Fiscal Compliance Requirements for Sponsored Programs University

Fiscal Compliance Requirements for Sponsored Programs University of Missouri – St. Louis February 11, 2009 1

Learning Objectives To understand: – Compliance requirements related to allowability of costs – Responsibility of Fiscal Officer and PI – Common issues and impact of noncompliance 2

Overview I. Definitions II. Compliance Requirements III. Responsibility IV. Concluding Points V. Frequently Asked Questions (FAQs) 3

Definitions Sponsored Award – Activities related to a proposal funded by an external entity for a specific purpose. PI/Co-PI – Principal Investigator. Named by sponsor on award document with ultimate responsibility for ensuring compliance. Fiscal Officer – the individual assisting the PI with the administrative management of an award. 4

Definitions Unallowable costs – Costs charged to an award not meeting the requirements. APM – Accounting Policy and Procedures Manual. Codification of accounting policies. BPM – Business Policy Manual. Codification of business and administrative policies. 5

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 Campuses and UM System 6

Compliance Requirements Who enforces the requirements? External Auditors – Identify questionable costs and internal control issues. Office of Inspector General (OIG) – Final enforcer of requirements. May require funds be returned to sponsor, impose fines, and/or sanctions. 7

Compliance Requirements What compliance requirements apply to sponsored programs? – OMB Circular A-21 - Cost Principles for Educational Institutions – OMB Circular A-110 - Administrative Requirements for Grants and Agreements – OMB Circular A-133 - Single Audit Requirements – Specific Sponsor Administrative Guides 8

Compliance Requirements When do these requirements apply? – Receipt of direct federal awards – Awards containing federal flow-through dollars – Awards where terms and conditions reference OMB Circulars However, the University requires all awards to follow the requirements for federal awards. 9

A-21 Overview Compliance requirements include: Guidelines for total allowable direct costs Discusses allowability Defines direct vs. Facilities & Administration (F&A) Sets the rules for F&A costs 10

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 11

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. 12

A-21 Compliance Total Costs include: – Allowable direct costs plus – Allocable portion of F&A Allowable costs must be: – Reasonable – Allocable – Consistent treatment – Conform to limitations or exclusions by sponsor 13

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 14

A-21 Requirements Allocable: – Incurred solely to advance the work under the agreement – Benefits the sponsored program in proportions that can be reasonably approximated 15

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 16

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 17

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! 18

A-21 Compliance Allowable costs – common questions: – Membership and/or subscription fees – Telecommunication – Federal Express and postage – Computer equipment Documentation required Must be specified in the agreement to be allowable! 19

A-21 Common Issues F&A Costs – Not allowable as direct charges unless specifically set out in the agreement – Items such as rent, administrative salaries, office supplies, telephone Allowable Cost Sharing – Items that are unallowable as direct costs cannot be cost shared unless specifically set out in the agreement 20

PI Responsibility Be knowledgeable of compliance requirements and restrictions Shares administrative management responsibility with the Fiscal Officer Ensuring all charges are: – Allowable – Authorized – Documented The PI has ultimate responsibility for an award 21

Fiscal Officer Responsibility Shares administrative management responsibility with the PI The Fiscal Officer should be aware of: Compliance requirements Unique restrictions by sponsor Budget Alert PI of potential or known compliance issues Contact ORA for assistance 22

Fiscal Officer 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 23

Common Issues Unallowable costs directly charged to award Lack of supporting documentation Costs outside period of availability Unlike circumstances not set out in sponsor agreement 24

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 25

Checklist for Success Ensure costs are: Authorized in the budget & agreement Within the period of availability Charged timely to the project Meet the requirements of allowability Timely review budget and costs Make timely and allowable cost transfers Appropriately document all costs 26

Cost Transfers - PCEs Points from recent Internal Audit – Compliance requirements – Late PCEs – Common issues 27

Definitions What is a Payroll Correcting Entry (PCE)? – A type of cost transfer to redistribute payroll to a different funding source. What is a Personnel Action Form (PAF)? – The form used to create the payroll record for a University employee. 28

Compliance Requirements Must be an allowable charge Directly benefits the project Required if the difference between Payroll Data % and the Modified Effort exceeds 5%. If over 60 days, approval required by*: – Individual, PI, Department Chair, and Dean Proper documentation *See BPM 213 – Adjustment of Income and Expense Items 29

Late Cost Transfer/PCE Form Required to complete if 60 days PI documents allowability Signature required for both: – where expenses are moving from – where expenses are moving to Send to ORA for final approval and processing 30

PCEs - Common Issues PCEs not completed to reflect changes in effort 5% Late PCEs – common reasons: – PAFs not updated to reflect payroll distribution – Untimely review of sponsored project to identify and correct errors – Pre-award projects not established Conflict between department and ORA 31

Frequently Asked Questions The following Frequently Asked Questions (FAQs) address practical application of this policy. 32

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? 33

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. 34

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 budgets, unless they have been set out in the agreement as allowable. – The PI is responsible for knowing what is allowable and unallowable. – If budget and agreement differ, agreement rules. 35

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. 36

FAQs What is an example of an unlike circumstance? – Postage. – If the award is for the preparation of a large volume of manuals and mailing to participants, postage may be allowable as a direct charge. – This needs to be set out in the agreement. 37

FAQs What is another example of an unlike circumstance? – Administrative Salaries. – If the project requires extensive travel and meeting 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. 38

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. 39

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 40

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 41

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 ORA office. 42

FAQs Why is the University required to adhere to budgets on sponsored programs? – A-21 K.1, states “To assure that expenditures for sponsored agreements are proper and in accordance with approved project budgets, ” – A-21 J.29 states “Any excess of costs over income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to, the institution's contributed portion by reason of cost sharing agreements ” [Emphasis Added] 43

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. 44

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. 45

References Where can I get more information? – OMB Circular A-21 – University Controller’s Office Policies – APM – Section 60 – Reference Guide for Sponsored Programs – Facilities & Administration Fiscal Misconduct Hotline 46

Contact Information Karen Boyd Manager, Business/Fiscal Operations 314-516-5923 [email protected] 47