Fundamentals: Introduction to Unallowable Costs at MIT

Transcription

1 OSP Fundamentals Series Fundamentals: Introduction to Unallowable Costs at MIT Presented by: The Office of Sponsored Programs The Office of the Vice President for Finance - 0

2 What We ll Talk About What the words Allowable and Reimbursable mean as they pertain to costs at MIT Specific activities and costs that are unallowable at MIT Treatment of unallowable costs by: The Office of Cost Analysis The Office of the Vice President for Finance You Resources and next steps - 1

3 Unallowable Costs: What It Means for You Fundamentals Everyone who initiates and/or approves financial transactions at MIT needs to be able to accurately determine: Is the cost eligible for reimbursement per MIT policy? Is the cost allowable per Federal policy (Circular OMB A-21 or Uniform Guidance, as applicable) What is the appropriate: Cost object? G/L account? - 2

4 Reimbursable Costs are Reimbursable when they adhere to MIT policies In a nutshell: Spend prudently Avoid conflicts of interest Don t accept gifts or gratuities from vendors Don t choose a vendor based on personal interest or gain Abstain from purchasing items for personal use Always allocate costs to the appropriate cost objects and GL accounts - 3

5 Allowable Costs are Allowable when they adhere to federal rules governing research. OMB (U.S. Office of Management and Budget) Circular A-21: Provides specific guidelines for determining costs applicable to research and development, training, and other sponsored work performed by colleges and universities under grants, contracts, and other Agreements with the Federal Government. Prohibits charging certain unallowable costs to federally sponsored agreements - 4

6 Four Principles of OMB A-21 Reasonable Allocable Consistently Treated Allowable - 5

7 Section J of Circular A-21 Provides principles to be applied when determining the allowability of certain costs. Specifies that in case of a discrepancy between the principles listed in Section J and a specific sponsored agreement, the sponsored agreement should always govern. - 6

8 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance or UG) Most Federal agencies implemented their new policies related to the release of the Uniform Guidance on December 26, Locates all OMB Circulars into Title 2 of the CFR (i.e. consolidation of 8 OMB Circulars into Title 2 of the CFR) Just like OMB Circular A-21, which it is replacing, the UG provides cost guidelines and prohibits charging unallowable costs to federally sponsored agreements. - 7

9 Four Principles of the Uniform Guidance Fundamentals Reasonableness Allocability Consistency Conformance - 8

10 UG Subpart E Cost Principles (Section 200.4xx) Just like Section J of A21, the UG Subpart E provides principles to be applied when determining the allowability of certain costs. Also specifies that in case of a discrepancy between the principles listed in Subpart E and a specific sponsored agreement, the sponsored agreement should always govern. - 9

11 What you should know about TREATMENT OF UNALLOWABLE COSTS - 10

12 Unallowable Costs & the Office of Cost Analysis Office of Cost Analysis Negotiates F&A, EB, Research Vacation and Lab Allocation rates with ONR Supplies documentation for audit by DCAA Point of contact for DCAA and other federal and nonfederal sponsored program audits Unallowable costs must be excluded from rate calculations! We identify and exclude unallowable costs by G/L and/or cost object - 11

13 Cost Objects An activity at MIT is identified in our accounting system as a Cost Object (account number) Cost objects tell us if an activity relates to instruction, research, both instruction and research, or another Institute activity We isolate unallowable activities using cost objects - 12

14 MIT s Big Cost Buckets Instruction Admissions, Registrar, student services Teaching & learning activities Fellowships Other Institute Activities Housing, Dining, MIT Press, Alumni Assn., Tech Review, other activities Sponsored Research Organized research projects, both federal and non-federal Facilities & Administration Central & campus administration Department heads, Lab directors, dept. headquarters Buildings, grounds & equipment maintenance, depreciation Libraries - 13

15 Instruction & Other Institute Activities Rules and regulations governing spending derived from MIT s Policies and Procedures Expense reimbursement for education is broad, including such items as food and beverages at a meeting, flying business class, a holiday party Fundamentals Costs that are permitted by MIT Policies & Procedures are reimbursable - 14

16 Federally sponsored research Rules and regulations for spending money derive from OMB s Circular A-21 or the Uniform Guidance which provide specific guidelines for determining costs applicable to research Costs eligible to be reimbursed by the federal government are allowable NOTE: A-21 and Uniform Guidance rules apply to both direct costs (sponsored research accounts) and indirect costs (accounts in the F&A cost pools such as department headquarters) - 15

17 Sponsored research with non-federal sponsors Rules and regulations for spending money derives from both OMB s Circular A-21 and MIT Policy and Procedures Basic principles of OMB A-21 still apply. Expense reimbursement for industry research is often broader than for federally sponsored research We say these expenses are allowable per the contract with the sponsor which takes precedence over A-21-16

18 Facilities & Administration Accounts such as department headquarters and other General Institute Budget (GIB) accounts may be included in MIT s F&A cost pools, recoverable from sponsored research projects via the F&A rate. Unallowable costs in the F&A pools are identified by GL account and excluded from recovery. - 17

19 GL Account / Cost Element GL Accounts Groups costs by type or purpose: Salaries & wages Materials & services Equipment Tuition Revenue & Transfers No matter the activity, whether education, research or other purposes, it is vital to use the correct G/L account - 18

20 Unallowable GL Accounts The term unallowable pertains to federal rules governing research. Certain costs are unallowable on federally sponsored research No matter where the money is spent, the cost must be assigned to the appropriate unallowable GL account. Exception: costs that are specifically allowed per contractual agreement with the sponsor - 19

21 Unallowable Costs on Federally Sponsored Projects Best Practices Be familiar with the terms of the award agreement Fundamentals Be aware of which set of cost principles apply (A-21 or UG) When in doubt consult: OMB Circular A-21: Uniform Guidance: /12/26/ /uniform-administrativerequirements-cost-principles-and-audit-requirements-forfederal-awards - 20

22 Best Practices Continued MIT OSP Uniform Guidance information: sponsored-programs-basics/ombs-uniform-guidance MIT Office of Sponsored Accounting Policies and Procedures: policies_procedures A-21 Prior Approvals: priorapproval_oct08.pdf - 21

23 Best Practices Continued Uniform Guidance Prior Approvals: See specific federal agency implementation. Your OSP Contract Administrator - 22

24 Unallowable Costs & VPF Offices: Accounting, Travel, Property, Procurement The Vice President for Finance Office is going to tell you about those special GLs and their impact on MIT s accounting John Larkin, Accounts Payable Andrea Siegel, Travel Dale Twomey, Sponsored Accounting Ryan McAlarney, Property Rositha Durham, Procurement - 23

25 Unallowable costs and ACCOUNTS PAYABLE - 24

26 GLs That Are Reimbursable But Unallowable Meetings Food and Beverages Alcoholic Beverages Recreation Related Expense Entertainment Promotional Items and Memorabilia Public Relations Publicity / Prizes and Awards Membership and Dues-Social Non-Reimbursable Expense Fundamentals - 25

27 MIT Memorabilia Personal Expenses Prizes and Awards Flowers/Floral Arrangements Catering/Food Contributions/Donations Items of Particular Interest - 26

28 Accounts Payable Best Practices Please remember to separate the meal and alcohol charges when submitting a request for reimbursement or PO invoice to A/P. All independent personal services, prizes/awards and honoraria payments are taxable. For prize/award payments to non-us citizens there is a mandatory 30% withholding on the amount submitted on the RFP. When approving PO invoices please indicate the receipt date of goods and/or services. - 27

29 Unallowable costs and TRAVEL - 28

30 Unallowable Travel GL Domestic Travel Unallowable GL Foreign Travel Unallowable These G/L accounts are for travel costs which are reimbursable under MIT s Travel Policy but which are not recoverable from the Federal government. In the Concur system expenses map to G/L s automatically based on the following: Trip Classification (Foreign vs. Domestic) Trip Purpose Expense Type - 29

31 Unallowable Travel Expenses, cont d Unallowable Trip Purposes in Concur Please note if the Trip Purpose in the Report Header is Unallowable the entire trip/every single expense in the report will map to the designated unallowable Travel G/L based on whether the trip is classified as foreign or domestic. Resource Development Retreat Prospective Student Visit President Travel Fundraising - 30

32 Unallowable Travel Expenses, cont d Unallowable Expense Types in Concur These can be either main line items in the report or itemizations within a line item and will always map to the designated unallowable Travel G/L based on whether the trip is classified as foreign or domestic in the Report Header. Alcohol Gift Upgrade Fee Airfare Difference (Itemization) Entertainment Other Non-Recoverable Expenses Misc. Promotional Expense Tips/Gratuities - 31

33 Unallowable Travel Expenses, cont d Best Practices: Sample Trip Trip Purpose: Conference Cost Object: Sponsored Project funded by the government NYU and Columbia are subcontractors and MIT is the prime contractor on the sponsored project. The MIT professor went to a conference in New York for the latest information on the science used in the sponsored research. The MIT professor had lunch with his NYU and Columbia collaborators to discuss their project. They had alcohol with their meal. The professor watched a movie in his room at the hotel. There was a charge for it. - 32

34 The alcohol is itemized and it s cost is charged to a discretionary account. The movie is itemized. It is not reimbursable and therefore is marked personal. - 33

35 Unallowable costs and SPONSORED ACCOUNTING - 34

36 Impact of Unallowable Costs on Sponsored Accounting Fundamentals Billings: Cost Reimbursable & Letter of Credit o Not billed to sponsor but remains on account Journal document approvals o Routed to Allowables for approval à majority rejected o If approved routed to WBS for approval Removal/reclassification of unallowable charges o Implement monthly/quarterly review Audits and Final Reporting o Closeout of WBS accounts and submission of final financial reports to sponsors significantly delayed - 35

37 Recorded Project Overrun Recorded Project Overrun (420314) This G/L account is used to remove an overrun on a sponsored program in accordance with Institute policy. Project overruns may be recorded to selected general accounts (cost centers) or fund accounts (internal orders) using this G/L account on both sides of a journal voucher transaction. It is unallowable to transfer an overrun on one project to a different sponsored research project. - 36

38 Unallowable costs and PROPERTY OFFICE - 37

39 Equipment and Allowability Capital/Minor Depends on the contract/ grant s terms and conditions Common clauses: All equipment purchases require prior approval Budgeted equipment may be purchased No Clause Fabricated Equipment - Integral components of fab are allowable - Some third party costs (e.g., machine shop) are allowable if 100% dedicated to fab - Unallowable: Salaries, food, travel, lab supplies, anything not directly related to the fab - 38

40 Best Practices for Property New Acquisitions Fabricated Equipment Familiarize yourself with equipment terms and conditions on sponsored research awards Help facilitate tagging of new acquisitions Notify Property Office of any equipment moves, equipment trade-ins, disposal plans, etc. ASK QUESTIONS Check parent WBS terms and conditions Check proposal budgets for unallowable costs Monitor spending/progress on fabs during construction Double check fab accounts just prior to closeout ASK QUESTIONS - 39

41 Notable Unallowable Equipment Cases DLC buys servers on subaward without getting the required prior approval; postpurchase approval initially granted by Georgia Tech. The next day, the prime sponsor overrules GT and disallows the server purchases. Result? MIT is docked $17K (value of servers) on the final payment from GT. PI builds a fabrication after sponsor rejects request to rebudget for this fabrication. Result? Fab is disallowed by sponsor five years after award ends. DLC writes ~$18K check to reimburse government for unallowable cost of fab. - 40

42 Unallowable costs and PROCUREMENT - 41

43 By the Numbers: who, what Fundamentals Please remember, we are a resource to assist you. 1. What do I need to purchase 2. Do I need an approval(s) to purchase this item(s) 3. Where do I go to purchase these supplies 4. What methods are available to purchase supplies 5. Where do I go to find MIT s preferred suppliers 6. Who do I call or should I need help 7. Intro to Procurement full presentation:

44 Purchasing Methods: 3 Options Preferred methods of purchasing products and services 1. Electronic Catalogs (ecat) via Atlas o Electronic ordering/invoicing direct to vendors 2. External Purchase Requisitions (via Atlas) o All other general and high-dollar purchases 3. MIT Procurement Card (ProCard) o Approved items <$3000, one-time purchases from vendors - 43

45 Equipment GL Account Coding Fundamentals Expense Cost GL Designation GL Account Equipment (Capitalized cost) Equipment (Expensed) $5000 or More Major Equipment $ $4999 Minor Equipment Computer Supplies <$1000 Computer Supplies/ Peripherals Office Supplies <$1000 Office Supplies Laboratory Supplies <$1000 Materials and Services/Laboratory Supplies Equipment Maintenance/Repairs All Equipment Repairs Maintenance & Repairs / Equipment: Any item that will last more than a year, is opera2onally complete and can be iden2fied as stand-alone is considered equipment. Purchases from the following product categories are normally considered equipment: furniture, computer, laboratory, scien;fic and test equipment, office and service equipment. The difference between capital (Major) and Minor equipment is determined by cost. Computer equipment at MIT is controlled by property record beginning at a cost of $1000 or greater. Detailed Procedure at: hlp://vpf.mit.edu/site/property (Policy & Procedure 2.0, Coding of Equipment Purchases). Please direct ques;ons about these designa;ons to Jo-Anne Chute ( or jchute@mit.edu). - 44

46 Training Resources - 45

47 What Do You Need to Do? Be aware of OMB Circular A-21 rules Code transactions with correct Cost Object and G/L account Review accounting statements for errors Ask for help when you re not sure - 46

48 Who to Contact for Help Fundamentals Area Contact Phone Accounts Payable John Larkin Journal Vouchers Payroll Payroll Service Center Property Jo-Anne Chute Michael McCarthy Ryan McAlarney Sponsored Accounting Tim Vacha Dale Twomey Travel Andrea Siegel Sourcing and Procurement Procurement Help /phone Rositha Durham Ann Julian David Petricone Cost Analysis John Donahue Sarah Brady

49 QUESTIONS - 48