Columbia University Medical Center

1
Columbia University Medical Center

• Training Certification Program For Senior
  Financial Administrators - Session 6

2
Session 7 Cost Accounting

• Part 1 Industry Overview
• Direct Costs
• FA Costs
• Cost Accounting Standards
• Part 2 Columbia University
• FA (ICR) and Fringe Benefits
• Significant Costing Policies Procedures
• Service/ Recharge Centers

Session 6
3
Agenda
4
Session Objectives

• To understand the cost accounting standards
• To understand compliance requirements in A-21
• To understand direct costs vs. facilities and
  administration
• To understand the components of the FA rate
• To understand service/ recharge centers

5
Part 1

• Industry Overview
• Direct Costs
• FA Costs
• Cost Accounting Standards

Session 7
6
OMB Circular A-21

• Cost Principles for Educational Institutions
• A. Purpose and Scope
• B. Definition of Terms
• C. Basic Considerations
• D. Direct Costs
• E. F A Costs
• F. Identification and Assignment of F A Costs
• G. Determination and Application of F A Cost
  Rate
• H. Simplified Method for Small Institutions
• I. Reserved not in use
• J. General Provisions for Selected Items of Costs
• K. Certification of Charges

7
OMB Circular A-21

• Purpose
• Used in determining the applicable costs of work
  performed by colleges and universities under
  sponsored agreements.
• Designed to provide that the Federal Government
  bears its fair share of total costs.
• Not significantly different from generally
  accepted accounting principles.
• Website link http//www.whitehouse.gov/omb/circ
  ulars/a021/a21_2004.html

8
OMB Circular A-21

• Definition of Terms
• Major functions of an institution
• Instruction, organized research, other sponsored
  activities and other institutional activities.
• Sponsored agreement
• Any grant, contract, or other agreement between
  the Institution and the Federal Government.
• Allocation
• The 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
• Facilities and administrative (FA) costs
• Costs that are 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

9
OMB Circular A-21

• Definition of Terms
• MTDC (Modified Total Direct Costs)
• Consist of all salaries, wages, fringe benefits,
  materials, supplies, services, travel, and
  subgrants/subcontracts up to the first 25,000 of
  each subgrant/subcontract (regardless of the
  period covered by the subgrant/subcontract).
  Modified Total Direct Costs exclude equipment,
  capital expenditures, charges for patient care,
  tuition remission, rental costs of off-site
  facilities, scholarships, and fellowships, as
  well as the portion of each subgrant/subcontract
  in excess of 25,000.
• TDC (Total Direct Costs)
• Include all costs charged to a sponsored program
  account, excluding Facilities and Administrative
  Costs.

10
OMB Circular A-21

• Basic Considerations
• Section C.2 Factors affecting allowability of
  costs
• Shall be consistent with policies that apply
  uniformly to both federally funded and other
  activities of the organization.
• Reasonable and allocable.
• Conform to any limitations or exclusions set
  forth in the circular or award.
• Justification for costs must be adequately
  documented.

11
OMB Circular A-21

• Reasonable Costs
• Section C.3 Is the cost reasonable?
• A cost is reasonable if it does not exceed that
  which would be incurred by a prudent person under
  the circumstances.
• Is the cost necessary for the overall operation
  of the University or the performance of the
  award?
• Are costs incurred consistent with University
  policies and procedures?

12
OMB Circular A-21

• Allocability
• Section C.4 A cost is allocable if
• It is incurred specifically for the award.
• It benefits the award and can be distributed in
  reasonable proportion to the benefits received.
• It is necessary to the overall operation of
  University, and is deemed to be assignable in
  part to sponsored projects.

13
OMB Circular A-21

• Allocability
• Section C.4.d Direct cost allocation principles
• If a cost benefits two or more projects or
  activities in proportions that can be determined
  without undue effort or cost, the cost should be
  allocated to the projects based on proportional
  benefit.
• If a cost benefits two or more projects or
  activities in proportions that cannot be
  determined because of the interrelationship
  involved, then the costs may be allocated or
  transferred to benefited projects on a reasonable
  basis.

14
OMB Circular A-21

• Direct costs
• Section D. Direct Costs
• Direct costs are those costs that can be
  identified specifically with a particular
  project. These charges represent costs necessary
  to meet the projects scientific and technical
  requirements.
• The relationship between the charge and the
  science should be clear and close and costs
  should support the projects purpose and activity
• SubContract- Contracting for goods and services
  under a government prime contract.
• As a subcontract, the transaction becomes subject
  to additional requirements imposed on the prime
  contract by Federal Law as provided by the
  Federal Acquisition Regulations and Agency
  Supplements.
• These additional requirements cover all aspects
  of the contractual relationship including the
  decision to buy, selection of the supplier,
  pricing the contract, terms of the contract,
  quality, payments and even completion and
  closeout.

15
OMB Circular A-21

• Direct Charging
• Examples of allowable direct charges include
• Salaries, wages, benefits, of PI, research
  associate, lab technician, graduate research
  assistant, technical staff
• Lab supplies or educational supplies
• Travel
• Equipment
• Consultants
• Tuition Fees for Grad Research Assistants
• Subcontracts
• Animal purchases and per diems

16
OMB Circular A-21

• Unacceptable Direct Costing Practices
• Assigning charges to the sponsored agreement with
  the largest remaining balance.
• Charging the budgeted amount rather than charging
  an amount based on actual usage.
• Identifying a cost as anything other than what it
  actually is, such as classifying a supply as an
  item of equipment.
• Charging expenses exclusively to sponsored
  agreements when the expense has supported
  non-sponsored agreement activities.
• Assigning charges that are part of normal
  administrative support (FA costs) for sponsored
  agreements (e.g., secretarial/ clerical,
  accounting, payroll).
• Shifting expenses from one grant thats overspent
  to another with available funds.

17
OMB Circular A-21

• What is an unallowable cost?
• One that is not eligible for reimbursement by
  federal sponsors.
• Contrast with
• Permissible by the university
• Allowable by other sponsors
• Unallowable Activities
• Organized fund raising
• Lobbying
• Commencement and convocation
• General public relations and alumni activities
• Costs for student activities, e.g., intramural
  activities, student clubs, student publications,
  etc.
• Managing investments solely to enhance income
• Prosecuting claims against the federal government

18
OMB Circular A-21

• Unallowable Expenses
• Advertising
• Alcoholic beverages
• Entertainment
• Fines and penalties
• Housing personal living expenses
• Memorabilia, promotional materials
• Moving costs if employee resigns within 12 months
• Certain recruitment costs (e.g. excessive size
  ads)
• Certain travel costs (e.g. first-class)
• Cash donations to other organizations
• Golden Parachute severance payments
• Memberships in social, dining, or country clubs
  and in civic or community organizations
• Tuition benefits for employee family members

19
Facilities Administrative (FA) Costs

• What are they?
• Allowable costs that normally cannot be assigned
  to a specific project.
• Examples
• Building depreciation
• Equipment depreciation
• Supplies
• Administration (Central)
• Administrative clerical salaries and related
  fringe benefits
• Postage
• General purpose computer software and office
  supplies
• Local area network costs
• Memberships subscriptions

20
Facilities Administrative (FA) Costs

• Special purposes or circumstances- Exceptions for
  direct charging
• Projects that are geographically inaccessible to
  normal departmental administrative services.
• Projects that require making travel and meeting
  arrangements (conferences seminars) for a large
  number of participants.
• Large, complex programs, program projects,
  environmental research centers, engineering
  research centers, and other sponsored agreements
  and contracts that entail assembling and managing
  teams of investigators from a number of
  institutions.
• Projects which involve extensive data
  accumulation, analysis and entry, surveying,
  tabulation, cataloging, searching literature, and
  reporting. For example, if a project requires
  substantial mailing expenses in the performance
  of the project activities or technical work,
  postage should be a direct cost of the project.
• Projects that the principal focus includes the
  preparation and production of manuals, long
  reports, books or monographs (Preparing routine
  progress and technical reports does not mean the
  project is a special purpose or circumstance).

21
Facilities Administrative (FA) Costs

• Administrative vs. Facilities
• Administrative Cost Pools
• (Subject to Cap)
• General Administration (Central, School)
• Departmental Administration
• Sponsored Projects Administration
• Student Administration and Services
• Note Administrative Cap is 26 points of the
  total rate

• Facilities Cost Pools
• (Uncapped)
• Building Depreciation
• Equipment Depreciation
• Interest
• Operations Maintenance and Security

22
Cost Accounting Standards (CAS)

• Direct and indirect costs are governed by Cost
  Accounting Standards
• CAS requires four standards and a disclosure
  statement
• 501 consistency in estimating, accumulating, and
  reporting costs
• 502 consistency in allocating costs incurred for
  the same purpose
• 505 accounting for unallowable costs
• 506 consistency in using the same cost
  accounting period
• CASB disclosure statement

23
Cost Accounting Standards (CAS)

• Purposes of CAS
• CAS are federal law and not administrative
  directives.
• Facilitate comparison of costs among sponsoring
  agencies and contractors.
• Ensure that costs are accounted for in the same
  way on proposals and grants/contracts.
• Ensure that costs are accounted for in the same
  way from grant to grant over time.

24
Cost Accounting Standards (CAS)

• Consistence in Estimating, Accumulating, and
  Reporting Costs
• Practices Must Be Consistent

Department to Department
Grant Proposal to Grant Proposal
Grant Proposal to Financial Report
25
Cost Accounting Standards (CAS)

• Consistency in allocating cost incurred for the
  same purpose.
• Each type of cost must be allocated once and on
  only one basis to any cost objective.
• Costs incurred for the same purpose in like
  circumstances are either direct costs only or FA
  costs only with respect to final cost objectives.

26
Question 1

• Salaries of Glass-Washers
• How would you allocate salaries and supplies of
  glass - washers who wash test tubes for seven
  different sponsored projects?
• A) Charge to the project with the most money.
• B) Charge all salaries to one project each month
  and then start over again.
• C) Count the test tubes used on each project and
  figure out the proportional share
• to be charged.
• D) Charge the expense based on the proportional
  share of PIs effort.
• E) Charge the expense based on the sq. Footage
  of glass - washers
• bench area.
• F) Not chargeable to grant.

27
Question 2

• Computer Purchased for Technical Use
• A principal investigator wants to purchase a
  computer on project A where it is budgeted. He
  put through a purchase requisition and a couple
  of days later he realizes he can also use it for
  project B.
• Should he go back and charge project B?

28
Question 3

• Photocopying Costs
• Can a PI charge the costs of photocopying
  research papers and making slides for use in a
  technical meeting to the research project?

29
Penalties for Noncompliance

• Funds for award may need to be returned to
  sponsoring agency
• Research on award may be frozen pending
  investigation
• Funding by sponsoring agency may cease
• Legal ramifications

30
BREAK
Session 7 - Cost Accounting
31
Part 2

• Columbia University Cost Accounting
• Facilities Administration (FA) Fringe
  Benefits
• Significant Costing Policies Procedures
• Service/ Recharge Centers

Session 7
32
Terminologies

• All costs are grouped into a number of pools
  (categories)
• Direct Costs
• FA (ICR)
• Facilities
• Administrative

33
Terminologies

• Direct Costs
• Costs that can be identified to a specific
  project, program, or activity of an institution.
• Facilities and Administrative Costs (Indirect
  Costs)
• Costs that cannot be identified to a specific
  project, program, or activity but benefit the
  total institution.

34
Terminologies

• Direct Cost Pools include
• Instruction
• Sponsored Training
• Department Research
• Organized Research (separately budgeted and
  accounted for)
• Other Sponsored Activities (not research)
• Other Institutional Activities (auxiliaries)

35
Terminologies

• FA Cost Pools include
• Facilities Cost Pools
• Building Depreciation
• Equipment Depreciation
• Operation and Maintenance
• Interest
• Library

36
Terminologies

• FA Cost Pools include
• Administrative Cost Pools
• General Administration
• Department Administration
• Sponsored Projects Administration
• The government has imposed a 26 CAP on
  Administrative components
• The cap was imposed for all grantees fiscal years
  after October 1991. Therefore, applicable at CU
  starting in Fiscal Year 1992

37
Terminologies

• Distribution Base or what is commonly referred to
  as the MTDC base
• The denominator used to compute the FA rate
• The base includes
• Salaries, wages, and benefits
• Materials, supplies, and services
• Travel
• Subcontract expenditures up to 25,000 each

38
Terminologies

• The Distribution Base excludes
• Equipment
• Capital expenditures
• Patient care charges
• Tuition remission
• Rental of off-site facilities
• Scholarships and fellowships
• Subcontract expenditures in excess of 25,000
• These items are excluded in order to avoid
  inequities in the distribution of FA costs.

39
Terminologies

• Facilities and Administrative (FA) Cost Rate
  Calculation
• FA Cost Pool Rate
• Distribution Base

40
Terminologies

• Base Year Costs
• Used as the basis to negotiate new set of FA
  rates. The base year is normally the fiscal year
  ending prior to the final year covered by the
  negotiation agreement.
• Columbia current rates run from July 1, 2004
  through June 30, 2007, therefore the future base
  year will be fiscal year ending June 30, 2006.

41
CU Facilities Administrative (ICR) Rates

• Columbias rates are
• On Campus 61.0
• Off Campus 26.0
• Off Campus Modified 28.8
• Lamont 51.0
• These rates are predetermined and are applicable
  for the period 7/1/04-6/30/07.
• On-Campus and Off-Campus rates apply to both CUMC
  and Morningside campuses.

42
Facilities Administrative (FA) Costs

• On Campus FA Rates at Peer Institutions
  FY 2003
• Brown 56.0
• Chicago 52.5
• Columbia 61.0
• Dartmouth 58.0
• Harvard 63.0
• Johns Hopkins 63.5
• MIT 63.0
• U of Penn 58.5
• Princeton 58.0
• Stanford 58.0
• Washington U 53.0
• Yale 63.5

43
Facilities Administrative (FA) Costs

• Proposal Preparation / Submission / Negotiation
  Process
• MTDC Base Review
• Cost Sharing
• Space Inventory
• OM Cost
• Equipment Inventory
• Building Depreciation
• Interest on Capital Projects
• Departmental Administration
• Library Costs
• Screening for unallowables
• FA Rate Calculation
• Proposal preparation / Submission / Negotiation

44
FA Proposal Timeline

• MTDC Base Review
• Review of the Modified Total Direct Cost Base is
  an ongoing process.
• FA cost team reviews each new account to
  determine proper classification
• This is an important process since the improper
  classification of projects as sponsored research
  will have a negative impact on the FA rate.

45
FA Proposal Timeline

• Cost Sharing
• We must identify any mandatory and voluntary cost
  sharing and add these costs to the MTDC base.
• Cost sharing has a negative impact on the FA
  rate.

46
FA Proposal Timeline

• Space Inventory
• The most significant step in the proposal process
  is to conduct a space inventory survey for the
  purpose of functionalizing space (i.e. space
  allocation to research, training, administration,
  etc.). Space statistics is the primary driver in
  allocating facilities costs pools, therefore it
  is important that we be as accurate as possible
  in functionalizing space, particularly research
  space.
• The space survey process is started in
  July/August of the base year and will take 8-10
  months to complete.
• We hold training sessions on how to conduct the
  survey. Instruction packets are given to each
  department with a data sheet for each space owned
  by the department. We also provide a listing of
  PIs and their restricted account numbers.
• The department must complete the data sheets for
  each space by annotating
• Room occupants
• Research projects conducted in the room
• When graduate students occupy space in the room
  there must be a reasonable allocation of space
  based on the funding source of the student.

47
FA Proposal Timeline

• Space Inventory (continued)
• The facilities component of the Universitys FA
  rate is approximately 50 of the rate and is most
  vulnerable to scrutiny by the Federal negotiator.
• It is important that there is adequate
  documentation to support the functionalization of
  the space by room.
• The FA cost team reviews each data sheet for
  reasonableness and accuracy. An important step in
  this review is to compare occupants effort to
  space functionalization.

48
FA Proposal Timeline

• Review of the Space Surveys - federal questions
• Did the Universitys space survey definitions
  comply with the definitions outlined in OMB
  Circular A-21?
• Did department personnel understand the space
  definitions and follow the Universitys
  procedures? In other words, the space survey
  instructions must be of sufficient scope, clear,
  and complete.
• Is the space study supported by adequate records?
  Documentation of space utilization may include
• A list of occupants for each room
• A list of sponsored research projects conducted
  in a room or sponsored projects by principal
  investigator
• Allocation of some space to non-research
  activities when students are occupants
• No room 100 research

49
FA Proposal Timeline

• Operation and Maintenance (OM)
• OM expenses include
• Utilities
• Janitorial / Custodial services / grounds keeping
• Physical plant administration
• Environmental Health and Safety
• Public safety/security
• Maintenance repair
• OM is the single largest component of the rate

50
FA Proposal Timeline

• Equipment Inventory (for depreciating assets)
• A wall to wall room by room inventory of all
  equipment in research intensive space.
• Equipment linked to space inventory.
• Next inventory expected in early 2006.

51
FA Proposal Timeline

• Equipment Depreciation
• Equipment inventories are required by Circular
  A-21
• Allocation of equipment depreciation on a
  room-by-room basis
• More precise allocation than a building-by-buildin
  g basis or allocation by department
• May provide increased recovery
• Requires defensible equipment inventories by room
• Property Control Manual
• Procedures for the control of equipment owned by
  Columbia
• Federal government and other sponsors
  requirements with respect to control over property

52
FA Proposal Timeline

• Building Depreciation
• Annually, Facilities Management will provide
  building costs data.
• Controller updates building depreciation database
  for calculating the building depreciation expense
  for FY2006.
• The depreciation allocated to research will be
  calculated based on the functionalization of the
  building.

53
FA Proposal Timeline

• Interest on Capital Projects
• University Budget office provide an updated
  projects listing for debt financed projects.
• Interest is calculated for research projects
  within a building.
• The interest allocated to research is calculated
  based on the functionalization of the building.

54
FA Proposal Timeline

• Department Administration
• Developed from information provided by effort
  reports and review of department accounts. (e.g.
  Ledgers 2, 4, 6B, and 6C)
• Department administration is calculated by
  department, by school.
• Salary and wage and other expenses categories
  must be consistent with Federal guidelines. (e.g.
  must exclude fundraising, alcohol, etc.)

55
FA Proposal Timeline

• Library
• Library costs are allocated based on Full Time
  Equivalents for
• Undergraduate students
• Graduated students
• Faculty
• Non-Salaried appointees

56
FA Proposal Timeline

• Screening for Unallowables
• Every attempt is made to insure unallowable costs
  are excluded from the cost pools. Some examples
  include
• Entertainment, flowers, liquor
• Fundraising
• Lobbying
• Certain legal costs
• Public affairs

57
Facilities Administrative (FA) Costs

• Flowchart of Basic FA Rate Calculation

58
FA Proposal Timeline

• Prepare Proposal Document
• Prepare supporting documentation as required by
  Standard Format
• Proposal must be submitted to the Division of
  Cost Allocation, New York by next base year, e.g.
  December 31, 2006.
• Provide addition materials as requested
• 4-6 month review and negotiation

59
Facilities Administrative (FA) Costs

• Key Drivers of FA Rates
• There are a few well-defined drivers of the FA
  rate
• New Buildings
• Space functionalization- which is the basis for
  allocating the space-related components
• Operation Maintenance - may be the most
  significant rate component
• Depreciation- for recovering the cost of
  equipment and buildings
• Interest - properly allocated to buildings
• The research base volume of sponsored research

60
CU Fringe Benefit Rates

• Federal Rate
• Current negotiated rate 26.4
• Type of rate Fixed
• Period 7/1/04-6/30/05
• Other Fringe Rates
• 4.1 Additional Fringe - not charged to federal
  projects
• Recovers fringe costs not included in 26.4 (e.g.
  Tuition for dependents)
• Fringe charges applicable only to practice plan
  salary
• A-1 16.45 (Pensionable)
• A-2 1.45 (Non-pensionable)
• Fringe charges applicable to registered students
  8.15

61
BREAK
Session 7 - Cost Accounting
62
Significant CU Costing Policies and Procedures

• Most significant policies and procedures that
  impact sponsored projects
• Columbia Policy Statements
• 92-1 Segregation of Unallowables
• 92-3 Administrative and Clerical Salaries
• 92-4 Office Supplies and Other Admin Expenses
• 92-5 PI Responsibility for Fiscal Oversight
• Other Significant Policies
• Effort Reporting and Cost Transfers
• Cost Sharing
• Overdrafts
• Service/Recharge Centers

63
CU Policy Statements

• Policy Statement on Segregation of Unallowables
  (92-1)
• Covers costs like alcoholic beverages, flowers,
  airfare in excess of lowest available fare
• These costs may NOT be charged directly or
  indirectly to federal awards
• Although unallowable as charges to federal
  awards, these may be reimbursed /paid from other
  sources if they conform to CU policy
• Use subcode 8500 or individual 85xx subcodes as
  identified in policy

64
CU Policy Statements

• Policy Statement on Admin/Clerical Salaries
  (92-3)
• Curtails reimbursement of these costs as direct
  charges to FEDERAL awards
• OMB Circular A-21 provides that these costs
  normally are indirect
• Direct charging may be appropriate under certain
  circumstances, including
• Large complex programs that require significant
  admin support (e.g., Program Projects)
• Projects requiring extensive data
  accumulation/analyses, etc.
• Projects geographically inaccessible to normal
  admin services
• Individuals charged must be those actually
  engaged in the project
• PI/Admin responsible for insuring that direct
  charging is appropriate, whether to Federal OR
  non-federal projects

65
CU Policy Statements

• Policy Statement on Office Supplies Other Admin
  Expenses (92-4)
• Curtails reimbursement of these costs as direct
  charges to FEDERAL awards
• OMB Circular A-21 provides that these costs
  normally are indirect
• Includes costs like office supplies, postage,
  memberships in prof. societies
• Direct charging may be appropriate under certain
  circumstances, including
• When the costs relate specifically to the
  technical substance of the project
• Where nature of project requires unusually high
  level of these costs
• PI/Admin responsible for insuring that direct
  charging is appropriate, whether to Federal OR
  non-federal projects

66
CU Policy Statements

• Policy Statement on PI Responsibilities (92-5)
• Requires active oversight of the principal
  investigator, who is often the only source to
  provide distribution of costs
• Encourages the use of administrative staff to
  handle details, but PI is ultimately responsible
  for financial (as well as programmatic) oversight

67
Other Significant CU Policies
Effort Reporting Allocation to Function
Research
PIs Effort
Instruction
Administration
68
Other Significant CU Policies

• Effort Reporting
• Instituted in early 1970s Government wanted
  reporting that provided a reasonable comfort
  level for substantiating salaries charged to
  research grants.
• Effort reporting evolved in what you might
  characterize as a simplistic world of research.
  Some thirty years later, the complexity,
  inter-disciplinary, inter-relatedness of research
  protocols has made the tracking of effort
  difficult particularly since PIs tend to work on
  several grants as well as other duties.

69
Other Significant CU Policies

• Effort Reporting
• What is Effort Reporting?
• Accounting for salaries and wages
• Certifying effort
• On individual sponsored agreements
• On all other activities (DA, Instruction, PP,
  Hospital Duty, Cost Sharing)

70
Other Significant CU Policies

• Effort Reporting
• Why Do Effort Reporting?
• Salary and wage charges to sponsored agreements
  are allowable only if they are supported by an
  effort reporting system

71
Other Significant CU Policies

• Effort Reporting
• Who has to do Effort Reporting?
• All employees in Academic departments
• Effort reporting salary is annual compensation
  for an employees appointment whether time is
  spend on research, teaching, patient care or
  other activities
• Excludes compensation from non-university sources
  (e.g. NYSPI)

72
Other Significant CU Policies

• Effort Reporting
• OMB A-21Requirements
• Columbia utilizes plan-confirmation to satisfy
  A-21 requirements
• A system based upon budgeted workload
• System will reasonably reflect the workload of
  each employee
• System will account for 100 of the workload for
  which the employee is compensated
• System provide for making necessary changes to
  the budgeted workload
• Annual certification that salaries and wages
  charged to sponsored agreements or other
  categories are reasonable in relation to the work
  performed

73
Other Significant CU Policies

• Effort Reporting
• Effort Definitions
• Sponsored Activities research, training, and
  other activities supported by grants and
  contracts from Federal and other sources. Effort
  is separately budgeted and accounted for
• Public Service Harlem Hospital and similar
  institutions under affiliation agreements
• Hospital Duty Effort devoted to patient care at
  NYPH where effort is part of base salary

74
Other Significant CU Policies

• Effort Reporting
• Effort Definitions (continued)
• Private Practice designated as private practice
  guaranteed and is part of base salary
• Instruction - teaching, curriculum development,
  departmental research. Departmental research is
  activity which is neither separately budgeted or
  accounted for, and is supported by departmental
  funds
• Department Administration Effort devoted to
  administrative activities that benefit common or
  joint objectives of the academic department.
• Maintenance of department records, budgets
• Supervision/guidance of administrative support
  staff
• Departmental chair or head, etc in administrative
  matters
• Preparation of grant contract proposal
• Instruction and departmental administration are
  often funded from the same FAS accounts,
  including FAS accounts supporting private
  practice.

75
Other Significant CU Policies

• Effort Reporting
• Department Responsibilities
• Determine initial effort allocation based on
  assigned workload
• Submit Salary Accounting Form (SAF) indicating
  salary to be charged to one or more activities,
  percentage of effort devoted to the project and
  period to which effort is attributable
• Provide breakdown of effort devoted to
  instruction, private practice and administration
• Must add to 100

76
Other Significant CU Policies

• Effort Reporting
• Department Responsibilities (Continued)
• Department must monitor workload distributions
• Quarterly monitoring snapshot reports provided
  to dept.
• Department must submit revised salary
  distribution instructions by submitting an SAF
  whenever there is a significant change in
  workload, including
• Beginning or end of a sponsored project
• Shift in effort resulting from new awards
• Long term change in effort devoted to one or more
  projects
• Shift in administrative responsibilities

77
Other Significant CU Policies

• Effort Reporting
• Department Responsibilities (Continued)
• Annual Effort Certification
• The effort summary is not intended to be a
  precise measure of an employees effort
  distribution, but rather a reasonable estimate
• Certification of an employees effort is to be
  verified by a person who has knowledge of that
  effort
• Note Refer to Effort Certification letter, dated
  October 18, 2004, for guidance on required steps.

78
Other Significant CU Policies

• Effort Reporting
• Annual Effort Certification Report
• Includes all salary transactions recorded in
  labor for fiscal year ended June 30, 2004 and any
  cost transfers affecting fiscal year 2004
  submitted through September 30, 2004
• Effort distribution percentages have been
  recalculated in consideration of the NIH caps
  that limit the amount of salary that can be
  charged to NIH grants
• Space is provided to record an individuals
  effort devoted to lobbying activities
• Cost sharing, whether mandatory (grant required)
  or voluntary (PI committed), must be reported.

79
Other Significant CU Policies

• Effort Reporting
• Effort Reporting Issues
• Certifying official must have knowledge of effort
  performed
• Effort reports must be certified and returned in
  a timely manner
• Overcommitments due to NIH cap and Cost Sharing

80
Other Significant CU Policies

• Effort Reporting
• Timeliness of Retroactive Cost Transfers
• Departments have up to 90 days to process
• Salary costs must be transferred within 90 days
  from the date of the payroll transaction
• Example Salary for the month of July may be
  transferred through the end of October
• Exceptions beyond 90 days require documentation
  and approval by the Controllers Office
• 90-day rule applies to both transfers and
  clearing suspense accounts

81
Other Significant CU Policies

• Effort Reporting
• Retroactive Cost Transfers may NOT be used
• To expend available funds remaining on a project.
• To avoid a cost overrun by charging another
  unrelated account.
• To avoid a restriction imposed by law or terms of
  agreement.

82
Other Significant CU Policies

• Effort Reporting
• Acceptable Reasons for a Retroactive Cost
  Transfer beyond 90 days
• Transfers between continuation grants and new
  project number was not established when cost was
  incurred.
• Pre-award costs, specifically authorized in
  writing by the sponsor.
• Pertinent information received from sponsoring
  agency.
• Impossible or impractical to allocate charges at
  time of original entry.
• RARE Clerical error

83
Other Significant CU Policies

• Effort Reporting / Cost Sharing
• Some sponsored projects require that federal
  grant funds be matched proportionately with
  non-federal funds or that the University
  participate to some extent in the cost of the
  project. In other cases, PIs volunteer cost
  sharing.
• Mandatory cost sharing
• Is mandated by sponsor requires dept. to fund a
  portion of direct costs
• Voluntary Committed cost sharing
• Is specifically pledged in the proposal budget or
  award
• Requires dept. to fund a portion of direct costs
• More complex tracking
• Voluntary uncommitted cost sharing
• Over and above the time which is committed and
  budgeted for in a sponsored agreement ( e.g.
  faculty-donated additional time)
• Documentation is not required

84
Other Significant CU Policies

• Grant / Contract Overdrafts
• Occurs when expenditures exceed budget
• Modest overdrafts during life of competitive
  segment generally
• Permissible on most Federal grants
• Must not interfere with completion of project
• Significant overdrafts must be covered on a
  timely basis
• Any residual overdraft must be funded within 9
  months after end of competitive segment
• Controllers Office will transfer any deficit to
  school

85
What are Service/ Recharge Centers?

• Operating units that provide good or services to
  users principally within the University community
  for a fee (e.g. departments and units)
• Types of Service/ Recharge Centers
• Specialized Service Facilities
• Highly complex or specialized facility
• Material effect on the FA rate for organized
  research
• Rates must include both direct and FA costs
• Example Animal care
• Recharge Centers
• Not highly specialized in nature
• High dollar volume
• Examples Facilities costs, NMR Facility,
  Printing and Reproduction DNA,

86
Recharge Centers

• Process for establishing a license to operate a
  recharge center
• Determine need. Does a similar center already
  exist that can be utilized?
• Prepare projection of costs/revenues
• Determine units of service and calculate a rate
  per service
• Rates must be set for overall breakeven (or dept
  funded deficit, but NOT a surplus)
• Rates must be based on cost, not market
  conditions
• Factor in depreciation, not cost of equipment to
  be charged to recharge center
• Submit to Restricted Funds for review and
  approval
• Annual review requirement
• Review and adjustment of rate(s) required
  annually.

87
Service/ Recharge Centers

• Compliance Issues OIG Findings at Major
  Research Institutions
• OIG audits found that service/ recharge centers
• Accumulated surplus funds resulting from excess
  charges
• Inappropriately transferred surplus funds out of
  operating accounts for unrelated purposes
• Cost of capital equipment purchases vs.
  depreciation??

88
Wrap Up

• That was all very interesting (???) But what
  should I take away from this presentation?
• FA (ICR) costs are real costs, and the process
  for documenting and negotiating them is rigorous
• Make sure to segregate all unallowable expenses
• Salary allocations and effort certification are
  vitally important
• SAFs must be processed timely
• Cost Transfers MUST be severely curtailed
• Annual effort certification is a serious matter.
  Signer must have knowledge of activities of
  faculty/staff
• Recharge center finances must be monitored and
  rates adjusted as necessary

89
My Research Joke

• This scientist is doing research on how the
  environment affects a frogs ability to jump

90
QUESTIONS?
Session 6
91
COURSE EVALUATION

• Please complete course evaluation form.

Session 7
Session 6