Office of Sponsored Projects Administration COST ACCOUNTING STANDARDS

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


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


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


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


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


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.


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”


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


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.


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


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


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…


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


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


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


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.


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


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


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


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.


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


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)


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


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

Documents

Office of Sponsored Projects Administration COST ACCOUNTING STANDARDS