Determination and Cost Sharing s represent the direct cost activities of an institution. Generally they consist of:» Instruction & departmental research» Organized research» Other sponsored activity (public service)» Other institutional activity» Special s 1
This is an extremely important issue Significant changes in the organized research base and/or other bases can cause increases or decreases in the F&A rate decisions impact other areas within the F&A proposal including» Space survey» General Administration» Departmental Administration» Cross allocations 2
Definition of terms (A-21, Section B) Major functions of an institution» Organized Research: Research & development activities of an institution that are separately budgeted and accounted for. It includes: Sponsored Research University Research Definition of terms (A-21, Section B)» Sponsored Research: All research and development sponsored by federal and nonfederal agencies and organizations (includes research training if utilizing the same facilities as other research and development activities and not included in the instruction function). 3
Definition of terms (A-21, Section B)» University Research: All research and development activities separately budgeted and accounted for under an internal application of institutional funds. For F&A purposes, combined with sponsored research under the function of organized research. Definition of terms (A-21, Section B)» Instruction: Teaching and training (except for research training when included in organized research) activities of an institution whether for credit or not. It includes: Sponsored instruction and training Departmental research 4
Instruction includes (A-21, Section B)» Sponsored instruction and training: Specific instructional or training activity established by grant, contract, or cooperative agreement. May be considered a major function (even though for accounting, may be included in instruction). Instruction includes (A-21, Section B)» Departmental research: Research, development and scholarly activities that are not separately budgeted and accounted for. Not considered a major function but a part of the instruction function. 5
Definition of terms (A-21, Section B)» Other sponsored activity: Programs and projects sponsored by federal and non-federal agencies and organizations which involve the performance of work other than instruction and organized research (e.g. community service). Definition of terms (A-21, Section B)» Other institutional activities: Activities of an institution other than instruction, departmental research, organized research, other sponsored activities, F&A cost activities, and specialized service facilities. 6
Exception» Special s: Actual conditions must be taken into account in selecting the base to be used The essential consideration in selecting a base is that it be the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship; or logic and reason... (A-21, E.d.(1)» Ship» Arctic or other remote site Modified Total Direct Cost (MTDC):» Salaries and wages» Fringe benefits» Materials and supplies» Services» Travel» Subgrants/contracts up to the first $25,000 7
MTDC excludes:» Equipment» Other capital expenditures» Patient care» Rental costs (facilities)» Scholarships and fellowships» Subgrants/contracts, amount of each over $25,000» Tuition remission [NOTE: New Uniform Guidance (applicable to nonfederal entities December 26, 2014) also excludes Participant Support Costs from MTDC] On and off campus bases (definition found in rate agreement):» In general, projects are considered off campus if the facilities costs are recovered as a direct charge as opposed to an indirect cost (i.e. external facility rental)» Be consistent in the application of the on and off campus base - Consistency in definition utilized in: determination Space determination Application of negotiated rates 8
Coding of financial data:» Process of assigning cost attributes to accounts» Coding will determine if the account is part of a pool or a base» Not a one to one match between A-21 activities and NACUBO financial statement functions Summary schedule of reclassifications WILL be reviewed Considerations in coding of financial data:» Functional purpose of the account» For sponsored, consider F&A rate used (not just charged rate)» Who is assigned the task Is this an indirect cost person (reclassification)» Funded through internal application of institutional funds» Where activity takes place (on vs off campus, room type, etc.) 9
Issues with the base:» in relation to space Reclassifications out of Research must be appropriate and reclassified accounts must not be used to support classification of research space Departmental S&W costs vs space usage Ratio of Research NASF to research salaries (You ll get the details in the Space sections but important to remember when developing your bases) Issues with the base:» Integrity of the subaccount codes» Discretionary accounts (e.g. F&A costs recovered and returned to academic departments in a separate, discrete account)» Drug studies» Overruns 10
Issues with the base:» Tuition Remission GRAs receiving tuition remission in lieu of salary compensation Research Trainees, if coded research If students occupying space only receive tuition remission and/or stipends, may need to increase base to match space (imputed salaries) OR adjust space If applicable, make sure you understand specific considerations for:» Specialized Service Facilities» Animal Research Facilities» Faculty medical practice plans» Affiliated hospital space» VA facility space» Visiting scholars 11
Cost Sharing (Matching) and Its Implications Cost Sharing Definitions» Cost Sharing or matching that portion of project or program costs not borne by the Federal Government (OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements, sec..2) Also applies to costs allocable too but not borne by non-federal sponsors 12
Cost Sharing Issues Direct Cost Very important issue for direct cost purposes» Federal reviews of cost sharing compliance (documentation of fulfilling commitments) Requirements (A-110, subpart C..23)» Provided for in the budget when required by the federal agency» Conforms to other A-110 provisions» May be in the form of cash or third party in-kind» May include un-recovered F&A, with agency approval Cost Sharing Requirements (A-110, subpart C..23)» Verifiable from records» Not included as a contribution for any other federally assisted program» Necessary and reasonable to accomplish program objectives» Allowable under the cost principles» Not paid under another federal award (except where authorized by statute) 13
Cost Sharing Issues F&A Consistency (A-21)» Basic cost accounting - You must identify and categorize costs by function, not by funding source» Space/ consistency There must be consistency between how space is classified compared to how the accounts that fund the activities using the space are classified Cost Sharing More Definitions» Mandatory cost sharing sponsor stipulates that cost sharing or matching funds are required as a condition of receiving an award Matching is generally used to refer to a statutorily specified percentage of program or project costs that must be contributed by a grantee in order to be eligible for Federal funding 14
Cost Sharing More Definitions» Voluntary cost sharing sponsor does not stipulate that cost sharing is required but the grantee incurs costs (e.g. additional effort, supplies) not reimbursed by the sponsor Committed Uncommitted Cost Sharing More Definitions» Voluntary Committed cost sharing primarily, voluntary cost sharing that occurs when costs of the project are quantified in the project proposal (including the budget narrative) but not included in the costs to be borne by the sponsor and that proposal is accepted by the sponsor 15
Cost Sharing More Definitions» Voluntary Committed cost sharing (cont.) Must be documented and accounted for just like mandatory cost sharing. If included, therefore, it is recommended that these costs appear in the budget. Also includes any voluntary that does not meet definition of Voluntary Uncommitted Voluntary Uncommitted Cost Sharing Term introduced in OMB Clarification Memo, January 5, 2001 (M-01-06)» Term is not in A-21, A-110, A-122 or A-133» Clarifies the treatment of voluntary uncommitted cost sharing of effort in the computation of F&A rates» For purposes of the memo, defined as university faculty (including senior researchers) effort that is over and above that which is committed and budgeted for in a sponsored agreement 16
OMB Clarification Memo Application» Voluntary uncommitted (VUCS) should be treated differently than committed effort Not included in the organized research base for computing the F&A rate Excluded from the effort reporting requirement in OMB Circular A-21 So we love VUCS but OMB Clarification Memo Clarification of clarification» Most research programs should have some level of committed effort, paid or unpaid If a research sponsored agreement shows no faculty effort, an estimated amount should be included in the Organized Research base Can not exclude from base by declaring it voluntary 17
OMB Clarification Memo More clarification of clarification» When an institution reduces a faculty member s level of activities dedicated to other institutional responsibilities in order to shift his/her activities to organized research activities, the institution must reflect this reduction in the payroll distribution system (as an increase to the research effort component) and in the F&A proposals Cost Share Impact Let s crunch numbers! 18
Voluntary Committed Cost Share PI annual salary is $120,000 PI proposes (commits) 50% effort to project Budget shows PI salary to grant at $30,000 Charged 25% but PI certifies 50% to the project $120,000 x 50% = $60,000 Less paid from grant = (30,000) Cost Share = $30,000 or 25% Cost share must be documented & included in the F&A base. Voluntary Uncommitted Cost Share PI annual salary is $120,000 PI budgets (commits) 50% effort to the project Budget shows PI salary to grant at $60,000 PI certifies 60% to the project The 10% effort over and above the budget (commitment) is voluntary uncommitted cost share and does not have to be captured or included in the F&A base. 19
NIH Salary Cap NIH does not directly require cost share but imposes salary cap. http://grants.nih.gov/grants/policy/salcap_summary.htm DCA Best Practices Manual The salary in excess of the NIH salary limitation must be included in the appropriate base for the F&A rate calculation according to where the individual effort was performed Salary over NIH Cap PI annual salary is $300,000. If salary cap is $180,000, difference is $120,000. PI budgets 15% effort to the project Budget shows salary to grant at $27,000 for PI salary (15% x cap) PI certifies 15% effort to the project Cost share is $18,000 ($120,000 x 15%) As cost share, it goes into the F&A base. 20
Salary Cap Plus Voluntary Committed Cost Sharing Same PI $300,000. Salary cap $ 180,000. Difference $120,000. Budget includes salary to grant at $18,000 (10% of cap) but Budget Narrative states 20% effort committed to project 10% charged to grant & PI certifies 20% effort spent on project CS for salary amount over the cap ($120,000 x 10%): $12,000 Voluntary committed cost share ($300,000 x 10%): $30,000 Cost share goes into the F&A base: $42,000 Total salary in base = $60,000» 300K x 20% or» 18,000 grant + 42,000 cost share Equipment as Cost Share Equipment cost share does not go into the F&A base (excluded from MTDC) Does not increase base like salaries But, depreciation on this piece of equipment should not be claimed as part of normal equipment depreciation 21
The F&A Rate as Cost Share A Federal agency mandates $25,000 in cost sharing as an eligibility criteria for submission of an application with a $100,000 direct cost cap The institution wants to match using unrecovered F&A The Federal agency approves the use of the F&A rate to meet the cost share requirement The F&A Rate as Cost Share In order to meet the match requirement, the institution (current F&A rate of 50%) proposes to charge F&A at a rate of 25% to the sponsor. Unrecovered F&A results in $25,000 cost sharing Cost Share does not have to go into the F&A base (excluded from MTDC) 22
Cost Share impact on F&A Rate for Research F&A Costs (alloc to Res) = F&A Rate Organized Research All direct (MTDC) expenses Related to organized research Overdrafts Sponsored project costs University-funded competitive awards Mandatory and Voluntary Committed Cost Sharing What Should Institutions Do? Document cost sharing» Companion account that parallels the federal project account» Separate subaccount code/expense class in the federal project account» Memorandum records (useful for third-party)» Include appropriate amount in F&A base 23
What Should Institutions Do? Institutions should continue to review proposals for committed effort by looking at the proposed budget AND BUDGET NARRATIVE Auditors will look at increases in F&A rate and will want comfort that all cost sharing to be included in base is included; audit and negotiation issues are still likely (despite introduction of voluntary uncommitted) Final Advice Institutions should develop and implement policies for ensuring consistency and compliance and for ensuring that practices are in the best interest of the institution. Address:» Request full salary support» Mandatory versus voluntary» Who and what can be cost shared» Who approves and who funds cost share» How to value cost share 24