cost accounting standards
DESCRIPTION
COST ACCOUNTING STANDARDS. OMB CIRCULAR A-21. Issued 1979 Defines Allowable Direct & Indirect Costs May 1996 revision incorporated Four Cost Accounting Standards and Required Disclosure Statement (DS-2) - a roadmap of our policies. CAS Applied to Universities. - PowerPoint PPT PresentationTRANSCRIPT
Office of Sponsored Projects AdministrationOffice of Sponsored Projects Administration
COST ACCOUNTING COST ACCOUNTING STANDARDSSTANDARDS
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
OMB CIRCULAR A-21OMB CIRCULAR A-21
Issued 1979Issued 1979
Defines Allowable Direct & Indirect CostsDefines Allowable Direct & Indirect Costs
May 1996 revision incorporated May 1996 revision incorporated
Four Cost Accounting Standards andFour Cost Accounting Standards and
Required Disclosure Statement (DS-2) - a Required Disclosure Statement (DS-2) - a roadmap of our policiesroadmap of our policies
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
CAS Applied to UniversitiesCAS Applied to Universities
CAS 501 – Consistency in Estimating, CAS 501 – Consistency in Estimating, Accumulating and Reporting CostsAccumulating and Reporting Costs
CAS 502 – Consistency in Allocating CAS 502 – Consistency in Allocating Costs for the Same PurposeCosts for the Same Purpose
CAS 505 – Accounting for Unallowable CAS 505 – Accounting for Unallowable CostsCosts
CAS 506 – Cost Accounting PeriodCAS 506 – Cost Accounting Period
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
A-21 Allowable CostA-21 Allowable Cost
ReasonableReasonable
AllocableAllocable
Consistently treated per A-21Consistently treated per A-21
Conform to limits in A-21 or Conform to limits in A-21 or specific awardspecific award
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
ReasonableReasonable
Prudent personPrudent person
Necessary expenseNecessary expense
Restraints of arms-length bargainingRestraints of arms-length bargaining
Consistent with institutional policy and Consistent with institutional policy and procedureprocedure
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
AllocableAllocable
Charged in relation to the benefitCharged in relation to the benefit
And by the way, you can’t shift the And by the way, you can’t shift the cost aroundcost around
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
CAS 505 - CAS 505 - Accounting for Unallowable Accounting for Unallowable CostsCosts
Unallowable costs must be identified and Unallowable costs must be identified and excluded from any billing, claim, excluded from any billing, claim, application or proposal.application or proposal.
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
CAS 501- CAS 501- Consistency in Estimating, Consistency in Estimating, Accumulating and Reporting CostsAccumulating and Reporting Costs
Practices used to estimate costs in a Practices used to estimate costs in a proposal should be the same as the way proposal should be the same as the way we charge and reportwe charge and report
Level of detail can be different, but should Level of detail can be different, but should be able to make “sufficient and meaningful be able to make “sufficient and meaningful comparison”comparison”
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
CAS 501 – Consistency in…CAS 501 – Consistency in…
Classifying as Direct vs IndirectClassifying as Direct vs Indirect
Placing an item in an Indirect poolPlacing an item in an Indirect pool
Methods of allocating indirect to Methods of allocating indirect to sponsored agreements sponsored agreements
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Direct CostsDirect Costs
Costs that can be identified specifically Costs that can be identified specifically with a particular sponsored project, an with a particular sponsored project, an instructional activity or any other instructional activity or any other institutional activity or that can be institutional activity or that can be directly assigned to such activities directly assigned to such activities relatively easily with a high degree of relatively easily with a high degree of accuracy.accuracy.
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Indirect CostsIndirect Costs
Costs incurred for common or joint Costs incurred for common or joint objectives and, therefore, cannot be objectives and, therefore, cannot be identified readily and specifically with a identified readily and specifically with a particular sponsored project, an particular sponsored project, an instructional activity or any other instructional activity or any other institutional activity.institutional activity.
Also called “Facilities & Administrative” costsAlso called “Facilities & Administrative” costs
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Examples of Direct and Indirect Examples of Direct and Indirect CostsCosts
DIRECTDIRECT– Salaries of PI, Salaries of PI,
technician, research technician, research assistantassistant
– Scientific equipmentScientific equipment– Animal careAnimal care– DuplicatingDuplicating– Lab supplies Lab supplies – SubcontractsSubcontracts– TravelTravel
INDIRECTINDIRECT– Salaries of secretary, Salaries of secretary,
dept. administratordept. administrator– General purpose General purpose
equipmentequipment– PostagePostage– Basic telephoneBasic telephone– Office suppliesOffice supplies– Expenses of SPA, Expenses of SPA,
OSPA, PurchasingOSPA, Purchasing
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
CAS 502 - CAS 502 - Consistency in Allocating Consistency in Allocating Costs Incurred for the Same PurposeCosts Incurred for the Same Purpose
Each type of cost may be allocated only Each type of cost may be allocated only onceonce
However…However…
All costs incurred for the All costs incurred for the same purposesame purpose, in , in like circumstanceslike circumstances, are either direct only or , are either direct only or indirect costs only…indirect costs only…
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
DS - 2DS - 2
Sets forth our accounting practices to Sets forth our accounting practices to distinguish direct vs indirectdistinguish direct vs indirect
AndAnd
If a cost is sometimes direct and sometimes If a cost is sometimes direct and sometimes indirect, spell out specific criteria and indirect, spell out specific criteria and circumstancescircumstances
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Examples of projects which could be Examples of projects which could be considered special purpose or considered special purpose or circumstance:circumstance:
Industry sponsored projectsIndustry sponsored projects
State sponsored projectsState sponsored projects
Training grantsTraining grants
Geographically inaccessible projectsGeographically inaccessible projects
Large, complex projectsLarge, complex projects
See section 3.2 of policy for complete listSee section 3.2 of policy for complete list
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Criteria for Direct Charging Normally Criteria for Direct Charging Normally Indirect Cost to a ProjectIndirect Cost to a Project
The item of cost must be:The item of cost must be:
Identified specifically with the project Identified specifically with the project with a high degree of accuracywith a high degree of accuracy
Incurred for a special purpose as Incurred for a special purpose as described in UK Costing Policydescribed in UK Costing Policy
Explicitly budgeted, justified in proposal, Explicitly budgeted, justified in proposal, and awardedand awarded
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Criteria, continued...Criteria, continued...
Federal projects have an additional Federal projects have an additional requirement :requirement : the Budget Justification the Budget Justification must state that the cost is normally treated must state that the cost is normally treated as indirect by the University; it is as indirect by the University; it is requested due to a different or special requested due to a different or special circumstance; and the circumstance is circumstance; and the circumstance is explained. explained.
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
ProceduresProcedures
Proposal BudgetProposal Budget
PI/department prepares budgetPI/department prepares budget
Draft budget to OSPA for reviewDraft budget to OSPA for review
PI and OSPA discuss changes to budgetPI and OSPA discuss changes to budget
Internal Approval Form completed & signedInternal Approval Form completed & signed
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
ProceduresProcedures
Awarded AccountAwarded Account
Approved indirect items budgeted in Approved indirect items budgeted in specific object codesspecific object codes
Monthly report of federal funds with Monthly report of federal funds with indirect object codes not approvedindirect object codes not approved– Remove by IDIVRemove by IDIV– Correct object code by IDIVCorrect object code by IDIV– Justify as special purposeJustify as special purpose
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Cost Sharing and CASCost Sharing and CAS
Treat a cost consistently as direct or Treat a cost consistently as direct or indirectindirect
Accumulate all costs consistently and only Accumulate all costs consistently and only onceonce
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Cost SharingCost Sharing
Use of institutional funds to supplement Use of institutional funds to supplement
project costs not borne by the sponsoring project costs not borne by the sponsoring
agency.agency.
Either required by sponsor, to voluntarily Either required by sponsor, to voluntarily
reflect University financial support, orreflect University financial support, or
when award is less than proposal.when award is less than proposal.
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Reasons to minimize Reasons to minimize cost sharingcost sharing
Increased administrative burden - ALL Increased administrative burden - ALL cost sharing on ALL sponsored projects cost sharing on ALL sponsored projects must be documentedmust be documented
Increase in cost sharing causes decrease Increase in cost sharing causes decrease in indirect cost ratein indirect cost rate
Depreciation on cost shared equipment Depreciation on cost shared equipment may NOT contribute to indirect ratemay NOT contribute to indirect rate
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Sources of Cost SharingSources of Cost Sharing
University funds University funds
Unfunded or waived indirect costUnfunded or waived indirect cost
Another sponsored project (requires Another sponsored project (requires approval of both sponsors and is rare)approval of both sponsors and is rare)
Third parties (non-University sources)Third parties (non-University sources)
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Criteria for Cost Sharing Criteria for Cost Sharing ExpendituresExpenditures
Verifiable in accounting recordsVerifiable in accounting records
Each expenditure used only once Each expenditure used only once
Necessary and reasonable expenseNecessary and reasonable expense
Allowable as a direct costAllowable as a direct cost
Itemized in budget (if required by sponsor)Itemized in budget (if required by sponsor)
Incurred during effective dates of sponsored Incurred during effective dates of sponsored agreementagreement
Research - Office of Sponsored Projects AdministrationResearch - Office of Sponsored Projects Administration
Documenting Cost SharingDocumenting Cost Sharing
1. Separate Ledger 3 Cost Sharing 1. Separate Ledger 3 Cost Sharing AccountAccount
2. Faculty Effort System (FES)2. Faculty Effort System (FES)
3. Cost Sharing Certification Report Form3. Cost Sharing Certification Report Form