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Fiscal Compliance Requirements

for Sponsored Programs

Missouri University of

Science and Technology

April 7, 2009

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Learning Objectives

• To understand:– Compliance requirements related to

allowability of costs– Responsibility of Research Administrator and

Principal Investigator (PI)– Frequent issues and impact of non-

compliance

Overview

I. Definitions

II. Compliance Requirements

III. Responsibility

IV. Concluding Points

V. Frequently Asked Questions (FAQs)

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Definitions

• Sponsored Award – Activities funded by an external entity for a specific purpose.

• PI/Co-PI – Principal Investigator. Named by sponsor on award document with responsibility for ensuring compliance.

• Research Administrator – The individual assisting the PI with the administrative management of an award.

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Definitions

• Unallowable costs – Costs charged to a project not meeting the requirements.

• APM – Accounting Policy and Procedures Manual. Codification of accounting policies.

• BPM – Business Policy Manual. Codification of business and administrative policies.

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Compliance Requirements

Who sets the requirements? • Office of Management and Budget (OMB) –

Oversight agency for the federal government– OMB Circulars – The federal rules for how awards are

to be administered.

• Sponsors – Individual sponsors may have additional requirements

• APM and BPM – Policies established jointly by Campus and UM System

Compliance Responsibilities

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• Department – PI, Research Administrator• College – Fiscal Officer, Chair • Sponsored Programs Office (OSP) – Pre and Post

Award• UM System Controller– Compliance oversight

and training• Auditors – Internal and External• Office of Inspector General (OIG) – Final enforcer

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Compliance Requirements

What compliance requirements determine allowability on a sponsored program?– OMB Circular A-21 - Cost Principles for

Educational Institutions• Allowable Direct Costs +• Allocable Facilities & Administration

– Specific Sponsor Administrative Guidelines

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Definitions

• Direct costs must be: – Identified specifically for a particular

sponsored award– Directly assigned with relative ease and a

high degree of accuracy– Consistently treated in like circumstances– Supported by documentation

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Definitions

• F&A is: – Incurred for a common or joint objective (e.g. utilities)– Cannot be easily identified with a particular award

• Facilities: depreciation, interest on related debt, operational, maintenance, and library costs.

• Administration: departmental, sponsored projects, student services, and other general administrative costs.

Importance of F&A

• How are support staff paid?

• What is the source of funding for the building where my lab is located?

• How are the utilities paid?

• How is research infrastructure paid for?

• Who prepares my financial reports?

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A-21Compliance

• Reasonable:– Act with due prudence– Consistent with University policies and

procedures– Necessary for performance of the sponsored

award– Arms length and legal transactions

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A-21 Requirements

• Allocable: – Incurred solely to advance the work under the

agreement– Benefits the sponsored program in

proportions that can be reasonably approximated

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A-21 Requirements

• Consistent treatment: – Practices consistent with reporting other costs

for:• same purposes, or • like circumstances

• Conform to limitations or exclusions: – Sponsor may be more restrictive than A-21– Specified in the award

Allowable Direct Charge?

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A-21 Compliance

• Certain costs are expressly unallowable: – Alcoholic beverages– Alumni activities– Bad debts– Donations and Contributions rendered– Entertainment– Furnished automobile – personal use – Goods or services for personal use– Housing and personal living– Losses on other sponsored agreements

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A-21 Compliance

• Certain costs are unallowable with exceptions:– Contingency provisions– Fines and penalties– Fundraising and investment costs– Lobbying– Pre-agreement costs– Selling and marketing costs– Student activity costs

• Must be specified in the agreement to be allowable!

A-21 Compliance

• Allowable - Direct charging of F&A costs: – Unlike circumstance must exist– Documentation to support– Include in the budget and agreement– Sponsor approval

• Approval by sponsor without the above does NOT ensure allowability!

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A-21 Compliance

• Allowable costs – frequent issues: – Communications (phone, etc)– Federal Express and postage– Administrative Salaries– Equipment - capital and computer– Memberships and/or subscription fees– Materials – office, lab, program– Meetings– Travel

• Documentation and sponsor approval required

Points to Remember

• Allowability considerations throughout: – Proposal and budget– Monthly Managerial review– Cost Transfers– Cost Sharing – Subaward payments – PI Certification at end of award

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PI Responsibility

• Be knowledgeable of compliance requirements and restrictions

• Shares administrative management responsibility with Research Administrator

• Ensuring all charges are:– Allowable– Authorized– Documented

• The PI has overall responsibility for an award

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Research Administrator Responsibility

• Shares administrative management responsibility with the PI

• Research Administrator awareness: • Compliance requirements• Unique restrictions by sponsor• Budget

• Alert PI of potential or known compliance issues

• Contact OSP for assistance

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Research Administrator Responsibility

• Ensure transactions are properly recorded• Specific responsibilities include:

- Processing expenditures - Providing monthly budget variance reports- Preparing timely cost transfers- Closing of award and deliverables- Ensure documentation exists for all charges

Frequent Issues

• Unallowable costs directly charged to award

• Lack of supporting documentation

• Purchases late in the award period

• Costs outside period of availability

• Unlike circumstances not set out in sponsor agreement

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Impact of Non-Compliance

• Questioned or unallowable costs

• Repayments to the sponsor

• Fines and/or sanctions

• Subject to additional external audits

• Jeopardize future funding opportunities

• Damage to reputation

Checklist for Success

Ensure costs are: Authorized in the budget & agreement Meet requirements of allowability Within period of availability Charged timely to project Appropriately documented

Make timely and allowable cost transfers

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Frequently Asked Questions

• The following Frequently Asked Questions (FAQs) address practical application of the requirements.

FAQs

• When should the sponsor be notified?– If any of the following occur:

• Change in scope or directive• Significant change in budget• Change in effort of key person specified in award• Absence of PI for more than 3 months • Reduction of PI time by 25%• Obtain a no-cost time extension

– Work with OSP to notify sponsor28

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FAQs

• What are some examples of direct costs?

– Examples may include:

• PI salary and benefits

• Graduate student salary

• Animal care

• Lab equipment for the award

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FAQs

• Are direct costs always allowable?

– No. If they are not included in the authorized budget and set out in the agreement, they are not allowable.

– For example, a PI’s salary would not be allowable on an equipment-only award.

FAQs

• Are all items in the awarded budget allowable if the agreement has been approved by the sponsor?– Not necessarily. Unallowable costs should not be

included in the budget, unless they have been set out in the agreement as allowable.

– The PI is responsible for knowing what is and is not allowable.

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FAQs

• What are some examples of F&A costs?

– Examples may include: • General office equipment• General and Sponsored Programs’

administrative salaries• Library support• Utilities• Postage• Office supplies

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FAQs

• Are costs, such as postage, always considered F&A?

– No. In certain circumstances, if the cost can be justified as an unlike circumstance it may be allowable as a direct charge.

– The costs need to be in the agreement and documentation must support the justification.

FAQs

• When could postage be considered an unlike circumstance?

– If the award is for mailing a large volume of manuals to participants, postage may be allowable as a direct charge.

– This needs to be set out in the agreement and approved by sponsor.

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FAQs

• What is another example of an unlike circumstance?

– If the project requires meeting and travel arrangements for a large number of participants, some or all of an administrator’s salary may be allowable as a direct charge.

– This needs to be set out in the agreement and approved by sponsor

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FAQs

• What is considered adequate documentation?– Sufficient Documentation should state:

• the charge is allowable, and• the charge directly benefits the related award.

– Substantial Documentation (for cost transfers > 60 days old) should address:

• Who, What, When, Where, and Why?• What will be done to ensure this does not reoccur?

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FAQ’s

• Can funds be spent on items not included in the award, or for more than the award?– Maybe. Per A-110, section 25; changes in the

budget must be approved before they take place

– Under certain conditions the changes will be allowed.

– Work with OSP.

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FAQs

• If the award is from a non-federal sponsor do the OMB Circulars apply?– Yes. The University requires all awards to

be administered consistently and follow the same requirements for federal awards.

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FAQ

• What is OMB Circular A-110? • These are the administrative requirements for

sponsored awards.• Common terms are defined, such as award,

cost-share, and subrecipient.• Requirements for the pre-award, post-award,

and closeout process are addressed.

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FAQ

• To whom does OMB Circular A-133 apply?

- A-133 outlines the responsibilities for: • External Auditors – These are the standards

for their review of the University's financial statements

• University – The administrative requirements of federal awards to be followed.

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Contact Information

Paula DeLong

Compliance Officer

Office of Sponsored Programs

573-341-4134

delongps@mst.edu

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References

Where can I get more information?– OMB Circular A-21 – University Controller’s Office Policies – APM –

Section 60 – Reference Guide for Sponsored Programs