Expenditure Management & Expenditure Management & Cost Sharing on Sponsored Cost Sharing on Sponsored

ProgramsPrograms

October 27, 2006October 27, 2006

Expenditure Expenditure ManagementManagement

Costing BasicsCosting Basics As a condition of receiving award funds As a condition of receiving award funds

from federal sponsors, OU is required to from federal sponsors, OU is required to follow basic government regulations and follow basic government regulations and Cost Accounting Standards (CAS)Cost Accounting Standards (CAS)

Agency regulations include the following:Agency regulations include the following:- OMB Circular A-21- OMB Circular A-21- 2 CFR Part 215 (formerly OMB Circular A-110)- 2 CFR Part 215 (formerly OMB Circular A-110)- OMB Circular A-133- OMB Circular A-133- CAS 501, 502, 505, and 506- CAS 501, 502, 505, and 506

Circular A-21Circular A-21 Defines the rules for “Direct” and Defines the rules for “Direct” and

“Indirect” (Facilities & “Indirect” (Facilities & Administrative) costsAdministrative) costs

Provides principles for determining if Provides principles for determining if costs are allowable, allocable, and costs are allowable, allocable, and reasonablereasonable

Sets forth standards for Effort Sets forth standards for Effort ReportingReporting

Circular A-110 (2 CFR Part 215)Circular A-110 (2 CFR Part 215) Defines reporting requirementsDefines reporting requirements Sets forth acceptable forms of cost sharingSets forth acceptable forms of cost sharing Defines procurement standards and Defines procurement standards and

proceduresprocedures Explains when prior approvals are required Explains when prior approvals are required

for revisions to budget or program plansfor revisions to budget or program plans Sets forth accounting standards for Sets forth accounting standards for

equipmentequipment

Circular A-133Circular A-133 Provides the standards for Provides the standards for

consistency and uniformity in the consistency and uniformity in the auditing of states, local auditing of states, local governments, and non-profit governments, and non-profit organizations receiving and organizations receiving and expending federal fundingexpending federal funding

Cost Accounting StandardsCost Accounting Standards CAS 501, 502, 505 and 506 were CAS 501, 502, 505 and 506 were

developed to create consistency in developed to create consistency in the following areas:the following areas:- Estimating, accumulating, and reporting costs - Estimating, accumulating, and reporting costs ( CAS 501)( CAS 501)- Allocating costs incurred for the same purpose - Allocating costs incurred for the same purpose in like circumstances (CAS 502)in like circumstances (CAS 502)- Accounting for unallowable costs (CAS 505)- Accounting for unallowable costs (CAS 505)- Cost accounting periods (CAS 506)- Cost accounting periods (CAS 506)

Indirect CostIndirect Cost A-21, Section BA-21, Section B

• Indirect costs are Indirect costs are incurred for incurred for common or joint objectivescommon or joint objectives and, and, therefore, therefore, cannot be identified cannot be identified readily and specifically with a readily and specifically with a particular sponsored projectparticular sponsored project, an , an institutional activity, or any other institutional activity, or any other institutional activity. Indirect costs are institutional activity. Indirect costs are synonymous with Facilities and synonymous with Facilities and Administrative (F&A) costs.Administrative (F&A) costs.

Direct CostsDirect Costs A-21, Section DA-21, Section D

• Direct costs are those costs that can be Direct costs are those costs that can be identified specifically with a identified specifically with a particular sponsored projectparticular sponsored project,, an 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 relatively easily with a high degree of accuracy.of accuracy.

The Cost Must Be The Cost Must Be ReasonableReasonable

A-21, Section C3:A-21, Section C3:““A cost may be considered A cost may be considered reasonable if the nature of the goods reasonable if the nature of the goods or services acquired, and the amount or services acquired, and the amount involved, reflect the action that a involved, reflect the action that a prudent personprudent person would have taken would have taken under like circumstances.”under like circumstances.”

Cont. ReasonableCont. Reasonable ““Prudent Person” Test:Prudent Person” Test:

• NecessaryNecessary• Consistent with established institutional Consistent with established institutional

policies and procedurespolicies and procedures

The Cost Must Be The Cost Must Be AllocableAllocable A-21, Section C4:A-21, Section C4:

““A cost is allocable to a sponsored A cost is allocable to a sponsored agreement if (1) it is agreement if (1) it is incurred solely incurred solely to advance the workto advance the work of the of the sponsored agreement; (2) it sponsored agreement; (2) it benefits benefits the sponsored agreementthe sponsored agreement; or (3) it is ; or (3) it is necessary to the overall operationnecessary to the overall operation of of the sponsored agreement.”the sponsored agreement.”

Allocable Cont.Allocable Cont.

““But For” Test:But For” Test:But for this project, this cost would But for this project, this cost would not be incurred.not be incurred.

The Cost Must Be The Cost Must Be AllowableAllowable Terms & ConditionsTerms & Conditions A21, Section JA21, Section J State LawsState Laws University Policy and ProceduresUniversity Policy and Procedures

Procedures for Charging Direct Procedures for Charging Direct CostsCosts

Administrative Affairs Guide to Administrative Affairs Guide to ServicesServices• http://www.ou.edu/fis/http://www.ou.edu/fis/

Purchasing Web SitePurchasing Web Site• http://www.ou.edu/purchasing/home/index.htmhttp://www.ou.edu/purchasing/home/index.htm

Small Dollar PolicySmall Dollar Policy

University departments may University departments may purchase products and services purchase products and services directly from a vendor when the directly from a vendor when the cost of the acquisition is $5,000 cost of the acquisition is $5,000 or less.or less.

Exceptions- Small Dollar PolicyExceptions- Small Dollar Policy Certain purchases, even if $5,000 or less, Certain purchases, even if $5,000 or less,

must be processed through the must be processed through the Purchasing Department:Purchasing Department:

1.1. If the purchase involves a contractual If the purchase involves a contractual document of any kind.document of any kind.

2.2. If the purchase involves radioactivityIf the purchase involves radioactivity3.3. If the purchase involves a laboratory If the purchase involves a laboratory

animalanimal4.4. Computer PurchasesComputer Purchases

Cont. Exceptions- Small Dollar Cont. Exceptions- Small Dollar PolicyPolicy

To the degree University Auxiliary To the degree University Auxiliary Services (i.e., Printing Services, Services (i.e., Printing Services, Physical Plant, Motor Pool) are able Physical Plant, Motor Pool) are able to support your needs- they must be to support your needs- they must be utilized.utilized.

Mandatory Contracts (i.e., Travel Mandatory Contracts (i.e., Travel Agencies, Corporate Express)Agencies, Corporate Express)

PAFS Approval!PAFS Approval!

ALLALL charges/expenses on a grant or charges/expenses on a grant or contract must be sent through PAFS for contract must be sent through PAFS for approval.approval.• Invoices

• Requisitions

• JVs

• Travel ClaimsTravel Claims

• AppointmentsAppointments

Approval ProcessApproval Process Department Sponsor must assign a Department Sponsor must assign a

department numberdepartment number Department Sponsor must sign for paymentDepartment Sponsor must sign for payment

• Cannot sign own reimbursementCannot sign own reimbursement Dept Sponsor should clarify what budget line Dept Sponsor should clarify what budget line

item expense should be taken from (i.e.: item expense should be taken from (i.e.: Participant vs. Supply)Participant vs. Supply)

Automatic BillingsAutomatic Billings

Book ExchangeBook Exchange Payment NetPayment Net Printing ServicesPrinting Services Motor PoolMotor Pool AramarkAramark

Corporate ExpressCorporate Express Physical PlantPhysical Plant TelecommunicationsTelecommunications Central MailCentral Mail

The following are automatic billings to your G & C. If these costs are determined to be unallowable they will be transferred, by PAFS, to a residual or responsible department number

PCard TransactionsPCard Transactions If you distribute a PCard Expense to a If you distribute a PCard Expense to a

sponsored agreement you must:sponsored agreement you must:• Include a Include a justification/explanationjustification/explanation in the in the

“Transaction Notes” field“Transaction Notes” field of the PaymentNet of the PaymentNet system adequate for PAFS to determine system adequate for PAFS to determine allowability. A more detailed explanation is allowability. A more detailed explanation is required for non-scientific vendors, such as required for non-scientific vendors, such as Target, Wal-Mart, and Corporate Express.Target, Wal-Mart, and Corporate Express.

• Department must keep copies of all receipts Department must keep copies of all receipts for PCard Transactions for audit purposes.for PCard Transactions for audit purposes.

Discussion QuestionsDiscussion Questions

Can I order equipment within the last 90 Can I order equipment within the last 90 days of my sponsored program?days of my sponsored program?

Can I pay for a lunch/dinner for a Can I pay for a lunch/dinner for a meeting with lab personnel working on meeting with lab personnel working on the project?the project?

My grant is ending and I have some My grant is ending and I have some unspent funds, can I purchase some lab unspent funds, can I purchase some lab supplies for general use in my lab?supplies for general use in my lab?

Discussion Questions, cont.Discussion Questions, cont.

5.5. What happens if I forget to send an What happens if I forget to send an invoice to PAFS first?invoice to PAFS first?

6.6. What happens if an auditor What happens if an auditor disallows a cost on my grant?disallows a cost on my grant?

7.7. Can I purchase office supplies on Can I purchase office supplies on my grant? my grant?

Deposits to Sponsored ProgramsDeposits to Sponsored Programs

Should only be made by Post Award Should only be made by Post Award Financial ServicesFinancial Services

Checks the Department receives that Checks the Department receives that are for the grant/contract should be are for the grant/contract should be sent to our office to depositsent to our office to deposit• If the check is refunding, rebating or If the check is refunding, rebating or

reimbursing something the grant paid reimbursing something the grant paid for please include a note with the check for please include a note with the check with an explanationwith an explanation

Cost TransfersCost Transfers

Cost TransferCost Transfer

What is a Cost Transfer?What is a Cost Transfer?• After-the-fact transfer of a cost After-the-fact transfer of a cost

previouslypreviously incurred incurred PurposePurpose

• Allow for reassignment of costs from one Allow for reassignment of costs from one dept. number to anotherdept. number to another

Cost Transfer PolicyCost Transfer Policy

See Attached PolicySee Attached Policy This policy does not apply to Cost This policy does not apply to Cost

Distributions or account code Distributions or account code correctionscorrections

Cost Transfer CodingCost Transfer Coding Who entered the CT in PeopleSoftWho entered the CT in PeopleSoft

• RSP = Research ServicesRSP = Research Services• CSP = CCECSP = CCE• T = FSST = FSS

All cost transfers are imaged in All cost transfers are imaged in Acorde under FSS TransfersAcorde under FSS Transfers

Cost Transfer PolicyCost Transfer Policy Types of TransfersTypes of Transfers

• Error CorrectionError Correction Typographical errorTypographical error

• Pre-Award CostsPre-Award Costs Before the grant or contract was set up in Before the grant or contract was set up in

accounting systemaccounting system• Closely-Related AccountsClosely-Related Accounts

Parent/ Child deptsParent/ Child depts Cost sharing deptsCost sharing depts

Cost Transfer PolicyCost Transfer Policy DocumentationDocumentation

• Non-LaborNon-Labor Journal Voucher/Transfer FormJournal Voucher/Transfer Form Cost Transfer Request (PAFS-1)Cost Transfer Request (PAFS-1) Copy of the original invoiceCopy of the original invoice Copy of appropriate University Financial Copy of appropriate University Financial

Report Report

Cost Transfer PolicyCost Transfer Policy DocumentationDocumentation

• LaborLabor Cost Transfer Request (PAFS-1)Cost Transfer Request (PAFS-1) Payroll Expense Transfer Request FormPayroll Expense Transfer Request Form Payroll ExtractPayroll Extract

Cost Transfer PolicyCost Transfer Policy Unacceptable Cost TransfersUnacceptable Cost Transfers

• Undocumented transfersUndocumented transfers• Inadequately justified transfersInadequately justified transfers

An explanation that merely states “to correct An explanation that merely states “to correct error” or “to transfer to correct dept” is not error” or “to transfer to correct dept” is not sufficientsufficient

• Costs transferred from a Fixed Price Dept Costs transferred from a Fixed Price Dept in an overrun status to a Cost in an overrun status to a Cost Reimbursable Dept in an under-run Reimbursable Dept in an under-run statusstatus

Cost Transfer PolicyCost Transfer Policy Timeliness of ProcessingTimeliness of Processing

• Non-LaborNon-Labor Transfers need to be processed no later than 90 Transfers need to be processed no later than 90

days after the item posted to the financial days after the item posted to the financial statementstatement

If requested after 90 days additional justification If requested after 90 days additional justification (PAFS-1, item 7) is required and transfer is (PAFS-1, item 7) is required and transfer is subject to approval by the Assistant Director of subject to approval by the Assistant Director of PAFS or the Executive Director of ORSPAFS or the Executive Director of ORS

Cost Transfer PolicyCost Transfer Policy Timeliness of ProcessingTimeliness of Processing

• LaborLabor Transfers need to be processed no later than Transfers need to be processed no later than

90 days after the pay period for which the 90 days after the pay period for which the salary was recordedsalary was recorded

Previously confirmed labor charges require Previously confirmed labor charges require additional justification and are subject to additional justification and are subject to approval by the Assistant Director of PAFS or approval by the Assistant Director of PAFS or the Executive Director of ORSthe Executive Director of ORS

Red FlagsRed Flags Transfers older than 90 Transfers older than 90

daysdays Transfers in the last Transfers in the last

month of the award or month of the award or after the award has after the award has expiredexpired

Explanations that raise Explanations that raise more questions than more questions than answersanswers

Frequent transfers from Frequent transfers from same officesame office

Discussion QuestionsDiscussion Questions1.1. I have a grant that is ending and need to spend the I have a grant that is ending and need to spend the

remaining funds, can I do an expense transfer to move remaining funds, can I do an expense transfer to move expenses to this grant?expenses to this grant?

2.2. Do I need to fill out a PAFS-1 and attach to the JV for Do I need to fill out a PAFS-1 and attach to the JV for copies I made using the department copy machine?copies I made using the department copy machine?

3.3. I have a new grant that was just set up. I have been I have a new grant that was just set up. I have been paying expenses, for this project, on the departmental paying expenses, for this project, on the departmental number (some more than 90 days old) can I do an number (some more than 90 days old) can I do an expense transfer to move these expenses to my new expense transfer to move these expenses to my new grant?grant?

4.4. I confirmed labor on grant A, but now decided it should I confirmed labor on grant A, but now decided it should be on grant B, can I do a payroll expense transfer?be on grant B, can I do a payroll expense transfer?

Cost Sharing

What is Cost Sharing?What is Cost Sharing?

A-110 defines Cost Sharing as any A-110 defines Cost Sharing as any project or program costs that are project or program costs that are notnot borne by the sponsoring agencyborne by the sponsoring agency

Costs could be anything Costs could be anything identifiedidentified in in the narrative or budget that will the narrative or budget that will support the project but is not paid for support the project but is not paid for by the sponsoring agencyby the sponsoring agency

What is Cost Sharing?, cont.What is Cost Sharing?, cont. Contributed costs Contributed costs mustmust be allowable, be allowable,

reasonable, and necessary to accomplish reasonable, and necessary to accomplish the objectives of the sponsored the objectives of the sponsored agreement during the project periodagreement during the project period

Cost sharing Cost sharing mustmust be verifiable and be verifiable and accounted for to the extent it was accounted for to the extent it was committedcommitted

Cost sharing may Cost sharing may notnot be counted toward be counted toward more than one sponsored agreementmore than one sponsored agreement

Examples of Cost SharingExamples of Cost Sharing Employee time, including fringe benefitsEmployee time, including fringe benefits Equipment (purchased during the time Equipment (purchased during the time

frame of grant or contract)frame of grant or contract) TravelTravel Supplies & ServicesSupplies & Services Volunteer time or other contributed itemsVolunteer time or other contributed items Unrecovered F & AUnrecovered F & A Unrecovered Tuition RemissionUnrecovered Tuition Remission

TypesTypes

MandatoryMandatory • Required by the sponsor as a condition of the Required by the sponsor as a condition of the

awardaward

VoluntaryVoluntary • Costs in excess of mandatory requirementsCosts in excess of mandatory requirements• Not required by the sponsor, but will become a Not required by the sponsor, but will become a

legally binding commitment if reflected in the legally binding commitment if reflected in the proposal & must be documentedproposal & must be documented

SourcesSources CashCash

• University funds University funds E&GE&G SRI FundsSRI Funds VPR Match – a separate 1X5 dept will be VPR Match – a separate 1X5 dept will be

establishedestablished• Third party cash contributionsThird party cash contributions

Other externally-funded agreementOther externally-funded agreement Program incomeProgram income OU FoundationOU Foundation

Sources, cont.Sources, cont. In-KindIn-Kind

• The value of non-The value of non-cash contributions cash contributions provided by third provided by third parties parties

• May include donated May include donated goods, services, real goods, services, real property, and non-property, and non-expendable expendable equipmentequipment

TimingTiming Cost share must be expenditures Cost share must be expenditures

incurred or services rendered during incurred or services rendered during effective award dateseffective award dates

Some agencies expect/require cost Some agencies expect/require cost sharing expenditures to occur at sharing expenditures to occur at same pace as grant dollarssame pace as grant dollars

DocumentationDocumentation Cash Cash

• Salary/WagesSalary/Wages Signed “Confirmation of Contributed Direct Signed “Confirmation of Contributed Direct

Labor” formLabor” form• Fringe BenefitsFringe Benefits

Calculated at OU Negotiated RatesCalculated at OU Negotiated Rates• Goods and ServicesGoods and Services

Copy of Invoice with paying dept numberCopy of Invoice with paying dept number

Documentation, cont.Documentation, cont. Cash, cont.Cash, cont.

• TravelTravel Copy of Travel Claim or Payment Net Travel Copy of Travel Claim or Payment Net Travel

with paying dept numberwith paying dept number• EquipmentEquipment

Copy of Invoice with paying dept numberCopy of Invoice with paying dept number• Indirect CostsIndirect Costs

Calculated at OU Negotiated RateCalculated at OU Negotiated Rate

Documentation, cont.Documentation, cont. In-KindIn-Kind

• Goods and Non-Expendable EquipmentGoods and Non-Expendable Equipment Signed letter from donor describing items Signed letter from donor describing items

and their fair market valuesand their fair market values• ServicesServices

Signed letter from donor or volunteer Signed letter from donor or volunteer describing services performed, time period, describing services performed, time period, rate of pay for job performed, and total rate of pay for job performed, and total amount of contributionamount of contribution

Third party employer may include fringe Third party employer may include fringe benefits, but not indirect costsbenefits, but not indirect costs

Documentation, cont.Documentation, cont. In-Kind, cont.In-Kind, cont.

• Real PropertyReal Property Certified, independent appraisal co-signed Certified, independent appraisal co-signed

by University official by University official Donor should be able to provide the Donor should be able to provide the

basis for determining the valuation basis for determining the valuation for goods, non-expendable for goods, non-expendable equipment, services and real equipment, services and real property if requiredproperty if required

Undocumented Cost ShareUndocumented Cost Share Treated as unmet cost shareTreated as unmet cost share May require reduction of May require reduction of

reimbursable grant expensesreimbursable grant expenses May reduce SRI funds to departmentMay reduce SRI funds to department May effect future fundingMay effect future funding

Discussion QuestionsDiscussion Questions1.1. I told Proposal Services about my cost share, I told Proposal Services about my cost share,

why does PAFS need more information?why does PAFS need more information?2.2. I was awarded a grant with $X required as cost I was awarded a grant with $X required as cost

share. I’ve spent all the grant funds, but cannot share. I’ve spent all the grant funds, but cannot meet the cost share funds. Is this okay?meet the cost share funds. Is this okay?

3.3. I spent a lot of effort/supplies on the proposal to I spent a lot of effort/supplies on the proposal to get this grant. Can I use these expenses as get this grant. Can I use these expenses as documented cost share?documented cost share?

Departmental Administrators Departmental Administrators CouncilCouncil

ORS is establishing a Departmental ORS is establishing a Departmental

Administrators Council to discuss Administrators Council to discuss departmental concerns on sponsored departmental concerns on sponsored programs. If you are interested in programs. If you are interested in serving on this council please contact serving on this council please contact Susan Cates at 325-4450 or Susan Cates at 325-4450 or srcates@ou.edusrcates@ou.edu