Sponsored Research Financial Management: Current Pre and Post-Award Issues

1. Sponsored Research Financial Management: Current Pre and Post-Award Issues

2. Sponsored Research Financial Management: Current Pre and Post-Award Issues Moderator/Team Leader: • Jerry Fife Assistant Vice Chancellor for Research Finance Vanderbilt University Faculty: • Michelle Fortnam Associate Director, Internal Audit Department Stanford University • Bob Galloway Professor of Biomedical Engineering School of Engineering Vanderbilt University

3. Sponsored Research Financial Management: Current Pre and Post Award Issues Faculty (continued): • F. Edward Herran Director, Office of Sponsored Projects Memorial Sloan-Kettering Cancer Center • Cynthia White Director, Research Office Washington University at St. Louis

4. The Basics of A-21 Cost Allowability

5. A-21 Standards forCost Allowability • Reasonable • Allocable • Treated Consistently • These standards apply to both proposals and active projects. If an unallowable cost is included in a proposal, the cost does not become allowable if it is not removed during the review process

6. A-21 Standards forCost Allowability (cont’d.) • All sponsored project awards contain terms and conditions (T&C's), which supersede all other regulations; therefore it is essential that the Research Administrator read, understand and abide by them

7. Unallowable for Federal Reimbursement • Expenses that are unallowable for federal reimbursement may be reasonable and necessary business expenses permitted by the University. Departments may incur these expenses but they must code them as unallowable.

8. Allowability • For a cost to be allowable, it must conform to: • Terms and conditions of the agreement • A-21 (federal awards) • Institutional policy

9. Allowability (cont’d.) • Some costs may be an appropriate University expense but are not allowable to charge to a sponsored project. For example, fund raising is an appropriate expense for a University, but cannot be charged, either directly or indirectly, to the federal government, according to OMB A-21.

10. Unallowableby University • University expenses that are: • NOT reasonable • NOT necessary • NOT allocable • NOT permitted by University policy • These expenses will not be paid for by University. • If incurred, they must be paid for by the individual. • Unallowable • for reimbursement by Federal Government • University expenses that are: • Reasonable • Necessary • Allocable • Permitted by University policy • but are unallowable for federal reimbursement. • These expenses: • can be paid for by • must be coded as unallowable • Unallowableby Sponsor • Expenses that do not conform to the sponsors terms and conditions and OMB Circular A-21 (if applicable), or are: • NOT reasonable • NOT necessary • NOT allocable • These expenses will not be paid for by the sponsor. • University may pay for the expenses, code as appropriate. Unallowable Costs can be:

11. Allowability Section J of OMB A-21 lists examples of allowable and unallowable costs Some unallowable expenses include: • Alcoholic beverages • Alumni activities • Commencement • Entertainment (incl. Non-business meals • Fines and Penalties • Goods for personal use • Social memberships • Fund raising

12. Reasonable A cost must be reasonable in order to charge it to a sponsored project. Reasonableness is defined as that which reflects the action of a prudent person. The three questions a person must ask to determine reasonableness of cost are: • Is it necessary for performance of the award? • Does it advance the scope of work? • Is it consistent with established institutional policies and practices?

13. Allocable • Allocation is the process of assigning a cost, or a group of costs, to one or more cost objectives. • Costs may be allocated only if they advance the work of the project. • The cost must be assigned to the project in proportion to the benefit that the project will receive. • Fund availability should not be used to determine allocability.

14. Consistent • Requires Costs Incurred for the Same Purpose, In Like Circumstances, to be Handled Consistently as Direct or Indirect Costs

15. Consistent (cont’d.) • Particularly applicable to costs identified in section F.6.b of A-21 (clerical and administrative salaries, office supplies, postage, memberships and local phone service.

16. A-21 Section F.6.b • Identifies costs that are normally treated as indirect • Clerical and administrative salaries • Office supplies • Postage • Local phone service • Memberships

17. Possible Exceptions to Section F.6.b • Costs that are normally treated as indirect can be treated as direct under exceptional circumstances. • Must meet all three of the criteria: • Major Project (Project with needs beyond that normally provided by department) • Specifically Identified • Explicitly Budgeted

18. Specific Identification? Criteria for charging an administrative expense directly to a major project • Cost must be specifically tied to a particular sponsored project

19. Specific Identification? Criteria for charging an administrative expense directly to a major project • Must be able to show how the project benefited from the expense using: • Documentation • Or a system

20. Administrative Charging (Direct) When all three criteria are met: • The expense can be charged directly to the project • This does not necessarily provide approval to charge any other administrative costs to the project. • In addition, the cost must meet the allowability criteria

21. Major Project • Requires an extensive amount of clerical or administrative support • Requires effort that is significantly more than is normally provided by the department/unit

22. Examples of Possible Major Projects • Large Complex Projects - Center grants, program project grants • Projects requiring: extensive data accumulation, analysis, reporting, surveying or tabulation • Projects requiring extensive amounts of travel and meeting arrangements

23. Examples of Major Projects • Projects where the principal focus is preparation and production of manuals, large reports, books, monographs • Projects that are geographically inaccessible to normal departmental administrative services • Projects requiring specific database management, manuscript preparation, human or animal Protocols or multiple project-related investigator coordination

24. Salaries and Wages

25. Institutional Base Salary (IBS) • Must conform to university policies, consistently applied (A-21) • Must be paid from the applicant organization and may not be increased as a result of obtaining grant funds (A-21 and NIH Grants Policy Statement)

26. Institutional Base Salary (IBS) Current Framework • Paid by the applicant organization • May not be increased as a result of receiving grant funds • Clinical practice compensation is considered part of IBS if guaranteed by the university, shown on the appt. form and paid through the university and included in the university’s effort reporting system

27. Institutional Base Salary (IBS) AAMC/COGR Proposal • Institutions with affiliated practice plans may include salary and effort as part of charges to NIH grants • Affiliated is defined as those instances where the institution pays or directs the salary decisions for those included in the practice plan.

28. Institutional Base Salary (IBS) • How about VA appointments? • More on this during our effort reporting discussion

29. Salary and Wage Issues • Salary increases • Supplemental Compensation or Overloads • Additional compensation provided over and above the IBS • Bonuses

30. Salary Increases • Pending promotion • Ok to include if assured • How should they be applied? • Must be fund source neutral • Must be applied consistently

31. Supplemental Compensation or Overloads A-21 indicates that faculty undertake research as a part of their normal responsibilities; however, it does recognize there are exceptions if: • The duties are across departmental lines • Involves a separate or remote operation, and work performed is in addition to regular departmental load and, • The charges are approved in writing by the sponsoring agency

32. Salary Overloads • Does disclosing an overload in the proposal constitute approval?

33. Bonuses Depends on the circumstances – No clear guidance • What do you think about? • Bonuses in lieu of salary increases • Bonuses based upon market competition • Bonuses based upon achievement of departmental goals • Bonuses based on financial success

34. Fringe Benefits

35. Fringe Benefits Some typical fringe benefit components: • FICA • Retirement • Health Care • Life Insurance • Disability • Worker’s Compensation • Unemployment Insurance

36. Fringe Benefits Two methods for budgeting and charging: • Using an estimated rate for budgeting and then charging actual • Developing, negotiating and charging rates • Accomplished by pooling fringe benefit costs and then comparing to salaries and wages.

37. Supplies

38. Supplies Two Types • Laboratory (chemicals, gases) • Office (printer paper, sharpies, post it notes)

39. Supplies What does A-21 say about office supplies? “In developing the departmental administration cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or F&A costs.”

40. Supplies So does A-21 say anything else on this topic? “Items such as office supplies, postage, local telephone costs, and memberships shall normally be treated as F&A costs.”

41. Supplies Does this mean that office supplies used in a laboratory must meet the major project definition to be direct charged or does the type of usage make the determination?

42. Equipment

43. Equipment • What is equipment? • Split funding • Fabricated equipment • Service agreements • Lease/purchase analysis • Already available but underutilized

44. What is Equipment? A-110 Definition • Nonexpendable tangible personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per year • Institutions can set a lower amount consistent with institutional policy • Remember this when dealing with other universities

45. Equipment (Split Funding) Basis for split funding • Equipment benefits more than one project • Cost sharing • Can non-federal amount be depreciated in your F&A rate?

46. Fabricated Equipment What is your institutional policy? • Implications of proper budgeting and charging • Proper classifications of costs (CAS 501) • F&A budgeted and charged correctly

47. Service Agreements • Direct or F&A cost? • Split funding • What if the equipment was not purchased from the project?

48. Lease/Purchase Analysis A-110 • “Where appropriate, an analysis is made of lease and purchase alternatives to determine which would be the most economical and practical procurement for the Federal Government.” • What is your institutions policy? • When is this addressed?

49. Already Available but Underutilized A-110 says procurement standards should avoid the purchase of unnecessary items • Is underutilized equipment covered in this statement? • How do institutions determine what is available and underutilized? • When is this determined? • During proposal processing • Before purchase

50. Subcontract, Consultant or Vendor?