August 10, 2004 Jim Vitale & Associates, Inc University of Georgia - Athens Cost Accounting Disclosure Statement “What is the Issue”

August 10, 2004 Jim Vitale & Associates, Inc

University of Georgia - Athens

Cost Accounting Disclosure Statement

“What is the Issue”


Agenda

• Brief background – why are we doing this?

• What are we going to do?

• Who is going to be involved?

• How will the process move forward?

• Overview of A-21, Cost Accounting Standards and DS-2

• Conclusion


Why - Federal History

• ONR negotiates first set of cost principles with Universities in 1947

• Original Circular A-21 issued in 1958

• Many revisions between 1958 and 1994 attempted to impose tougher requirements for accounting for research effort and established standard indirect cost allocation standards. Base changed from S&W to MTDC. Fixed rates.

• 1994- CASB consistency standards/disclosure statement.– Requirement for DS-2 submission

– Requirement for review and approval by Federal agency

– Document must reflect current activities


Federal History – cont’d

• 1996 - 2003 Additional changes –– F&A cost pools

– Animal care space

– Cost sharing

– Tuition remission

• 2004 – Codification of A-21– DCA selects DCAA to complete OIG’s role

• Audit scope to be defined

• Project teams to be defined

• DCAA staffed differently than OIG


UGA History

• 1995-96 – University prepares and submits DS-2 to Federal agency• 1996-2001 – University awaits OIG review of DS-2

– National review process moves slowly and inconsistently – UGA creates training program for A-21

• Post Sept. 11, 2001 – OIG activities redirected• 2001 – UGA management concerned about 6 year old DS-2

– University hires outside consultant to review DS-2– Areas of weakness identified:

• Direct cost• Inconsistent departmental costing• Time and Effort• Service centers• Cost Transfers


UGA History – cont’d

• 2003 – University reviews consultant recommendations and action plan

• 2004 – UGA implements process to update DS-2 and supporting policies and procedures– Retains consultant to provide project training and support

– Creates core committee to provide project sponsorship, final document review and approval

– Reaches agreement with DCA that FY1996 DS-2 will be replaced with updated version by December 31, 2004

– Creates committees to address consultant review issues


Who is going to do this?

• Core team selected based on experience, skills and knowledge

• Core team provides potential candidates for project committees

• Cross-campus committees should include where possible faculty participation


Who is going to do this? Cont’d

• Cross-campus teams supported by personnel from Contracts and Grants Sponsored Projects and Accounting

• Teams will have ongoing access to University’s DS-2 consultant

• Campus members selected based on experience, skills and knowledge


UGA Committees

Core (Res Comm Group)1. Alan Darvil2. Joe Crim3. Steve Beech4. Clif Pannell5. Jerry Cherry6. Jim Sweeney7. Regina Smith8. Chad Cleveland9. Tracy Walters10. Dale Wetzelberger

Effort Reporting/Cost Sharing

1. Mike Padilla2. Kathy Shelnut3. Tonia Gantt4. Paula Tolbert5. Mike Mispagel6. Vicki Smith7. Diana Shelnutt


UGA Committees cont’d

Service Centers

1. Chris King

2. Jerry Nesmith

3. Tammy Andros

4. Bill Stauff

5. Karen Barger

6. TBA

Direct Cost

1. Ted Gragson

2. Chiki George

3. Anuj Sinha

4. Peggy Peters

5. Kathy Vinson

6. Debra Rucker


Major Issues

Time and Effort/Cost Sharing

1. Timeliness

2. Accuracy

3. Appropriate signatures

4. Transfers

5. Committed cost sharing vs. uncommitted

Service Centers

1. User base

2. Rate discrimination

3. Costing vs. pricing

4. Business plan

5. Rate review and approval

6. UBIT


Major Issues – cont’d

Direct Costing

1. Clerical salaries

2. General purpose equipment

3. Office supplies (inc computers & supplies

4. P-cards

5. JV – 90 days/explanations

6. Account close out

7. Exceptions – major projects


What are we going to do? Cont’d

• Modify documents based on campus input

• Prepare final draft for core committee review

• Modify policies and procedures based on core committee feedback

• Outline training goals for implementation of new policies and procedures


What are we going to do? Cont’d

• Prepare new DS-2 document reflecting current practices

• Submit DS-2 to DCA by December 31, 2004• Prepare campus training programs for rollout of

new policies and procedures• Plan for Federal audit of new DS-2• Maintain departmental compliance with UGA

policies and procedures


How will the process move forward?

• Select project team members

• Assign committee specific areas of policies and procedures to review

• Provide DS-2 and A-21 training to core and project committees

• Project committees will set timing for initial meeting


How will the process move forward? Cont’d

• Initial team meeting– Select team leadership

– Identify resources

– Review team objectives

– Discuss DS-2 review report with UGA consultant

– Provide team members copies of policies and procedures

– Establish timeline for 12/04 submission

– Assign member responsibilities



• Team members review policies and procedures• Compare current practices to existing policies

and procedures• Draft new policies and procedures to comply

with Federal and State regulations• University consultant will review policy drafts• Make changes to draft based on consultant input



• Submit revised draft to core committee for review and comment

• Prepare final post-core committee draft for approval and adoption

• Outline plan for implementation and training of campus on new policies and procedures

• Design ongoing monitoring system to ensure compliance with new policies and procedures



• Assemble new policies and procedures

• Prepare draft DS-2 statement for review by Core Committee

• Finalize DS-2 language

• Prepare final DS-2 document package

• Submit DS-2 to cognizant Federal agency

• Wait for audit and approval


A-21 and DS-2 Overview

• This segment is designed to give project committee members a broad look at what drives this process of updating University financial policies and procedures

• The Cost Accounting Standards and the DS-2 requirement are contained in A-21


Objectives of OMB Circular A-21

• Establish standards for cost allocation

• Establish standards for cost allowability

• Identify Federal fair share of total costs

• Require consistent treatment of costs

• Clarifications

• Does not supersede limitations imposed by law

• Does not dictate how funds received should be spent

• Does not dictate organizational form or management

• Does not provide for recovering losses resulting from indirect cost reimbursement


General Standards for Cost Allowability

• Reasonable costs• Prudent person test• Necessary for the operation of institution or project• Consistent with established policies and procedures• Allocable costs• Benefits sponsored project whole or in part (equipment).• Direct cost determined without undue effort or on any

reasonable basis.• Consistent treatment - direct only or indirect only• Conform to limitations or exclusions under A-21 or NGA


A-21 Terms

• F&A – facilities and administrative (replaced indirect cost)

• Facilities component – calculated share of buildings, movable equipment, land improvements, interest, operation and maintenance and library.

• Administrative component – share of system, central, research, student and departmental administrative costs

• MTDC – modified total direct cost base is the adjusted direct dollars that the facil. And admin. costs are applied to calculate a rate.


F&A Rate

• Facilities and Administrative Cost Rate Formula

(Facilities and Administrative* components)(Sponsored Research MTDC)

EqualsThe Calculated F&A (indirect cost) Rate

* Administrative caps – 3.6% on faculty administrative salaries (1986) and 26% maximum admin. Component (1993)


Cost Accounting Standards

• Nothing New!

• OMB Circular A-21 requires:– Consistency– Allowability– Certification


Cost Accounting Standards

Standards501 Consistency in estimating, accumulating and reporting costs

Are proposal costs consistent with actual cost accumulations?

502 Consistency in allocating costs incurred for the same purpose

How is the expense related to the project?

505 Accounting for unallowable costs

Will the sponsor pay for the expense?

506 Cost accounting period

Is the full fiscal year used in estimating and accounting for costs?


What is a Disclosure Statement?

• Documents cost accounting practices• Required to be submitted to cognizant agency

and cognizant audit agency.• Supported by Policies and procedures,

instructions, and guidelines for individual investigators, department heads, and administrators need to be made available because it is their responsibility to understand and know them.


What is a Disclosure Statement? Cont’d

• A living document that is a timely reflection of University operations.

• Identifies formal guidelines for “charging costs to sponsored awards”– Direct and Indirect costs– Cost-sharing policies– Time and effort reporting policies and

procedures– Policies for “Service Centers”

Disclosure Statement is Disclosure Statement is a Fiscal Roadmapa Fiscal Roadmap

A comprehensive description of an organization’s A comprehensive description of an organization’s cost accounting practicescost accounting practices

General Information

Direct Costs

Depreciation and Use Allowances

Leave Costs and Applicable Credits

Deferred Compensation/ Insurance Costs

Central systems and Group Expenses

CASBIndirect Costs


DHHS DS-2 Bulletin!

• DHHS has recently streamlined the Disclosure Statement (CASB Form DS‑2) approval process.

• DHHS has contracted with DCAA.• DCAA will soon begin working through the

backlog and is contacting the colleges to perform audits of the DS‑2s.

• UGA is part of the backlog and an audit letter was received.

• UGA DS-2 on hold effective June 8, 2004 submission January 2005.


Major Audit Issues

• Documentation of time and effort• Cost transfers – 90 days• Cost sharing• NIH Cap = cost sharing• Consistent treatment of clerical and admin.

Salaries• Service/Recharge Centers


Cost Sharing

• January 5, 2001 interpretation-– Mandatory and voluntary committed cost sharing is

specifically pledged in the proposal’s budget or award. Does not include general expressions of support in proposal narrative or current and pending support pages. Does include “% of effort” in NIH modular grant applications. Some level of faculty effort is expected and will be imputed, if absent.

– Voluntary uncommitted cost sharing is faculty effort that is over and above that which is committed and budgeted for in a sponsored agreement.


Clerical and Administrative Salaries

• Examples of Clerical and Administrative functionsTyping and mailing correspondence

Accounting and budgeting

Purchasing and tracking purchasing orders

Non-scientific software and system development

Processing vouchers

Routine travel related planning

Routine data entry and database maintenance

Typing newsletters and brochures

Typing applications for awards


Work/Project Meetings

• Kick-off Week 8/16– Time and Effort/Cost Sharing

Tues. 8/17 3pm– Service Center Wed. 8/18 3pm– Direct Costing Thurs. 8/19 3pm


Work/Project Meetings

• Initial meeting– Web-page

• DS-2

• A-21

• PowerPoint Presentations

• Meeting minutes

– Work group specific issues– Example policies


Conclusion

• A-21 sets the standards for consistency and allowability

• Cost Accounting Standards require the University to certify their processes and be audited to those standards

• Policies and Procedures are the heart of the process

• Policies and Procedures need to reflect University operations and regulatory compliance

• This is an important project that needs to be completed on time

• Questions?