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7 PART I - GENERAL INFORMATION No. Description Part I Description of Your Cost Accounting System for recording expenses charged to Federally sponsored agreements (e.g. contracts, grants and cooperative agreements). (Mark the appropriate line(s) and if more than one is marked, explain on a continuation sheet.) A. Accrual B. X Modified Accrual Basis 1 C. Cash Basis Y. Other Integration of Cost Accounting with Financial Accounting. The cost accounting system is: (Mark one. If B or C is marked, describe on a continuation sheet the costs which are accumulated on memorandum records). A. Integrated with financial accounting records (Subsidiary cost accounts are all controlled by general ledger control accounts.) B. Not integrated with financial accounting records (Cost data are accumulated on memorandum records.) C. X Combination of A and B Unallowable Costs. Costs that are not reimbursable as allowable costs under the terms and conditions of Federally sponsored agreements are: (Mark one). A. Specifically identified and recorded separately in the formal financial accounting records 1. B. Identified in separately maintained accounting records or workpapers. 1 C. Identifiable through use of less formal accounting techniques that permit audit verification. 1 D. X Combination A, B or C 1. E. Determinable by other means 1 1 Describe on a Continuation Sheet I-1

8 PART I GENERAL INFORMATION No. Description Treatment of Unallowable Costs. (Explain on a continuation sheet how unallowable costs and directly associated costs are treated in each allocation base and indirect expense pool, e.g., when allocating costs to a major function or activity; when determining indirect cost rates; or, when a central office or group office allocates costs to a segment.) Cost Accounting Period: July 1 to June 30 (Specify the twelve month period used for the accumulation and reporting of costs under Federally sponsored agreements, e.g., 7/1 to 6/30. If the cost accounting period is other than the institution s fiscal year used for financial accounting and reporting purposes, explain circumstances on a continuation sheet.) State Laws or Regulations. Identify on a continuation sheet any State laws or regulations which influence the institution s cost accounting practices, e.g., State administered pension plans, and any applicable statutory limitations or special agreements on allowance of costs. 1 Describe on a Continuation Sheet. I-2 COST ACCOUNTING STANDARDS BOARD Part I Page 1 of 3

9 No. Description - Revision No. 2 Effective Date 6/30/ R R R1 Description of your Cost Accounting System Modified Accrual Basis The Medical University of South Carolina (MUSC) uses the accrual method of assigning costs to Federal projects except for annual, sick and holiday leave costs, which are charged on a cash basis. Unused accrued annual leave payout (termination pay) and sabbatical leave costs are included as part of the fringe benefits rates. Integration of Cost Accounting with Financial Accounting - Combination of A and B The cost accounting system is integrated with the financial accounting system except for the following: 1. The accrual of Compensated personal absences is recorded in memorandum records. 2. Departmental Administration (DA): MUSC does not have a separate function in its financial accounting records for DA. However, the cost elements used to develop the DA cost pool are included in the University s financial accounting records. DA is calculated within the cost accounting system using data downloaded from the university s financial system into a Direct Charge Equivalent (DCE) formula driven system. See Continuation Sheets, Sections and for a complete description of the calculation and methodology for the DA cost pool. Unallowable Costs Combination of A, B or C Costs that are not reimbursable as allowable under the terms and conditions of Federally sponsored agreements or by regulation due to the type of expense or the nature of the activity causing the cost to be incurred are identified as follows: MUSC uses an accounting string referred to as a UDAK (User Defined Accounting Key), which consists of six components. Refer to Finance Administrative Policies and Procedures No for a detailed description of each UDAK component. Each UDAK has a unique project number, whereas, anytime any component of the UDAK is changed a new project number is created. An entire UDAK can be identified as unallowable by including the word Unallowable as the first word in the description field. With an unallowable UDAK either the regular expense account codes or the unallowable expense account codes may be used to charge cost to the UDAK. A component of the UDAK represents the specific expense account code. I-3

10 Part I Page 2 of 3 No. Description - Revision No. 2 Effective Date 6/30/ (continued) R1 I. Unallowable Expense: The University s accounting system categorizes costs by expense type in the general ledger (G/L) using specific account codes. Unallowable expenses are recorded and identified by using a 3 as the second digit in the five digit expense account code. The accounting system will not permit expenses coded as unallowable to be charged to a Sponsored project. II. III. Unallowable Activities: Activities and their related expenses are accumulated, by expense type, in UDAK accounts. A specific activity may have several UDAKs where their expenses are captured. MUSC identifies unallowable activities through the unit number segment of the UDAK, based on a review of the unit name, description of the unit s activities, discussions with knowledgeable university personnel, or a review of the after the fact activity reports. MUSC s review for unallowable activity costs include the identification of directly associated costs. The documentation supporting the determination of the allowability of UDAK accounts is maintained in the F&A cost rate study workpapers, as appropriate. Direct Costs: Direct salary in excess of the NIH salary cap is treated as an unallowable cost and captured in a separate UDAK within the University s accounting system. These UDAKs are coded using a function reporting code of 26. Direct costs that are determined by audit, by the specific terms of a sponsored agreement to be unallowable, or simply represent costs spent in excess of the approved budget are charged to cost overrun accounts or a separate unallowable costs UDAK. These accounts are funded from University or unrestricted sources and are included in the appropriate base when calculating the F&A rate. The cost overrun or unallowable UDAKs are identified by the description field of the UDAK and will begin with Cost Overrun or Unallowable depending on the nature of the costs. I-4

11 Part I page 3 of 3 No. Description - Revision No. 2 Effective Date 6/30/ R1 Treatment of Unallowable Costs I. Facilities and Administrative Cost Pools: Unallowable costs (including directly associated costs) are removed from the F&A cost pool prior to the allocation of the pool expenses to the benefiting activities (functions). Unallowable activities benefiting from allowable F&A costs are included in the Other Institutional Activities function and draw their appropriate share of F&A costs. When unallowable expenses are recorded as part of an indirect cost pool, the cost is removed from the pool and transferred to the Other Institutional Activities (OIA) pool. These rules are uniformly applied to each F&A cost pool described in Part III of this disclosure. II. Allocation Bases: When unallowable costs are recorded as part of a direct base, the cost is left in the base to draw its allocable share of F&A costs. Unallowable F&A costs, excluding unallowable General and Administrative (G&A) and Operations and Maintenance (O&M)) are included in the Other Institutional Activities base. G&A and O&M unallowable costs are excluded from the G&A allocation base in order to comply with the A-21 specified stepdown allocation sequence. Salary dollars in excess of the NIH regulatory salary cap are included in the same allocation base as the sponsored salary expenses. Cost overruns are included in the same allocation base where the sponsored project expenditures reside. Unallowable costs resulting from audit are either excluded from the pool or remain in the base depending on the nature of the costs being disallowed State Laws or Regulations R-2 The following state laws and regulations influence the University s cost accounting practices: 1. The fiscal year is established by the State of South Carolina in Section of the State Codes. 2. The State establishes limitations for mileage reimbursement and in and out of state perdiems for travel reimbursements. These regulations also apply to grants and contracts unless the award specifically states a different reimbursement rate. These regulations can be accessed at under the heading State Disbursement Regulations. 3. The University is governed by the South Carolina Consolidated Procurement Code. The Procurement Code can be found at 4. The State establishes the contributions for health, dental, life, long-term disability, South Carolina retirement, and optional retirement. The details of each plan may be found at END OF PART I - 5

12 PART II - DIRECT COSTS No. Description - Revision No. 1 Effective Date 8/31/04 Instructions for Part II Institutions should disclose what costs are, or will be, charged directly to Federally sponsored agreements or similar cost objectives as Direct Costs. It is expected that the disclosed cost accounting practices (as defined at 48 CFR ) for classifying costs either as direct costs or indirect costs will be consistently applied to all costs incurred by the reporting unit Criteria for Determining How Costs are Charged to Federally Sponsored Agreements or Similar Cost Objectives. (For all major categories of cost under each major function or activity such as instruction, organized research, other sponsored activities and other institutional activities, describe on a continuation sheet, your 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. Particular emphasis should be placed on items of cost that may be treated as either direct or indirect costs (e.g., Supplies, Materials, Salaries and Wages, Fringe Benefits, etc.) depending upon the purpose of the activity involved. Separate explanations on the criteria governing each direct cost category identified in this Part II are required. Also, list and explain if there are any deviations from the specified criteria.) Description of Direct Materials. All materials and supplies directly identified with Federally sponsored agreements or similar cost objectives. (Describe on a continuation sheet the principal classes of materials which are charged as direct materials and supplies.) Method of Charging Direct Materials and Supplies. (Mark the appropriate line(s) and if more than one is marked, explain on a continuation sheet.) Direct Purchases for Projects are Charged to Projects at: A. Actual Invoiced Costs B. X Actual Invoiced Costs Net Of Discount Taken Y. Other(s) 1 Z. Not Applicable R1 (Inventory Requisitions from Central or Common, Institution-owned Inventory. (Identify the inventory valuation method used to charge projects): A. First In, First Out B. Last In, First Out C. Average Costs 1 D. Predetermined Costs 1 Y. Other(s) 1 Z. X Not Applicable 1 Describe on a Continuation Sheet. II-1

13 PART II DIRECT COSTS No. Description - Revision No. 2 Effective Date 6/30/ Description of Direct Personal Services. All personal services directly identified with Federally sponsored agreements or similar cost objectives. (Describe on a continuation sheet the personal services compensation costs, including applicable fringe benefit costs, if any, within each major institutional function or activity that are charged as direct personal services.) R1 Method of Charging Direct Salaries and Wages. (Mark the appropriate line(s) for each Direct Personal Services Category to identify the method(s) used to charge direct salary and wage costs to Federally sponsored agreements or similar costs objectives. If more than one line is marked in a column, fully describe on a continuation sheet, the applicable methods used.) Direct Personal Services Category Faculty Staff Students Other 1 (1) (2) (3) (4) A. Payroll Distribution Method X X (Individual time card/actual hours and rates) B. Plan Confirmation (Budgeted planned or assigned work activity, updated to reflect Significant changes) C. After-the-fact Activity Records X X (Percentage Distribution of employee activity) D. Multiple Confirmation Records (Employee Reports prepared each academic term, to account for employee s activities, direct and indirect charges are certified separately.) Y. Other(s) 1 X X X 1 Describe on a Continuation Sheet. II-2

14 PART II - DIRECT COSTS No. Description Salary and Wage Cost Distribution Systems. Within each major function or activity, are the methods marked in used by all employees compensated by the reporting unit? (If NO, describe on a continuation sheet, the types of employees not included and describe the methods used to identify and distribute their salary and wage costs to direct and indirect cost objectives.) X Yes No Salary and Wage Cost Accumulation System. (Within each major function or activity, describe, on a continuation sheet, the specific accounting records or memorandum records used to accumulate and record the share of the total salary and wage costs attributable to each employee s direct (Federally sponsored projects, non sponsored projects or similar cost objectives) and indirect activities. Indicate how the salary and wage cost distributions are reconciled with the payroll data recorded in the institution s financial accounting records.) Description of Direct Fringe Benefits Costs. All fringe benefits that are attributable to direct salaries and wages and are charged directly to Federally sponsored agreements or similar cost objectives. (Describe on a continuation sheet all of the different types of fringe benefits which are classified and charged as direct costs, e.g., actual or accrued costs of vacation, holidays, sick leave, sabbatical leave, premium pay, social security, pension plans, post-retirement benefits other than pensions, health insurance, training, tuition, tuition remission, etc.) Method of Charging Direct Fringe Benefits. (Describe on continuation sheet, how each type of fringe benefit cost identified item is measured, assigned and allocated (for definitions, See ); first, to the major functions (e.g., instruction, research); and, then to individual projects or direct cost objectives within each function.) Description of Other Direct Costs. All other items of cost directly identified with Federally sponsored agreements or similar cost objectives. (List on a continuation sheet the principal classes of other costs which are charged directly, e.g., travel, consultants, services, subgrants, subcontracts, malpractice insurance, etc.) 1 Describe on a Continuation Sheet. II-3

15 PART II DIRECT COSTS No. Description Cost Transfers. When Federally sponsored agreements or similar cost objectives are credited for cost transfers to other projects, grants or contracts, is the credit amount for direct personal services, materials, other direct charges and applicable indirect costs always based on the same amount(s) or rate(s) (e.g., direct labor rate, indirect costs) originally used to charge or allocate costs to the project (Consider transactions where the original charge and the credit occur in different cost accounting periods). (Mark one, if No, explain on a continuation sheet how the credit differs from original charge.) X Yes No Interorganizational Transfers. This item is directed only to those materials, supplies, and services which are, or will be transferred to you from other segments of the educational institution. (Mark the appropriate line(s) in each column to indicate the basis used by you as transferee to charge the cost or price of interorganizational transfers or materials, supplies, and services to Federally sponsored agreements or similar cost objectives. If more than one line is marked in a column, explain on a continuation sheet.) Materials Supplies Services (1) (2) (3) A. At full cost excluding indirect X X X costs attributable to group or central office expenses. B. At full cost including indirect costs attributable to group or central office expenses. C. At established catalog or market price or prices based on adequate competition. Y. Other(s) 1 Z. Interorganizational transfers are not applicable. 1 Describe on a Continuation Sheet. II-4

16 Part II Page 1 of 10 No. Description - Revision No. 2 Effective Date 6/30/ Criteria for Determining how Costs are Charged to Federally Sponsored Agreements or Similar Cost Objectives R1 Direct Costs Costs are charged direct to Federally sponsored agreements, an instructional activity, cost sharing projects, institutionally-funded projects, or any other institutional activity when the costs are incurred to accomplish the scope of work and can be specifically identified to the sponsored agreement, the instructional activity, the cost share project, the institutionally-funded project, or any other institutional activity with relative ease and with a high degree of accuracy. The cost must also meet the allowability and allocability criteria established by OMB Circular A-21. In addition to the criteria established by OMB Circular A-21, agency-specific regulations or policies are reviewed to ensure there are no restrictions in charging the cost as direct. Cost Share or Matching The University recognizes and accounts for cost share or matching commitments when (i) it is required by the sponsor or individual program or (ii) the University voluntarily includes costs in its proposal with no request for funding from the sponsor. To capture committed cost sharing or matching expenditures, a separate cost share UDAK is established in the University s financial system. These accounts are identified through the project description field where the title would be COST SHARE FOR MUCR - [UNIT] -[PROJECT] [REPORTING], or if State funds are being used to fund the cost share, the fund source must be 13. Costs charged to a cost share or matching project are tested to ensure they meet the requirements set forth in OMB Circulars A-110 and A-21. For the University s detailed policies and procedures governing Cost Sharing, see Finance Administrative Policies and Procedures, No and Facilities and Administrative (F&A) Costs F&A costs are general institutional expenditures that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, instructional activity, or any other institutional activity. These costs are accumulated in cost pools such as operation and maintenance of buildings and grounds, the depreciation of buildings and equipment, central and departmental administrative expenses, sponsored projects administration, and library and student costs. F&A costs pool groups are developed in accordance with OMB Circular A-21 guidelines. A composite F&A rate is derived for each major function (Organized Research, Instruction, Other Sponsored Activity) consisting of each of the aforementioned components. The F&A costs applicable to each agreement are charged through the negotiated composite F&A rate in effect at the time the award is made. II-5

17 Page 2 of 10 No. Description - Revision No. 2 Effective Date 6/30/ (continued) R1 R1 Direct versus F&A Costs Costs incurred for the same purpose and in like circumstances are treated consistently as either direct or indirect costs. The costs of administrative and clerical salaries that support departmental activities, general office supplies, books, journals, periodicals, subscriptions, copier charges, general purpose computers, postage, furniture, computer software, and fax machines are treated as indirect costs. However, there are instances when it is appropriate to charge these same types of expenses as direct, and that is when the unique type or requirements of the sponsored agreement dictate the need for the costs in order to accomplish the scope of work. The special type of award or requirements creates what OMB Circular A-21 refers to as unlike circumstances (they are incurred for a different purpose or in unlike circumstances and can be specifically identified with a sponsored agreement or similar cost objective). When unlike circumstances exist they are evaluated on a case by case basis. Sponsor and Award Types As permitted by OMB Circular A-21, the University has determined that certain costs normally charged as F&A can be direct-charged to specific types of awards or to specified non-federal sponsors because the direct charging of the expenses would not create an inequity or have a negative financial impact to the Federal Government. Examples of the specific award types or sponsor types where it would be appropriate to charge the aforementioned F&A costs as direct are as follows: 1. Industrial/Commercial agreements Projects sponsored by these organizations are performed at least in part for the benefit of the industrial/commercial sponsor rather than improving the welfare of the general public. Total costs of the project are the concern of the sponsor, and generally the sponsoring company awards fixed-price agreements and does not require a detailed budget. Further, awards from these entities are not governed by Federal regulations; therefore, F&A type expenses can be charged to awards sponsored under an industrial or commercial agreement. 2. Foundations and not-for-profit Agencies and Associations Typically the funding guidelines of these organizations specify the types of costs they will allow to be directly charged to a project. Accordingly, if the sponsor does not restrict the direct charging of F&A type expenses, they may be charged to awards sponsored by these types of agencies. II-6

18 Part II Page 3 of 10 No. Description - Revision No. 2 Effective Date 6/30/ (continued) 3. State Sponsored Agreements or Contracts MUSC must comply with state agency regulations and statutory requirements. Consequently, cost must be assigned based on the sponsor s agreement and the award budget; therefore, if the sponsor allows it in the award or does not specifically restrict F&A type expenses, these types of expenses may be charged direct to awards from this type of sponsoring agency. 4. Training Grants The primary purpose of these types of grants are to develop or enhance research careers for individuals through training opportunities in various research areas. The project budgets for training grants are designed to meet the training needs of the trainee; therefore, F&A types of costs are normally required to meet the programmatic goals. When these costs are proposed and approved in the awarded budget, MUSC allows them as a direct charge to the project. 5. Planning Grants - Research planning grants are used for preliminary work to determine the feasibility of a proposed line of inquiry and/or for other activities that will facilitate proposal development. The types of costs required to accomplish the scope of work under planning type grants typically include F&A type costs that are in excess of the normal F&A expenses needed to support a sponsored project. Therefore, F&A type expenses can be charged to this type of grant when it is clear that the expenses are required to accomplish the scope of work. R1 MUSC direct charges F&A type expenses when the special nature of the project requires different skills and extensive support costs than those required for routine departmental administrative activities. Some examples of when the direct charging of F&A type expenses may be appropriate under these circumstances are as follows: 1. Projects that are geographically inaccessible to normal departmental administrative services and supplies (e.g., a project that takes place in site(s) that is/are remote from the main campus in Charleston.) 2. Projects with major logistical requirements such as making travel and meeting arrangements (conferences and seminars) for large numbers of participants. 3. Large, complex programs such as program projects, center grants and other sponsored agreements that entail assembling and managing teams of investigators. II-7

19 Part II Page 4 of 10 No. Description - Revision No. 1 Effective Date 8/31/ (continued) 1. Projects which involve extensive data accumulation and analysis, such as epidemiological studies, clinical trials, and retrospective clinical records studies. 2. Projects whose principal focus includes the preparation and production of manuals, large reports, books and monographs, software and multimedia materials (excludes projects that only require routine progress and technical reports.) 3. Individual projects requiring project-specific database management, individualized graphics or manuscript preparation, human or animal subject protocols, and other project-specific regulatory protocols. 4. Other sponsored activities (not for research or instruction) Projects which are beyond the traditional instructional and research responsibilities of an academic unit. These activities primarily provide services beneficial to individuals and groups external to the institution. Examples include activities such as public services, workshops, community development, clinical studies, and projects supported by funds passed through by state agencies. Other The above categories are not exhaustive. The Office of Research and Sponsored Programs will review the specific nature of sponsored agreements on a case-by-case basis to determine if direct charging of F&A type costs is appropriate. In addition, the Office of Grants and Contracts Accounting monitors expenditures charged direct to Federally sponsored awards to ensure compliance with University policies, OMB Circular A-21, and the specific terms of the agreement Description of Direct Materials R1 The principal classes of items that are charged direct to Federally sponsored agreements or similar cost objectives are as follows: Supplies and materials such as chemical and biological supplies, general lab supplies, educational supplies, medical/surgical supplies, gases, gas cylinder rental, blood and blood products, technical supplies, animals, drugs, and food (research and subject related). Books, periodicals, postage, office supplies, reference material and minor scientific/instructional equipment (minor are those items below the university s capitalization threshold of $5,000 per unit) when they meet the test of unlike circumstances as described in above. II -8

20 Part II Page 5 of 10 No. Description - Revision No. 2 Effective Date 6/30/ Description of Direct Personnel Services R1 Direct personal services compensation costs consist of salaries, wages and fringe benefits applied at the current negotiated rate for the applicable salary category that is paid through the University and/or University segment (Affiliate) payroll systems. Refer to for further details of fringe benefits rates and composition. The composition of specific direct personnel services costs are different depending on the employee type/classification. The major employee types/classifications are as follows: I. Faculty II. Staff III. Student employees IV. Dual employees/added Source I. Faculty Faculty personal services compensation costs consist of the base salary which includes vacation, sick and holiday pay plus fringe benefits applied at the negotiated Staff rate. Each employee classified as Faculty is under contract with the University and their base salary is stipulated in their contract. II. Staff For payroll purposes, staff are grouped into six categories as follows: 1.Exempt Staff (Monthly) Exempt staff personal services compensation costs consist of the base salary which includes vacation, holiday, and sick pay plus fringe benefits applied at the negotiated Staff rate. Additional compensation may include payment of differential and on-call pay. 2. Non-exempt Staff (Bi-weekly) Non-exempt personal services compensation costs consist of hourly pay which includes vacation, sick and holiday pay, plus fringe benefits applied at the negotiated Staff rate. Additional compensation may include payment of overtime, differential pay and on-call pay. 3. Temporary Staff Temporary staff personal services compensation costs consist of hourly pay and overtime (when applicable) plus fringe benefits applied at the negotiated Post Docs/Temps rate. Temporary staff do not receive paid vacation, sick and holiday pay, but they do have the option of participating in the State Retirement System. 4. Temporary Grant Employees Benefits Temporary grant employees-benefits personal services compensation consists of hourly or monthly pay which includes vacation, sick and holiday pay plus fringe benefits applied at the negotiated Staff rate. Hourly paid temporary grant employees may have additional compensation for overtime. II-9

21 Part II Page 6 of 10 No. Description - Revision No. 2 Effective Date 6/30/ (Continued) 5. Temporary Grant Employees No Benefits Temporary grant employees no benefits personal services compensation costs consist of hourly pay or monthly salary plus fringe benefits applied at the negotiated Stud/Temp-Ltd Bene rate. Temporary grant employees-no benefits do not receive paid vacation, sick and holiday pay. However, compensation for this category may include overtime pay, when applicable. 6. Post Docs Post Docs personal services compensation costs consist of the base salary which includes vacation, holiday and sick pay plus fringe benefits applied at the negotiated Post Docs/Temp rate. Participation in the State Retirement Plan is optional for Post Docs. III. Students Students are grouped into two categories in the payroll system. 1. PhD Students PhD Students are classified in the payroll system as Students, but they function as Graduate Assistants. The personal services compensation costs for this group consist of monthly salary plus fringe benefits applied at the negotiated PhD Students rate. PhD Students do not receive paid vacation, sick or holiday pay. 2. All Other Students All other students personal services compensation costs consist of hourly pay and overtime (when applicable) plus fringe benefits applied at the negotiated Stud/Temp-Ltd Bene rate. Student employees do not receive paid vacation, sick or holiday pay. IV. Dual Employment Employees/Added Source Dual Employment is applicable to employees in an FTE position and is defined as any employment and compensation by state agencies for services rendered which clearly is not part of the employee s normal duties. Compensation for Dual Employment services shall be determined by and paid by the requesting (secondary) department or agency and approved by the MUSC Department of Human Resources Management. Nonexempt employees who work in excess of forty hours per week under Dual Employment agreement are subject to overtime pay. The total compensation for Dual Employment, from all fund sources and agencies, cannot exceed 30 percent of the employee s annualized salary for the fiscal year. Taxes and retirement will automatically be deducted upon payment. R1 Added Source is applicable to non-fte employees and is defined as any employment and compensation by MUSC for services rendered that clearly are not part of the non-fte employee s normal duties. Request for approval of the conditions and amount of compensation must be processed and approved through the MUSC Department of Human Resources Management before the secondary employment begins. Residents, post doctoral fellows, temporary staff, temporary research grant and student employees are considered non-fte employees and are eligible to receive additional compensation through Added Source. Nonexempt employees who work in excess of forty hours per week under Added Source employment are subject to overtime pay. Human Resources Management Policy Number 38 provides the detailed criteria for Dual Employment/Added Source. Total compensation for Added Source services is not limited. II-10

22 Part II Page 7 of 10 No. Description - Revision No. 2 Effective Date 6/30/ Method of Charging Direct Salaries and Wages R1 The Position/Employee Action Request (PEAR) form is prepared and submitted for all employees to distribute salaries and wages expenditures to Federally sponsored agreements and other cost objectives in the payroll system. The PEAR form is completed by the responsible department based on the budgeted or assigned level of effort for each employee. Upon payment of salaries and wages to each employee, the PEAR salary distribution percentages are applied in the payroll system to charge 100% of the employee s salary to the direct and indirect activities to which the employee is assigned. Edits are in place in the payroll system to ensure that no more than the total salary paid is distributed. The edits are run with each payroll cycle either bi-weekly or monthly. Total salary paid for non-exempt employees may include overtime premium, unless expressly disallowed by the specific terms of the agreement. Faculty/Staff In order to confirm the distribution of salaries and wages expenditures charged direct to sponsored projects, Activity Reports are completed and certified on a quarterly basis by faculty and monthly-paid employees. Activity reports are required for (1) all faculty, except faculty with 100% effort in instruction, and (2) all other employees who direct charge or cost share to sponsored agreement(s) or distribute activities between direct and indirect activities. Each individual employee completes a quarterly activity report to reflect a reasonable estimate of his/her activities for the covered period. Staff/Students Bi-weekly-paid employees certify the distribution of salaries and wages via the electronic time reporting system or manual time records. Adjustments to the PEAR form salary distribution are made retroactively by the responsible department if the certified distribution of effort varies from the actual salary distribution by more than plus or minus five percent of the budgeted effort. These adjustments are processed via the payroll system to redistribute salaries and wages to the direct and indirect activities. Other Dual Employment / Added Source Employees as defined and approved by University policy are charged to Federally sponsored agreements and similar cost objectives based on the actual number of hours worked supported by a completed purchase requisition, adequate form of support documenting the dual employment/added source hours worked, and a copy of the approved Dual Employment/Added Source Request Form. The Dual Employment/Added Source are identified as Other because the activity performed represents additional duties outside the individual s normal activities and are performed outside of the normal work hours. Activities performed as dual employment/added source are not captured as part of the normal payroll distribution. Therefore, no adjustments to the employee s normal effort distribution are required as a result of engaging in dual employment or added source activities Salary and Wage Cost Accumulation R1 Salaries and wages expenditures are accumulated in the payroll system by employee upon issuance of periodic (monthly or bi-weekly) payments. Each payment is then distributed to the employee s direct and indirect activities in the payroll accounting system to individual project activities based on the PEAR form distribution. II-11

23 Part II Page 8 of 10 No. Description - Revision No. 2 Effective Date 6/30/ (Continued) R1 The projects are identified/coded to accumulate charges to specific institutional functions (i.e. research, instruction, public service, academic support, administration). A specific expenditure object code is also charged under each project to accumulate the type of salary and wage expenditure based on the employee s job classification or type of payment (payment types such as dual employment, added source, premium pay). Reconciliation of Payroll Data to the Financial Accounting Records All entries affecting salary distributions are submitted through the payroll system(s). Edits are in place to ensure that a distribution of salary for an individual cannot be more than the total salary paid Description of Direct Fringe Benefits Costs R1 The principal classes of fringe benefits attributable to direct salaries and wages are charged through negotiated composite fringe benefits rates. Vacation, holiday and sick leave pay are charged on an actual basis to projects in proportion to the direct salaries and wages charged to the project. Fringe Benefits elements which comprise the pool for the composite rate are as follows: Social Security and Medicare Represents employer contributions on behalf of employees in accordance with the provisions of the Federal Insurance Contributions Act (FICA) for coverage under the Old Age, Survivors, and Disability Insurance (OASDI) and Medicare insurance programs. Retirement Represents employer contributions made to South Carolina State Retirement Systems (SCRS) on behalf of employees. S.C. State law requires that permanent employees, full-time and part-time, enroll in a retirement plan as a condition of employment unless specifically exempted by S.C. statute. Deferred Compensation Represents employer matching contributions made to 401(k), 403(b) and/or 457 plans for the benefit of eligible employees. Health and Dental Insurance Represents employer contributions made to provide health insurance coverage for eligible employees and their dependents under one of several optional health insurance programs. Unemployment Compensation Insurance Represents employer contributions made to the S.C. Employment Security Commission for coverage under the State Unemployment Insurance Program. These expenses are allocated within the payroll system based on salaries and wages by employee. Worker s Compensation Insurance Represents payments made to the S.C. State Accident Fund for coverage for Worker s Compensation benefits. These expenses are allocated within the payroll system based on salaries and wages by employee. Miscellaneous Fringe Benefits Represents the expenses associated with miscellaneous benefits offered to employees. These costs are assigned to individual employees in the payroll system records. II-12

24 Part II Page 9 of 10 No. Description - Revision No. 2 Effective Date 6/30/ (Continued) Retirement Incentive Represent payments to faculty employees who retire voluntarily prior to the usual retirement age under the MUSC Board of Trustees-approved Faculty Early Retirement Incentive Plan. Termination Pay Represents payments to employees for unused accrued Annual Leave hours at the time of termination of employment. Tuition Assistance Represents payment for reimbursement of tuition and fees for employees to enroll in credit-bearing courses at a S.C. institution of higher learning for purposes of enhancing their job skills. Continuing education courses are not included. Sabbatical Leave Represents payments made to faculty employees who are granted Sabbatical Leave by the Board of Trustees in order to study or undertake further training. Allocated Fringe Benefits Represents payments made for administration and operation of MUSC benefits programs. The costs of these programs are allocated based on headcount (full-time equivalents) by employee category: Employee Assistance Program Represents payments made for professional assistance under the MUSC Employee Assistance Program to employees who develop substance abuse or other personal problems which affect their job performance. Employee Health Services and Worker s Compensation Tracking System Represents expenses of the MUSC Department of Risk Management for Employee Health Services, including health screenings and medical care for employees injured on-the-job, and expenses for the Worker s Compensation Tracking System used for the reporting and tracking of on-the-job injury claims. Expenses related to use of this service by employees of affiliated entities are excluded Assignment and Allocation of Fringe Benefit Costs R1 Direct Fringe Benefits attributable to sponsored agreements are charged on the basis of negotiated composite fringe benefits rates through the following four rate categories: Rate Agreement Category MUSC Rate Submission 1. Staff 1. Staff 2. Post Docs/Temps 2. Post Docs/Temporaries 3. PhD Students 3. PhD Students 4. Stud/Temp-Ltd Bene 4. Students/Temps-LTD Benefits The comparison categories are shown because in some instances the actual rate agreement may have abbreviated our submitted categories. Fringe Benefits rates are calculated based on actual expenses for fringe benefits for the most recent completed fiscal year, plus projections, and then adjusted by the over/under recovery. There is usually a lag time in the base year of a rate calculation. For example, to establish negotiated rates to be used in FY2006, MUSC s proposal would be based on FY2004 actual expenses. Fringe benefits expenses are then charged to sponsored agreements within the payroll system by applying the applicable negotiated rate, based on the employee s salary type classification (i.e., faculty, exempt staff, non-exempt staff, etc.), to the allocated gross salaries and wages for the particular project. II -13

25 Part II Page 10 of 10 No. Description - Revision No. 2 Effective Date 6/30/ (Continued) R1 Fringe benefits attributable to actual vacation, sick and holiday leave are charged direct to Federally sponsored agreements or similar cost objectives on the basis of the actual costs assigned to each employee on a pro rata share based on their salary distribution in the payroll system. The specific fringe benefits assigned to each employee benefits category are as follows: Employee Benefits Category Post-Doc / PhD Students / Staff Temporaries Students Temps-LTD Fringe Benefit Benefits Social Security X X X X Medicare X X X X Retirement X X Health & Dental Insurance X X X Unemployment Insurance X X X X Workers Compensation X X X X Miscellaneous Fringe Benefits X X X Allocated Fringe Benefits X X X X Description of Other Direct Costs The principal classes of other direct costs that are charged to Federally sponsored agreements or similar cost objectives include: Special purpose scientific/instructional equipment (project specific) Repairs and maintenance of special purpose equipment (project specific) Equipment maintenance contracts for special purpose equipment (project specific) Scientific publications, reprints and reference materials (project specific) Consultant fees/honorariums Contracted purchased services including University dual employment Long distance telephone charges Printing and copying directly related to the sponsored agreement Advertising for research subjects Trainee costs including stipend, tuition and fees and other related costs Patient care costs Research subject costs Participant costs Travel costs (project specific) Subcontract/subrecipient costs Alterations and renovations approved by the sponsor Over-night delivery services and freight Service center charges such as animal care and laboratory testing END OF PART II-14

26 EDUCATIONAL ITSTITUTIONS PART III INDIRECT COSTS No. Description Instructions for Part III Institutions should disclose how the segment s total indirect costs are identified and accumulated in specific indirect cost categories and allocated to applicable indirect cost pools and service centers within each major function or activity, how service center costs are accumulated and billed to users, and the specific indirect cost pools and allocation bases used to calculate the indirect cost rates that are used to allocate accumulated indirect costs to Federally sponsored agreements or similar final cost objectives. A continuation sheet should be used wherever additional space is required or when a response requires further explanation to ensure clarity and understanding. The following Allocation Base Codes are provided for use in connection with s and A. Direct charge or Allocation B. Total Expenditures C. Modified Total Cost Basis D. Modified Total Direct Cost Basis E. Salaries and Wages F. Salaries, Wages and Fringe Benefits G. Number of Employees (head count) H. Number of Employees (full-time equivalent basis) I. Number of Students (head count) J. Number of Students (full-time equivalent basis) K. Student Hours-classroom and work performed L. Square Footage M. Usage N. Unit of Product O. Total Production P. More than one base (Separate Cost Groupings) 1 Y. Other(s) 1 Z. Category or Pool not applicable 1 List on a continuation sheet, the category and subgrouping(s) of expense involved and the allocation base(s) Used. III-1

27 PART III - INDIRECT COSTS No. Description - Revision No. 2 Effective Date 6/30/ R1 Indirect Cost Categories-Accumulation and Allocation. This item is directed at the identification, accumulation and allocation of all indirect costs of the institution. (Under the column heading, Accumulation Method, insert Yes or No to indicate if the cost elements included in each indirect cost category are identified, recorded and accumulated in the institution s formal accounting system. If No, describe on a continuation sheet, how the cost elements included in the indirect cost category are identified and accumulated. Under the column heading Allocation Base, enter one of the allocation base codes A through P, Y, or Z, to indicate the basis used for allocating the accumulated costs of each indirect cost category to other applicable indirect cost categories, indirect cost pools, other institutional activities, specialized service facilities and other service centers. Under the column heading Allocation Sequence, insert 1, 2, or 3 next to each of the first three indirect cost categories to indicate the sequence of the allocation process. If cross-allocation techniques are used, insert CA. If an indirect cost category listed in this section is not used, insert NA. ) Accumulation Allocation Allocation Indirect Cost Category Method Base Code Sequence (a) Depreciation/Use Allowances/Interest 1 Building Yes P Equipment Yes P Capital Improvements to Land 1 Yes P Interest 1 Yes L (b) Operation and Maintenance Yes P 2 (c) General Administration and General Yes C 3 Expense (d) Departmental Administration Yes C (e) Sponsored Projects Administration Yes C (f) Library Yes P (g) Student Administration and Services Yes A (h) Other 1 Yes Y 1 Describe on a Continuation Sheet. III-2

28 PART III INDIRECT COSTS No. Description - Revision No. 2 Effective Date 6/30/ R1 Service Centers. Service centers are departments or functional units that perform specific technical or administrative services primarily for the benefit of other units within a reporting unit. Service Centers include recharge centers and the specialized service facilities defined in Section J of Circular A-21. (The codes identified below should be inserted on the appropriate line for each service center listed. The column numbers correspond to the paragraphs listed below that provide the codes. Explain on a Continuation Sheet if any of the services are charged to users on a basis other than usage of the services. Enter Z in Column 1, if not applicable.) (1) (2) (3) (4) (5) (6) (a) Scientific Computer Operations Z (b) Business Data Processing Z (c) Animal Care Facilities A A C A A B (d) Other Service Centers with annual Operating Budgets exceeding $1,000,000 or that generate significant charges to Federally sponsored agreements either as a direct or indirect cost. Mail Services C A C A A B MUSC Press C A C A A B (1) Category Code: Use code A if the service center costs are billed only as direct costs of final cost objectives; code B if billed only to indirect cost categories or indirect cost pools; code C if billed to both direct and indirect cost objectives. (2) Burden Code: Code A center receives an allocation of all applicable indirect costs; Code B: --partial allocation of indirect costs; Code C no allocation of indirect costs. (3) Billing Rate Code: Code A billing rates are based on historical costs; Code B rates are based on projected costs; Code C rates are based on a combination of historical and projected costs; Code D billings are based on the actual costs of the billing period; Code Y other (explain on a Continuation Sheet). (4) User Charges Code: Code A all users are charged at the same billing rates; Code B some users are charged at different rates than other users (explain on a Continuation Sheet). (5) Actual Costs vs. Revenue Code: Code A billings (revenues) are compared to actual costs (expenditures) at least annually; Code B billings are compared to actual costs less frequently than annually. (6) Variance Code: Code A Annual variances between billed and actual costs are prorated to users (as credits or charges); Code B variances are carried forward as adjustments to billing rate of future periods; Code C annual variances are charged or credited to indirect costs; Code Y other (explain on a Continuation Sheet). III-3

29 PART III INDIRECT COSTS No. Description - Revision No. 2 Effective Date 6/30/ Indirect Cost Pools and Allocation Bases R (Identify all of the indirect cost pools established for the accumulation of indirect costs, excluding service centers, and the allocation bases used to distribute accumulated indirect costs to Federally sponsored agreements or similar cost objectives within each major function or activity. For all applicable indirect cost pools, enter the applicable Allocation Base Code A through P, Y, or Z, to indicate the basis used for allocating accumulated pool costs to Federally sponsored agreements or similar cost objectives.) Indirect Cost Pools A. Instruction X On-Campus X Off-Campus Other 1 B. Organized Research X On-Campus X Off-Campus Other 1 C. Other Sponsored Activities X On-Campus X Off-Campus Other 1 Allocation Base Code D D D D D D D. Other Institutional Activities Composition of Indirect Cost Pools. (For each pool identified under s and 3.2.0, describe on a continuation sheet the major organizational components, subgroupings of expenses, and elements of cost included. 1 Describe on a Continuation Sheet. III-4