Presentation Transcript

1. National Sponsored Programs Administrators Alliance Of Historically Black Colleges and Universities, Inc.

   General Plenary Session III - The Litmus Test for Cost Allowability June 5, 2013 Moses Yomi Senior Director, Grants and Contracts, American Council on Education
2. Laws, Rules, and Regulations
3. “Litmus Test for Cost Allowability” - What does it mean? Reasonable Allocable Allowable
4. Cost Principles - 2 CFR 220 (OMB Circular A-21) The cost principles are used to determine: The criteria for determining allowability How cost are allocated (allocability) The reasonableness and necessity of costs Allowability of selected items of cost Allowability of complex costs Distinction between Direct costs and Facilities & Administrative (F&A) costs
5. Can I charge this expense?
6. Litmus Test for Cost Allowability Allowability: Reasonable Allocable to sponsored program Treated consistently within the Institution Determine according to GAAP Conform to any limitation or exclusions set forth in CFR 220 or awarding document as to types or amount of costs
7. Examples Of Allowable Costs Example 1: Airfare to attend a conference included in the budget of a sponsored agreement and properly approved = ALLOWABLE Example 2: Airfare for 3 additional participants without prior approval = NOT ALLOWABLE GRAY AREAS: Advertising, marketing, etc. If general provisions from the cost principles and the provisions of a specific sponsored agreement differ, the agreement governs. Remember: All costs incurred must be allocable, reasonable and necessary.
8. Other factors affecting allowability Adequate documentation Consistency with institutional policies for federally and nonfederally funded programs or activities
9. Reasonableness and Necessity Action reflects what a prudent person would do under similar situation or circumstances prevailing at the time the decision to incur a cost was made. Is the cost necessary for the performance of sponsored agreement?
10. Factors affecting reasonableness Is the cost generally recognized as ordinary and necessary for the institution’s operation or the performance of the sponsored agreement? Is there any restraints or requirements imposed by such factors as Arm’s-length bargaining Federal and state laws and regulations
11. Factors affecting Reasonableness (cont’d) Sponsored agreement’s terms and conditions Whether or not the individuals acted in a prudent manner in the circumstances considering their responsibilities to the institution members, employees and client public at large, and the extent that the action taken was consistent with established institutional policies
12. Allocability: 1) Incurred specifically for a particular award 2) Benefits both federal award and other nonfederal award related work 3) Necessary to support the overall organization’s operations or mission, even though it may not be related to any particular cost objective Example: Electricity bill
13. Direct vs. F & A F & A Costs CANNOT be identified with a particular sponsored project because incurred for joint objectives Distributing these costs requires careful consideration; factors are explained in Appendix A of 2 CFR 220 Direct Costs Can be identified with a particular sponsored project Typical examples; compensation of employees for work under the project, materials used in doing the work Tip:Once a cost is classified as “Direct” or “ F & A”, all similar costs should be classified the same way.
14. Provision for Selected Items Section J of Appendix A to 2 CFR 220 The cost principles always apply, regardless of item being treated as direct cost or F&A cost. When there is a discrepancy between the provisions of a sponsored agreement and this section, the agreement prevails.
15. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost J.1. Advertising and Public Relations Advertising: The only allowable Advertising costs are for recruiting of personnel for the sponsored project; procurement of goods and services; and disposal of scrap or surplus materials acquired in the performance of the sponsored agreement.
16. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. Public relations: The only allowable costs are: Costs specifically required in by the sponsored agreement Costs for communicating with the public and press pertaining to specific activities or results from performance of sponsored agreement Costs of conducting general liaison with news media and government public relations officers to the extent that such activities are limited to communication and liaison necessary to keep public informed on matters of public concern
17. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J.9. Communication costs Costs incurred for: telephone (local and long distance calls) telegrams postage messenger, and electronic or computer transmittal services
18. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J.10 Compensation for employees Salaries, wages, and fringe benefits Are allowable to the extent that the total compensation to individual conforms to the established institutional policies; are consistently applied; and the charges are for worked performed on the sponsored program or agreement based on approved payroll distribution.
19. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J. 10 (c). Payroll Distribution Distribution of direct or F&A salaries should be based on payrolls documented in accordance with generally accepted practice of the institution. Acceptable Methods of Payroll Distributions: Plan-Confirmation After-the-fact Activity Records Multiple Confirmation Records
20. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J.10 (d). Salary rates for faculty members Salary rates must be based on regular compensation. In no event may salary charges to sponsored agreements, regardless of basis of computation, exceed the proportionate share of the base salary for that period. Intra-university consulting payment is unallowed, unless the work performed is in addition to his or her regular work load.
21. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J.10 (d). Salary rates for faculty members Consulting charges for any work representing extra compensation above the base salary are allowable, as long as: such arrangement was provided for in the sponsored agreement, AND approved in writing from the awarding agency. Work performed during the summer months will be paid at a rate not in excess of the base salary divided by the period to which the base salary relates (consult organization policies for summer salary rates)
22. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J. 18. Equipment Equipment is defined as an article of nonexpendable, intangible personal property having a useful life of more than one year and acquisition cost of $5,000 or the capitalization level established by the institution.
23. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J. 29. Losses on other sponsored agreements or contracts. Cost of this nature are unallowable. Cannot transfer cost overrun from one award to another. Such costs cannot be included in cost sharing of the institution and cost recoveries through negotiated F&A.
24. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J. 33. Memberships, and Subscriptions: allowable with certain exceptions. J.38.Proposal costs: allowable as F&A costs only. J. 42. Recruiting Costs: allowable with certain exceptions.
25. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J.45. Scholarships and student aid costs: allowable, but must be provided for in the sponsored agreement. J. 51. Training costs (for employee development): allowable.
26. 2 CFR 220, Appendix A, Section JProvisions for Selected Items of Cost, cont. J. 53.Travel: Reasonable travel costs for travel, including costs for lodging, other subsistence, and incidental expenses are allowable. Airfare costs in excess of the customary standard commercial airfare (economy) or the lowest discounted fare are unallowable except for medical reasons.
27. Common Audit Findings Faulty time and effort reporting Spotty purchasing documentation Inadequate cost or price analysis Substandard records for grant-acquired property Mismanagement of federal cash advance Non-observation of regulations, internal policies, and grant requirements. Unsubstantiated Time and Effort Salary Supplementation
28. Common Audit Findings Cont’d Lack of receipts and/or approval for certain expenses Unsubstantiated Data (M&E) Failure to obtain prior approval when required Incurring questionable costs Failure to show cost allocability Failure to check the Excluded Parties List, Specially Designated Nationals (SDN)List, etc.
29. Common Audit Findings:Cost Share Not having timesheets or time & effort reports for employees paid with match dollars. Not properly valuing the match. Counting match contributions to more than one award. Using other federal funds as source for match. Matching contributions did not happen during the award period. Not having adequate source documentation for claimed cost share contributions.
30. References 2 CFR 215 (OMB Circular A-110): Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and other Non-Profit Organizations 2 CFR 220 (OMB Circular A-21): Cost Principles for Educational Institutions 2 OMB Circular A-133: Audit of States, Local Governments and Non-Profit Organizations
31. Contact Information Moses Yomi 202-939-9333 myomi@acenet.edu