Documenting & Determining Allowable Costs 1 Office of Sponsored Programs Post-Award Determining & Documenting Allowable Costs

Documenting & Determining Allowable Costs

1

Office of Sponsored Programs

Post-Award

Determining & Documenting Allowable

Costs


2

Office of Sponsored Programs Post-Award Staff

Post-Award Director:Jeanne Wicks 472-1825 [email protected]

Assistant Director:Mike Behne 472-6323 [email protected]

Training and Web Resource Development:Ginny Gross 472-7061 [email protected]

Legal Intern:Heather Smith 472-7049 [email protected]


3

Kathy Anderson 2-6326 [email protected]

Deb Arent 2-6327 [email protected]

Donna Douglas 2-6321 [email protected]

Shelly Hardies 2-2247 [email protected]

Kathi Malone 2-3430 [email protected]

Joyce Schuette 2-6354 [email protected]

Post-Award Project Specialists


4

Session Topics

• Definitions & Governing Regulations• Basic Considerations• Personal Services (Effort Reporting/PARs)• Operating Expenses/Supplies• Travel• Pass Through/Subawards• Cost Transfers• Equipment• Cost Share• F & A Versus Direct Charges• Pre-Award Costs• Other Considerations


5

Governing Regulations

• OMB Circular A-21 (Principles for Determining Costs)• OMB Circular A-110 (Grants and Agreements with Institutions of

Higher Education, Hospitals, and Other Non-Profit Organizations)• OMB Circular A-133 (Audits of Non-Profits)• Code of Federal Regulations (CFR)• FAR (Federal Acquisition Regulations)• FDP (Federal Demonstration Partnership)• Agency specific regulations• University of Nebraska regulations• State of Nebraska regulations


6

Governing Regulations – Important Web Sites:• OMB Circulars: http://www.omb.gov• CFR: http://www.access.gpo.gov/nara/cfr/cfr-

table-search.html• FAR: http://www.arnet.gov/far/• FDP: http://www. thefdp.org• UNL: http://busfin.unl.edu/bfsite/• State of Nebraska:

http://www.das.state.ne.us/accounting/nis/amcon.htm


7

Basic Considerations:

Primary Principle - All costs must: (a) be reasonable (b) be allocable (c) be treated consistently across the institution (d) conform to any limitations or exclusions set

forth in the principles or in the sponsored agreement as to types or amounts of cost items

If these are not met, the cost is unallowable.


8


Primary Principle - All costs must:

Be reasonable: Reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision was made to incur the cost.

• Necessary?• Benefits the grant?• Arm’s-length bargaining?• Agreements/terms?• Meets federal & state laws & regulations?


9


Primary Principle – All costs must:

Be Allocable:• incurred solely to advance the work under the sponsored

agreement• benefit both the sponsored agreement and other work of the

institution, in proportions that can be approximated using reasonable methods

• necessary to the overall operation of the institution and deemed to be assignable in part to sponsored projects


10


Primary Principle:

Costs must be treated consistently across the institution.

Treated consistently: A cost type can’t be treated as indirect (F & A) and as a direct cost unless granting agency specifically authorizes.


11

A mother enters her daughter's bedroom and sees a letter over the bed. With the worst premonition, she reads it, with trembling hands:It is with great regret and sorrow that I'm telling you that I eloped with my new boyfriend. I found real passion and he is so nice, with all his piercings and tattoos and his big motorcycle. But it is not only that mom, I'm pregnant and he said that we will be very happy in his trailer in the woods. He wants to have many more children with me and that's one of my dreams. I've learned that marijuana doesn't hurt anyone and we'll be growing it for us and his friends, who are providing us with all the cocaine and ecstasy we may want. In the meantime, we'll pray for the science to find the AIDS cure for him to get better, he deserves it.Don't worry Mom, I'm 15 years old now and I know how to take care of myself. Some day I'll visit for you to know your grandchildren.Your daughter, Judith


12

P.S. Mom, it's not true. I'm at the neighbor's house. I just wanted to show you that there are worse things in life than the school's report card that's in my desk drawer...

I love you!


13

Personal services charges to the award are allowable provided that the charges are documented adequately. OMB Circular A-21 requires educational institutions to document 100% of the distribution of charges for personal services paid from federal funds. The system chosen will reflect activity applicable to each sponsored agreement. The system chosen will reflect activity applicable to each sponsored agreement.

The University of Nebraska – Lincoln has chosen the After-the-fact Activity Records method for documenting payroll distribution, which under Section J.10.c (2) (c) of Circular A-21 requires reports to reasonably reflect the activities for which employees are compensated by the institution.

Personal Services (Salaries/Wages/Fringe Benefits)


14

• Administrative or clerical staff salaries are generally not direct charges to an award. However, direct charges for administrative or clerical staff may be appropriate when the project meets the definition of a major project or activity or explicitly budgets for these charges. Any personnel involved must be specifically identified with the project or activity.

• “Major project” is defined as a project that requires an extensive amount of administrative or clerical support, that is significantly greater than the level of such services routinely provided by academic departments.

Examples may be found in

OMB Circular A-21, Exhibit C.


15

Documenting Effort/PARs

To confirm that the distribution of activity representsa reasonable estimate of the work performed by the employee during the period, the reports will be signed by the employee, principal investigator, or responsible official(s) using suitable means of verification that the work was performed.


16

•PARs and payroll charges should support one another.

•Retro payroll adjustments should prompt a review of the PARs

for that time period.

Documenting Effort/PARS

Use a “Personal Activity Report (PAR)” to document personal services. A PAR is also required for any direct charges and cost share for an award.

PAR = invoice for services


17


18

Operating expenses & supplies

Operating expenses include items such as office supplies, freight & shipping, communications, printing, contractual services, repair & maintenance expenses. Many operating expenses are included in F & A calculationsand shouldn’t be directly charged to a grant unless the award gives specific authority.

A purchase order is required for items costing in excess of $5,000. Consult UNL Business and Finance policies for additional requirements.


19

Operating Expenses & Supplies

Be prepared to justify the necessity for the grant award.

Be careful not to charge items such as keys, telephones or office supplies to a grant without specific granting authority.

Keep all information for a transaction together (invoice, bid documents, purchase order, notes, etc.).

Note: Timing is important. Purchase must be made during the grant period. Certain expenditures shouldn’t be made in the last 60 - 90 days (e.g., a new computer).


20

Travel

IRS "Standard Meal Allowances"

The IRS has ruled that certain amounts paid to employees for meal expenses may be taxable income to the employee. Amounts paid for employee travel are taxable if the standard IRS meal allowance is exceeded and the employee does not substantiate those expenses. If the required documentation is not provided, the employer must treat the reimbursement in excess of the IRS allowance as taxable income subject to payroll taxes and reporting on the employee's W-2.

Appropriate documentation consists of a detailed itemization listing the date, amount and restaurant for each meal, including tips. If a single meal cost more than $25, a receipt must also be submitted.


21

TravelRemember that IRS allowances only define when detailed documentation must be submitted with the employee expense voucher. State statutes don’t authorize payment of per diem allowances for meals. The statute states:

"...only actual employee expenses are to be reimbursed.”


22

Name Name of Trip

Employee Expense Log

Date City, State Name of Restaurant Meal Amount (incl. Tip)

Travel


23

Meal Reimbursement During University Travel

Trip Breakfast Lunch Dinner

One day trip

Yes, if departure from home is

prior to 6:30 a.m. No

Yes, if departure is prior to 5:00

p.m. and returned home after 7:00

p.m.

Multiday trips - first day

reimbursements

Yes, if departure from home is

prior to 6:30 a.m.


a.m.


p.m.

During multiday trip Yes Yes Yes

Multiday trip - final day

Yes, if return is after 10:00 a.m.

Yes, if return is after 2:00 p.m.

Yes, if return is after 7:00 p.m.

Travel


24

Travel

Be alert for special travel conditions:

Fly America ActU.S. flag air carrierDocument the requirement for travelRefer to:

http://www.nsf.gov/home/grants/gc102.pdf

Note UNL policies about travel with students.


25

Travel with Students

Student Trip Insurance:• may be purchased at a nominal daily cost• is required for travel outside Lincoln and encouraged for

travel within Lincoln

Submit requests for Student Trip Insurance to UNL Benefits Office at least 3 days prior to departure.

For more information:http://hr.unl.edu/benefits/studenttrip.shtml


26

• Must have a signed subaward agreement before work begins

• Work must be performed within the time frame of the agreement

• Subawards of $200,000 or more require Board of Regents approval

• Use of a sub-award must be included in original proposal or have subsequent granting agency approval

• Technical Progress (deliverables) must be monitored by the PI or department

• Cost Share required by the sub-award agreement must be adequately reported

• PAA might ask PI to approve invoice prior to payment

• PI can approve all invoices prior to payment

Pass Through/Subawards


27

Cost TransfersExplanations such as:

• to correct error• to transfer cost• to use up excess funds• to close account

. . . aren’t acceptable and don’t explain what happened.

All transfers of costs after 90 days from the original transaction must explain why there was a delay in making the transfer.


28

Cost Transfers

Red flags to auditors:

Multiple transfers – “Don’t you guys know what you are doing?”

Late transfers – “Aren’t you guys checking your reports?

Incomplete or poor explanations – “Why aren’t you telling us the whole story? What are you hiding?”


29

Cost Transfers

Costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies resulting from:

• overruns or other fund considerations• restrictions imposed by law• restrictions imposed by terms of the sponsored agreement• reasons of convenience.


30

Cost Transfers

• Costs must be valid charges to the award.

• Costs can’t be transferred to an award to “use up” excess funds.

Note:

Transfers of large, even funds

are an audit flag.


31

Cost Transfers

Link transfer to original transaction & include:

•Document number•Original date posted•Original amount•Scanned copy of document

Use extra text field for full explanation.(Use cut & paste or scan in documents.)

Avoid posting to a revolving account & then transferring to an to an award.

Note: Internal consulting is not allowed.


32

Equipment

Requires specific grantor approval.

Follow UNL Business and Finance, and Procurement ruleshttp://busfin.unl.edu/bfsite/unpolicypage.cfm

Purchase orders and informal bids needed at $5,000 - $40,000

Purchase orders and competitive bids needed between $40,000 and $400,000

Board of Regents approval needed for equipment purchases > $400,000


33

Code of Conduct (OMB Circular A-110):

No employee, officer, or agent shall participate in the selection, award, or administration of a contract supported by federal funds if a real or apparent conflict of interest would be involved. Such a conflict would arise when the employee, officer, or agency, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in the form selected for an award. The officers, employees, and agents of the recipient shall neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, or parties to sub-agreements. However, recipients may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value.


34

Cost Share

Cost share provided by effort (salary) will be documented through a Personnel Activity Report (PAR).

Cost share provided by other forms of expenses will be documented and substantiated in departmental files and in some cases, in Post-Award files. The original invoice and payment document should have a notation that the expense is used as cost share for grant “XYZ.”


35


36

Cost Share

Cost share provided by a third party requires added documentation to include:

Copies of the invoices

Certification that third party provided the cost share and that it wasn’t used as cost share for another grant

Note:Volunteer certification must substantiate:• time was provided• a reasonable value was assessed to volunteer time

Assign a reasonable value to donated items and document how the value was determined.


37

Cost Share/Sub-recipient concerns

Post-Award can delay payment to a third party until adequate documentation is received.


38

Facilities & Administration (F & A) versus Direct Costs

F & A :

Supports the administration & facilities costs associated with a research center

Portion is returned to colleges

Is a true cost to the college

Is based on a rate negotiated and approved by federal government


39

Facilities & Administration (F & A) versus Direct CostsFacilities & Administration costs are incurred for common or joint objectives

& can’t be identified readily and specifically with a sponsored project, an

instructional activity, or any other institutional activity.

F & A can include items such as:

• building costs (depreciation and use)

• operational and maintenance costs

• library costs

• departmental administration

• sponsored projects administration

• student administration & services

For more information & a copy of our most recently approved F & A rate visit:

http://www.unl.edu/osp/indirect.html


40

Facilities & Administration (F & A) versus Direct Costs

OMB Circular A-21 requires that costs be treated consistently. A cost type can’t be treated as indirect (F & A) and as a direct cost without specific authorization from the granting authority.

Since items such as telephone, office supplies, and administrative support are typically included in the F & A calculations. They can’t be included in the charges to a grant unless specific approval is obtained from the granting authority.

Written approval is required. It can be included in the award document or in a letter from the grantor specifically identifying the cost and the award.


41

Pre-Award Costs

In some instances, expenditures are authorized within 90 days prior to the effective date of the award. However, costs incurred prior to the award are incurred solely at the financial risk of the unit requesting them. Costs incurred prior to 90 days before the effective date of the award are not allowable costs for the award unless the granting agency provides specific written approval. All other costs must be incurred during the grant award period.

(Use the UNL Institutional Prior Approval to Spend (IPAS) form available on the OSP website to request authorization for Pre-Award costs.)

,


42

Pre-Award CostsState Single Letter of Credit Grants (“24s”) createproblems and manual processes for Accounting,Post-Award and UNL departments if costs are incurred before an award is signed.


43

Other considerations

“My PI says that it is okay to purchase something that may not be allowable for this project. Who am I to question the PI?”

•Use the A-21 summary to show that the purchase is normally not allowed and that further documentation is needed so that auditors will be satisfied with the request.•Direct your question to your Project Specialist or Operations Analysis.

How do you want your name spelled in the

headline?


44

• Questions or comments?

Documents

Documenting & Determining Allowable Costs 1 Office of Sponsored Programs Post-Award Determining & Documenting Allowable Costs