Preventing Unallowable Costs

Transcription

1 Preventing Unallowable Costs Susan Tkachick Sponsored Research Accountant Jessica Cote, CRA Contract and Grant Specialist Research Administrators Conference April 25, 2013 Session Objectives Review UD s cost accounting standards Practice determining allowable costs Critique justification examples and formulate questions for PI 1

2 Cost Accounting Standards (CAS) Background Basis in OMB Circular A-21, Cost Principles for Educational Institutions CAS Consistency in estimating, accumulating and reporting costs Consistency in allocating costs incurred for the same purpose Accounting for unallowable costs 506 Consistency in using the same cost accounting period 2

3 Why do we need to comply with the CAS? 3

4 Why do we need to comply with the CAS? Disallowed costs = expenses moved to department Time wasted doing 90 Day JVs More audit scrutiny = time spent pulling & explaining files Prevents audit findings and other adverse publicity Compliance = successful research administration No stress and worries at closeout Loss of future funding = Decrease in F&A revenue = Fewer research administration jobs! 4

5 UD s CAS Guidelines Clarifies the federal regulations Provides specific examples Includes a flow chart and definitions 5

6 Basic Principles 1. Allowable 2. Allocable TRIFECTA 3. Reasonable 4. Consistent 5. Direct Costs 6. Indirect Costs Basic Principles Reasonable Allowable Allocable 6

7 Reasonable Allowable Allowable Allocable Definition Costs are allowable if they conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items. (OMB Circular A-21, Sec. C.2.d.) Is the Cost Allowable? Proposed / Budgeted / Approved Not disallowed by T&C s 7

8 Reasonable Reasonable Allowable Allocable Definition - 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, Sec. C.3.) Is the Cost Reasonable? Prudent person test Necessary for performance of the project Consistent with established institution practices 8

9 Reasonable Allocable Allowable Allocable Definition - A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship. (OMB Circular A-21, Sec. C.4.) Is the Cost Allocable? Benefits the project Cost of one project may not be shifted to another Proportional to the relative benefit received by project 9

10 Consistency Definition practices used in estimating costs in pricing a proposal shall be consistent with the educational institutions cost accounting practices used in accumulating and reporting costs All costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only. (OMB Circular A-21, Sec. C.10 & C.11) Consistency Treat federal funds like all others Must apply the principles consistently across grants and contracts 10

11 Direct Costs Costs that can be identified specifically with a particular sponsored project, instructional activity or that can be directly assigned to such activities relatively easily with a high degree of accuracy. 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. (OMB Circular A-21 Sec. D1) 11

12 Direct Costs Indirect Costs Costs that are incurred for common and joint objectives and therefore cannot be identified readily and specifically with a particular sponsored activity, instructional activity, or other institutional activity. (OMB Circular A-21 Sec. E1) 12

13 Indirect Costs Direct v. Indirect Don t charge twice for same cost Direct Costs Indirect Costs Sponsored Program Expenditures 13

14 Unlike Circumstance A cost that is normally considered to be an F&A cost but is allowed to be charged directly to a particular sponsored award IF it meets specific criteria Unlike Circumstance Can be defined as a direct cost Is extensive or unique in nature Has been included in the budget Can be adequately documented Contribute directly to the research goals 14

15 ALLOCATION METHODS Proportional Interrelationships CAS Misconceptions Budgeted = ALLOWABLE (false!) Approved once = approved ALWAYS (false!) Unlike circumstance approved, therefore allocable (still must justify) Program officer approved, therefore allowed (audit may disagree) 15

16 CASE STUDIES Reviewing Justifications Key questions to ask when reviewing a justification Is the allocability and reasonableness of the expense clear? Is this a standard practice or unusual? Does it pass the prudent person test? 16

17 FISHING FOR MORE INFORMATION FROM THE PI Resources UD CAS OMB Circular A-21 UD Grants Management Guide 17

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