OMB A21 for the Department Administrator

1
OMB A-21 for the Department Administrator

• NCURA Region II Spring Meeting
• April 24, 2006

2
Panelists

• Kevin Ashman, Assistant Business Manager,
  Department of Chemistry Chemical Biology,
  Cornell University, kda1_at_cornell.edu
• Deborah Shackelford, Grant PublicationsAdminist
  rator, Center for Technology in Education, Johns
  Hopkins University, dshack_at_jhu.edu
• Jeffrey Silber, Senior Director, Sponsored
  Program Services, Cornell University,
  jas9_at_cornell.edu

3
Salaries are reasonable in relation to work
performed

• Why J.10 is Really Important
• Kevin Ashman

4
Payroll Distribution and Certification

• The apportionment of employees' salaries and
  wages which are chargeable to more than one
  sponsored agreement or other cost objective will
  be accomplished by methods which will produce
  an equitable distribution of charges for
  employee's activities.
• In the use of any methods for apportioning
  salaries, it is recognized that, in an academic
  setting, teaching, research, service, and
  administration are often inextricably
  intermingled. A precise assessment of factors
  that contribute to costs is not always feasible,
  nor is it expected. Reliance, therefore, is
  placed on estimates in which a degree of
  tolerance is appropriate.

5
Payroll Distribution

• The government wants to pay its fair share.
• Auditors want to make sure that it is not a penny
  more.
• Payroll must
• be incorporated into the official records of the
  institution.
• reasonably reflect the activity for which the
  employee is compensated by the institution.
• encompass both sponsored and all other activities
  on an integrated basis, but may include the use
  of subsidiary records.

6
Payroll Distribution

• The distribution must
• Be certified by the employee or someone having a
  suitable means of verification that the work was
  performed.
• Have detail at the individual sponsored agreement
  level.
• Provide for independent internal evaluations to
  ensure the system's effectiveness and
  compliance.
• Three methods cited as examples in A-21.

7
Distribution Methods

• Plan Confirmation
• A plan is developed and modified through-out
  the year.
• At least once a year the results are confirmed.
• After the Fact Activity Reports
• Salaries are allocated to various activities.
• Several times a year (ranging from monthly to
  semi-annually) the reports must be certified.

8
Benefits to the Institution

• For systems which meet these standards, the
  institution will not be required to provide
  additional support or documentation for the
  effort actually performed.
• Proper payroll certification means that time
  cards or activity logs often required for
  government contractors are not required.

9
Payroll Certification Issues

• Perhaps the highest priority in the federal audit
  community.
• Concern that costs are shifted from one agreement
  or activity to another without a reasonable
  basis.
• Several high profile, high dollar paybacks have
  occurred in recent years.
• Wall Street Journal article . . . dirty little
  secret of university medical research the
  misuse of taxpayers' funds.http//www.post-gazet
  te.com/pg/05228/554819.stm

10
Problems that May Occur

• Budgeted, not actual, effort is used as basis of
  allocation.
• Mismatch of effort and salary.
• Lack of timely certification.
• Revision of certified effort.
• Failure to meet effort commitment.
• Improper handling of NIH salary cap.

11
You want to spend the money on what?!

• The Ins and Outs of Section J
• Deborah Shackelford

12
Section J

• Principles to be applied in establishing the
  allowability of certain items involved in
  determining cost.
• Guidance on 54 specific areas.
• Not all types of costs listed. May have to
  interpret based on the treatment provided for
  similar or related items of cost.
• Terms in sponsored agreements override A-21.
• Limitations set forth in government policy result
  in some reasonable university business expenses
  being unallowable.

13
Direct or Indirect?

• Section J classifies certain specific costs as
  direct or indirect. For others it is silent.
• Further discussions of direct versus indirect are
  in Sections D, E, F.
• Since the early 1990s Administrative and Clerical
  expenses have been defined as generally indirect,
  but Exhibit C lists exceptions.
• Incorporated CAS standards require consistent
  treatment of costs.

14
Allowable or not?

• Section C says for costs to be allowable
• they must be reasonable
• they must be allocable to sponsored agreements
  under the principles and methods provided herein
• they must be given consistent treatment through
  application of those generally accepted
  accounting principles appropriate to the
  circumstances and
• they must conform to any limitations or
  exclusions set forth in these principles or in
  the sponsored agreement as to types or amounts of
  cost items.
• Above section C terms override Section J.

15
Common Questions of Allowability

• Advertising/PR (J.1)
• Alcohol (J.3)
• Alumni Activities (J.4)
• Bad Debt/Collection Costs (J.6)
• Defense Costs (J.13)
• Donations (J.15)
• Entertainment (J.17)
• Fines (J.19)
• Fund Raising (J.20)
• Goods for Personal Use (J.22)

16
Common Questions of Allowability

• Housing for Officers (J.23)
• Lobbying (J.28)
• Sponsored Agreement Losses (J.29)
• Memberships (J.33)
• Preagreement Costs (J.36) (see also A-110)
• Proposal Costs (J.38)
• Scholarships (J.45)
• Selling and Marketing (J.46)
• Student Activities (J.48)

17
What is this overhead tax, anyway?

• Composition of FA Rates
• Jeffrey Silber

18
What are FA costs?

• FA costs are those 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.
• Real costs paid on or behalf of institution.

19
FA Components Administration

• General Administration
• Central administration
• Accounting, audit, purchasing, etc.
• Departmental Administration
• Deans offices
• Departmental offices
• Faculty administrative effort
• Sponsored Program Administration
• Pre- and post- award
• Student Administration

20
FA Components Facilities

• Building Depreciation
• Equipment Depreciation
• Interest
• Buildings and equipment
• Operation Maintenance of Plant
• Utilities
• Libraries

21
What is the FA rate?

• The allocation of actual costs, using a valid
  methodology, to all institutional activities,
  divided by that activity base.
• MathematicallyINDIRECT COSTS FA RateDIRECT
  COSTS
• All costs in the base bear the rate whether or
  not charged.

22
Creation of an FA rate

• Simplified method for small institutions. For
  the rest it is a major project.
• Generally, two types of rates Predetermined and
  Fixed with Carry Forward.
• Developed over many months, typically using a
  specialized modeling tool.
• Submitted, typically, to either HHS or ONR.
• Cognizant agency performs a site visit.
• Rate is then negotiated.

23
Use of FA Recovery

• Payments are a recovery. Actual costs were paid
  by or on behalf of the institution. Sometimes
  many years before.
• Once the funds come in they are mostly
  unrestricted. Larger institutions may be
  required to reinvest a portion. Rarely a
  problem.
• Some institutions distribute recovery on a
  formulaic basis to units and PIs.

24
Questions for the Panel?