within the claim
  • Certification of F&A Costs
  • Must be signed by VP or Chief Financial Officer
omb circular a 21 exhibit a
OMB Circular A-21Exhibit A
  • List of Colleges and Universities subject to Section J.12.F
omb circular a 21 exhibit a61
OMB Circular A-21Exhibit A
  • Institutions in this list must expend or reserve for expenditure the portion of F&A costs related to depreciation and use allowance for improvement of research facilities within the next five years
omb circular a 21 appendix a
OMB Circular A-21Appendix A

Cost Accounting Standards for Educational Institutions

  • CAS 9905.501 - Consistency in Estimating, Accumulating & Reporting Costs
omb circular a 21 appendix a63
OMB Circular A-21Appendix A

Cost Accounting Standards for Educational Institutions

  • CAS 9905-502 - Consistency in Allocating Costs Incurred for the Same Purpose
  • CAS 9905.505 - Accounting for Unallowable Costs
omb circular a 21 appendix a64
OMB Circular A-21Appendix A

Cost Accounting Standards for Educational Institutions

  • CAS 9905.506 - Costs Accounting Period
omb circular a 21 appendix b
OMB Circular A-21Appendix B

Sample CASB Disclosure Statement

(DS-2)

see supplemental handout 5

See Supplemental Handout #5

Allocation, Allocation, Allocation Case Study

omb circular a 110
OMB Circular A-110

Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations

omb circular a 11068
OMB Circular A-110
  • Purpose - This Circular sets for the 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
omb circular a 11069
OMB Circular A-110
  • Subpart A - General
    • Purpose, definitions, deviations, sub-awards
omb circular a 11070
OMB Circular A-110
  • Subpart B - Pre-Award Requirements
    • Pre-award policies, forms for applying for Federal assistance, debarment and suspension, special award considerations, certifications and representations
omb circular a 11071
OMB Circular A-110
  • Subpart C - Post-Award Requirements
    • Financial and Program Management
omb circular a 11072
OMB Circular A-110

Purpose and standards for F & P M, payments, cost sharing, matching, program income, revision of budgets, allowable costs, non-federal audits

omb circular a 11073
OMB Circular A-110
  • Property Standards
    • Insurance coverage, real property, Federally owned and exempt equipment, supplies, intangible property, property trust relationships
omb circular a 11074
OMB Circular A-110
  • Subpart C - Post-Award Requirements (cont.)
    • Procurement Standards
omb circular a 11075
OMB Circular A-110
  • recipients responsibilities, competition, procurement procedures, cost and price analysis, records, contract administration and provisions
omb circular a 11076
OMB Circular A-110
  • Subpart C - Post-Award Requirements (cont.)
    • Reports and records
      • Monitoring and reporting program performance, financial reporting and record retention
omb circular a 11077
OMB Circular A-110
  • Termination and Enforcement
omb circular a 11078
OMB Circular A-110
  • Subpart D - After the Award Requirements
    • Closeout procedures, adjustments, collections of amounts due
  • Appendix A
    • Contract Provisions
history of cost accounting standards cas81
History of Cost Accounting Standards (CAS)
  • Cost Accounting Standards Board
    • Created as an Act of Congress:
      • Applied to Defense Contracts
      • Public Law 91-379 (1970)
history of cost accounting standards cas82
History of Cost Accounting Standards (CAS)
  • Cost Accounting Standards Board
    • Created as an Act of Congress:
      • Grew out of the perceptions that contractors were manipulating costs
history of cost accounting standards cas83
History of Cost Accounting Standards (CAS)
  • Cost Accounting Standards Board

-Remember the $500 hammer and$250 toilet seat?

history of cost accounting standards cas84
History of Cost Accounting Standards (CAS)
  • Without details, costs could not be adequately linked from the proposal to invoices to the final report
cas for educational institutions
CAS for Educational Institutions
  • In 1978, educational institutions were exempted from CAS
    • OMB Circular A-21 was understood to contain required guidance
cas for educational institutions86
CAS for Educational Institutions
  • In 1994, CAS was applied to them
    • Consequence of “unallowable cost” problem
      • Remember a certain Research University in a certain Western state?
cas for educational institutions87
CAS for Educational Institutions
  • In 1994, CAS was applied to them
    • Congress decided that A-21 alone was not enough regulatory guidance for universities
cas for educational institutions88
CAS for Educational Institutions
  • CAS requires four Standards and a Disclosure Statement
    • 501: Consistency in estimating, accumulating and reporting costs
cas for educational institutions89
CAS for Educational Institutions
  • CAS requires four Standards and a Disclosure Statement
    • 502: Consistency in allocating costs incurred for the same purpose
cas for educational institutions90
CAS for Educational Institutions
  • CAS requires four Standards and a Disclosure Statement
    • 505: Accounting for unallowable costs
cas for educational institutions91
CAS for Educational Institutions
  • CAS requires four Standards and a Disclosure Statement
    • 506: Consistency in using the same cost accounting period
cas for educational institutions92
CAS for Educational Institutions
  • CASB-Disclosure Statement
  • FYI--Defense Contractors follow 19 CAS Standards!
link between cas 501 and cost sharing
Link between CAS 501 and Cost Sharing
  • OMB A-110 defines Cost Sharing as any project cost not borne by the sponsor!
  • Could be anything identified and quantified in the narrative or the budget that will support the project not paid for by the original sponsor
cas 501 impacts cost sharing
CAS 501 Impacts Cost Sharing
  • Cost Sharing is often a direct cost!
organized research cost sharing cas 501
Organized Research Cost Sharing CAS 501
  • When faculty propose effort on organized research projects, even though they are not charging their salary, their effort related to the project is known as committed cost sharing and must be accounted for to the extent it was committed
organized research cost sharing cas 50196
Organized Research Cost Sharing CAS 501
  • Recall we said earlier that faculty salary is a “direct cost,” hence, this cost sharing needs to end up in the OR base for F&A calculation purposes
cost sharing
Cost Sharing
  • Also may include:
    • Grant or contract over-expenditures identified at the end of the project
cost sharing98
Cost Sharing
  • Also may include:
    • Pre-planned change in project scope resulting in increased effort with no additional sponsored funding
cost sharing99
Cost Sharing
  • Also may include:
    • Faculty salary effort over the NIH salary cap
see supplemental handout 7

See Supplemental Handout #7

Cost Sharing Case Study

cas 502102
CAS 502
  • Requires consistency in the way the same type of cost is allocated in the F&A rate
  • The same type of cost cannot be both a “direct cost” and an “indirect cost”
slide103
Costs Defined as Direct in A-21 and in a typical Disclosure Statement
  • PI salary
  • Technician salary
  • Lab supplies
  • Research equipment
  • Technical consultants
  • related to the projects
costs defined as f a in a 21 and in a typical disclosure statement
Costs Defined as F&A in A-21 and in a typical Disclosure Statement
  • Department administrator salary
  • postage
  • Memberships
  • Office supplies
cas 502105
CAS 502
  • Just to make the situation slightly more confusing, A-21, Section F6B, allows certain F&A costs to be charged directly to an award if three circumstances exist:
cas 502107
CAS 502
  • The cost can be specifically identified with the project with a high degree of accuracy and
  • The project has characteristics that make it one of “different purpose and circumstance” and
cas 502108
CAS 502
  • The cost is identified in the budget and approved by the sponsor
cas 502109
CAS 502
  • What does “different purpose and circumstance” mean?
  • It means, by definition, the project’s purpose uses an inordinate or disproportional amount of administrative costs
cas 502110
CAS 502
  • for example, a project whose primary purpose is to collect survey data by mail would use an inordinate amount of postage! Hence, in this case, this administrative cost (postage) would be charged to this award
cas 502111
CAS 502
  • This does not mean that:
    • All administrative costs on this award can be directly charged to this award or
    • Postage can be a direct charge on all awards
cas 502112
CAS 502
  • This does not mean that:
    • Remember--postage must be identified in the budget and approved by the sponsor
cas 502113
CAS 502
  • Other examples of “different purpose and circumstance”
cas 502114
CAS 502
  • A project whose primary means of data collection will be performed through travel in different countries would likely require a disproportional amount of administrative effort to deal with:
cas 502115
CAS 502
  • Travel plans
  • Currency issues
cas 502116
CAS 502
  • There are other examples we cannot nor should we define--think of the relationship between the administrative effort and the nature of the project
cas 502117
CAS 502
  • These are the rules for federally supported projects?
  • Now what do we see in practice?
    • Rotation of charges among projects
cas 502118
CAS 502
  • Now what do we see in practice?
    • Charging projects with largest remaining balance
    • Charging budgeted amount, not actual cost
    • Charging projects in advance of when cost is incurred
cas 502119
CAS 502
  • Describing a cost as something other than what it is
    • e.g., office supplies as lab supplies
    • adding a “tax” to proposal costs
cas 502121
CAS 502
  • What about nonfederal projects that often:
    • Do not pay full or even partial F&A
    • May require what we know as “indirect costs” be charged directly to the project
see supplemental handout 8

See Supplemental Handout #8

CAS 502 Case Study

cas 505
CAS 505
  • Requires an accounting of unallowable costs
    • In the OR base and in the F&A pools
  • Examples:
    • Alcohol (G&A, O&M, DA)
cas 505125
CAS 505
  • Examples:
    • Flowers, gifts
    • Bad debt expense
    • Parking tickets (O&M)
    • Lobbying costs
cas 505126
CAS 505

Mr. Clean

cas 505127
CAS 505
  • These have to be excluded if we want to stay out of the newspaper headlines and comply with CAS!
  • We will “scrub” for unallowables by object code as we prepare the rate
the disclosure statement ds 2
The Disclosure Statement DS-2
  • Written description of all of our accounting practices
  • Divided into seven sections
  • Much detail is required
the disclosure statement ds 2129
The Disclosure Statement DS-2
  • The DS-2 becomes a road map for auditors
  • CFO signs under penalty of perjury
summary of key issues
Summary of Key Issues
  • CAS has made recovery of costs much more difficult and the requirement of including cost sharing in the OR base has been a disincentive to Federal Government - University Research partnership
summary of key issues131
Summary of Key Issues
  • Cost Sharing lowers the rate (higher base, lower rate)
summary of key issues132
Summary of Key Issues
  • Many non-reimbursed administrative costs are incurred to ensure we are doing things correctly! (Administrative costs capped in F&A rate at 26%)
let s talk more about effort reporting
Let’s talk more about: Effort Reporting
  • Required by OMB Circular A-21 (Section J.8)
  • Alternatives:
    • Plan-Confirmation System
    • After-the-fact Activity Records
    • Multiple Confirmation Records
cost sharing134
Cost Sharing
  • Sharing of project costs by the institution
  • more than a token amount (i.e. more than 1%)
  • normally on grants: not on contracts
  • allowable methods: academic year effort, cash, equipment
matching
Matching
  • Major institutional commitment to the project
  • primarily takes place on equipment grants, but others as well
  • usually ranges from 1/3 to 1/2 of total costs
  • allowable methods: generally cash
cost sharing matching
Cost Sharing/ Matching
  • Non-Federal Contribution/Participation to a Federally Sponsored Agreement (OMB Circular A-110, Section 23)
cost sharing matching137
Cost Sharing/ Matching
  • Mandatory - Required by the sponsor as a condition for making an award
  • Voluntary - Not required by the sponsor but may become a legally binding commitment if reflected in proposal budget
cost sharing matching138
COST SHARING/MATCHING
  • What can be included:
    • Real Dollars:
      • Contributed Effort
      • Equipment
      • Other Non-Labor Costs
cost sharing matching139
Cost Sharing/ Matching
    • In-Kind Contributions
  • Must withstand same allowability test as if charged directly to the project
cost sharing matching140
Cost Sharing/ Matching
  • Costs used for this purpose:
    • Must be verifiable
    • Not counted toward more than one Federal program
    • Necessary and reasonable
cost sharing matching141
Cost Sharing/ Matching
  • Costs used for this purpose:
    • Allowable
    • Not funded by other Federal funds unless specifically authorized
cost transfers
Cost Transfers

Purpose

  • Allow for reassignment of costs to a sponsored program from another source of fund (account)
cost transfers144
Cost Transfers

Policy

  • Written justification and approval needed for reassignment of expenses
cost transfers145
Cost Transfers

Appropriate - If transfer is for:

  • correction of error
  • charges benefit more than one program (distribution of costs based on benefits received)
cost transfers146
Cost Transfers

Appropriate - If transfer is for:

  • programs involve closely related work
cost transfers148
Cost Transfers

Not Appropriate:

  • To reduce overruns if transfer is from one federal program to another
  • For reasons of convenience
  • To use unspent money in a project
cost transfers149
Cost Transfers

Transfers should be processed:

  • in accordance with institutional policies and procedures, inclusive with conditions cited in the award
  • in a timely manner
cost transfers150
Cost Transfers

Transfers should be processed:

  • for older transfers, high level approval sometimes required
see supplemental handout 10

See Supplemental Handout #10

Cost Transfer Case Study

the ultimate test the audit
The Ultimate Test: The Audit!
  • Different Types of Audits
  • Contract close out audit (CIA, ONR)
the ultimate test the audit153
The Ultimate Test: The Audit!
  • Different Types of Audits
  • F&A Audit - Division of Cost Allocation, HHS Inspector General, or Office of Naval Research, Defense Contract Audit Agency
the ultimate test the audit154
The Ultimate Test: The Audit!
  • Different Types of Audits
  • A-133 Audit - Direct Cost Audit required annually for institutions receiving over $300K in funds for federally sponsored programs
the ultimate test the audit155
The Ultimate Test: The Audit!
  • What are these audits about?
what is a 133
What. . . is A-133?
  • An Office of Management and Budget (OMB) Circular requiring an annual external audit of non-profits receiving federal funds
what is a 133158
What. . . is A-133?
  • Sample of federal awards and their direct cost transactions are selected for audit to determine if expenditures and procedures were appropriate (i.e., in accordance with sponsor terms/conditions and University policies)
a 133 what are they looking for
A-133 WHAT are they looking for?
  • Direct attribution (linkage between cost and purpose of the project) must be established and demonstrated through supporting documentation
a 133 what are they looking for160
A-133 WHAT are they looking for?
  • A readily identifiable causal-beneficial relationship (i.e., test tubes were purchased for a wet lab experiment involving fluid analysis) must exist between costs and the project
a 133 what are they looking for162
A-133 WHAT are they looking for?
  • Other testing includes effort reporting, control testing, cost transfers, program income, financial and non-financial reporting, sub-recipient monitoring,
a 133 what are they looking for163
A-133 WHAT are they looking for?

Davis-Bacon Act, Service Centers, Student Financial Aid, and indirect cost rate application

a 133 why do we care
A-133 WHY . . . do we care?
  • All federal and more non-federal sponsors look at A-133 as a ‘report card’ of how we spend their money
a 133 why do we care165
A-133 WHY . . . do we care?
  • Findings are reported to federal government and become public record, distributed to all federal agencies through a clearing house
bottom line
Bottom Line?
  • Research Administration is a multifaceted, high risk business
  • need clarity on roles and responsibilities to understand who should be doing what
  • Training is critical