Let’s Talk Cost Sharing

Deborah Moon, AVP of Finance and Controller Derek Sommer Manager, Post Award Accounting Let’s Talk Cost Sharing

What is Cost Sharing?/Committed vs. Uncommitted Why Cost Share?/Decision to Cost Share What is Allowable? Cost Sharing & Allowability A-21/Administrative Requirements A-110 Do’s and Don'ts What is the cost to the institution? How is the F&A Rate Impacted? Are Some Costs Better Than Others? How to Account for Cost Share? Examples of Best Practices Agenda

Defined as “all contributions, including cash and third party in-kind which meet seven criteria: Verifiable not included as contributions for any other federally-assisted project or program necessary and reasonable for accomplishment of objectives allowable not paid by the Federal Government under another award (except where authorized by statute) provided for in the aproved budget when required by the /federal awarding agency conform to other Circular provisions.” What is Cost Sharing?

Cash – recipient’s cash outlay In-Kind – non-cash contributions provided by non-federal third parties i.e. Volunteer services – at rates, inclusive of respective benefits, exclusive of F&A, paid for similar work Donated supplies & equipment – current FMV What is Cost Sharing?

Mandatory vs. Voluntary Mandatory cost sharing is required by the sponsor as a condition of the award, either due to laws passed by Congress or agency program guidelines - cost sharing specifically pledged in the proposal’s budget or award Voluntary cost sharing may be offered by a University to make a proposal more competitive - university X or faculty effort that is over and above that which is committed and budgeted for in a sponsored agreement What is Cost Sharing?

Committed Cost Sharing: Whether mandatory or voluntary, commitments are a condition of the award. Must be properly documented for cost accounting purposes (i.e., F&A rate calculation) Voluntary Uncommitted Cost Sharing: Treated differently from committed cost sharing Not included in organized research base for F&A rate purposes Not reflected in any allocation of F&A Costs Voluntary Uncommitted effort (Faculty-donated) is excluded from the effort reporting requirements of A-21 Section J.8. Committed vs. Uncommitted

Sponsors issue RFPs requiring cost sharing Scope of work requires resources greater than commitment by sponsors Competition for awards – PI’s feel that cost sharing will enhance their ability to win awards NSF Clarification on cost sharing Why Cost Share?

Cost/Benefit Analysis A-110 and A-21 Institutional Policies / Approvals Ability to account and report “Value” to institution Don’t budget/propose if you’re not willing to cover the cost Institutional resources Decision to Cost Share

NSF cost sharing beyond the statutory requirement will be clearly stated in program solicitations NSF statutory 1% cost sharing requirement for unsolicited research projects – this is an institutional aggregate commitment In budget negotiations any reduction of 10% or more should have corresponding reduction in scope Voluntary cost sharing should not be included on line M of the proposal budget – do not include cost sharing beyond the amounts specified in the solicitations Fastlane revised to mask Line M from reviewers Cost Sharing on Line M > $500K must be certified by Authorized Organizational Representative w/in 90 days of end of each budget period and within 90 days following expiration of award NSF Cost Sharing: January 2003

All sponsored projects should have some degree of faculty effort - otherwise institutions run the risk of extrapolations for F&A bases Beware of expressions of support in budget narratives and workscope that are not included in the budget figures Remember that all direct cost sharing has a respective F&A component Cautions

Equipment YES, if newly purchased, specifically for project previously owned equipment is already covered through IDC and may not be offered as matching Space and Facilities NO, space and facilities typically serve joint objectives and their cost is factored into the F&A rate YES, leased space, although the lease costs must be excluded from the facility component when calculating the F&A rate What is Allowable?

Level of Effort YES, if the service is integral to the approved project or program. OMB Circular A-110: “Rates for volunteer services shall be consistent with those paid for similar work in the recipient's organization….paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation.” What is Allowable?

Unrecovered Indirect Costs YES, the difference between the amount awarded and the amount which could have been awarded under the University's approved negotiated indirect cost rate. OMB Circular A-110: “Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency.” Other Indirect Costs YES, those indirect costs associated with the direct costs being cost-shared are allowable What is Allowable?

Cost Overruns YES, overruns may meet the cost sharing requirements on the project for which they were incurred. However, it is unallowable for the cost overruns on one project to be used as cost sharing on another. OMB Circular A-21: “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 or any under-recoveries through negotiation of flat amounts for F&A costs. What is Allowable?

Factors affecting allowability of costs: Reasonable – necessary, prudent, consistent with institutional policies and practices Allocable – incurred solely to advance the work under sponsored agreement, benefits is measurable, necessary Consistent treatment through application of GAAP Conform to limitations/exclusions set forth in A-21 or in sponsored agreement as to types or amounts of cost items Cost Sharing & AllowabilityOMB Circular A-21

OMB Circular A-110, Section 23 All contributions, including cash and third party in-kind, shall be accepted as part of the recipients cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the recipient’s records (2) Are not included as contributions for any other federally-assisted project or program (3) Are necessary and reasonable for proper and efficient accomplishment of project or program objectives (4) Are allowable under the applicable cost principles (5) Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching (6) Are provided for in the approved budget when required by the Federal awarding agency (7) Conform to other provisions of the circular Administrative Requirements:OMB Circular A-110

Do… Track/document all cost-shared items for an award Include only those items necessary and reasonable for the project Include mandatory items noted in the proposed budget when required by the Federal sponsoring agency Don’t… Include items already noted as a contribution on another award Include items unallowable per the applicable cost principles Include items paid by the Federal government under another award, unless authorized Do’s and Don'tsFollow the regulations outlined in OMB Circular A-110

Committed salaries/wages, ODC Loss of fringe benefit and indirect cost recovery Increase in Research Base for F&A calculations Time value of accounting/reporting What is the Cost to the Institution?

Tracking unrecovered indirect costs helps establish the true cost of F&A expenses to the University. An accurate depiction of the indirect cost calculation will help with future rate negotiations. How is the F&A Rate Impacted?

Direct Costs Costs incurred in Performing Research Activity: Salaries and fringes of laboratory personnel Research lab supplies and materials Calculation of the Indirect Cost Rate • Indirect Costs • Overhead costs incurred in • Support of Research Activities: • Depreciation of Bldg.. & Equip. • Operation & Maintenance of labs e.g.. utilities • Cost of Research Space • Administrative Services $59,000 $100,000 Indirect Costs Direct Costs Indirect Cost Rate $59,000/$100,000 = 59.0%

Indirect Costs Overhead costs incurred in Support of Research Activities: Depreciation of Bldg. & Equip. Operation & Maintenance of labs e.g. utilities Cost of Research Space Administrative Services Effect of Cost Sharing on the Indirect Cost Rate School Faculty Volunteers $10K of Time Project • Direct Costs • Costs incurred in Performing • Research Activity: • Salaries and fringes of laboratory personnel • Research lab supplies and materials $100,000 + $10,000 IndirectCosts DirectCosts $59,000 Indirect Cost Rate $59,000/$110,000 = 53.64%

Cost Sharing from non-federal sources which would already be included in the research base- and hopefully generating F&A revenue Graduate students support if graduate students are partially excluded from MTDC- smaller affect on base Equipment – excluded from MTDC for research base; but removes that equipment from depreciable pool Are Some Costs Better Than Others?

Companion Centers Contra GL Accounts Shadow Systems – departmental funds Gamble and Ignore Accounting for Cost Sharing

Benefits Costs are separately accountable and reportable by natural account classifications Ease of institutional tracking and reporting – PAR’s (effort reporting) Cost Maintenance of additional cost centers in general ledger system, payroll system, paperwork Companion Centers

Benefits Costs are identifiable and reportable from accounting system records Costs Need to reconcile from GL detail to determine natural accounts Confusing for research personnel to decipher Contra GL Accounts

Benefits Costs are tracked and identifiable Costs Effort of maintaining and reconciling shadow system Potential to overcommit Accountability Shadow Systems

Benefits No additional work now Costs A-133 Audit Findings Project Audits Extrapolation techniques for F&A Base additions Effort Reporting Gamble and Ignore

QUESTIONS

BREAK

Cost Sharing Account Set-up Identifying Cost Sharing Factors Affecting Cost Sharing Necessary Information from Department Accounting for Cost Sharing Coverage of Cost Sharing Costs in GL CMU Cost Sharing

Identifying Cost Sharing When reviewing the executed award documentation all cost sharing specifically pledged in the proposal’s budget or award must be accounted for within an Oracle cost sharing award or matching non-federal award Cost sharing awards in Oracle begin with a 2xxxxxx Each department on campus should have at least three (3) different cost sharing award numbers (one for each sponsored award purpose) mapped to their organizations CMU Cost Sharing Set-Up

Factors Affecting Cost Sharing Type of Cost Sharing (matching, departmental, etc.) Cost Sharing award purpose Sponsored Research Other Sponsored Projects Sponsored Instruction Example: A sponsored award that’s main purpose is Sponsored Research should have a cost sharing award that matches this purpose CMU Cost Sharing Set-Up

Factors Affecting Cost Sharing (con’t) Cost Sharing Requirement (% of project expenses or actual $ figure) Cost Sharing information will be input into the sponsored award DFF The award will be marked as having cost sharing Cost Sharing or Non-Federal matching number should be provided to your SPA Representative (if a cost sharing number is needed for your organization, please contact your SPA Representative) The $ value of the cost sharing will be input into this field CMU Cost Sharing Set-Up

Necessary Information from Department Cost Sharing Award Number Amount of Funding Project and Task to Fund Keep in mind the task controls the organization expenses post against in grants AND GL. Cost Sharing Budget CMU Cost Sharing Set-Up

Moving Funds within GL All Cost Sharing expenses must post in the Grants Module All expenses posting in the Grants Module flow-through to the General Ledger Funding transfer should be completed via journal entry in the General Ledger once the CS award has been linked to a project/task in the GM Example: A charge of $5,000 in cost sharing expenses post in GM. At this point, your Cost Sharing GL Funding Source (063000) will be in deficit by $5,000. A journal entry must be completed to balance your GL string. The entry should be posted against: 72100.063000.0.0.Dept Org.01 Funding Transfers should be completed as soon as expenses hit the cost sharing accounts CMU Cost Sharing in GL

Moving Funds within GL Sample Journal Entry 72100.000001.001.000.Dept Org.01DEBIT 72100.063000.000.000.Dept Org.01 CREDIT CMU Cost Sharing in GL INTERNAL TRANSFER GENERAL UNRESTRICTED ORGANIZATION WHERE EXPENSES POST INTERNAL TRANSFER COST SHARING FS ORGANIZATION WHERE EXPENSES POST

Moving Funds within GL Amount of Funding to Move TUBS Organizations recognized as TUBS complete funding transfers to account for Direct AND Indirect Cost Sharing expenses Non-TUBS Organizations recognized as Non-TUBS complete funding transfers to account for Direct Cost Sharing expenses ONLY CMU Cost Sharing in GL

Accounting for Cost Sharing Direct Charging – to a Cost Sharing PTA Pros: Does not require a manual entry by SPA More control over what expenses are cost shared Ability to keep your GL CS account in balance Cons: More difficult to cost share accurately Splitting charges between sponsored and CS award Manual Cost Sharing Entries – batch posted by SPA Pros: Ability to charge on only one account (sponsored) More accurate cost sharing calculation Cons: Time constraints on SPA in completing the entry CMU Cost Sharing

Accounting for Cost Sharing % of Project Expenses Regular cost sharing entries may be needed to properly account for cost sharing when based on a % of project costs Example: CS Requirement is 20% of Total Project Costs Sponsor Funding Obligation = $85,000 Total Project Expenses = $100,000 $100,000 X 20% = $20,000 Sponsor Pays $80,000 CMU Pays $20,000 CMU Cost Sharing Set-Up

Accounting for Cost Sharing (con’t) Mandatory Cost Sharing Amount Cost Sharing may be based on an actual $ figure that must be paid by CMU to meet the cost sharing requirement – example would be commitment to purchase a piece of equipment costing $10K Example: CS Requirement = $10,000 Sponsor Funding Obligation = $50,000 Total Project Expenses = $45,000 $45,000 – $10,000 = $35,000 Sponsor Pays $35,000 CMU Pays $10,000 CMU Cost Sharing Set-Up

Accounting for Cost Sharing (con’t) Matching Cost Sharing Non-Federal awards used to meet cost sharing requirements on a Federal award must be set-up within their own sponsored award, with the funding source listed as the Non-Federal sponsor, to properly account for the expenses Note: Once a Non-Federal award is matched against any Federal award, that Non-Federal award can not be used to match any further Federal awards CMU Cost Sharing Set-Up

Cost Sharing Overspent Awards Sponsor awards that become overspent must have the overspent amounts moved to cost sharing accounts when the awards are closed Accomplished via Pre-Approved Batches entered by SPA Able to be covered in two ways Faculty Discretionary Accounts accomplished via a Transfer to Close Entry Funded by a GL Funding Transfer CMU Cost Sharing Set-Up

QUESTIONS

Rules: 5 prize levels “Phone an audience member” “Ask the audience” If contestant misses question – prize goes to audience member who answers – finish round with the audience answering Volunteers……… Cost Sharing Millionaire

Let’s Talk Cost Sharing