Cost Accounting Standards & Disclosure Statement

Transcription

1 Cost Accounting Standards & Disclosure Statement Ginger Baker, Manager SW Systems Office Cost Analysis and Sponsored Program Administration (907)

2 Today s Topics Overview and History Cost Accounting Standards Disclosure Statement Navigating the Disclosure Statement Applying the Disclosure Statement Non-Compliance Issues 2

3 Acronyms Common Terms

4 Overview and History

5 Overview and History Concern about pricing and accounting practices of defense contractors 1968 No consistency Amendments - Defense Production Act Government Accounting Office (GAO) Study to determine feasibility of Establishing & applying cost accounting standards Greater uniformity in cost accounting Negotiating & administering procurement contracts 5

6 Overview and History Recommendations CAS Feasible - greater uniformity and consistency Should not be limited to Defense contracts Benefits vs. costs Eliminate alternative practices Contractor should be required to maintain records 6

7 Overview and History Congress created CASB Tasked to increase uniformity and consistency CASB created CAS 19 commercial standards Implemented standards in 1980 Applied to negotiated defense contracts in excess of $100,000 Educational Institutions were exempted from CAS 7

8 Overview and History CASB dissolved CASB reestablished Permanent, independent board Office of Federal Procurement Policy in OMB Increased contract threshold to $500,000 Extended coverage to all Federal contracts 8

9 Overview and History F&A cost concerns Scandals CAS coverage extended to colleges and universities Four standards Negotiated Federal contracts and subcontracts greater than $500,000 9

10 Overview and History CAS Exemptions Negotiated contracts and subcontracts less than $500,000 Sealed bid contracts Contracts and subcontracts with small businesses or foreign governments or foreign concerns Contracts and subcontracts in which prices are set by law Firm fixed price contracts Contracts and subcontracts performed outside U.S. Disclosure Statement required if meet certain thresholds 10

11 Overview and History 1996 Amendment to A-21 Emphasis on consistency among and within institutions Incorporates the four cost accounting standards Disclosure Statement Requirements Circular A-21, C.14 Extends coverage of A-21 to all sponsored agreements Contracts and grants regardless of award amount 11

12 Overview and History 2001 Focus is on Consistency and standardization Institutions must be proactive in identifying compliance problems 12

13 Definitions

14 Definitions Cost objective A specific or major function of the institution, a particular service or project, sponsored agreement, or a F&A cost activity OMB Circular A-21, Section B

15 Definitions Allocation Process of assigning a cost, or a group of costs, to one or more cost objective, in reasonable and realistic proportion to the benefit provided or other equitable relationship. OMB Circular A-21, Section B

16 Definitions Allocable A cost is allocable if It is chargeable or assignable to a particular cost objective according to the relative benefit received or other equitable relationship. OMB Circular A-21, Section C.4.a. 16

17 Definitions Specifically, a cost is allocable to sponsored agreements if the cost Is incurred to advance the work under the sponsored agreement Benefits sponsored and other work Proportions can be reasonably estimated Is necessary for the overall operation of the institution OMB Circular A-21, Section C.4.a. 17

18 Definitions Direct cost Those costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to these activities relatively easily with a high degree of accuracy. OMB Circular A-21, Section D.1. 18

19 Definitions F&A costs (indirect costs) Those costs incurred for common or joint objectives and therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity. OMB Circular A-21, Section E.1. 19

20 Definitions Allowable Costs Costs that are reasonable, allocable to sponsored agreements under principles and methods outlined A-21, given consistent treatment through application of those principles and methods, conform to any limitations or exclusions in A-21 or in the sponsored agreement as to types or amounts of cost items. OMB Circular A-21, C.2. 20

21 Definitions Unallowable cost Any cost, which, under the provisions of any pertinent law, regulation, or sponsored agreement, cannot be included in prices, cost reimbursements, or settlements under Government sponsored agreement to which is is allocable. CAS (4) 21

22 Definitions Cost accounting practice Any disclosed or established accounting method or technique which is used for allocation of cost to cost objectives, assignment of cost to cost accounting period, or measurement of cost CAS

23 Cost Accounting Standards Consistency, Consistency, Consistency!!!!

24 CAS Perspective OMB CIRCULAR A-21 University to comply with existing standards COST ACCOUNTING STANDARDS CAS 501 CAS 502 CAS 505 CAS 506 Describes how University Business is Conducted Required Must Include DISCLOSURE STATEMENT (DS-2)

25 Cost Accounting Standards OMB Circular A-21 Section C.10 C.13 Appendix A Four standards CAS 501 CAS 502 CAS 505 CAS

26 Cost Accounting Standards Designed to achieve uniformity and consistency in the measurement, assignment, and allocation of costs to government contracts Promulgated by the government in the interest of the government 26

27 Cost Accounting Standards Cost Accounting Standards vs. Cost Principles (A-21) CAS addresses measurement, assignment, and allocation A-21 addresses cost allowability Costs that are not accounted for in accordance with CAS are unallowable 27

28 Cost Accounting Standards Federal regulations affect the accounting of funds from all funding sources because of F&A Cost sharing 28

29 Cost Accounting Standards F&A University funds are included in the calculation of the F&A rate charged on federal sponsored agreements Distorted F&A cost rate Incorrect assignment and allocation of costs Results in an over or under recovery of F&A costs each time a project is billed for F&A Accumulated over recovery can result in repayment to the government University funds sacrificed 29

30 Cost Accounting Standards Cost sharing University funds are included in total project costs funded by the federal government Incorrect assignment of costs in rate calculation Unallowable costs Must be accounted for and reported 30

31 CAS 501 Consistency in estimating, accumulating and reporting costs 31

32 CAS 501 Purpose Estimating practices for a proposal are consistent with cost accounting practices used in accumulating and reporting costs Comparable transactions are treated alike Cost estimates are reliable Improved cost control Enhanced accountability 32

33 CAS 501 Fundamental requirements Estimate costs same way that incurred costs are accumulated and reported Accumulate and report costs consistent with cost estimating procedures Actual costs may be recorded in more detail than those provided in proposal estimates, but not vice versa 33

34 CAS 501 Techniques for application Comparability Must be able to compare costs estimated in proposal with actual costs Consistency Direct or indirect Assignment to F&A cost pools Allocation methodologies 34

35 CAS 501 Example of consistent practice Proposal estimate Average direct labor rate by category Actual Actual labor recorded by the individual Proposal estimate Individual costs are estimated and identified to project in budget Actual Costs are charged directly to the project as incurred 35

36 CAS 501 Examples of inconsistent practice Proposal estimate PI effort proposed on a research project is the anticipated effort required to successfully perform the project Actual Effort devoted to the project is charged to the restricted fund to the extent of available funding. Effort devoted to the project, but paid from general funds, is charged to an instruction account 36

37 CAS 502 Consistency in allocating costs incurred for the same purpose 37

38 CAS 502 Purpose Each type of cost is allocated only once and on only one basis to any contract or other cost objective Criteria for allocating costs to sponsored agreements is same for all similar cost objectives Prevent overcharging, double counting, or double dipping 38

39 CAS 502 Fundamental requirements All costs incurred for the same purpose in like circumstances are either direct or indirect only If a sponsored agreement is charged directly for a cost, no other similar costs incurred for the same purpose, in like circumstances, can be in the F&A cost pools and subsequently the F&A rate (and vice versa) 39

40 CAS 502 Techniques for application Apply to estimates used in proposals and to actual costs Describe in DS-2 which cost items are direct which are indirect Describe criteria of dissimilar circumstances and/or different purposes for hybrid costs 40

41 CAS 502 Example of costs incurred for same purpose Purchasing support Indirect cost Sponsored project requires disproportionate amount of subcontract administration Costs cannot be charged both directly and indirectly 41

42 CAS 502 Examples of costs not incurred for same purpose Test equipment costs Special - charged directly General purpose - normally indirect Accounting treatment disclosed 42

43 CAS 502 Costs incurred in preparing and submitting proposal Renewal proposal Existing award s specific requirement Direct cost of existing contract Existing award has no specific requirement Indirect cost of department New Proposals Indirect cost of department 43

44 CAS 502 Fire protection 10 general firefighters Indirect cost New contract requires 3 firemen at fixed post 24 hours due to high risk materials Direct cost 44

45 Circular A-21, Section F.6.b Dept administration expenses special care should be exercised to ensure that costs incurred for the same purpose, in like circumstances, are treated consistently as either direct costs or F&A costs. 45

46 Circular A-21, Section F.6.b Normally direct Technical staff salaries, lab supplies, telephone toll charges, animals and care costs, computer costs travel costs, and specialized shop costs Identifiable to particular project 46

47 Circular A-21, Section F.6.b Normally F&A Administrative & clerical salaries Office supplies Postage Local telephone costs Memberships 47

48 Circular A-21, Section F.6.b Potential different circumstances Nature of activity is not the same Direct charging of administrative & clerical salaries may be appropriate where a major project or activity Explicitly budgets for administrative or clerical services AND Individuals can be specifically identified with project or activity 48

49 Circular A-21, Section F.6.b Major project is defined as a project that requires an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments. 49

50 Circular A-21, Exhibit C Criteria Inappropriate to charge these costs directly to a specific sponsored agreement if, in similar circumstances, the costs of performing the same type of activity for other sponsored agreements is included in department administration costs. 50

51 CAS 505 Accounting for Unallowable Costs 51

52 CAS 505 Purpose Facilitate the negotiation, audit, administration and settlement of sponsored agreements by establishing the guidelines covering Identification of unallowable costs Consistent cost accounting treatment of all costs, including unallowable costs Does not address which costs are allowable 52

53 CAS 505 Fundamental requirements Two types Costs expressly unallowable by sponsor, laws, or rules Costs directly associated with unallowable costs Identify and exclude all costs from any billing, claim, application or proposal that are Expressly unallowable OR Mutually agreed to be unallowable 53

54 CAS 505 All unallowable costs are subject to the same cost accounting principles as allowable costs Allocable 54

55 CAS 505 Fully allocate overrun costs to agreements Cost overruns must be identified Amount over ceiling Not thru specific identification of particular cost items 55

56 CAS 505 Techniques for application Documentation required as support for proposals, billings, or claims must be adequate to Identify unallowable costs through specific account codes and program codes Identify cost accounting treatment of the unallowable costs 56

57 CAS 505 A-21, Section J Examples of unallowables Advertising Alumni activities Bad debt Dependent/spouse tuition waivers Alcoholic beverages Donations 57

58 CAS 506 Cost Accounting Period 58

59 CAS 506 Purpose Provide criteria for the selection of cost accounting time periods for F&A rate development Enhance objectivity, consistency, and verifiability, and promote uniformity and comparability in sponsored agreement measurements 59

60 CAS 506 Fundamental requirement Use fiscal year, except Costs of indirect function which exists for part of fiscal year may be allocated to cost objectives of same period Another annual period may be used if an established practice at institution Recharge activities may have a different year 60

61 CAS 506 Same accounting period used for both F&A pool and direct base costs 61

62 CAS 506 Techniques for application Government can agree to allow institution to use a fixed annual period other than its fiscal year 62

63 10 minute break! 63

64 Disclosure Statement (DS-2)

65 Disclosure Statement (DS-2) What is it? A written description of an educational institution s cost accounting practices and procedures Meets requirements of Public Law

66 Disclosure Statement (DS-2) When is it required? A-21, Section B Total federal sponsored awards of $25 million or more in most recent fiscal year 66

67 Disclosure Statement (DS-2) What is required? Submit for each business unit Significantly different practices Maintain accurate DS-2 Actual practices consistent with disclosed Amend for any changes If material impact, changes must be approved in advance by ONR Cost impact study required Proposal year prior to proposal preparation 67

68 Disclosure Statement (DS-2) SW original, submitted December 1997 Effective August 17, 1995 Revision 1, effective July 1998 Revision 2, effective July 2001 Pending determination of adequacy from ONR 68

69 Disclosure Statement (DS-2) UAF original, submitted December 1997 Effective August 17, 1995 Revision 1, effective July 1997 Revision 2, effective July 1998 Revision 3, effective July 2001 Pending determination of adequacy from ONR 69

70 Disclosure Statement (DS-2) Disclosure statement must be both Adequate Compliant Adequacy audit to determine if DS-2 is Current Accurate Complete 70

71 Disclosure Statement Submittal Compliance audit to determine if disclosed practices comply with CAS Circular A-21 Cost adjustments plus interest if fail to Disclose practices Consistently follow practice 71

72 Navigating the DS-2

73 Disclosure Statement (DS-2) Cover Sheet Name & address of institution Type or reporting unit Official contact information Statement type and effective date Cognizant federal agency and auditor Certification Complete and accurate disclosure of accounting practices Signed by VP for Finance 73

74 Graphical Picture of Disclosure Statement (DS-2) I. General Information VII. Central Systems & Group Expenses II. Direct Costs VI. Deferred Compensation & Insurance Costs DS-2 III. Indirect Costs Specialized Service Centers V. Leave Costs & Applicable Credits IV. Depreciation & Use Allowance

75 Disclosure Statement (DS-2) Format Select from methods described Continuation sheets Description of hybrid practices Descriptions of specific cost practices 75

76 Disclosure Statement (DS-2) SW Systems Office DS-2 Current Cover Sheet Certification Part I Part VII Future Complete Parts IV, V, and VI if these types of cost amounts incurred are material 76

77 Disclosure Statement (DS-2) UAF DS-2 Cover sheet Certifications Part I Part VI 77

78 DS-2 Part I General Information Description of accounting system Accrual Integration of cost accounting and financial accounting 78

79 DS-2 Part I General Information Unallowable costs Hybrid (continuation sheet) Specific account and program codes Query of responsible individuals for costs not formally identified in accounting system GCS monitors compliance with A-21 and federal agency policy Travel and cost transfers reviewed for propriety Shifting losses prohibited 79

80 DS-2 Part I General Information Treatment of unallowable costs (continuation sheet) Unallowable expense In direct cost bases remain in base In F&A pool excluded from calculations Unallowable activities - OIA Unallowable activities space OIA Procedure assures that Appropriate share of F&A gets allocated to unallowable activities Other activities are not charged for support costs that benefit unallowable expenses and activities 80

81 DS-2 Part I General Information Cost accounting period State Laws or Regulations 81

82 DS-2 Part II Direct Costs Criteria for determining how costs are charged to federally sponsored agreements or similar cost objectives Describe on continuation sheet institution s criteria for determining when costs incurred for the same purpose, in like circumstances, are treated either as direct costs only or as indirect costs only with respect to final cost objectives 82

83 DS-2 Part II Direct Costs Direct Costs Identified specifically with OR, IN, OSA, OIA With relative ease High degree of accuracy Allowable, A-21 Not expressly disallowed in budget 83

84 DS-2 Part II Direct Costs Multiple projects - assign costs based on relative benefits received by that project Must also be Reasonable Necessary Allowable In accordance with T&C of sponsored award Cost sharing, mandatory and voluntary Separately budgeted and accounted for Included in appropriate direct base for F&A rate development 84

85 DS-2 Part II Direct Costs Cost categories Salaries, wages & related fringe benefits -Programmatic personnel necessary to meet the objectives of the project/activity Materials Project supplies Travel Telephone - non-routine expenses Subcontract, subgrants, subawards Services - recharge center charges, professional & consultants Capitalized scientific and technical equipment Postage - special handling Miscellaneous - participant expenses and fees 85

86 DS-2 Part II Direct Costs Indirect Costs General institutional costs incurred for common and joint objectives that cannot be identified Readily AND Specifically with a particular direct activity Indirect pools include O&M, depreciation, GA & DA expenses, SPA & OSP, library costs, and SS Allocated in accordance with A-21 86

87 DS-2 Part II Direct Costs Use organization codes with their corresponding program codes to identify activity types by unit Direct type costs can be charged to indirect pools if Not material OR For general institutional purposes GA & DA are normally indirect activities GA - Financial Services, Purchasing, Personnel, Post Office, Business Office, Provost, Chancellor, Vice Chancellor DA - Expenses incurred to support the normal core operations of the unit 87

88 DS-2 Part II Direct Costs Cost categories Salaries, wages and related fringe benefits - clerical & administrative personnel that perform a broad range of baseline general support activities Office supplies - routine expenditures Postage - general & routine mailings not requiring special handling Telephone - local recurring phone charges, installation, and telephone equipment rentals Equipment - general and office Repair and maintenance 88

89 DS-2 Part II Direct Costs Indirect costs Considered Direct Costs Costs incurred for the same purpose, in like circumstances, are consistently treated as direct or indirect Costs normally charged indirectly may be charged as direct costs if Purpose and circumstances are different Size, nature, and complexity of project - important considerations Existence of unlike circumstances evaluated on case by case basis 89

90 DS-2 Part II Direct Costs May be appropriate where Services are required by the project scope Individuals or cost can be accurately and specifically identified with the project with relative ease Approved project budget clearly describes the need for services Other key factors are Specific type and nature of services required Nature of work preformed is functionally different 90

91 DS-2 Part II Direct Costs Examples of activities where is may be appropriate to charge (Circular A-21, Exhibit C) Large, complex programs Extensive data accumulation, analysis and tabulation Preparation and production of manuals, large reports, or books Extensive travel and meeting arrangements for large numbers of participants Management of a project in locations that are remote from campus Individual projects requiring project-specific technical or administrative work 91

92 DS-2 Part II Direct Costs Non-federal agreements Indirect type costs may be charged as direct costs When not expressly prohibited by sponsor Technical violation of CAS and A-21 Federally sponsored agreements are not adversely impacted financially 92

93 DS-2 Part II Direct Costs Description of direct materials (continuation sheet) Direct materials are always related to the project Project, teaching, professional, technical, and scientific supplies Periodical subscriptions and books Other supplies/commodities and materials when readily identifiable to a specific project 93

94 DS-2 Part II Direct Costs Methods of charging direct materials and supplies Direct purchases for projects are charged to projects at Actual invoiced costs net of discounts taken Inventory requisitions from central or common, institution-owned inventory Various methods Describes specific practices by inventory (continuation sheet) 94

95 DS-2 Part II Direct Costs Description of direct personal services (continuation sheet) Salaries and wages plus fringe benefits Job group descriptions 95

96 DS-2 Part II Direct Costs Method of charging direct salaries and wages Two methods Payroll distribution records Staff & students After-the-fact activity records Faculty, staff, & students Continuation sheet Staff Students 96

97 DS-2 Part II Direct Costs Salary and wage cost distribution system Methods described in are used by all employees within each major function or activity 97

98 DS-2 Part II Direct Costs Salary and wage cost accumulation system (continuation sheet) Describes process for Charging original labor costs Labor reallocation Employees charging sponsored projects subject to bi-weekly leave/effort reporting using afterthe-fact activity records 98

99 DS-2 Part II Direct Costs Description of fringe benefits (continuation sheet) Recovered through the computed benefit rates Lists Compensated absences Staff benefits 99

100 DS-2 Part II Direct Costs Method of charging direct fringe benefits (continuation sheet) Recharge rates Established annually based on projected expenses Over or under recovery carried forward and liquidated Employees grouped by benefit received Describes base to which charge is applied 100

101 DS-2 Part II Direct Costs Description of other direct costs Lists other items (continuation sheet) Travel Sub-agreements Contractual services Recharge activities Equipment Student aid Miscellaneous 101

102 DS-2 Part II Direct Costs Cost Transfers Cost transfers are not always based on the same amount or rate originally used to charge or allocate costs to a project (continuation sheet) Costs transfer for direct costs is always based on original actual cost Current F&A rate at the time of the transfer is applied which may vary from original rate 102

103 DS-2 Part II Direct Costs Interorganizational transfers Interorganizational transfers for materials, supplies, and services are charged at full cost excluding indirect costs attributed to group or central office 103

104 DS-2 Part III Indirect Costs Indirect cost categories - accumulation and allocation Accumulation method, base, and allocation sequence for all applicable indirect cost categories 104

105 DS-2 Part III Indirect Costs Service centers Select codes that describe service centers including Type of cost objectives billed Amount of indirect costs allocated Basis for billing rates Describe rates Frequency of comparison of actual costs to revenue Over and under recovery accounting 105

106 DS-2 Part III Indirect Costs Continuation sheet Describe service centers that specifically meet the following criteria Explain Annual operating budgets greater than $1 M OR Charge significant amounts to federally sponsored agreements either directly or indirectly Circumstances where users are charged at different rates Handling of over or under recoveries 106

107 DS-2 Part III Indirect Costs Indirect cost pools and allocation bases Indirect costs are allocated to instruction, organized research, other sponsored activities, and other institutional activity based on MTDC 107

108 DS-2 Part III Indirect Costs Composition of indirect cost pools Describe major organizational components, subgroupings of expense and elements of cost included (continuation sheet) F&A pools include Salaries, wages and related fringe benefits Materials & supplies Services Travel 108

109 DS-2 Part III Indirect Costs F&A pools exclude Pools are Equipment and other capital expenditures Financial aid Unallowable expenses Depreciation/Use Allowance/Interest O&M GA DA SPA 109

110 DS-2 Part III Indirect Costs Library Student Administration and Services Service Centers Composition of allocation bases Describe each allocation base used for each pool (continuation sheet) Listed by pool and describes allocation base used in F&A rate development 110

111 DS-2 Part III Indirect Costs MTDC base defined Included Salaries, wages and related fringe benefits Materials and supplies Services Travel Subgrants and subcontracts, <= $25K Excluded Equipment and capital expenditures Charges for patient care Tuition remission Long-term space rentals Scholarships and fellowships Subgrants and subcontracts, > $25K 111

112 DS-2 Part III Indirect Costs Allocation of indirect costs to programs that pay less than full indirect costs Appropriate direct costs are included in the allocation bases regardless of whether F&A costs are fully reimbursed by the sponsoring organization 112

113 DS-2 Part IV Depreciation & Use Allowances Depreciation charged to federally sponsored agreements or similar cost objectives By asset class (continuation sheet) Depreciation method Useful life Property unit Residual value 113

114 DS-2 Part IV Depreciation & Use Allowances Asset valuations and useful lives Asset valuations and useful lives are consistent with our financial statements Fully depreciated assets No usage charge for fully depreciated assets is charged to any cost objective 114

115 DS-2 Part IV Depreciation & Use Allowances Treatment of gains and losses on disposition of depreciable property Credited or charged to the same pools where depreciation of the assets originally was charged 115

116 DS-2 Part IV Depreciation & Use Allowances Criteria for Capitalization Minimum dollar amount of $2,500 Minimum life of greater than 1 year Continuation sheet Specific capitalization criteria by asset class 116

117 DS-2 Part IV Depreciation & Use Allowances Group or mass purchase Group or mass purchases or similar items are not capitalized unless they individually meet the criteria 117

118 DS-2 Part V Other Costs and Credits Method of charging leave costs Accrual (continuation sheet) Compensated absences charged on accrual basis Sabbatical leave is not charged to sponsored programs unless specifically budgeted 118

119 DS-2 Part V Other Costs and Credits Applicable credits Hybrid method (continuation sheet) Specifically identified with a particular expenditure Offset against expenditure to which they relate Other miscellaneous receipts Offset against the applicable F&A cost pool Or if in sponsored projects or other direct cost accounts Program receipts - not offset against expense 119

120 DS-2 Part VI Deferred Compensation & Insurance Pension Plans Defined-contribution pension plans Defined-benefit pension plan Post retirement benefits other than pension Determination of PRB costs 120

121 DS-2 Part VI Deferred Compensation & Insurance Self-insurance programs (Employee group insurance) Costs of program charged using multiple methods (continuation sheet) Describes types of coverage Charged through staff benefit recharge rate 121

122 DS-2 Part VI Deferred Compensation & Insurance Self-insurance programs (worker s compensation & casualty insurance) (continuation sheet) Describes types of coverage Administered at system level Allocated to each major campus 122

123 DS-2 Part VI Deferred Compensation & Insurance Worker s compensation and liability Costs are charged using multiple methods (continuation sheet) Worker s compensation Liability Marine coverage 123

124 DS-2 Part VI Deferred Compensation & Insurance Casualty insurance Costs are charged using multiple methods (continuation sheet) Liability accrued based on estimated repair or replacement costs Costs less credit for estimated interest allocated to major campuses based on risk exposure adjusted for loss experience 124

125 10 minute break! 125

126 Applying the DS-2

127 Applying the DS-2 Questions to consider Is this cost allowable? If not allowable, where should this type of cost be charged? Is this cost for items or activities that we routinely charge to department administration accounts? Is the project federally funded? 127

128 Applying the DS-2 Is the project funded with federal pass thru funds? Are these costs part of cost sharing? Am I treating costs consistently? 128

129 Applying the DS-2 Direct vs. indirect Critical that faculty and staff can distinguish Think outside the box How do other departments treat this cost or activity? Network 129

130 Applying the DS-2 We cannot charges costs normally treated as indirect costs directly to sponsored programs Unless we can substantiate that those costs are Not also being covered in whole or in part by department administrative funds Indirectly to the program 130

131 Non-Compliance

132 Common Areas of Noncompliance Effort Certification Indirect Costs Cost Transfers Prior Approvals Cost Overruns Inconsistent Charging Practices Period of Performance Cost Sharing Recharge Centers Unallowables 132

133 Effort Certification Certify budgeted instead of actual Don t match effort and charges Certification must be by individual with first hand knowledge of all employee s effort Cost sharing not captured 133

134 Percent of Effort Principal Investigator (PI) works 100 hours for the pay period - 60 hours on instruction and 40 hours on a sponsored project Percent of effort is 60% to the instruction org and 40% to the project org 134

135 Percent of Effort Conversion to hours is 48 hours instruction and 32 hours project It is not correct to code 40 actual hours to the project with remainder (80-40 = 40) to instruction 135

136 Actual Practices at U of X Charge labor to a project or org with budget Labor not charged to activity actually taking place Work, but not charge project, so don t have overruns Convert the dollar amount funded by instruction into hours allowed to charge 136

137 Actual Practices at U of X Record hours worked on research, remainder to other; not based on percentage of effort Labor charged first to restricted funds, then remainder to unrestricted research orgs or instruction orgs 137

138 Cost Transfers Can raise compliance concerns High volume Timing Insufficient documentation Inconsistent with effort certification Auditors may assume transfers are done to accommodate funding needs 138

139 Cost Overruns A-21 - Overruns UA budget mechanisms make overrun accounting painful Negative connotations Unplanned cost sharing How long in overdraft status Charge to departmental guarantee org after deadline 139

140 Inconsistent Charging Practices Rotating costs based on funding availability Distribution base not reflective of usage/benefit Charges without actual costs incurred Noncompliance with recharge policy 140

141 Recharge Centers Rates are not cost-based Rates are not adequately documented Inappropriate treatment of surpluses and deficits Surpluses used to fund equipment Deficits included in F&A pools 141

142 Recharge Centers Costs included in rates and also in F&A Equipment depreciation Rates charged to federal users may subsidize other users Must charge all users Feds must be charged lowest rate 142

143 Unallowables Unallowables to allowable account codes Catering Unallowable dues & memberships 143

144 Indirect Costs Charged as direct costs to sponsored projects Admin/Clerical salaries Administrative Travel Office supplies 144

145 Prior Approvals Must obtain in accordance with federal regulations, agency requirements, or terms and conditions of award for: Equipment purchases Foreign travel and Significant rebudgeting Include these items in proposal if possible 145

146 Period of Performance Costs incurred outside performance period are unallowable Pre-award costs usually approved up to 90 days prior to start date Costs posted after date are allowable if incurred prior to end date 146

147 Period of Performance Equipment purchased at end of project = red flag No cost extensions are routinely granted and should be requested when costs are expected to be incurred late in the award 147

148 Cost Sharing Represents the portion of the project not borne by the sponsoring agency Must be documented Must be included in the related direct cost base CAS 501 requires consistency between proposal and accounting If include cost sharing in proposal, must account for it 148

149 Cost Sharing Mandatory Required by legislation or by sponsoring agency May be fixed dollar amount or fixed ratio 149

150 Cost Sharing Voluntary Not mandatory or exceeds mandatory match If incorporated in proposal, it becomes a condition of the award, ie. it is committed Committed M/CS requires same accounting as mandatory 150

151 Cost Sharing Verifiable from University records Not included as contribution on another federal program Not charged directly or indirectly to feds under another sponsored agreement unless specified in award document Necessary and reasonable 151

152 Cost Sharing Allowable costs under A-21 Not claimed as part of indirect costs Administrative and support staff salaries Depreciation charges for equipment Not paid for with program income unless feds expressly permit this Incurred during period of performance 152

153 Cost Sharing Allowable Salaries and fringe benefits Travel, contractual, commodities Graduate assistant tuition remission Equipment cost only if include as line item in budget Waived F&A costs recorded via memo to the file, not in Banner Third party contributions, cash or in-kind 153

154 Cost Sharing Unallowable Clerical and administrative support University owned facilities University owned equipment Other costs included in F&A rates 154

155 Other Support A.K.A. co-funding, as needed effort Cash or in-kind contributions pledged to support the project, but not required by federal legislation or award document Not required to be documented or accounted for as M/CS Critical it s not characterized as M/CS 155

156 Results of Non-Compliance Overcharges Feds Violates CAS Provides unreliable internal management information Reputation Dollars!!!!! 156

157 Miscellaneous Disclosure Statements Available on Web Questions Future Training Opportunities February Cost Sharing March - Recharge 157

158 Contacts University of Alaska Fairbanks Grants & Contracts Personnel Statewide Systems Office Cost Analysis and Sponsored Program Administration Dept. Ginger Baker, Manager Tanya Hollis, Accountant

159 Please complete feedback sheets. Thanks for coming! 159