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Fiscal Compliance Requirements for Sponsored Programs

University of Missouri – St. LouisFebruary 11, 2009

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Learning Objectives

• To understand:– Compliance requirements related to

allowability of costs– Responsibility of Fiscal Officer and PI– Common issues and impact of non-

compliance

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Overview

I. DefinitionsII. Compliance RequirementsIII. ResponsibilityIV. Concluding PointsV. Frequently Asked Questions (FAQs)

Definitions

• Sponsored Award – Activities related to a proposal funded by an external entity for a specific purpose.

• PI/Co-PI – Principal Investigator. Named by sponsor on award document with ultimate responsibility for ensuring compliance.

• Fiscal Officer – the individual assisting the PI with the administrative management of an award.

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Definitions

• Unallowable costs – Costs charged to an award not meeting the requirements.

• APM – Accounting Policy and Procedures Manual. Codification of accounting policies.

• BPM – Business Policy Manual. Codification of business and administrative policies.

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Compliance Requirements

Who sets the requirements? • Office of Management and Budget (OMB) –

Oversight agency for the federal government– OMB Circulars – The federal rules for how awards are

to be administered.• Sponsors – Individual sponsors may have

additional requirements• APM and BPM – policies established jointly by

Campuses and UM System

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Compliance Requirements

Who enforces the requirements?• External Auditors – Identify questionable costs

and internal control issues. • Office of Inspector General (OIG) – Final

enforcer of requirements. May require funds be returned to sponsor, impose fines, and/or sanctions.

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Compliance Requirements

What compliance requirements apply to sponsored programs? – OMB Circular A-21 - Cost Principles for

Educational Institutions– OMB Circular A-110 - Administrative

Requirements for Grants and Agreements– OMB Circular A-133 - Single Audit

Requirements– Specific Sponsor Administrative Guides

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Compliance Requirements

When do these requirements apply?– Receipt of direct federal awards– Awards containing federal flow-through dollars– Awards where terms and conditions reference

OMB Circulars

However, the University requires all awards to follow the requirements for federal awards.

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A-21 Overview

Compliance requirements include: • Guidelines for total allowable direct costs• Discusses allowability• Defines direct vs. Facilities & Administration

(F&A)• Sets the rules for F&A costs

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Definitions

• Direct costs must be: – Identified specifically for a particular

sponsored award– Directly assigned with relative ease and a

high degree of accuracy– Consistently treated in like circumstances– Supported by documentation

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Definitions

• F&A is: – Incurred for a common or joint objective (e.g. utilities)– Cannot be easily identified with a particular award

• Facilities: depreciation, interest on related debt, operational, maintenance, and library costs.

• Administration: departmental, sponsored projects, student services, and other general administrative costs.

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A-21 Compliance

• Total Costs include: – Allowable direct costs plus – Allocable portion of F&A

• Allowable costs must be: – Reasonable– Allocable – Consistent treatment– Conform to limitations or exclusions by sponsor

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A-21Compliance

• Reasonable:– Act with due prudence– Consistent with University policies and

procedures– Necessary for performance of the sponsored

award– Arms length and legal transactions

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A-21 Requirements

• Allocable: – Incurred solely to advance the work under the

agreement– Benefits the sponsored program in

proportions that can be reasonably approximated

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A-21 Requirements

• Consistent treatment: – Practices consistent with reporting other costs

for:• same purposes, or • like circumstances

• Conform to limitations or exclusions: – Sponsor may be more restrictive than A-21– Specified in the award

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A-21 Compliance

• Certain costs are expressly unallowable: – Alcoholic beverages– Alumni activities– Bad debts– Donations and Contributions rendered– Entertainment– Furnished automobile – personal use – Goods or services for personal use– Housing and personal living– Losses on other sponsored agreements

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A-21 Compliance

• Certain costs are unallowable with exceptions:– Contingency provisions– Fines and penalties– Fundraising and investment costs– Lobbying– Pre-agreement costs– Selling and marketing costs– Student activity costs

• Must be specified in the agreement to be allowable!

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A-21 Compliance

• Allowable costs – common questions: –Membership and/or subscription fees–Telecommunication –Federal Express and postage–Computer equipment

• Documentation required• Must be specified in the agreement to

be allowable!

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A-21 Common Issues

• F&A Costs– Not allowable as direct charges unless

specifically set out in the agreement – Items such as rent, administrative salaries,

office supplies, telephone• Allowable Cost Sharing

– Items that are unallowable as direct costs cannot be cost shared unless specifically set out in the agreement

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PI Responsibility

• Be knowledgeable of compliance requirements and restrictions

• Shares administrative management responsibility with the Fiscal Officer

• Ensuring all charges are:– Allowable– Authorized– Documented

• The PI has ultimate responsibility for an award

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Fiscal Officer Responsibility

• Shares administrative management responsibility with the PI

• The Fiscal Officer should be aware of: • Compliance requirements• Unique restrictions by sponsor• Budget

• Alert PI of potential or known compliance issues

• Contact ORA for assistance

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Fiscal Officer Responsibility

• Ensure transactions are properly recorded• Specific responsibilities include:

- Processing expenditures - Providing monthly budget variance reports- Preparing timely cost transfers- Closing of award and deliverables- Ensure documentation exists for all charges

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Common Issues

• Unallowable costs directly charged to award

• Lack of supporting documentation• Costs outside period of availability• Unlike circumstances not set out in

sponsor agreement

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Impact of Non-Compliance

• Questioned or unallowable costs• Repayments to the sponsor• Fines and/or sanctions• Subject to additional external audits• Jeopardize future funding opportunities• Damage to reputation

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Checklist for Success

Ensure costs are: Authorized in the budget & agreement Within the period of availability Charged timely to the project Meet the requirements of allowability

Timely review budget and costs Make timely and allowable cost transfers Appropriately document all costs

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Cost Transfers - PCEs

• Points from recent Internal Audit –Compliance requirements–Late PCEs–Common issues

Definitions

• What is a Payroll Correcting Entry (PCE)?–A type of cost transfer to redistribute

payroll to a different funding source.• What is a Personnel Action Form (PAF)?

–The form used to create the payroll record for a University employee.

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Compliance Requirements

• Must be an allowable charge• Directly benefits the project• Required if the difference between Payroll

Data % and the Modified Effort exceeds 5%.

• If over 60 days, approval required by*:– Individual, PI, Department Chair, and Dean

• Proper documentation

*See BPM 213 – Adjustment of Income and Expense Items

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Late Cost Transfer/PCE Form

• Required to complete if > 60 days• PI documents allowability• Signature required for both:

– where expenses are moving from– where expenses are moving to

• Send to ORA for final approval and processing

PCEs - Common Issues

• PCEs not completed to reflect changes in effort > 5%

• Late PCEs – common reasons: – PAFs not updated to reflect payroll distribution – Untimely review of sponsored project to identify

and correct errors– Pre-award projects not established

• Conflict between department and ORA31

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Frequently Asked Questions

• The following Frequently Asked Questions (FAQs) address practical application of this policy.

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FAQs

• What is considered adequate documentation?– Sufficient Documentation should state:

• the charge is allowable, and• the charge directly benefits the related award.

– Substantial Documentation (for cost transfers > 60 days old) should address:• Who, What, When, Where, and Why?• What will be done to ensure this does not reoccur?

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FAQs

• Are direct costs always allowable?–No. If they are not included in the

authorized budget and set out in the agreement, they are not allowable.

–For example, a PI’s salary would not be allowable on an equipment-only award.

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FAQs

• Are all items in the awarded budget allowable if the agreement has been approved by the sponsor?– Not necessarily. Unallowable costs should not be

included in the budgets, unless they have been set out in the agreement as allowable.

– The PI is responsible for knowing what is allowable and unallowable.

– If budget and agreement differ, agreement rules.

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FAQs

• Are costs, such as postage, always considered F&A? –No. In certain circumstances, if the cost

can be justified as an unlike circumstance it may be allowable as a direct charge.

–The costs need to be in the agreement and documentation must support the justification.

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FAQs

• What is an example of an unlike circumstance?–Postage. – If the award is for the preparation of a large

volume of manuals and mailing to participants, postage may be allowable as a direct charge.

–This needs to be set out in the agreement.

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FAQs

• What is another example of an unlike circumstance?–Administrative Salaries. – If the project requires extensive travel and

meeting arrangements for a large number of participants, some or all of an administrator’s salary may be allowable as a direct charge.

–This needs to be set out in the agreement.

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FAQs

• If the award is from a non-federal sponsor do the OMB Circulars apply?–Yes. The University requires all awards to

be administered consistently and follow the same requirements for federal awards.

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FAQs

• What are some examples of direct costs?–Examples may include:

• PI salary and benefits• Graduate student salary• Animal care• Lab equipment for the award

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FAQs

• What are some examples of F&A costs?–Examples may include:

• General office equipment• General and Sponsored Programs’

administrative salaries• Library support• Utilities• Postage• Office supplies

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FAQ’s

• Can funds be spent on items not included in the award, or for more than the award?– Maybe. Per A-110, section 25; changes in the

budget must be approved before they take place.

– Under certain conditions the changes will be allowed.

– Work with ORA office.

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FAQs

• Why is the University required to adhere to budgets on sponsored programs?– A-21 K.1, states “To assure that expenditures for sponsored

agreements are proper and in accordance with … approved project budgets, …”

– A-21 J.29 states “Any excess of costs over income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to, the institution's contributed portion by reason of cost sharing agreements…” [Emphasis Added]

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FAQ

• What is OMB Circular A-110? • These are the administrative requirements for

sponsored awards.• Common terms are defined, such as award,

cost-share, and subrecipient.• Requirements for the pre-award, post-award,

and closeout process are addressed.

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FAQ

• To whom does OMB Circular A-133 apply? - A-133 outlines the responsibilities for:

• External Auditors – These are the standards for their review of the University's financial statements

• University – The administrative requirements of federal awards to be followed.

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References

Where can I get more information?– OMB Circular A-21 – University Controller’s Office Policies –

APM – Section 60 – Reference Guide for Sponsored Programs – Facilities & Administration

Fiscal Misconduct Hotline

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Contact Information

• Karen Boyd• Manager, Business/Fiscal Operations• 314-516-5923• boyd@umsl.edu