Allowable Costs Learning to Negotiate a Slippery Slope

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Allowable Costs Learning to Negotiate a
Slippery Slope
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Learning to Negotiate Allowable or Unallowable

• Negotiation is a dialogue intended to resolve
  disputes, to agree on courses of action, or to
  craft outcomes to satisfy various interests.
• It is the primary method of alternative dispute
  resolution.
• The study of the subject is called negotiation
  theory.
• Those who work in negotiation professionally are
  called negotiators.
• Professional negotiators are often specialized,
  such as Research or Department Administrators.

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What do you need to know?

• What are the administrative requirements for
  Grants and Cooperative Agreements?  
• How do they affect the administration of your
  awards?   
• What are cost principles?  What are some of the
  differences in the cost principles?  
• How do the different cost principles may affect
  the way grants are administered? 
• How do you determine if a cost is allowable or
  unallowable for different organizations? 

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• Administrative
• Requirements

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Administrative Requirements

• 2 CFR Part 92, Uniform Administrative
  Requirements for State Local Governments
  (formerly OMB Circular A-102)
• 2 CFR Part 215, Uniform Administrative
  Requirements for Grants and Agreements of Higher
  Education, Hospitals, and other Non-Profit
  Organizations (formerly OMB Circular A-110)
• 2 CFR Part 215 applies to For-Profits and Foreign
  organizations as well

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Structure of Administrative Requirements

• Follows the life cycle of the grants process
  pre-award, post-award and after-the-grant.
• It sets the standards for acceptable financial
  and management systems.
• Limits the control the awarding agency can have
  on day to day operations of the recipients
  organization by restricting the authority of
  agencies to impose more stringent requirements.

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Administrative Requirements Sets the Rules

• Definitions and general info
• Pre award
• Post award
• Financial systems requirements
• Property management requirements
• Required reports and records
• Terminations and enforcement of awards
• After the grant requirements
• Guidance sets forth standards for obtaining
  consistency and uniformity in agencies
  administration

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• Cost Principles

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Costs Principles

• Circular A-21 - Educational Institutions
  (Relocated to 2 CFR, Part 220)
• Circular A-87 - State, Local Indian Tribal
  Governments (Relocated to 2 CFR, Part 225)
• Circular A-122 - Non-Profit Organizations
  (Relocated to 2 CFR, Part 230)
• 48 CFR 31.201-2 For Profits
• 45 CFR 74, Appendix E, for Hospitals

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Cost PrinciplesPurpose

• To set forth standards to achieve consistency and
  uniformity among the federal agencies in the
  administration of grants and agreements.
• In 1999, the Federal Financial assistance
  Management Improvement Act, PL 106-107 required
  federal agencies to
• Streamline and simplify requirements
• Standardization of the language in the cost
  principles
• Move the cost principles to 2 CFR 220, 225,230

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Cost Principles Objectives

• Achieve uniformity
• Reduce administrative burdens on both recipients
  and federal awarding agencies
• Ensure that charges to federal awards meet the
  requirement of cost principles
• If cost fails the test of allowability,
  allocability, reasonableness and necessity, then,
  it should be removed from the budget

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Cost Principles Similarities

• Cost Principles identify DC IC (FA) that may
  be charged to federal grants/awards, contracts
  and other agreements. It also identifies those
  charges that cannot be charged to grants thus
  considered unallowable expenses.

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Cost Principles Purpose

• Determining costs applicable to grants,
  contracts, and other agreements.
• Federal Government bear its fair share of total
  costs, determined in accordance with GAAP, except
  where restricted or prohibited by law.

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Cost PrinciplesCost Determination

• Allowable
• Allocable
• Necessary and Reasonable
• Treated Consistently
• Authorized

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Cost DeterminationReasonable

• A cost may be considered reasonable if the nature
  of the goods or services acquired reflect the
  action that a prudent person would have taken
  under the circumstances prevailing at the time
  the decision to incur the cost was made.

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Cost DeterminationAllocable

• A cost is allocable to a specific grant if
• it is incurred solely in order to advance work
  under the grant
• if it benefits both the grant and other work of
  the institution
• if is necessary to the overall operation of the
  organization
• and is deemed assignable, at least in part, to
  the grant.

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Cost DeterminationAllowable

• A cost is allowable if it is reasonable,
  allocable and conforms to the cost principles and
  the sponsored agreement AND is not prohibited by
  law or regulation.
• Conformance with limitations and exclusions as
  contained in the terms and conditions of award
  including the cost principlesvaries by type of
  activity, type of recipient, and other
  characteristics of individual awards.

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Cost DeterminationConsistently Applied

• Grantees must be consistent in assigning costs to
  cost objectives. Although costs may be charged as
  either direct costs or FA costs, depending on
  their identifiable benefit to a particular
  project or program, they must be treated
  consistently for all work of the organization
  under similar circumstances, regardless of the
  source of funding, so as to avoid duplicate
  charges.

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Cost DeterminationObstacles

• Difficulty identifying unallowable costs to
  exclude from billing, claim, or application
• Identifying indirect costs (FA costs pool) to
  avoid duplicity
• Knowledge of regulatory and statutory limits or
  exclusions of certain costs
• Identify provisional and final rates for FA
• Inability to identify costs unallowability under
  expanded authorities, i.e. (SNAPs, re-budgeting)

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Costs Consideration

• Consult applicable Authorities
• Cost principles
• Grant agreement
• Program statute/regulations/guidelines
• Internal policies
• Appropriate Documentation

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Grant Award Basics
NOTICE OF GRANT
AWARDCENTER GRANT
Issue Date06/24/2004Departmen
t of Health and Human ServicesNational
Institutes Of Health
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Read the Notice of Grant Award (NoA)

• Special Terms and Conditions
• Other Terms of Award
• 45 CFR Part 74 or 92 - HHS rules and requirements
  that govern the administration of grants
• NIH Grants Policy Statement policy requirements
  that serve as the terms and conditions of NIH
  awards latest version 12/01/03
• Program legislation
• Program regulations
• 42 CFR Part 52 - Grants for Research Projects

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Award Restrictions

• Only applied to a particular grant for cause
• Shown on the NoA after Section IV
• Funds usually are not restricted in the Payment
  Management System
• Restricted funds must be tracked by grantee to
  ensure compliance
• EXAMPLE of Award Restriction No funds may be
  expended for human embryonic stem cell research
  until the registered cell line(s) has been
  reported to the awarding agency program official
  and grants management contacts noted below.

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Decision Tree
NO
NO
NO
NO
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Decision Tree
YES
NO
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Consistent Treatment

• Indirect (FA Costs)
• Salaries of Admin or clerical staff
• Office Supplies
• Local phone charges
• Postage (Stamps)
• Library Support
• Routine Maintenance of Plant/equipment
• Insurance

• Direct Costs
• Salaries of Tech staff
• Lab supplies
• Animal Care costs
• Travel
• Equipment
• Service / Recharge Centers

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Generally Unallowable

• Alcoholic Beverages
• Bad Debts
• Donations Contributions
• Entertainment
• Fundraising Investment Management Costs
• Fines and Penalties
• Lobbying
• Losses on other sponsored agreements or contracts

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Exceptional Circumstances

• Usually treated as FA, but if it can be
  justified as an exceptional need
• Office supplies
• Postage
• Administrative and Clerical Salaries
• Local Telephone charges
• General Purpose Equipment (laptops, cell phones)

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Allowable or Unallowable

• Thats the question!

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Items of Cost

• Case Studies
• For discussion at session.

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Helpful Hints

• Keep abreast of Federal Policy changes and
  updates
• Question and obtain justification
• Be proactive in addressing issues
• Dont rely only on your memory
• When in doubt consult with others and policy
• Attend training classes and conferences
• Document your files

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RESOURCES

• Cost Principles for State, Local, and Indian
  Tribal Governments
• http//www.whitehouse.gov/omb/circulars/a0872/a87
  _2004.html
• Cost Principles for Non-Profits Organization
• http//www.whitehouse.gov/omb/circulars/a122/a122
  _2004.html
• Cost Principles for Educational Institutions
• http//www.whitehouse.gov/omb/circulars/a021/a021
  _2004.html
• NIH Grants Policy Statement
• http//grants.nih.gov/grants/policy/policy.htm
• Division of Cost Allocation HHS
• http//rates.psc.gov/fms/dca/orgmenu.html
• Your Organizational Policies and Procedures

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Questions?

• Jeannette Gordon
• NIH/NINDS
• jg82s_at_nih.gov
• 301-496-3813