Accounting for Cost Share: Post Award and Beyond

Report
PAD Seminar – October, 2012
Gail L. Ryan, Assistant Vice President
Sponsored Program Administration
High
level understanding of
the following:
 Cost-sharing
on sponsored projects
 Sub-contracts on sponsored projects
 OMB Circular A-21 Basics
 Uses of Indirect Cost Recovery
 Definition
(reference OMB Circular
A-110):
 Project
costs not borne by the
sponsor but supported by
contributions from the recipient
and/or third parties, both cash and
in-kind.
 Portion
of research costs that are not borne
by the sponsor




Primarily required by federal sponsors
Pledge can be a % of total project costs or a
fixed amount
Obligation must come from non federal funds
Obligation must not come from federal flow
through
 Mandatory
– explicit in award document
and/or explicit in program announcement or
guidelines.
 Voluntary
Committed – defined and
quantified in either dollars or narrative in
proposal.
 Voluntary
Uncommitted – occurs in course of
project, was not planned or anticipated.

Cost overruns fall into this category
 Committed



Regardless of mandatory or voluntary, once
committed becomes true obligation to the
institution.
Must be documented in financial system
Proposal commitments = Award requirements
 Voluntary




cost-sharing
Uncommitted cost-sharing
Treated differently than committed cost-sharing.
Not included in organized research base for F&A
rate purposes.
Excluded from effort reporting requirements of
A-21, Section J-8.
Does NOT need to be documented

Personnel – time/effort of PI or other staff


Per OMB A-110, rates for volunteer services shall be
consistent with those paid for similar work in the
recipient’s organization.
Equipment – sometimes a required match for a
new piece of equipment to be provided by the
University.

Use of existing equipment is usually not allowable as
cost-sharing.
Operational costs – supplies, travel, etc.
 “In-kind” cost sharing – donations by third
parties.




Quantifiable
Certification/documentation of actual
F&A – reduction in recovery can often be claimed
PI will spend 20%
effort for the
project at no cost
to the agency
PI will be available
to provide advice
As opposed to
PI will use general
budget to purchase
the $500K laser
interferometer
PI has access to laser
interferometer
 How
should salary amount in excess of the
agency (e.g. NIH) salary cap be handled?
 Salary
cap is considered voluntary
committed, and must therefore be
documented and identifiable within the
financial records of the institution.
 Current
NIH salary cap = $179,700
 Dr. Smith’s salary is $250,000/year
 Proposed effort on project -10% = $25,000/yr
 Max to be charged to grant is $17,970
17,970
= 7.188% = ~7%
250,000
 Charge
7% to project and 3% to cost-sharing
 Cost-sharing
requirements may be passed
along to sub-recipients.
 Prime awardee retains ultimate responsibility
for the commitment.
 Therefore, if sub-recipient does not meet
their match requirement, the prime awardee
may need to scramble at the end of the
project.
 Important to monitor as part of invoicing
approval process, etc.
 In
order to be claimed as c/s, must meet all
the same criteria to be allowable on the
award:




Incurred during award period
Allowable expenditure to the project
Necessary and reasonable for accomplishing
project goals and objectives
Must be auditable
 Items
normally treated as indirect costs (e.g.
office supplies, clerical salaries, etc.)
 Specifically
 Cost
unallowable costs
sharing used on another project
 Funding
sources should be identified at the
time of proposal submission to ensure that
commitments are in place.
 In
other words, “don’t put it in the proposal
if you aren’t willing and able to cover the
cost!”
 Some
agencies may require c/s expenditures
to occur at same pace as sponsored award.
 Consider
total cost to the institution – hidden
costs of c/s include:



Loss of fringe benefits and indirect cost recovery
Increase in research base for F&A calculations
Staff time at both departmental and central
level for accounting and reporting of c/s
 Cash
– those outlays that involve an actual
outlay of cash by the institution (personnel,
supplies, equipment, etc.)
 In-kind
– non-cash contributions provided by
non-federal third parties, e.g.


Volunteer services
Donated supplies/equipment – must use current
fair market value
 Either
type must be identifiable and able to
be documented.
 There
are several “not so obvious” negative
impacts of voluntary cost-sharing.
 Negative impacts:



Lowers F&A rate
Complicates effort reporting system
Increases administrative costs for
tracking/reporting cost-share
 If
there is no documentation (i.e. in the
payroll distribution system) of the time
devoted to research, an agency may factor in
additional dollars into the research base.
 This
may hurt your rate negotiation process!
 Better
to be able to bury them in
documentation.
 Basics
of the F&A rate:
 Pooled expenditures – those that cannot be
allocated to a particular project (i.e.
indirect costs)
 Base expenditures – those direct expenses
that make up an institution’s MTDC base
 Rate = Pool
Base
 Goal is to keep the pool high and the base
low.
 Where does cost-sharing fit in?
Indirect Expenses (pooled costs) = 100,000
MTDC Base = 200,000
Rate = 100,000 = 50%
200,000
Add 20,000 of cost sharing expenses to base.
Indirect Expenses (pooled costs) = 100,000
MTDC Base = 220,000
Rate = 100,000 = 45.45%
220,000
 Only
commit to cost-sharing when required.
 Only
commit to the level of the amount
required.
 Only
commit what you are prepared to
deliver.
 DOCUMENT,
DOCUMENT, DOCUMENT!
Differentiation between a subcontractor and a
vendor is the first step:
 Subcontract:
An agreement written under
the authority of and consistent with the
terms of the Prime Award (grant or contract)
that transfers a portion of the research or
substantive effort to another organization.
 A subcontract is normally signed by both
parties.
 Personal
Services Contract: A written
agreement that transfers a specialized
service not available through a routine
service provider.
 The contractor requires a specialized
knowledge in a particular field and often
requires originality, creativity, and decisionmaking abilities.
 The agreement is intellectual and
professional in nature, and is normally signed
by both parties.
 Purchased
Services: Are orders to procure
goods and services that are normally routine
in nature.
 They are normally signed only by the
Purchasing party.
A subcontract is an appropriate procurement
mechanism when:
 1. The collaboration is substantive programmatic
work which is beyond mere analytical work-forhire normally conducted by a routine service
provider.
 2. The collaboration is substantial enough that
the collaborating individual or organization will
participate in preparation of results, publication,
presentation or other collaborative participation
beyond routine analytical work.
 3. The collaborator will maintain control of the
work to be performed under the subcontract.

 Subcontracts
are typically identified in the
proposal and/or approved by the sponsor.
 SPA has a team dedicated to preparation and
administration of subcontracts.
 Approval of invoices from subrecipients is a
shared responsibility:


PI responsible for verifying work proceeding at an
expected pace, and expenses are reasonable
based on work completed.
SPA responsible for verifying budget, allowability
of expenses, etc.
 Approve
scope of work and related budget
 Ensure receipt of required deliverables
and/or progress reports and review for
appropriateness
 Align deliverables/progress reports with
invoices submitted for payment
 Coordinate any modifications with the SPA
contracts team (e.g. change in scope,
rebudget request, etc.)
 Federal
awards – OMB Circular A21 outlines
allowability for certain types of
expenditures.
 A21 = “Cost Principles for Educational
Institutions”
 Guidance on what should be direct charged
to projects vs. what we recover via our
indirect cost rate
 Specifically, costs of a clerical or
administrative nature are considered
“sensitive” and care must be taken if direct
charged (typically recovered via indirects)
 The
following items are considered sensitive,
and require extra justification to directly
charge to federal projects:





Clerical and administrative salaries
Office supplies (includes computers by definition
of equipment threshold)
Telephone line costs (local)
Postage
Other
 Certain
criteria need to be met in order to
allow these types of expenses as direct
charges:



Must be able to identify the costs specifically to
the project with a high degree of accuracy
Costs must be incurred for a different purpose or
circumstance (how the item is used, not “what it
is”) OR part of a “major project” as defined in
the circular.
Costs must have been explicitly budgeted, with
justification, and awarded.
 ICR
funds are set up in the general fund
range, and must follow the “rules” for the
general fund.
 Typical
expenditures include items necessary
to the research, but which might be
considered questionable, or unallowable, if
charged directly to a sponsored project.
 Examples





of expenditures include:
Office supplies, toner, computers, etc. (those
items which we discussed as being A21 sensitive)
Travel
Memberships, dues
Books, journals
Miscellaneous items which are not easily
identifiable to a particular project (e.g. shared
by multiple projects)

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