OMB UNIFORM GUIDANCE AND COST ACCOUNTING STANDARDS

COST ACCOUNTINGSTANDARDS DEFINITION

• Cost accounting standards (CAS) are issued by the Cost Accounting Standards Board (CASB)

• The standards applicable to UT are included in Uniform Guidance.

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UNIFORM GUIDANCE SUBPART D CONTENTS• Purpose & scope & definitions• Basic considerations• Direct costs and F&A costs• Identification & assignment of F&A costs• Determination & application of F&A cost

rates• General provisions for selected items of

cost• Cost Accounting Standards (CAS)• Disclosure Statement (DS-2)

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OTHER FEDERAL REGULATIONS

Sponsor regulations Individual sponsoring agencies have policy manuals on their web sites that are incorporated into award documents

Example: National Science Fdn (NSF)http://www.nsf.gov/pubs/policydocs/pappguide/nsf15001/nsf15_1.pdf

Federal Acquisition Regulations (FAR)https://www.acquisition.gov

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UNIFORM GUIDANCE REGARDING EXPENDITURES

UG requires that all costsbe reasonable, allocable,allowable and necessary.

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UG BASIC CONSIDERATIONS

Only allowable costs may be charged to

a Federal sponsored project!!!

In order to be allowable, a cost must be:

Incurred during period of award Reasonable See slide # 7 Allocable See slide # 8 Consistently treated See slide # 9

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REASONABLE COSTS

“Prudent person” testCost is generally recognized as necessary to the institution or project

“Arm’s length” bargainingExercise of due prudence in the circumstances

Cost incurred consistently with University practices

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ALLOCABLE COSTSGoods or services involved are

chargeableor assignable in accordance with

relativebenefits received or other equitableRelationship.

Cost is incurred solely to advance the work, or Cost benefits both the sponsored agreement

& other work of the institution, in proportions that can be approximated through use of reasonable methods, or

Cost is necessary to the overall operation of the institution & is deemed to be assignable in part to sponsored projects

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ALLOCABLE COSTS WARNING

Any costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.

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MORE BASIC CONSIDERATIONSConsistency in estimating, accumulating &

reporting costs Example: Sponsor requires hourly rates for faculty in

proposal, but UT’s payroll system accumulates charges on a percentage of effort basis

Consistency in allocating costs incurred for the same purpose

All costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only

Cost accounting period Educational institutions shall use their fiscal year as their cost

accounting periodDisclosure statement (DS-2)

UT Knoxville and UT Memphis campuses required

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COST ACCOUNTING STANDARDS• CAS 9905.501 -- Consistency in

estimating, accumulating and reporting costs

• CAS 9905.502 -- Consistency in allocating costs incurred for the same purpose

• CAS 9905.505 -- Accounting for unallowable costs

• CAS 9905.506 -- Cost accounting period

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CASB DISCLOSURE STATEMENT (DS-2)

Cost Accounting Standards Board (CASB) requires large schools to submit Disclosure Statement form DS-2

UT Knoxville and UT Memphis have filed theirsUT Knoxville is currently updating theirs in regards to Uniform Guidance changes.

Audits of cost accounting procedures

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F&A COSTS

Definition of F&A costsF&A 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

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GENERAL DEFINITIONFacilities & Administrative costs is an easymechanism for charging a sponsored

projectan added cost for facilities used andadministrative costs

Some costs are too difficult or too time consuming to account for on an individual project basis

This is a shortcut accounting method for general instead of project-specific costs

Actual project direct costs multiplied by a predetermined percentage rate

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IDENTIFICATION & ASSIGNMENT OF F&A COSTS

To determine UT’s F&A rate, the nature of our costs are evaluated and classified in prescribed cost pools for facilities costs and administrative costs:

Depreciation & use allowance Operation & maintenance expenses General administration expense Departmental administration expense Sponsored projects administration expense Library expense Student administration and service expense

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DETERMINATION & APPLICATION OF F&A RATESSeparate F&A rates will be assigned to each

function Instruction, Research, Other Sponsored ActivitiesDistribution of F&A costs will be on a modified

total direct cost base Except for small institutions (Martin & Chattanooga) which will be

on a salaries & wages basePredetermined F&A rates to be used prospectivelyFixed rate for the life of the sponsored project This is really important!

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GENERAL PROVISIONS FOR SELECTED ITEMS OF COST

Allowability of general groups of costs

Remember, allowability does not refer to direct versus F&A costing

ExamplesAlcoholic beverages are unallowableBad debts are unallowableCommunication costs are allowable

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INTERNAL CONTROLS - EFFORT

OMB Uniform Guidance puts a huge emphasis on internal controls. While effort certification, per se, is not required, the UG requires the entity to have a strong system of Internal Controls in place to clearly document that the salaries charged to sponsored projects are accurate.

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INTERNAL CONTROLS

UG 200.62   Internal control over compliance requirements for Federal awards.

Internal control over compliance requirements for Federal awards means a process implemented by a non-Federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for Federal awards:

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INTERNAL CONTROLS(a) Transactions are properly recorded and

accounted for, in order to:(1) Permit the preparation of reliable

financial statements and Federal reports;(2) Maintain accountability over assets; and(3) Demonstrate compliance with Federal

statutes, regulations, and the terms and conditions of the Federal award;

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INTERNAL CONTROLS FOR SALARY UG Standards for Documentation of Personnel

Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.

These records must:(i) Be supported by a system of internal control

which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;

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INTERNAL CONTROLS FOR SALARY(ii) Be incorporated into the official

records of the non-Federal entity;(iii) Reasonably reflect the total activity

for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS);

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INTERNAL CONTROLS FOR SALARY

(iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy;

(v) Comply with the established accounting policies and practices of the non-Federal entity

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INTERNAL CONTROLS FOR SALARY(vii) Support the distribution of the employee's

salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.

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INTERNAL CONTROLS FOR SALARY(ix) Because practices vary as to the activity

constituting a full workload (for IHEs, IBS), records may reflect categories of activities expressed as a percentage distribution of total activities.

2) For records which meet the standards required in paragraph (i)(1) of this section, the non-Federal entity will not be required to provide additional support or documentation for the work performed, other than that referenced in paragraph (i)(3) of this section.

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EFFORT CERTIFICATION

After-the-fact effort certificationFaculty and staff assigned to sponsored projects will certify their time

Effort certification at UTMonthly certification is strongly encouragedCertification must be done within 30 days of project ending date in order for retroactive payroll adjustments to post in time for final invoices & financial reports to sponsor

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UNIFORM GUIDANCE CONTENTS

Subpart A – DefinitionsSubpart B – General ProvisionsSubpart C – Pre-award

RequirementsSubpart D – Post-award

Requirements

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UG, SUBPART C

Pre-award Requirements

Awarding agency shall decide upon the appropriate award instrument (grant, cooperative agreement)

Awarding agency must design and execute a merit review process for applications.

Awarding agency must review the risk posed by applicants.

Special award considerations

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UG, SUBPART DPost-award Requirements

Financial and program managementInternal ControlsProcurement standardsReports and recordsTermination and enforcementCloseout

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FINANCIAL & PROGRAM MANAGEMENT• Purpose and Standards• Payment• Cost sharing or matching• Program income• Revision of budget and program

plans• Non-Federal audits • Allowable costs • Conditional exemptions

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PURPOSE AND STANDARDS Accurate, current and complete disclosure of the

financial results of each federally-sponsored project or program in accordance with the reporting requirements

Records that identify adequately the source and application of funds for federally-sponsored activities

Comparison of outlays with budget amounts for each award

Written procedures for determining the reasonableness, allocability and allowability of costs in accordance with the provisions of the applicable Federal cost principles and the terms and conditions of the award

Accounting records including cost accounting records that are supported by source documentation

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PAYMENT METHODSAdvanceFor immediate cash needs only; otherwise, interest must be paid on funds

UT has Letters of Credit with major Federal agencies where we electronically draw funds

ReimbursementPayment within 30 days of receipt of invoice

•SF-270, Request for Advance or Reimbursement

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COST SHARING GENERAL CRITERIA• Costs are verifiable in accounting records• Costs are not included in another Federal

award• Costs are necessary & reasonable for

proper and efficient accomplishment of program objectives

• Costs are allowable under Subpart E-Cost Principles

• Costs are included in the approved budget

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COST SHARING SOURCESUnrecovered F&A costs may be

included as part of cost sharing or matching only with the prior approval of the Federal awarding agency

This differs among agenciesDonated services and property must

be valued fairly and documentedUT policy for cost sharing FI0210

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PROGRAM INCOMEProgram income is income earned by the

recipient that is directly generated by a supported activity or earned as a result of the award

Example: UT receives an award for $100,000 to conduct a conference. UT receives program income of $10,000 from conference registration fees charged to participants.

Program income must be budgeted andreported to the Federal agency.UT policy for program income FI0235

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PROGRAM INCOME METHODSAdditiveUT has a total of $110,000 to spend on the conference $100,000 from the sponsor and $10,000 from

program income Default method for research projects

DeductiveUT has a total of $100,000 to spend on the conference $90,000 from the sponsor and $10,000 from program

income Default method for non-research projects

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REVISION OF BUDGET& PROGRAM PLANS

Prior approvals from Federal agency for:Disengagement from project for more than three months, or a 23% reduction is devoted time worked by the PI or Project Director.

Change in scope of workChange in key personSignificant change in effort of PINeed for additional Federal fundingTransfer of budget to / from direct and F&A cost categories

Subawards not named in proposalThese requirements vary between Federal

agencies

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EXPANDED AUTHORITY

In some cases, UT may be authorized to make

some approvals by expanded authority granted by

Federal agency:

Pre-award costs 90 days prior to awardOne-time no-cost time extension up to one yearCarry forward funds to subsequent funding periods

Minor rebudgeting less than 10% of award

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PROCUREMENTGenerally, UT gets title to equipment

purchased under Federal awardsUT must use the equipment in the project

or program for which it was acquired as long as needed

Equipment must be tagged & physical inventory conducted regularly

UT may copyright any work and the Federal awarding agency reserves a right to reproduce or publish

UT must have sound procurement policies

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REPORTS & RECORDSReportsUT is responsible for monitoring subawardsTechnical reportingFinancial reporting

• SF-269, Financial Status Report • SF-272, Report of Federal Cash Transactions

RecordsFinancial records, supporting documents, statistical records, and all other records pertinent to an award shall be retained for a period of three years from the date of submission of the final expenditure report

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CLOSEOUTReports “Recipients shall submit, within 90 calendar days after the date of completion of the award, all financial, performance, and other reports as required by the terms and conditions of the award” In order to accomplish this, all charges should be

correct and final on the R WBS Element by 60 days after the ending date per UT fiscal policy

UT should liquidate all obligations incurred under the award not later than 90 calendar days after the award’s ending date

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UNIFORM GUIDANCE SUBPART F-AUDIT REQUIREMENTS

AUDITS OF S

TATE

S, LOCAL G

OVERNMEN

TS, A

ND NON-PROFIT

ORGANIZATIONS

UG, SUBPART F

• The purpose is to implement the single audit act and ensure consistency in audits of organizations expending Federal funds (or pass-through)

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EXAMPLE

S

FOR DISCUSSION

UT charges NSF grant for PI’s salary to prepare proposal to NavyDid we do right?No - allocability

UT charges NSF grant for the PI’s May monthly salary when the grant ended 4/30Did we do right?No - allocability

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EXAMPLES

Are basic phone line charges an allowable cost?YesAre basic phone line charges normally a direct cost or included in F&A?F&A

Professor Smith spends $25,000 of his $100,000 Federal grant on supplies instead of travelDid we do right?No – We need to get prior approval for such a large budget revision

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MORE EXAMPLES

TRAINING CLASSES1 Overview of Accounting for Sponsored Projects2 OMB UG and Cost Accounting Standards3 Understanding F&A Costs4 Direct Costing5 Cost Transfers & Closeout6 Cost Sharing7 Subcontract Monitoring8 Advanced Topics9 Invoicing, Reporting & Cash Receipts11 Business Ethics for Sponsored Projects12 Schedule of Final Charges (SFC) Other – IRIS classes for reporting for sponsored

projects

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SPONSORED PROJECTS ACCOUNTING “CERTIFICATION”

The Modules listed as Training Classes related to Sponsored Projects can also be taken as a Certification.

In order to gain a Certification in Sponsored Projects Accounting, you must take the training class and pass a quiz associated with the training module.

Trainings toward the Certification can be obtained through HR training courses, Blackboard, or In-House training (upon departmental request)

If taking the training through HR for the Certification you will need to take the quiz. Quiz’s are located in the Sponsored Projects Accounting project section in Blackboard.

You must be registered as a participant within this project in Blackboard to gain access.

To be setup in Blackboard contact Jay Taylor, Financial Compliance Officer, SPA @vtaylor@utk.edu or 974-0952.

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RAOR MEETINGSROAR meetings are held on the 3rd Wed. of each month

between 10-11am.

Please consider attending these meetings. Each meeting has a specific topic and the meetings are open forum discussion. That means you should bring all your questions based on the topic being presented or just come to provide feedback about your experiences with others based on their questions.

Also, the topics are chosen by topics/concerns supplied by attendees. The ROAR Committee would love to hear your topic requests.

These meetings will give valuable information for you to take back to your department!

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