Accounting for Cost Share: Post Award and Beyond

PAD Seminar – October, 2012
Gail L. Ryan, Assistant Vice President
Sponsored Program Administration
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
 Project
costs not borne by the
sponsor but supported by
contributions from the recipient
and/or third parties, both cash and
 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
 Mandatory
– explicit in award document
and/or explicit in program announcement or
 Voluntary
Committed – defined and
quantified in either dollars or narrative in
 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
Must be documented in financial system
Proposal commitments = Award requirements
 Voluntary
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
Use of existing equipment is usually not allowable as
Operational costs – supplies, travel, etc.
 “In-kind” cost sharing – donations by third
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
PI has access to laser
 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
= 7.188% = ~7%
 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
 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
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
 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
 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
 Goal is to keep the pool high and the base
 Where does cost-sharing fit in?
Indirect Expenses (pooled costs) = 100,000
MTDC Base = 200,000
Rate = 100,000 = 50%
Add 20,000 of cost sharing expenses to base.
Indirect Expenses (pooled costs) = 100,000
MTDC Base = 220,000
Rate = 100,000 = 45.45%
 Only
commit to cost-sharing when required.
 Only
commit to the level of the amount
 Only
commit what you are prepared to
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
 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
 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
 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
 A21 = “Cost Principles for Educational
 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)
 Certain
criteria need to be met in order to
allow these types of expenses as direct
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.
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)
Memberships, dues
Books, journals
Miscellaneous items which are not easily
identifiable to a particular project (e.g. shared
by multiple projects)

similar documents