Can I Charge this Item to a Grant?

A Mini Guide for Determining Allowability of Charges on Grants

Glenda A. Bullock (Luecke)Manager of Business Operations

Division of HematologyWashington University

Jennifer J EvansPost Award ManagerPurdue University Calumet

OMB Circular A-21 Purpose• Establishes principles for determining costs

applicable to grants, contracts, and other agreements with educational institutions

• Designed to provide that the Federal Government bear its fair share of total costs, determined in accordance with generally accepted accounting principles, except where restricted or prohibited by law

• Acts as a guide, not all-inclusive

OMB Circular A-21 defines

• Factors affecting the charging of costs• Definition of direct costs and of indirect costs• Discussion of selected items of costs• Calculation of the indirect cost rate

COST ACCOUNTING STANDARDS BOARD (CASB) • 501 Consistency in Reporting Costs• 502 Consistency in Allocating Costs• 505 Accounting for Unallowable Costs• 506 Consistency in Cost Accounting Period

Factors Affecting the Charging of Costs or

“The Golden Rules”• Must be reasonable– Prudent person test – what would a reasonable

person do in a similar situation?– Necessary to the project– Adhere to all applicable laws and regulations– Adheres to the sponsor’s terms and is consistent with

University practices

Newspaper Test“Contemplating any business act, an employee should ask himself whether he would be willing to see it immediately described by an informed and critical reporter on the front page of his local paper, there to be read by his spouse, children and friends.”--Warren E. Buffett

Factors Affecting the Charging of Costs• Allocable costs– Goods or services involved are chargeable or assignable

in accordance with relative benefits received or other equitable relationship• 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

• No shifting of costs from one fund to another to cover cost overruns, avoid restrictions on agreement or for reasons of convenience

Factors Affecting the Charging of Costs

• Consistent treatment–Consistency in proposing, charging and

reporting–Cost Accounting Standards (CAS), A-21

Appendix A

Consistent Treatment

Section D.1 of A-21 states: "Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution."

What does “Allowable” mean??

• If a cost cannot meet the criteria of reasonableness, allocability, and consistency, it is unallowable, no matter what it is for!

• Remember, if it is not allowable on a sponsored fund it is not allowable on a cost share account.

“The fact that a cost requested in a budget is awarded, as requested, does not ensure a determination of allowability. The organization is responsible for presenting costs consistently and must not include costs associated with their F&A rate as direct costs.”

- NIH Grants Policy Statement

Direct vs. Indirect? That is the question!• Where do you go for answers?– OMB Circular A-21– Agency Rules/Guidelines– Program Specific Guidelines– Special Conditions– Institutional Policy– Award Document

Direct Cost Definition (OMB Circular A-21, Section D)

• “Costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity; or that can be directly assigned to such activities relatively easily with a high degree of accuracy.”

• “Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or F&A.”

Examples of Direct Costs• Salaries of researchers/project directors – (including benefit costs)

• Laboratory/project supplies• Travel• Technicians

OMB Circular A-21:F&A Costs -Section E&F

“Costs 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 other institutional activity.”

Examples of F&A Costs

• Salary of Department Administrator• Building utility and maintenance costs• Proposal preparation costs• Office supplies, postage, local phone (Exceptions

allowed ONLY for different purposes or circumstances) (CAS 502)

Are there times when typical F&A costs are allowed on a sponsored fund?

It Depends!!

Special Circumstances• Extensive data accumulation, analysis, entry• Large amounts of travel/meeting arrangements• Large, complex programs• Remote field projects that cannot access normal

departmental services• Major projects such as General Clinical Research Centers,

center grants, program project grants, etc.• Training grants• Sponsored projects not supported, in whole or in part, by

federal funds

If special circumstances exist, an F&A cost may be budgeted as a direct cost provided that the cost is: – Allowable – Identified specifically with a proposed project and

will advance the proposed work – Cost can be attributed to the proposed project

with relative ease and a high degree of accuracy

Document!Document!Document!

Why the need for documentation?• Auditors will expect documentation on all transactions.

Especially those considered under “exceptional” circumstances or for major projects.

• Receipts with enough detail to support the charge• Written explanation of how the expense benefited the

project(s)• If you leave the university or department is there sufficient

detail that the documentation can speak for itself?

Helpful HintCreate a form (with as much detail as you want) to attach to

backup documentation. Expense Documentation Form

Date: 7/1/2013Fund # Mason 3048-55167

Product/Service 100 White Binders w/dividers

How does it benefit the project? Binders necessary to complete the didactic courses for trainees as outlined in the scope of work.

Allocability Method: Binders will only be used for this fund. 100% allocable to this project.

This is an exceptional circumstance as research grants do not normally require courses to be taught and workshop/handout materials to be dispensed to trainees as required in the RFA for this project. (see page 4 of RFA-12-046)

How is this an exceptional circumstance?

Case Study 1

Dr. Smith has a U-54 grant that requires a great deal of support in arranging travel for the project leaders from six universities, and five internal research projects to attend semi-annual progress meetings. He also is coordinating the preparation and submission of several publications and the planning of four separate seminars related to the grant. Do you think he can charge for administrative/clerical services on the grant?

Case Study 2Your PI asked you to stop at Office Depot on your way in to work to pick up a few of his favorite kind of ink pen. He also asks you to stop at the bakery for brownies and cookies for the lab meeting that day. When you get to work he tells you to turn in the receipts and charge his NSF grant. Do you think these are allowable charges to a sponsored project?

Case Study 3Dr. Cutter invited his co-investigator on his PPG, an expert in the field of zebra fish from another university, to give a talk to your university staff/faculty about the unique discovery they have made on their project. After the seminar Dr. Cutter and several other faculty members have dinner with the speaker at a local restaurant before his flight home. What, if any, expenses incurred can be charged to Dr. Cutter’s PPG?

UNACCEPTABLE PRACTICES

• Purchasing items simply to exhaust an unobligated balance.• Rotating charges among projects.• Assigning charges to a project on the basis of the remaining balance to resolve

availability of funding issues or simply to avoid the loss of carry-forward balances.• Charging the budgeted amount (in contrast to an amount based on actual usage),

unless the project allows a fixed price or other type of approved reimbursement method that does not require tracking of actual charges to the project.

• Assigning charges to an award before the cost is incurred.• Charging an expense exclusively to a single award when the expense clearly has

supported other activities.• Applying a unit "tax" to projects to distribute clerical and administrative expenses.• Transferring an overdraft from one sponsored project to another, without express

sponsor approval.

False Claims Act

Under the U.S. False Claims Act, persons working with federal funds are prohibited from “knowingly presenting, or causing to be presented, to an officer or employee of the U.S. Government or a member of the Armed Forces of the U.S. a false or fraudulent claim for payment or approval.” (VII.J.)

What’s the worst that can happen?

Non-Compliance can lead to:• Disallowed Costs• Reduction in Funding• Award Termination• Additional Compliance Requirements/Oversight• Sanctions • Suspension • Debarment • Criminal Penalties

Reference Materials

• OMB Circular A-21• False Claims Act• NIH Grants Policy & Guidance

Additional Resources

Talk with your peers: NCURA Collaborate

Sponsors may have resources available on-line:

EDGAR (US Dept of Education)

NSF (National Science Foundation)

Review published audit findings:

NSF External Reports

NIH Office of Audit Services

Time for Questions

The Fun Continues!Come join us from 4-5 for the

Discussion GroupWhere we will to a more in-depth look at cost

allowability and some case studies.We look forward to seeing you there.

Contact Information

Glenda A. Bullock (Luecke)(314) 362-8806gbullock@dom.wustl.edu

Jennifer J Evans(219)931-8819jennifer.evans@purduecal.edu