ncura 51st annual meeting, october 20091 post award basics rob barbret, university of michigan...

NCURA 51st Annual Meeting, October 2009 1

Post Award Basics

Rob Barbret, University of Michigan

Vivian Holmes, Broad Institute

Tracey Fraser, California Institute ofTechnology


Overview of Workshop

The Rules

Establishing Accounts

Managing Spending on Awards

Overview of OMB Circular A-21

Cash Management



Collections

Sub-recipient Monitoring

Cost Sharing

NIH Salary Cap



Program Income

Effort Reporting

Close-out of Awards

Audits

Training


The Rules

OMB Circulars A-21 Cost Principles for Educational

Institutions A-110 Grants and Agreements with Institutions

of Higher Education: Uniform Admin Requirements

A-133Audits of Institution of Higher Education and Other Nonprofit Institutions

http://www.whitehouse.gov/omb/circulars



The Rules

OMB Circulars A-87 Cost Principles Applicable to Grants and

Contracts with State and Local Governments

A-122Cost Principles for Non-Profit Organizations

Etc.




Order of Precedence

Award

Special Conditions

Program Rules

Agency Rules

OMB Circulars


Establishing New Accounts

Type of Awards Grant Cooperative Agreement Contract Gift



Grant

Principal purpose is to transfer money, property, services or anything of value to recipient in order to accomplish a public purpose

No substantial involvement is anticipated between government and recipient during performance of activity



Cooperative Agreement

Principal purpose is to transfer money, property, services or anything of value to recipient in order to accomplish a public purpose

Substantial involvement is anticipated between government and recipient during performance of activity



Contract

Principal purpose is to acquire property or services for direct benefit or use of the federal government

Sponsor determines that procurement contract is appropriate

Very restrictive, can have high demands No expectation of cost sharing



Gift

A gift from a donor may carry a stipulation as to its use, but there can be no expectation of benefit back to the donor including the technical and financial reports common to sponsored project grants and contracts.



Grant project conceived by investigator agency supports or assists performer defines details and retains scientific

freedom agency maintains cognizance unilateral

Contract project conceived by agency agency procures service agency exercises direction or control agency closely monitors bilateral



Departments are often frustrated by the time lag between receiving the award and establishing the account. Ideas to speed-up the process

Establish check-list for pre-award office Determine what documents are “must haves” and what

can wait until after the account is established Send data electronically or via fax whenever possible Train departmental administrators

Roles and responsibilities Required forms and documentation


Establishing New Accounts Advance Account Numbers

Allow departments to formally request with sign-off by Dean

Institution will be ultimately liable for expenses if award is not granted

Individual institution culture will drive actual funding

Pre-Award office authorizes the account based on contact with sponsor

Eliminates the need for transfers after the agreement is signed



Only establish a new account if the SPONSOR requires it New accounts are not necessary for each year of the

award Spend time training the person establishing the

award in the accounting system Understand data elements to ensure:

Billing vs. LOC is correct F&A calculation will be accurate based on how the

account is established Account Number Structure

Prime and Sub Account Relationships



Reviewing expenditures Establish reasonable practices for reviewing

expenditures Does your university review all expenditures or

target higher risk transactions?

Rebudgeting



Procurement Cards Strong written policy needed

Clearly define responsibilities: What is allowable? Who maintains documentation? Length of time records are to be kept

Beware of sponsored projects as default Set dollar limits Audit frequently



Cost Transfers A cost transfer is an after-the-fact

transfer of expenditures from one project to another project.



Cost Transfers “Transfer(s) must be justified by documentation that contains a

full explanation of how the error occurred...” “An explanation that merely states ‘to correct error’ or ‘to

transfer to correct project’ is not sufficient.” “It should be noted that frequent errors in the recording of costs

may indicate the need to review the accounting system and/or internal controls.” (DHHS Grants Manual)

Part II of the NIH policy statement provides guidance for cost transfers on NIH grants, including a 90 day timeframe to complete.



Cost Transfer “RED FLAGS” Transfers older than 90 days Transfers in the last month of the award or after

the award has expired Round numbers!! Explanations that raise more questions than

answers. Overdrafts from one sponsored project to

another



Cost Overruns Cost Overruns happen for a variety of reasons

Sponsor is slow to send additional year funding Principal Investigator assumes new funds are

coming Lack of management of accounts at department

level



Cost Overruns Serious problem that must be managed by the central

accounting office Budget cuts of state funds may exacerbate the problem Staff turnover and lack of training in departments can add

to the problem Business Managers may fear repercussions if they tell the

PI to stop spending Establish a policy and stick to it!


Best Practices on Managing Spending

How Overspending is Managed University of Michigan

Monthly status reports are sent to departmental administrators

A published policy has been established to dictate timing of write off to Dean’s account

Overspending not always a bad thing



How Overspending is Managed Broad Institute

Overrun reports are distributed monthly OSR administrator reviews with department/lab

administrator and/or PI OSR has responsibility for removing/covering

deficit; allocating appropriately or moving overrun to discretionary funds



How Overspending is Managed Caltech

Very de-centralized Grant managers have access to account

information; in addition, central administration monitors

Monthly meetings between central and departmental administrators

Deficits are (eventually) written off to the department



Definitions – Key Terms OMB – Office of Management and Budget

Issues principles for determining costs applicable to R&D, training, and other sponsored work performed under grants, contracts and other cost reimbursable agreements with the Federal government.

Cognizant Agencies Responsible for negotiating and approving F&A rates and auditing

to ensure that institutions are applying cost principles on a consistent basis.

Two primary agencies:Department of Health and Human Services (DHHS)Office of Naval Research (ONR)



Definitions – Key Terms Direct Cost

Can be identified specifically with a particular project, program, or activity of an institution

Examples: Salaries, Benefits, Materials, Animal Care Costs, Supplies and Services Facilities and Administrative (Indirect) Cost

Incurred for common or joint objectives; cannot be easily identified to a particular project, program, or activity of an institution

Examples: Depreciation (Building, Renovations, Equipment), Interest, Operations and Maintenance, Library, Administration costs

Allocation Base(s) Common measurable base(s) used to allocate F&A costs

Examples: Space (square footage), Modified Total Direct Cost (MTDC), Full-Time Equivalents, Salaries and Wages



Definitions – Key Terms Modified Total Direct Cost (MTDC)

Distribution base consisting of salaries, fringe benefits, materials, supplies, services, travel, subcontracts up to first $25,000 of each

Examples of items excluded from MTDC are Equipment, Patient Care , Subcontracts greater than $25,000, and Tuition

Distribution Base (Direct Costs) – Major Functional Activities Instruction: teaching and training activities including departmentally funded

research Organized Research: research and development activities that are

separately budgeted and accounted for including sponsored and university funded research

Other Sponsored Activities: performance of sponsored work other than organized research and instruction

Other Institutional Activities: residence halls, dining halls, athletics, ancillaries



What the Cost Principles Do: Requires that a cost:

Be allowable Be allocable Be reasonable (prudent person test) Be treated consistently Be necessary to perform the program Be permissible under the law



Allowable Section J of Circular A-21

Currently describes 54 types of costsAlphabetical orderFor some costs, also specifies approval

requirements, documentation and other provisions



Unallowable Activities (something you do)

Organized fund raising Lobbying General public relations &

alumni activities Student Activities Managing investments

solely to enhance income

Unallowable Objects(Something you buy, a line item)

Advertising Alcoholic beverages Entertainment Fines & penalties Moving costs if employee

resigns within twelve months

Certain recruitment costs

Examples of Unallowable Costs per A-21 (Cannot be charged against Federal agreements, used as cost sharing, included in service center rates or placed in the F&A cost base)



Allocable• Costs Must be Assigned to a Project (or Cost

Objective) in Proportion to the Benefit Received.

• Actual• Allocation on a Reasonable Basis

• Costs Allocable to a Project may not be Shifted to Another Project to Eliminate Deficits or Other Reasons of Convenience.



Reasonable

“A cost is considered reasonable if the nature of the goods or services acquired, and the amount involved reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.”

OMB Circular A-21 C3.



ReasonableMajor Considerations:

• Is the cost required by law or within terms and conditions of sponsored award?

• Is the cost necessary?• The Prudent Person Test• Consistent with institutional policies/practices?• Would you buy this item and pay this price if you

had to personally pay for it?



Consistent Costs Must be Treated Consistently in

Estimating, Accumulating and Reporting Costs (CAS 501)

All costs incurred for the same purpose in like circumstances are either direct costs only or F&A costs only with respect to final cost objectives. (CA 502)



Consistent - What Costs are Most at Risk?

Clerical and Administrative Costs Office Supplies Local Phone Charges Memberships Postage Equipment Maintenance



Consistent - Why is it a Problem to Charge These Costs as a Direct Cost?

Each of These Cost Categories are Included in The Departmental Administration Component of Universities F&A Rates (Generally in Large Amounts).

Economic Factors May Preclude Doing the Right Thing


Cost

Acc

ounti

ng

Reg

ula

tions


F&A Rate Application

On Campus Research Award $100,000

F&A Negotiated Rate 51%

Base MTDC

Budget:

Salaries and Benefits $45,000

Equipment 10,000

Supplies 5,000

Subcontract 40,000

Total Direct $100,000

F&A (75,000 x 51%) 38,250

Total $138,250


F&A Rate Application

Items to Consider: Life of the Award Retroactive Adjustments Your F&A Negotiation Agreement with the

Federal Government Sponsored Agreement Terms and Conditions


Cash Management

Billing Standardize billing when possible

Work with Pre-Award office to eliminate special condition billing and the need to provide back-up with each invoice.

Create attributes in the accounting system to allow for meaningful reports to track billing

Develop a report to verify ALL accounts have been billed

Establish attributes in system to identify frequency of reporting, forms & special instructions


Cash Management

Letter of Credit Management Develop a report or system that allows you to

draw only up to the award amount and not overruns

If possible draw actual expenditures rather than relying on estimates

Make sure the reconciliation process for letter of credit accounts is accurate and ties to reports sent to the government


Cash Management

Special Considerations Small start-up for profits, venture capitalist Research Agreements include

Terms and Conditions acceptable to institution Precise scope of work Clear payment clause Deliverables defined Consistency between clauses

Monitor accounts receivable closely Create internal list of “high risk” sponsor’s


Collections

Develop or purchase a system to track receivables.

Make sure ALL receivables are tracked in the system, including “automatic” or scheduled payments


Collections

Reconcile A/R to accounting system on a regular basis

If departments must be involved in the invoicing, make sure the central office approves the invoice and establishes the A/R Regardless of who prepares the invoice, make

sure all payments are directed to the Central Accounting Office for deposit


Collections

The “Send and Hope” collection process is not effective!!!

Establish standard dunning notices and send them on a regular basis.

Set goals for collections Consider establishing a collection person or team to deal

with past due accounts Document everything Develop a plan of attack (e.g. big $ first or small

corporations first, etc.)


Subrecipient Monitoring

Develop a policy Have clearly defined roles

PI Department Central Administration

Risk Assessment Educational vs. Industrial vs. Foreign



Develop good contract templates Have system in place to monitor

appropriateness of invoices Have PI approve invoices before paying Remember that as prime recipient you are

ultimately responsible



Develop process to review subrecipients on federal awards on an annual basis

For all subrecipients on federal awards, verify that an A-133 audit was completed, if applicable

Develop a process to followup with a subrecipient if they had any audit findings related to your award

Develop a process to provide oversight of any for-profit or foreign subrecipients on federal awards due to the potential of higher risk


Cost Sharing

Develop a policy

Understand different categories Mandatory Voluntary committed cost sharing Voluntary uncommitted cost sharing

Communicate/Train


Cost Sharing

Accounting & reporting Separate accounts Same account through object codes

Proactive management through out life of award


Best Practices for Cost Sharing

University of Michigan Proposal Approval Form (PAF) requires

departmental commitment at proposal stage Companion account established at award set

up to track cost sharing expenses Policy that ALL quantified cost sharing in

proposal is “mandatory”



Broad Institute Cost sharing must be approved at proposal

stage When awarded, it is

accounted for separately in its “own” account treated uniformly, consistent



Caltech Must be clearly identified at proposal stage Cost share account set-up at award initiation Reports available to central and departmental

administrators to help monitor if cost sharing effort commitments are on target


NIH Salary Cap

Limits the amount of direct salary Pay scale changes January 1 each year Monthly rate – Keep in mind for Academic

Year and Summer Salary Have a process in place to track

http://grants.nih.gov/grant/policy/salcap_summary.htm

http://grants.nih.gov/grant/policy/salcap_summary.htm


Program Income

Definition

Gross income earned by a grantee, a consortium participant, or a contractor under a grant that was directly generated by the grant-supported activity or earned as a result of the award.


Program Income

Examples of Program Income

Income from fees for services performed such as laboratory tests

Money generated from the use, sale or rental of equipment purchased from project funds

Proceeds from the sale of supplies or equipment purchased with project funds

Proceeds from the sale of software, tapes or publications

Income from the sale of research materials such as animal models

Fees from participants at conferences or symposia

Royalties from patents and copyrights

What is not Program Income

Interest earned on advances of federal funds

Receipt of principal on loans, credits discounts or interest earned on them

Taxes, special assessments, levies, and fines raised by government recipients

Patient care credits


Program Income

Proposals NIH requires that program income be

estimated at the time of proposal submission

In other instances, it is a good idea to determine as soon as possible so it can be isolated.


Program Income

Accounting for Program Income Isolate so it can be identified Separate account is ideal Treatment may vary by agency Will be specified in grant/contract May not be addressed in non-federal projects Most Federal agencies require reporting with

financial report


Effort Reporting

Definition Time and effort reporting is a Federal

requirement (OMB A-21. Section J(10)) to ensure that individuals confirm “after-the-fact” any effort they have expended on federally funded activities.

http://www.whitehouse.gov/omb/circulars/a021/a021.html


Effort Reporting

Effort Reporting

Salary Cost Transfers Faculty Work

Week

Appointment / Annual Salary

Letters Unclear

9 Month Faculty

What’s in & What’s Out of Effort?

Research Faculty

Proposal Preparation

Costs

CHALLENGES


Effort Reporting

Research Instruction Administration Service Proposal Preparation (paid from

University Sources) Lectures About Specific Aspects of

Your Sponsored Project Reports & Articles Related to the

Sponsored Project Conferring with Students Working

on the Project Attending Meetings Required to

Conduct Work on the Project

Any Outside Activity for Which Compensation is Paid (or for Which You Would Normally Expect Pay)

Outside Consulting Volunteer Community or Public

Service Interdepartmental Consulting Sponsor Review Panels or Other

Advisory Activities for Federal Sponsors

What’s In What’s Out


Effort Reporting

Red Flags 100% Effort on Sponsored Projects 0% Effort for PI’s Summer Salary Supplemental Payments


Effort Reporting

Issues to Consider: Make sure reports are completed by individual or

someone with suitable means of verification Be careful to certify actual effort rather than budgeted

amount or payroll charges Manage system to ensure reports are completed in a

timely manner to avoid late certifications Consider NIH salary cap as applicable Make sure cost shared effort is included in 100% and

certified


Best Practices for Effort Reporting

University of Michigan All are required to sign their own certification

statement Process is audited and outlying departments

are contacted to review process Process handled through Sponsored

Programs Office Web based application



Broad Institute Plan Confirmation System Effort captured via payroll system Monthly certification



Caltech Effort reports are certified by someone with

suitable means of verification (PI or supervisor) Paper reports, developed internally Distributed and collected twice a year Report data comes from Payroll system Reports include information on effort commitments

made in award


Close Out of Awards

Potential Solutions to Meeting Deadlines Send notices of expiring awards well in advance

of the expiration date Create reports to track closing awards Require written request from the department if

deadlines cannot be met Develop a close out policy “Freeze” award once final financial report is sent


Close Out of Awards

Financial Aspects of Close Outs Departmental Signoff on Final Expenditures Verification of Cost Sharing Verification of F&A Financial Status Report Final Invoice or Draw Fixed Price Agreements Residual Balances Close Account in General Ledger


Close Out of Awards

Non-Financial Aspects of Close Outs Technical Reports Property Reports PI Relocation


Best Practices for Close Out

University of Michigan 90 Day notice e-mail Appointment follow-up letter Tracking system - metrics Meet with departments


Broad Institute Closing Notice sent 60 days prior to end of grant

requesting close out info or extension request. Monitor changes – follow-up – track invoices Monthly meetings for review and updates



Caltech 90 day notification Tracking system Monitored by central administration



Audits

Central Point of Contact for Audit Co-ordination Consider policy for audit protocol Make campus aware of who to contact if

contacted directly by an auditor What kind of audit is it and who are the auditors?

Audit vs. investigation Federal vs. Internal vs. Financial auditors


Types of Audits

Pre-award ($1mil or greater)

Financial Statement

OMB A-133

Program

Disclosure Statement

F&A Cost Proposal

Procurement System Review

Property System Review


What Auditors Test For:

Allowability of Costs Cost Transfers Cost sharing Effort reporting Program Income Timeliness of Reports Sub-recipient Monitoring F&A rate and calculation Everything else…


Keys to A Successful Audit

Central point of contact Organized files Documentation for expenses Appropriate approvals Audit trails Knowledge of policies and regulations Brief staff on audit process and

assign a point of contact


Audit Management

Don’t assume the auditor has complete knowledge of regulations – they don’t!

Understand all auditor’s questions If you are not sure - check it out Don’t ramble or provide additional

information – short, concise answers Keep track of questions and responses Always accompany the auditors when they

speak to the PI


Training

The key to ensuring proper accounting for sponsored projects is training Department administrators MUST be trained in

the basics of accounting, OMB circulars, and institutional policies and procedures.

Training programs do not have to be elaborate but must be offered repeatedly to ensure that staff is aware of changing regulations

Training must also be done for pre/post-award offices


Best Practices for Training

University of Michigan Research Administrators’ Instructional

Network (RAIN) Research Administrators’ Network (RAN) Customer Service one-on-one training Additional Central Office Training Programs



Broad Institute Administrator Orientation and Training

New system training

External resources such as NCURA; Fundamentals, Neighborhoods, Listserves



Caltech Quarterly Research Administrators Forum Just-in-time training for new policies, procedures and

systems On-going refresher courses Relaying audit findings and corrective action plans to

campus


Web Sites

University of Michigan http://www.umich.research.edu/ http://www.umich.edu/~finops/

Broad Institute of MIT and Harvard http://www.broadinstitute.org/

Caltech http://www.caltech.edu

http://www.umich.research.edu/

http://www.umich.edu/~finops/

http://www.broadinstitute.org/


How to Contact Us

Rob BarbretUniversity of MichiganAssociate Director, Financial Operations734 [email protected]

Vivian HolmesBroad Institute of MIT and HarvardAssistant Director, Sponsored Research617/714-7132 [email protected]

Tracey FraserCaltechSenior Director, Financial [email protected]

mailto:[email protected]

mailto:[email protected]

ncura 51st annual meeting, october 20091 post award basics rob barbret, university of michigan...

Documents

annual meeting

bilateral slide

agency agency

performance of activity

cash management slide

new accounts grant project

control agency

investigator agency