Oregon Health & Science University Cost Accounting Standards

1. Oregon Health & Science UniversityCost Accounting Standards June 26 & 27, 2001 Presented by Shandy S. Husmann, Arthur Andersen LLP Hosted by Sponsored Projects Administration, OHSU

2. OHSU “Where Healing, Teaching and Discovery Come Together”

3. OHSU • As part of OHSU’s research mission, you accept government grants and contracts. • In accepting these grants and contracts, OHSU agrees to abide by the regulations governing the use of these funds.

4. Regulations Include: • OMB Circular A-110 - Grant Administration Rules • OMB Circular A-21 - Cost Principles • OMB Circular A-133 - Audit Standards • Cost Accounting Standards - CAS 501, 502, 505 and 506 • Other regulations as applicable

5. OMB Circular A-110Grant Administration Rules • Defines reporting requirements • Defines acceptable forms of cost sharing or matching • Defines methods of handling program income • Defines when prior approvals are required for revisions of budget or program plans • Defines accounting standards and procedures for equipment acquired with Federal funds • Defines procurement standards and procedures • Other

6. OMB Circular A-21Cost Principles • Defines rules for Direct and Facilities and Administration Costs • Provides principles for determining the allowability, allocability and reasonableness of costs • Effort Reporting • Other

7. OMB Circular A-133Audit Standards Provides standards for consistency and uniformity in the auditing of states, local governments and non-profit organizations expending federal funds.

8. Cost Accounting StandardsCAS 501, 502, 505, and 506 Developed to regulate the consistency in: • estimating, accumulating and reporting costs (CAS 501) • allocating costs incurred for the same purpose in like circumstances (CAS 502) • accounting for unallowable costs (CAS 505) • cost accounting periods (CAS 506)

9. What is the purpose of the Cost Accounting Standards? • To promote consistency and to keep the government from being... • “DOUBLE DIPPED” • Charge Direct & Charge Indirect $ $

10. What does this mean? Consistency • OHSU should consistently follow its disclosed accounting practices. • In other words, we must consistently follow the rules.

11. How do we achieve consistency? • By being knowledgeable about OHSU’s accounting practices and the regulations defining direct costs. • Ask questions if not sure.

12. What are direct costs? Criteria used to define allowable direct costs: • Reasonable • Allocable • Treated Consistently • Allowable • Sponsor Funds Available

13. Reasonable “A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved therefore, 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, Section C.3.)

14. Allocable Cost incurred for benefit of only one project or can be easily assigned to multiple projects which benefit.

15. Consistent • Must be treated consistent with similar costs incurred in like circumstances. • (Examples to follow)

16. Allowable Costs allowable according to Generally Accepted Accounting Principles (GAAP), award agreement and other applicable regulations.

17. Sponsor Funds Available Appropriate direct cost items should be charged to sponsor funds. If sponsor funds are not available, the cost should be identified as cost shared.

18. Consistency: • Now we will discuss consistency in detail and provide some specific examples of OHSU’s accounting practices.

19. Consistency Defined: “Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution.”

20. Consistency: Identification with the sponsored workrather than the nature of the goods and services is the determining factor in distinguishing direct from indirect costs of sponsored agreements. In other words, it doesn’t matter what it is. What counts is how it is used.

21. Consistency: Items normally charged as indirect costs of sponsored projects, if there is NO direct relationship to a specific sponsored project’s scope of work. • Salaries of persons engaged in routine departmental or administrative work. • Supplies for routine departmental or administrative activities. • Other costs such as travel, repairs, fees, local and long distance telephone expenses, copying and postage that are routine departmental or administrative use. • General office items with multi-functional use such as computers, staplers, filing cabinets, chairs, etc.

22. OHSU Now, let’s discuss some specific examples.

23. Scenario - Supplies(Dialog between Principal Investigator and Central Administration) PI I’m a new professor and I need to meet with you about my supply needs. Can I charge them to my grants? CA Let me see what type of grant funds you have. What are the supplies and how will they be used? PI Well, all my grants require paper and general supplies. I even put it in my proposal on my research grant and the agency approved it. CA Yes, but if the costs are not consistent with OHSU’s direct cost guidelines, they cannot be charged to the grant. PI I know about the guidelines. What about the paper for my survey responses from the 500 participants? Can that be charged direct? CA Yes, because it is necessary for the conduct of the research. Let’s make sure we clearly document the purchase.

24. CAS - Specific ExamplesSupplies (e.g. paper, manila folders, pencils, staplers, etc.) • Circumstance 1Circumstance 2 - Paper - Paper - Research Grant - develop - Research Grant - must print and print mass number of final technical report and other surveys general correspondence - Unique to scope of work - Routine administrative task - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

25. What does this really mean? See Diagram

26. Scenario - Software PI Can you do a PO for me? I like to type my own progress reports and I want the new version of Word. Can I charge it to my federal grant? CA It doesn’t sound specific to your grant. It is not an allowable direct charge to your federal grant because it is not allocable. It is a general use item and is considered an administrative cost by the sponsor. PI Well, I also have to buy AutoCAD. I need it to do some of my analysis. It costs a fortune! CA That can be charged to the federal grant because it is needed to do the work. We need to be sure and clarify this clearly on the PO.

27. CAS - Specific ExamplesSoftware • Circumstance 1Circumstance 2 - Software (AutoCAD) - Software (Word) - Research Grant - develop - Research Grant - must type and run analysis for final technical report research project - Unique to scope of work - General use - should be an administrative cost - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

28. Scenario - Postage PI I need to buy some stamps. Can I charge them to my federal grant? CA How do you plan to use them? PI Several things - I get requests to mail out reprints, correspondence about my work, and I put stamps in the lab for the students to use. CA I’m sorry, but none of those are allowable charges to your federal grant. They are general use charges which are administrative charges. PI What about the samples I have to mail to my collaborators on my federal project? CA You can charge those. They are a “specified” deliverable required by the grant. OHSU treats that as a direct cost.

29. CAS - Specific ExamplesPostage • Circumstance 1Circumstance 2 - Postage - Postage - Research Grant/Contract - - Research Grant/Contract - mail “specified” deliverables mail general departmental (surveys, samples, sponsored related materials required rpts. etc.) - Unique to scope of work - General use - should be an administrative cost - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

30. Memberships/Subscriptions The following criteria must be met for these types of charges to be charged directly to federal research projects: • Demonstrate a need for the journal to conduct research on the project; demonstrate a need to attend conference in relation to the research project. • Indicate that another copy of the journal is not available. • Demonstrate that the cost of the membership in the society supplying the journal or sponsoring the meeting is less that the cost of buying the journal on a stand-alone basis or attending the meeting as a non-member.

31. CAS - Specific ExamplesMemberships/Subscriptions Circumstance 1Circumstance 2 - Membership in Scientific - Membership in Scientific Society Society - Research Grant - need copy of - Research Grant - copy journal to be able to conduct of journal is available in research; copy not currently departmental library available - Unique to scope of work - Duplicative cost - not reasonable - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

32. Case Study - Memberships/Subscriptions(This slide is not in your packet) • The Deal: • $20 per hour ($10 + 100% F&A) • + Paint and supplies • The Invoice: • $1,000 labor (no hourly support) • $250 paint • $33 stamps • $49.95 oil change for truck • $400 new ladder • $125 subscription to “Painters Annual”

33. Scenario -Administrative Support PI I need to hire someone to take over the administrative duties on my four grants. I can’t juggle them all. CA It does sound like you need help, but you know, you can’t charge that to your grants. The government expects OHSU to provide administrative support. PI But my spouse has a person on her project. Why can’t I? I’ll write my program officer to get approval. CA You still couldn’t charge your federal grant. It isn’t compliant with OHSU’s direct charge guidelines. Your spouse’s project has an administrative core so it is allowable for that project. PI What about the data entry I have on my grants? I can’t do that, too. CA It would be reasonable to charge someone for that. Let’s document it carefully, and do a budget revision.

34. CAS - Specific ExamplesAdministrative Support Circumstance 1Circumstance 2 - Administrative Support - Administrative Support - Federal Research Grant/Contract - Federal Research Grant/Contract large volume of research data typing of correspondence, jounal to be entered articles, progress reports, etc. - Unique to scope of work - General - should be an administrative cost - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

35. Scenario - Copying PI I need to get a copy card (or code for the departmental copier) - Can I charge it to my federal grant? CA Okay, but remember that you will need to get another card/code to use for general administrative copying. PI You mean I have to separately identify the grant-specific copying from the general administrative copying? CA Yes. Only copying costs that are directly related to fulfilling the scope of work for your grant can be charged directly. Copying that is general in nature must be charged somewhere else.

36. CAS - Specific ExamplesCopying • Circumstance 1 Circumstance 2 - Copying Charges - Copying Charges - Research Grant - copy and - Research Grant - copy disseminate materials created journal articles of general as part of the scope of work interest in your field on the grant. - Unique to scope of work - General - should be an administrative cost - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

37. CAS - Specific ExamplesMachine Service Contract Circumstance 1Circumstance 2 - Machine Service Contract - Machine Service Contract - Research Grant - cover cost - Research Grant - cover partial of service contract for equipment cost of service contract when used on the grant not based on usage - Unique to scope of work - General - should be an administrative cost - OK per CAS & OHSU - NOT OK per CAS & OHSU Direct Charge Policy Direct Charge Policy

38. OK... Now where do you fit in the picture? What is everyone’s role?

39. Roles and Responsibilities -Principal Investigator The principal investigator is responsible for justifying the appropriateness of direct costs budgeted and charged on sponsored projects in accordance with overall government regulations, sponsoring agency guidelines, conditions made as a part of individual award and OHSU policies and guidelines.

40. Roles and Responsibilities - Dept Chair/Administrator The Department Chair’s/Administrator’s role is to be a resource for principal investigators, advising on proper direct cost charging and budgeting practices within government and other sponsoring agency regulations and OHSU guidelines. Department offices should maintain copies of government, other sponsoring agency and OHSU policies and guidelines pertaining to sponsored projects.

41. Roles and Responsibilities - Dean/Director The Dean’s/Director’s role is to ensure guidance is provided to principal investigators and departments on criteria used to determine allowable direct costs on sponsored projects. Each Dean/Director is responsible for having a mechanism in place to ensure principal investigators and administrators accountability for direct cost budgeting and charging to sponsored projects.

42. Roles and Responsibilities - Central Offices These offices are responsible for providing University-wide guidance on criteria used to determine allowable direct costs on sponsored projects.

43. Key Points: • The world continues to change. • CASB is here. • CAS shifts the burden to OHSU. • Nature of the item means nothing; how it was used dictates. • There will be increased scrutiny. • Think about it !!!!!!!!

44. Finally…What is OHSU doing?

45. OHSU Current Process = Reactive • Daily, expenses post to SPA funds. • Weekly, SPA draws cash from government for expenses. • Periodically, SPA reviews expenses. • SPA asks for justification for questionable expenses. • SPA asks for alternate fund for unallowable/indirect expenses. • Annually, A-133 audit is conducted.

46. A-133 Audit Findings • Audit findings: • Disallowed expenditures. • Cash draws of government funds for disallowed expenses. • Consequences: • Government refunds and/or fines • Corrective action plans • Loss of Expanded Authorities

47. OHSU Future Plans = Proactive • Updated and clearer policies and procedures • Education and training • Implementation of Oracle Grants Accounting • Transaction controls • Funds checking and Budgetary control • Future Sessions • F&A rate development • Oracle Grant Accounting • Effort Reporting

48. Sponsored Projects AdministrationContacts & Resouces • Lynette Arias, Director • Phone: 503-494-1193 • Fax: 503-494-1191 • E-mail: ariasl@ohsu.edu • Mail Code: AD220 • Address: 2525 SW First Ave, Suite 220 • ADP Building - East

49. Sponsored Projects AdministrationContacts & Resouces • SPA Home Page: • www.oshu.edu/ra/spa • NIH Grants Policy Statement web site: • http://grants.nih.gov/grants/policy/nihgps_2001/nihgps_2001.pdf • NIH Office of Extramural Research Home Page: • http://grants.nih.gov/grants/OER.htm • Office of Management and Budget Home Page: • http://www.whitehouse.gov/omb/ • National Council of University Research Administrators (NCURA) • http://www.ncura.edu/ • Research Funding Opportunities and Administration (TRAM) • http://TRAM.EAST.ASU.EDU/