OMB CIRCULAR A-21 Cost Principles for Educational Institutions OMB CIRCULAR A-21

OMBOMB CIRCULAR A-21CIRCULAR A-21http://www.whitehouse.gov/omb/circulars/a021/a21_2004.htmlhttp://www.whitehouse.gov/omb/circulars/a021/a21_2004.html

Cost Principles for Cost Principles for Educational InstitutionsEducational Institutions

• Who Controls?Who Controls?

– Circular A-21Circular A-21

– Agency wide regulationsAgency wide regulations

– Award specific restrictionsAward specific restrictions

– University policiesUniversity policies• Can be more restrictive than the Can be more restrictive than the

aboveabove

OM

B C

ircular A

-21O

MB

Circu

lar A-21

IntroductionIntroduction

General overviewGeneral overview

DefinitionsDefinitions Major FunctionsMajor Functions Direct CostsDirect Costs F&A (Indirect) F&A (Indirect)

Direct Costs Direct Costs AllowableAllowable Major ProjectsMajor Projects

Selected Item of CostsSelected Item of Costs

F & A rateF & A rate

Cost Accounting Standards (CAS) Cost Accounting Standards (CAS)

DS-2 DS-2

ResponsibilitiesResponsibilities

OM

B C

ircular A-21

OM

B C

ircular A-21

OM

B C

ircular A-21

OM

B C

ircular A-21

Introduction Introduction

• Developed by the Federal Government in the Developed by the Federal Government in the early 1970s, modified a number of times,early 1970s, modified a number of times, latest revision 5/10/04latest revision 5/10/04

• Established principles for determining costs Established principles for determining costs applicable to grants, contracts, and other applicable to grants, contracts, and other agreements with educational institutionsagreements with educational institutions

• Purpose was to ensure the federal Purpose was to ensure the federal government did not pay more than its fairgovernment did not pay more than its fair share of the total costs of the sponsored share of the total costs of the sponsored agreement. agreement.

OMB Circular A-21OMB Circular A-21

General OverviewGeneral Overview - - Comprised of 11 Comprised of 11 sections, 3 exhibits and 3 appendicessections, 3 exhibits and 3 appendices

• Sections A, B and C:Sections A, B and C:– deal with purpose, definitions, and basic deal with purpose, definitions, and basic

considerationsconsiderations

• Section D & E Section D & E – deal with Direct Costs & Facilities & Administrative deal with Direct Costs & Facilities & Administrative

(F&A) Costs(F&A) Costs

• Sections F, G, H Sections F, G, H – cover F&A rate developmentcover F&A rate development

continuedcontinued


General OverviewGeneral Overview • Section I Section I

– has not been usedhas not been used

• Section J Section J – lists specific items of costs and whether lists specific items of costs and whether

allowable or unallowable -- caution -- this section allowable or unallowable -- caution -- this section does not state whether an item of cost can be does not state whether an item of cost can be charged as direct or whether it is part of the F&A charged as direct or whether it is part of the F&A raterate

• Section K Section K – requires UM to certify we are in compliance with requires UM to certify we are in compliance with

the circularthe circularcontinuedcontinued


General OverviewGeneral Overview • Exhibit A Exhibit A

– lists universities that must follow A-21, including UMlists universities that must follow A-21, including UM

• Exhibit B Exhibit B – Does not apply to UM Does not apply to UM

• Exhibit C – Exhibit C – Major Project definitions & examplesMajor Project definitions & examples

• Appendixes A & B Appendixes A & B cover Cost Accounting Standards cover Cost Accounting Standards (CAS) & the Disclosure Statement (DS2) (CAS) & the Disclosure Statement (DS2)

• Appendix C Appendix C reflects the documentation required to reflects the documentation required to submit an F&A rate proposalsubmit an F&A rate proposal


MAJOR FUNCTIONSMAJOR FUNCTIONS


20% 35% 22%20% 35% 22%

Fiscal Year Ending May 31, 2005 Fiscal Year Ending May 31, 2005 Total Revenues $1.5 BillionTotal Revenues $1.5 Billion

MAJOR FUNCTIONSMAJOR FUNCTIONS

Definitions per A-21Definitions per A-21

are very specific are very specific


Definitions - MAJOR FUNCTIONSDefinitions - MAJOR FUNCTIONS

• Organized researchOrganized research - all research - all research & development activities of an & development activities of an

institution that are separately institution that are separately budgeted & accounted for, including:budgeted & accounted for, including:– Sponsored research - all research & Sponsored research - all research &

development activities development activities sponsoredsponsored by Federal & by Federal & non Federal agencies and organizations. non Federal agencies and organizations.

– Activities involving the training of individuals Activities involving the training of individuals in research techniques (commonly called in research techniques (commonly called research training) where such activities utilize research training) where such activities utilize the same facilities as other research the same facilities as other research


NIH, NIH,

NSF, NSF,

ONR, ONR,

NASANASA


• InstructionInstruction means the teaching means the teaching

& training activities of an institution.& training activities of an institution.

Also considered part of this majorAlso considered part of this major

function is function is departmental researchdepartmental research..

“ “ Departmental researchDepartmental research means research, development means research, development

and scholarly activities and scholarly activities that are not organized researchthat are not organized research &, &,

consequently, are not separately budgeted and accountedconsequently, are not separately budgeted and accounted

for. Departmental research, for purposes of A-21,for. Departmental research, for purposes of A-21,

is not considered as a major function, but as a part of the is not considered as a major function, but as a part of the

instruction function of the institution”instruction function of the institution”


&& DeptlDeptl..


• Other sponsored activities (OSA)Other sponsored activities (OSA) - - programs & projects programs & projects externallyexternally financed financed by Federal & non Federal agencies & by Federal & non Federal agencies & organizations which involve the organizations which involve the performance of work other than performance of work other than

instruction & organized research.instruction & organized research. – Examples:Examples: health service projects, IPA agreements health service projects, IPA agreements

with the federal govt.with the federal govt.

– If financed by UM – Other Institutional Activities (OIA)If financed by UM – Other Institutional Activities (OIA)



• Other institutional activities (OIA)Other institutional activities (OIA)

all activities of an institution, e.g.all activities of an institution, e.g. – Residence halls, dining halls, athletics,Residence halls, dining halls, athletics,

hospitals and clinics, patient care, etc. hospitals and clinics, patient care, etc.

OIA OIA does notdoes not include: include:– Instruction, Departmental Research, Organized Instruction, Departmental Research, Organized

Research, & Other Sponsored Activities (OSA)Research, & Other Sponsored Activities (OSA) – F&A cost activitiesF&A cost activities – specialized service facilities (service centers)specialized service facilities (service centers)


MAJOR FUNCTIONS - where used?MAJOR FUNCTIONS - where used?


University of MiamiUniversity of Miami

Proposal Transmittal FormProposal Transmittal Form

Type of Project:Type of Project:

Research Research Instruction Instruction

Other Sponsored AgreementsOther Sponsored Agreements

Other (Other (mainly construction projectsmainly construction projects))

UM Space systemUM Space system

Functional classification of space - used in the F&A rate Functional classification of space - used in the F&A rate development - will be discussed later when we talk about development - will be discussed later when we talk about F&AF&A

F & A rateF & A rate

Application Application

11stst to proposal, to proposal,

then to awardthen to award

Definitions - COSTSDefinitions - COSTS

• DIRECTDIRECT– allowable costs incident to the allowable costs incident to the

performance of the projectperformance of the project

• Facilities and Administrative (F&A) Facilities and Administrative (F&A) oror Indirect Indirect oror Overhead Overhead

– incurred for common or joint objectives &, incurred for common or joint objectives &, therefore, cannot be identified readily & therefore, cannot be identified readily & specifically with a particular sponsored specifically with a particular sponsored project, an instructional activity, or any project, an instructional activity, or any other institutional activity. other institutional activity.



Definitions – COSTSDefinitions – COSTS

• Identification with the sponsored work Identification with the sponsored work rather than the nature of the goods and rather than the nature of the goods and services involved is the determining services involved is the determining factor in distinguishing factor in distinguishing directdirect fromfrom F&AF&A costs of sponsored agreementscosts of sponsored agreements.

Definitions - COSTSDefinitions - COSTS

• DIRECT – examples:DIRECT – examples:

– CompensationCompensation of employees for of employees for performance of work under the sponsored performance of work under the sponsored agreement agreement

– Costs of materials consumed or expended Costs of materials consumed or expended in the performance of the workin the performance of the work

– Other items of expense incurred for the Other items of expense incurred for the sponsored agreement sponsored agreement


DIRECT COSTSDIRECT COSTS

• Must beMust be– allowable allowable

reasonable reasonable

allocable to sponsored agreements allocable to sponsored agreements

must be given consistent treatment must be given consistent treatment

conform to any limitations or exclusionsconform to any limitations or exclusions

per A-21 or per the sponsored agreementper A-21 or per the sponsored agreement

– incident to the performance of the projectincident to the performance of the project


DIRECT COSTS -DIRECT COSTS - ALLOWABLEALLOWABLEReasonable Reasonable

– reflects the action that a prudent personreflects the action that a prudent person would have taken under the circumstanceswould have taken under the circumstances

Allocable to sponsored agreementsAllocable to sponsored agreements

– incurred solely to advance the project, ORincurred solely to advance the project, OR– benefits both the sponsored agreement & benefits both the sponsored agreement &

other work of the institution, in proportions other work of the institution, in proportions that can be approximated that can be approximated through use of through use of reasonable methodsreasonable methods


DIRECT COSTS – ALLOWABLE, continuedDIRECT COSTS – ALLOWABLE, continued

Allocable to sponsored agreements, continued Allocable to sponsored agreements, continued

– May not be shifted to other sponsored agreements in May not be shifted to other sponsored agreements in order to:order to:

• meet deficiencies caused by overruns (deficits)meet deficiencies caused by overruns (deficits)

• to avoid restrictions imposed by law or by terms to avoid restrictions imposed by law or by terms of the sponsored agreement, of the sponsored agreement,

• or for other reasons of convenienceor for other reasons of convenience

– sponsored by industry, foreign governments or othersponsored by industry, foreign governments or other sponsors may not be shifted to federally sponsoredsponsors may not be shifted to federally sponsored agreements.agreements.


DIRECT COSTS–ALLOWABLE, cDIRECT COSTS–ALLOWABLE, continuedontinued

Must be given consistent treatmentMust be given consistent treatment ““An educational institution's practices used in estimating An educational institution's practices used in estimating costs in pricing a proposal shall be consistent with the costs in pricing a proposal shall be consistent with the educational institution's cost accounting practices used in educational institution's cost accounting practices used in accumulating and reporting costs” accumulating and reporting costs”

Meaning use the same standards in preparing theMeaning use the same standards in preparing the

proposal budget than when charging costs to the proposal budget than when charging costs to the

award.award.


DIRECT COSTS–ALLOWABLE, cDIRECT COSTS–ALLOWABLE, continuedontinued

Consistency in allocating costs incurred for the Consistency in allocating costs incurred for the same purposesame purpose – Salaries & fringe benefits of administrative & clerical Salaries & fringe benefits of administrative & clerical

staff & certain general administrative expenses, such as staff & certain general administrative expenses, such as office supplies, postage, local telephone costs, & office supplies, postage, local telephone costs, & memberships, should be charged as F&A costs memberships, should be charged as F&A costs

– HoweverHowever, direct charging may be appropriate where a , direct charging may be appropriate where a MAJOR PROJECTMAJOR PROJECT explicitly budgets for administrative explicitly budgets for administrative or clerical services AND individuals involved can be or clerical services AND individuals involved can be

specifically identified with the project or activity.specifically identified with the project or activity.


Exhibit C – Major ProjectsExhibit C – Major Projects

Direct charging of administrative or Direct charging of administrative or clerical staff salaries may be appropriate.clerical staff salaries may be appropriate.

Examples…..Examples…..


• Large, complex programs Large, complex programs such as General Clinical such as General Clinical Research Centers, Research Centers, Program Projects, & Program Projects, &

other grants/contracts other grants/contracts that entail assembling & that entail assembling & managing teams of managing teams of investigators from a investigators from a number of institutions.number of institutions.



• Projects which involve Projects which involve extensive data accumulation, extensive data accumulation, analysis and entry, surveying, analysis and entry, surveying, tabulation, cataloging, tabulation, cataloging, searching literature, & reporting searching literature, & reporting (such as epidemiological (such as epidemiological studies, clinical trials, & studies, clinical trials, & retrospective clinical records retrospective clinical records studies). studies).



• Projects that require Projects that require making travel & meeting making travel & meeting arrangements for large arrangements for large numbers of participants, numbers of participants, such as conferences & such as conferences & seminars.seminars.



• Projects whose principal Projects whose principal focus is the preparation & focus is the preparation & production of manuals & production of manuals & large reports, books & large reports, books & monographs (excluding monographs (excluding routine progress & technical routine progress & technical reports).reports).



• Projects that are Projects that are geographically geographically inaccessible to normal inaccessible to normal departmental departmental administrative services, administrative services, such as research such as research vessels, & other research vessels, & other research fields sites that are fields sites that are remote from campus.remote from campus.

OMB Circular A-21OMB Circular A-21Exhibit C – Major ProjectsExhibit C – Major Projects

What do these prior examples have in What do these prior examples have in common?common?

Projects that require unusually high levelsProjects that require unusually high levels and/or a disproportionate amountand/or a disproportionate amount of of administrative activity associated with large &administrative activity associated with large & complexcomplex workwork

Responsibilities that duplicate normal departmental Responsibilities that duplicate normal departmental administrative functions such as proposal preparation, administrative functions such as proposal preparation, accounting, payroll, purchasing, etc. accounting, payroll, purchasing, etc. cannotcannot be charged be charged directly to a sponsored project.directly to a sponsored project.



Section J Section J

Selected items of cost -Selected items of cost -

Allowable vs UnallowableAllowable vs Unallowable


Section J - Selected items of cost.Section J - Selected items of cost.

• Only allowable Only allowable advertisingadvertising is for: is for:

– The recruitment of personnel required for the The recruitment of personnel required for the performance by the institutionperformance by the institution of obligations of obligations arising under a sponsored agreement;arising under a sponsored agreement;

– The procurement of goods and services for The procurement of goods and services for the performance of a sponsored agreement;the performance of a sponsored agreement;



• AlcoholicAlcoholic beverages beverages.. – Costs of alcoholic beveragesCosts of alcoholic beverages

are are unallowable.unallowable.

• Compensation for Compensation for personal servicespersonal services– Will be covered in a separate sessionWill be covered in a separate session

– In no event will charges to sponsored agreements, In no event will charges to sponsored agreements, irrespective of the basis of computation, exceed the irrespective of the basis of computation, exceed the proportionate share of the base salary for that proportionate share of the base salary for that period.period.


SSection J - Selected items of cost.ection J - Selected items of cost.

• Costs of Costs of entertainmententertainment

– including amusement, diversion, and social including amusement, diversion, and social activities and any costs directly associated activities and any costs directly associated with such costs (such as tickets to shows or with such costs (such as tickets to shows or sports events, meals, lodging, rentals, sports events, meals, lodging, rentals, transportation, and gratuities) are transportation, and gratuities) are unallowableunallowable. .

OMB Circular A-21


• ""EquipmentEquipment" " – an article of nonexpendable, tangible personal property an article of nonexpendable, tangible personal property

having a useful life of more than one year & an having a useful life of more than one year & an acquisition cost of $2,500 or more.acquisition cost of $2,500 or more.

““Special purpose equipmentSpecial purpose equipment" "

equipment used only for research,equipment used only for research,

medical, scientific, or other technical medical, scientific, or other technical

activities - allowable as direct costs, e.g. microscopes, activities - allowable as direct costs, e.g. microscopes, x-ray machines, surgical instruments, spectrometers.x-ray machines, surgical instruments, spectrometers.

OMB Circular A-21

SSection J - Selected items of cost.ection J - Selected items of cost.

• ""Equipment, continuedEquipment, continued" "

• "General purpose equipment"General purpose equipment" "

Equipment not limited to research, medical, scientific Equipment not limited to research, medical, scientific or other technical activities, or other technical activities,

Examples: office equipment & furnishings, modular Examples: office equipment & furnishings, modular offices, telephone networks, information technology offices, telephone networks, information technology equipment and systems, air conditioning equipment, equipment and systems, air conditioning equipment, reproduction & printing equipment, and motor reproduction & printing equipment, and motor vehicles.vehicles.

unallowableunallowable as direct charges, as direct charges, except where approved in advance byexcept where approved in advance by the awarding agency.the awarding agency.


• Goods or services for personal Goods or services for personal useuse

– Are Are unallowableunallowable, including , including cost of coffee for the office, cost of coffee for the office, flowers for an employee or flowers for an employee or family, gifts for an employee, family, gifts for an employee, a student or anyone else, a student or anyone else, etc.etc.

– Use object code 3621 in a non Use object code 3621 in a non grant accountgrant account




• LobbyingLobbying - - Activities unallowableActivities unallowableAttempts to influence the outcomes of any Federal, State, or local election, Attempts to influence the outcomes of any Federal, State, or local election, referendum, initiative, or similar procedure, through in kind or cash referendum, initiative, or similar procedure, through in kind or cash contributions, endorsements, publicity, or similar activity; establishing, contributions, endorsements, publicity, or similar activity; establishing, administering, contributing to, or paying the expenses of a political party, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or other organization established for campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections; any attempt to the purpose of influencing the outcomes of elections; any attempt to influence – (i) the introduction of Federal or State legislation; (ii) the influence – (i) the introduction of Federal or State legislation; (ii) the enactment or modification of any pending Federal or State legislation through enactment or modification of any pending Federal or State legislation through communication with any member or employee of the Congress or State communication with any member or employee of the Congress or State legislature, including efforts to influence State or local officials to engage in legislature, including efforts to influence State or local officials to engage in similar lobbying activity; or (iii) any government official or employee in similar lobbying activity; or (iii) any government official or employee in connection with a decision to sign or veto enrolled legislation; legislative connection with a decision to sign or veto enrolled legislation; legislative liaison activities, including attendance at legislative sessions or committee liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, & analyzing the effect hearings, gathering information regarding legislation, & analyzing the effect of legislation, when such activities are carried on in support of or in knowing of legislation, when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable lobbying.preparation for an effort to engage in unallowable lobbying.



• Meetings and Conferences Meetings and Conferences

– When theWhen the primary purpose is the primary purpose is the dissemination of technical information, are dissemination of technical information, are allowableallowable, including costs of meals, , including costs of meals, transportation, rental of facilities, speakers' transportation, rental of facilities, speakers' fees, and other items incidental tofees, and other items incidental to

such meetings or conferencessuch meetings or conferences



• Proposal costsProposal costs

– Costs of preparing bids or proposals on Costs of preparing bids or proposals on potential federally and non federally funded potential federally and non federally funded sponsored projects, including the sponsored projects, including the development of data necessary to support the development of data necessary to support the proposals should be treated as proposals should be treated as F&A costsF&A costs . .


Section K - Section K - Certification of charges.Certification of charges.

By an authorized official of the university, By an authorized official of the university, which reads essentially as follows: which reads essentially as follows:

"I certify that all expenditures reported (or "I certify that all expenditures reported (or payment requested) are for appropriate payment requested) are for appropriate purposes and in accordance with the purposes and in accordance with the provisions of the application andprovisions of the application and

award documents." award documents."


Facilities & AdministrativeFacilities & Administrative

(F&A) Rate(F&A) Rate


F&A RATEF&A RATE

– Circular gives guidelines on how to calculate Circular gives guidelines on how to calculate an F&A ratean F&A rate

– Rate, once computed is sent to DHHS for Rate, once computed is sent to DHHS for review and approvalreview and approval

– After audit, negotiation takes place to settle After audit, negotiation takes place to settle on the approved rates – different by campuson the approved rates – different by campus

– Approved rates are usually in effect for 3 to 4 Approved rates are usually in effect for 3 to 4 years.years.


F&A RATEF&A RATE• Main rate applies to Organized ResearchMain rate applies to Organized Research

• Separate rates for OSA, InstructionSeparate rates for OSA, Instruction

• On campus / off campus rateOn campus / off campus rate

• Each rate is composed of two Each rate is composed of two components – a Facilities rate and an components – a Facilities rate and an Administrative rateAdministrative rate

• Each component is further composed of Each component is further composed of multiple ratesmultiple rates


F&A RATE COMPONENTSF&A RATE COMPONENTS

• Facilities component of the rate includes:Facilities component of the rate includes:– Building costs Building costs

• operating & maintaining e.g. cleaning, utilities, operating & maintaining e.g. cleaning, utilities, securitysecurity• depreciation - cost of acquisition/construction of depreciation - cost of acquisition/construction of buildings over their estimated useful lives buildings over their estimated useful lives • interest on externalinterest on external borrowing when principal is borrowing when principal is used to construct buildingsused to construct buildings

– Equipment depreciation - cost of acquisition of Equipment depreciation - cost of acquisition of equipment over its estimated useful lifeequipment over its estimated useful life

– Libraries – cost of operationsLibraries – cost of operations



Facilities component of the rate isFacilities component of the rate is derived by:derived by:

1.1. Obtaining from the department the function(s) carried Obtaining from the department the function(s) carried out in each room – out in each room – organized research, instruction, etc. – organized research, instruction, etc. – room may have one function or multiple functions.room may have one function or multiple functions.

2.2. Aggregating on a room by room basis the functional Aggregating on a room by room basis the functional use of each building, use of each building, e.g. Pope may be 60% organized e.g. Pope may be 60% organized research, 20% departmental research, 10% instruction, 10% research, 20% departmental research, 10% instruction, 10% departmental administration.departmental administration.

3.3. Using the costs for each building (see previous slide) Using the costs for each building (see previous slide) and multiplying by the function % we obtain the costs and multiplying by the function % we obtain the costs applicable to organized research.applicable to organized research.



• Administrative component of the rate includes:Administrative component of the rate includes:– General Administration, e.g. operating costs for General Administration, e.g. operating costs for

President, Payroll, Purchasing, Accounts Payable, etc.President, Payroll, Purchasing, Accounts Payable, etc.– Academic Administration, e.g. operating costs for the Academic Administration, e.g. operating costs for the

Provost, Associate/Asst Provosts Provost, Associate/Asst Provosts – Departmental Administration, e.g. operating costs for Departmental Administration, e.g. operating costs for

Dean’s and Chair’s Dean’s and Chair’s – Sponsored Programs administration, e.g. operating Sponsored Programs administration, e.g. operating

costs for Vice Provost for Research, Sponsored costs for Vice Provost for Research, Sponsored Programs, IRB, Research Compliance.Programs, IRB, Research Compliance.

– Student services administration, e.g. operating costs Student services administration, e.g. operating costs for enrollment, admissions, registrar, etc.for enrollment, admissions, registrar, etc.



AdministrativeAdministrative component of the rate is derived component of the rate is derived by:by:

1.1. Obtaining the costs of operating the offices listed on Obtaining the costs of operating the offices listed on the slide before.the slide before.

2.2. Allocating those costs based on the area that receives Allocating those costs based on the area that receives the benefit, e.g. President – allocated over entire the benefit, e.g. President – allocated over entire University; Dean – allocated over his/her school; University; Dean – allocated over his/her school; Sponsored Programs – allocated over Organized Sponsored Programs – allocated over Organized research and OSA, Student Services – allocated to research and OSA, Student Services – allocated to Instruction.Instruction.

3.3. Rate for administrative costs for organized research, Rate for administrative costs for organized research, OSA and instruction are computed.OSA and instruction are computed.



LIMITATION ON THE RATELIMITATION ON THE RATE

AdministrativeAdministrative component of the rate component of the rate is capped at 26% by A-21, even is capped at 26% by A-21, even when the rate computed is higher.when the rate computed is higher.


F&A RATE COMPONENTS, an example:F&A RATE COMPONENTS, an example:ON CAMPUS Organized Research RATE:ON CAMPUS Organized Research RATE:

Computed Allowed ApprovedComputed Allowed Approved

Facilities Facilities 30% 30% 30% 27% 30% 27%

Administrative Administrative 31%31% 26%26% * * 26%26% * *

TotalTotal 61%61% 56%56% 53%53%

* * capped at 26% by regulationcapped at 26% by regulation

OFF CAMPUS Organized Research Rate: 26%OFF CAMPUS Organized Research Rate: 26%


F&A RATE COMPONENTSF&A RATE COMPONENTSOFF Campus Rate = 26%OFF Campus Rate = 26%

• Coincidence that it is the same as the Coincidence that it is the same as the Administrative part of the F&A rate?Administrative part of the F&A rate? No coincidence – it does not include the No coincidence – it does not include the

Facilities component of the rateFacilities component of the rate

• Off campus definition Off campus definition Projects conducted in non UM facilities whereProjects conducted in non UM facilities where rent is directly charged to the project. rent is directly charged to the project.

Note: projects can only bear one rate (on or off). If more Note: projects can only bear one rate (on or off). If more than 50% of the project is performed off campus (rent than 50% of the project is performed off campus (rent charged), the off campus rate applies to the entire project.charged), the off campus rate applies to the entire project.


COST ACCOUNTING COST ACCOUNTING

STANDARDSSTANDARDS

(CAS)(CAS)

4 APPLY to EDUCATIONAL INSTITUTIONS4 APPLY to EDUCATIONAL INSTITUTIONS


COST ACCOUNTING STANDARDS (CAS)COST ACCOUNTING STANDARDS (CAS)

–– Consistency in estimating, accumulating Consistency in estimating, accumulating and reporting costs (CAS 501)and reporting costs (CAS 501).

• Amounts budgeted in proposal should correspond to Amounts budgeted in proposal should correspond to actual expenses incurred for the projectactual expenses incurred for the project

– Consistency in allocating costs incurred Consistency in allocating costs incurred for the same purpose (CAS 502). for the same purpose (CAS 502).

• Administrative costs can not be charged directly to a Administrative costs can not be charged directly to a federal sponsored project.federal sponsored project.


COST ACCOUNTING STANDARDS (CAS)COST ACCOUNTING STANDARDS (CAS)

– Accounting for unallowable costs (CAS Accounting for unallowable costs (CAS 503)503)• Unallowable costs shall be identified and excluded Unallowable costs shall be identified and excluded

from any billing, claim, application, or proposal from any billing, claim, application, or proposal applicable to a Government sponsored agreement.applicable to a Government sponsored agreement.

– Use the University’s fiscal year as the cost Use the University’s fiscal year as the cost accounting period (CAS 504)accounting period (CAS 504)• For purposes of developing the F&A rate proposal.For purposes of developing the F&A rate proposal.


CAS - DISCLOSURE STATEMENT (DS2)CAS - DISCLOSURE STATEMENT (DS2)• Required for institutions with $25 M or more in Required for institutions with $25 M or more in

federal awards per year – UM qualifiesfederal awards per year – UM qualifies– Institutions must disclose their cost accounting Institutions must disclose their cost accounting

practices by filing a Disclosure Statement (DS 2).practices by filing a Disclosure Statement (DS 2).

– DS 2 subject to audit. UM’s was audited in 1999.DS 2 subject to audit. UM’s was audited in 1999.

Rejected, changed and resubmitted in 2001 and 2003 – Rejected, changed and resubmitted in 2001 and 2003 –

☺☺approved January 2006.approved January 2006.

– University must file amendments to the DS 2 when University must file amendments to the DS 2 when disclosed practices are changed to comply with a new disclosed practices are changed to comply with a new or modified standard, or when practices are changed for or modified standard, or when practices are changed for other reasons. other reasons.


FINANCIAL RESPONSIBILITIESFINANCIAL RESPONSIBILITIES• Principal InvestigatorsPrincipal Investigators

– Overall management of the sponsored funds Overall management of the sponsored funds

– Preparation of appropriate budgets, including budget Preparation of appropriate budgets, including budget explanations and where necessary justification of explanations and where necessary justification of exceptions for major projects. exceptions for major projects.

– Ensuring the appropriateness of all charges on Ensuring the appropriateness of all charges on sponsored projects – allowable, allocable.sponsored projects – allowable, allocable.

– Ensure the consistent application of direct costing Ensure the consistent application of direct costing practices to federal sponsored projects – no general & practices to federal sponsored projects – no general & admin costs charged to the projectadmin costs charged to the project

UM POLICIESUM POLICIESUM POLICIESUM POLICIES

FINANCIAL RESPONSIBILITIESFINANCIAL RESPONSIBILITIES• Department AdministratorsDepartment Administrators

– Provides day-to-day oversight of financial Provides day-to-day oversight of financial management as delegated by Principal management as delegated by Principal Investigator. Investigator. • Assist Principal Investigators in ensuring the Assist Principal Investigators in ensuring the

appropriateness of all charges on sponsored appropriateness of all charges on sponsored projects.projects.

• Reviews online and monthly accounting reports and Reviews online and monthly accounting reports and initiates corrections when necessary on a timely initiates corrections when necessary on a timely basis.basis.


FINANCIAL RESPONSIBILITIESFINANCIAL RESPONSIBILITIES• Sponsored Programs AdministrationSponsored Programs Administration

– Maintain current knowledge of regulations, Maintain current knowledge of regulations, policies and procedures. policies and procedures.

– Assist in interpretation of federal regulations, Assist in interpretation of federal regulations, such as OMB Circular A-21. such as OMB Circular A-21.

– Review expenditures to ensure compliance Review expenditures to ensure compliance with circulars, rules, policies.with circulars, rules, policies.

– Set up accounts, invoice sponsor, record Set up accounts, invoice sponsor, record receipt of cash, report as required by awardreceipt of cash, report as required by award


Federal auditors are currently at:Federal auditors are currently at: ** University of FloridaUniversity of Florida ** Duke UniversityDuke University

** Dartmouth CollegeDartmouth College * * 2 others2 others

Once they complete their work, Once they complete their work, other universities will be selected for audit.other universities will be selected for audit. We must all be aware of the audit environment. We must all be aware of the audit environment. More importantly, when it comes to sponsored More importantly, when it comes to sponsored agreements we all bear the responsibility to ensure that:agreements we all bear the responsibility to ensure that:

COSTS ARE ALLOWABLE, BENEFIT THE PROJECT COSTS ARE ALLOWABLE, BENEFIT THE PROJECT AND ARE PROPERLY RECORDED & REPORTEDAND ARE PROPERLY RECORDED & REPORTED

We should do this not because the government mayWe should do this not because the government may come in to audit...but because we are all accountablecome in to audit...but because we are all accountable for the ethical administration of public funds.for the ethical administration of public funds.

Next Program will be on Next Program will be on

Compensation, Effort & OMB Circular A-110Compensation, Effort & OMB Circular A-110

Watch for the announcementWatch for the announcement

Documents

OMB CIRCULAR A-21 Cost Principles for Educational Institutions OMB CIRCULAR A-21