Fiscal Compliance Requirements for Sponsored Programs University of Missouri – St. Louis

1. Fiscal Compliance Requirements for Sponsored Programs University of Missouri – St. Louis February 11, 2009

2. Learning Objectives • To understand: • Compliance requirements related to allowability of costs • Responsibility of Fiscal Officer and PI • Common issues and impact of non-compliance

3. Overview • Definitions • Compliance Requirements • Responsibility • Concluding Points • Frequently Asked Questions (FAQs)

4. 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.

5. 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.

6. 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

7. 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.

8. Compliance Requirements Whatcompliance 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

9. 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.

10. 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

11. 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

12. 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.

13. A-21 Compliance • Total Costs include: • Allowable direct costs plus • Allocable portion of F&A • Allowablecosts must be: • Reasonable • Allocable • Consistent treatment • Conform to limitations or exclusions by sponsor

14. 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

15. A-21 Requirements • Allocable: • Incurred solely to advance the work under the agreement • Benefits the sponsored program in proportions that can be reasonably approximated

16. 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

17. 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

18. 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!

19. 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!

20. 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

21. 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 ultimateresponsibility for an award

22. 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

23. 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

24. 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

25. 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

26. 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

27. Cost Transfers - PCEs • Points from recent Internal Audit • Compliance requirements • Late PCEs • Common issues

28. 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.

29. 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

30. 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

31. 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 ORA

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

33. 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?

34. 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.

35. 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.

36. 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.

37. 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.

38. 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.

39. 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.

40. 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

41. 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

42. 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.

43. 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]

44. 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.

45. 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.

46. 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

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