Overview of Accounting for Sponsored Projects

DatePresenter Name

Presenter Phone NumberPresenter E-mail

2

What are sponsored projects?

• Governmental agencies & private companies give $ to UT to perform technical projects and produce a deliverable– Our professors are in demand due to

their expertise in their field• Some have international reputations

3

Importance ofsponsored projects

• UT’s mission is instruction, research, public service– External funding pays for research work that

our faculty members are interested in pursuing

• Active researchers make better teachers• Pays for high-tech equipment & buildings• Attracts quality graduate students who want to

work with highly-regarded faculty• Spin-off companies improve state & local economy

– Boosts UT’s image / reputation / national rankings

4

How much $ is involved?

• FY 2004 $315,197,533• FY 2005 $336,364,661• FY 2006 $339,450,751• FY 2007 $337,004,722

5

Who is involved?Principal

InvestigatorCo-PI’s &

research staffGraduate students

Subcontractors

Dept Head Department accounting & clerical staff

College admin Research office

Campus / unit

business office

Controller’s Office

Treasurer’s Office

(A/P dept)

Payroll

Sponsor contracting

officer

Sponsor fiscal rep or A/P dept

Vendors

Technical work

Administrative & support

staff

External to UT

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Support staff goal

– Provide superior service to the PI so that he / she can devote maximum time to technical aspects of project & teaching students

– Exceed sponsors’ expectations for fiscal responsibility & administrative performance• Promotes reputation of PI and UT• Sponsors will want to give us more money

7

PI responsibilities

• The PI is responsible for all aspects of the sponsored project – his reputation is on the line– Technical– Financial– Administrative

8

PI technical responsibilities

• Ensure that all technical reports / deliverables are of high quality and are submitted by sponsor deadlines

• Ensure that subcontractors are performing technical tasks adequately

9

PI financial responsibilities

• Ensure that all charges are reasonable, allowable, allocable, and correctly classified as direct versus F&A

• Ensure that all charges post to the correct sponsored project in a timely manner – initiate Advance WBS Element, if necessary

• Ensure that the budget is followed• Ensure that any sponsor-required prior approvals are

obtained– Budget changes, equipment purchases, travel

• Ensure that subcontractor invoices are reasonable based upon the technical work performed and are allocable, allowable and correctly classified as direct versus F&A– Don’t approve payout invoices until satisfied with

technical performance

10

PI administrative responsibilities

• Ensure that support staff are performing tasks adequately

• Ensure that support staff are given required information in a timely manner

• Ensure that all applicable Federal, sponsor and UT rules & regulations are followed

• Ensure that award amendments are requested in a timely manner

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Department Head responsibilities

• The Department Head is responsible for ensuring that the PI and support staff perform their jobs in an adequate, timely, and compliant manner.– Technical– Financial– Administrative

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Department Headtechnical responsibilities

• Ensure that scope of work advances UT’s mission and the goals of the academic unit

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Department Headfinancial responsibilities

• Ensure that all charges are reasonable, allowable, allocable, and correctly classified as direct versus F&A

• Ensure that all charges post to the correct sponsored project in a timely manner– Approve PI starting work before signed award

document is received?– Approve Advance WBS Element, if necessary?

• Pay for any charges not collected from sponsors– Including overruns, disallowances, cost sharing,

uncollected or disputed sponsor invoices

14

Department Head administrative responsibilities

• Ensure space exists to perform project work• Ensure that support staff are performing

tasks adequately and are adequately trained• Ensure that processes and culture are

present that promote financial compliance• Ensure that all applicable Federal, sponsor,

and UT rules & regulations are followed

15

Dept accounting staff responsibilities

• Same as for the PI, plus:– Process accounting transactions– Monthly account reconciliation– Provide PI and Department Head with

adequate financial information to manage project

– Solve problems– Liaison between PI and everyone else– Assist PI in compliance with regulations– Closeout in a timely manner

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Campus / unit business office responsibilities

• Set up project in IRIS• Work with PI, department accounting staff &

research office to get WBS Element opened as quickly as possible

• Periodic financial reporting• Periodic invoicing / cash receipts performed to

maximize UT’s cash flow• Assist department accounting staff & PI with

regulation compliance• Closeout in a timely manner

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Campus / unit research office financial responsibilities

• Review proposals and budgets for accuracy and financial compliance

• Flow through financial rules to subcontractors• Help the PI, department accounting staff & business office

get WBS Element opened as quickly as possible• Get fully executed award documents from sponsor ASAP so

that invoicing can begin which maximizes UT’s cash flow• Maximize F&A recovery• Negotiate / disallow detrimental financial terms &

conditions– Inconsistent costing, such as hourly rates versus % of effort– Unreasonable reporting deadlines– Non-standard invoicing and reporting forms– Backup documentation for expenditures

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Sponsored project life cycle

PI has great idea=>

PI prepares proposal

document

Proposal approved by

UT

Proposal submitted to

potential sponsor

Sponsor accepts proposal

=>

Sponsor & UT negotiate

award & UT may award

subcontracts

UT sets up R account in

IRIS

PI starts technical

work & incurs charges

Periodic invoicing /

cash receipts=>

Interim technical &

financial reporting

Project ends and all

project costs are on R within 60

days

Final technical &

financial reports due within 90

days of end date

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Proposals

• Proposal document prepared by PI– Includes statement of work– Includes budget & budget justification

narrative– Includes known subcontractors– Submitted to the campus / unit research office

• Routing / approval sheet signed by administrators– Including cost sharing and space

• Research office reviews total document

– Proposal submitted on behalf of the University

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Awards

• A successful proposal results in an award document between the sponsor and UT– Grant– Cooperative agreement– Contract, purchase order

• Standard information included in award document• Start & end dates, award amount, budget, statement of work

• Different award types have progressive levels of• Sponsor control & restrictions• Reporting requirements

21

Federal grants

• “For the public good” • One or two page grant document• May not require UT to sign• Usually incorporates agency grant

policies– Guide usually located on their web

site

22

Flow-through awards• An award where the prime funding

sponsor awards money to an awardee and the awardee awards part of the money to a sub-awardee– Example: NASA gives Vanderbilt a grant for

$1 million & Vanderbilt sub-grants $100,000 to UT

– UT’s sponsor is Vanderbilt, a private entity, because that is who our award agreement is with; however, it is Federal flow-through funding because we know that the prime sponsor is NASA

• Same compliance requirements as direct Federal award

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Restricted WBS Element

• Restricted WBS Elements are cost collectors in IRIS

• UT must spend the $ in accordance with the sponsor’s specifications

• UT must maintain separate accounting of each project’s financial activity

• Established by the campus / unit business office at the request of the department or upon receipt of an award document from the campus / unit research office

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Advance WBS Element

• A restricted WBS Element can be established before the executed award document is received– PI wants to start working on the project

• If costs will be incurred, then where will they post?• Never to another sponsored project WBS Element!!!

– Department evaluates likelihood of award and authorized PI to start work without an executed award agreement

– Submits signed form to the campus / unit business office– http://admin.tennessee.edu/uwa/to/co/pdf/WBS.PDF

• Risks? See next slide.

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Risks?• Factors affecting risk of setting up

an advanced WBS Element– Government or private sponsor?– Good and reliable past relationship

with sponsor?– Competitive or non-competitive

proposal?– Intent to award provided verbally or

in writing?– Have we already started working?

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Restricted WBSElement setup

• Required information– Signed Advance WBS Element request form or

fully-executed award document– COEUS proposal # (for Knoxville)– Budget in IRIS

• Delays can occur– Department must monitor new account setup

progress– If award amount differs from proposed amount,

then department must submit revised budget to campus / unit research office or business office ASAP

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Timeline for setup

• Restricted WBS Elements need to be established in a timely manner– Ideally, before the project start date

• Provide adequate time for department to assign recurring costs

– Payroll PIF’s, service centers, etc.

– In reality, we are not always timely• Causes more work for everyone• Sponsors & auditors not happy

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Sponsored projects in IRIS• Master data in various IRIS modules

– Project Systems module has most master data– Funds Mgmt module has some master data &

budget– Sales & Distribution module has invoicing master

data– Accounts Receivable module has invoicing &

collection activity

• You should review this information and make sure that it agrees with your award document– If not, call campus / unit business office– Errors can radically affect your project!

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IRIS transactions

• CJ20N contains many attributes– Dates, obligated award amount, F&A,

cost sharing, PI, invoicing, function, sponsor, project profile, project type, etc.

– Learn what all of these represent– Field names aren’t always descriptive

» Read Business Process Procedure (BPP) on IRIS web site for definitions

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Accounting structure

• CJ20N work breakdown structure– Project definition

• Header only, not a chargeable object

– WBS elements• Chargeable objects with many attributes• Different levels & flexibility• Link to funds centers

– Can cross organizational lines

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Required structure

• Award document requirements– New award document number from

sponsor always requires a new Project Definition & WBS Element

– Different F&A rates within one award• This always requires separate WBS

Element for those charges that are treated differently for F&A computation

• Example – Department of Education - participant support costs

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Optional structure

• Divide project for mgmt purposes– By technical phases of work– For different sub- or co-PI’s within UT

• WBS Element linked to their funds center– They have spending control– They have accounting ledger access– You can see other IRIS accounting reports, not ledger– They get F&A recovery and research “credit”

– Department must request new WBS Element• Campus / unit business office has no other way of

knowing that they are needed

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Complex structure

Project DefinitionR011024009

WBS ElementR011024009

(lead PI)

WBS ElementR074215115

(co-PI)

Funds CenterU013410024

Funds CenterU073415055

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Charges to projects

• Charges must be in compliance with the rules & regulations applicable to UT– OMB Circular A-21 and A-110– UT Fiscal Policy– Sponsor policy manuals– Award document clauses

• Responsibility of PI and department– Consequences of incorrect charges

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Types of charges

• Direct costs– Salaries, staff

benefits, supplies, long-distance phone calls, travel, equipment, subcontracts

– Exception to “basic support” costs

• Due to nature of project technical work

• F&A costs– Facilities costs

• Bldgs, equip, electricity, library

– Admin costs• “Basic support”

costs– Clerical & admin

salaries, phone line charges, office supplies

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What are F&A costs?

• Facilities & Administrative costs– Federally-approved rate applied to a

specified cost base• Modified Total Direct Costs (MTDC) base• Salaries & Wages (S&W) base

– Matrix of rates in effect• Campus, function, location, award year• Same rate for life of project (A-21 requirement)

– Reimbursement for expenses already paid by UT to support research

• These are real costs!

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Expenses included in F&A

• Facilities– Buildings– Sidewalks– Electricity / fuel– Equipment– Library– Security– Custodial

• Administrative– Department clerical &

admin staff salaries– Research & business

offices– Basic office supplies &

expenses– Portion of other admin

costs – Dept Head, Dean, system charge, etc.

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F&A cost sharing

• Must be negotiated & approved in advance by campus / unit research office

• A portion of collected F&A is returned to college / unit that generated it

• Financial activity– F&A is charged to WBS Element at full, audited rate

during month-end closing using cost element 501000– F&A cost sharing is credited during month-end

closing using cost element 501990 in an amount sufficient so that the net F&A charge is equal to the amount or % allowed by the sponsor

39

Transfers of costs

• Cost transfers should only be to correct errors

• Subject to sponsor, Federal, State and internal audit disapproval– Excessive or late transfers– Cost transfers that do not document how

target project benefited from the charge

• New fiscal policy includes time limits and documentation requirements – similar to other universities

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Ledger summary

Budget should equal zero!

Obligated amount and budget fortotal uses of funds should match!

Remember that cumulative actualexpenditures and budget variance for

uses of funds includes F&A !

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Training classes• 1 Overview of Accounting for Sponsored

Projects• 2 OMB Circulars & Cost Accounting Standards• 3 Understanding F&A Costs• 4 Direct Costing• 5 Cost Transfers & Closeout• 6 Cost Sharing• 7 Subcontract Monitoring• 8 Advanced Topics• 9 Invoicing, Reporting & Cash Receipts• 10 Sponsored Projects Reports in IRIS

• Other – IRIS reporting for sponsored projects