OVERVIEW OF CONTRACT AND GRANT ADMINISTRATION
Sponsored projects are administered fiscally in the Office of Financial Services. The Office of Financial Services is located in the Mesa Building, Room 1224. All pre-award negotiation of sponsored projects and the technical aspect of the program is handled by the Office of Sponsored Projects (OSP), Dr. Juli Ratheal, Assistant Vice President, 552-2530, Mesa Building, Room 1208B. Questions about new awards or modifications should be directed to OSP. Questions about existing projects, allowability of costs, reporting requirements, rebudgeting, fringe benefits and indirect costs should be directed to Financial Services, 552-2706.
Primary Responsibilities of the Office of Financial Services are:
1.Ensure compliance with applicable regulations.
Federal guidelines such as those contained in OMB circulars A-21 and A-110 are the most commonly referenced. However, A-21 states that allowable costs must be given consistent treatment through applications of generally accepted accounting principles appropriate to the circumstances. This has been interpreted to mean that state regulations such as those for procurement and travel must be applied to federal program expenditures.
2.Financial monitoring and reporting.
All projects are set up on a budget. The degree of deviation allowed by the granting agency varies widely from complete discretion by the project director to requiring agency approval for all changes. The reporting of expenditures also varies in the amount of detail required and the frequency of the reports. Circular A-110 requires all federal granting agencies to use one set of reports. However, contracts and non-federal projects are not bound by that restriction.
3.Cash position monitoring.
The administration of sponsored projects requires constant monitoring of the cash position to prevent a large surplus or deficit. For letters of credit purposes, the surplus is limited to three days of expenditures. Advance requests are permitted up to one month's estimated expenditures. In an amendment to A-110, cash drawn in advance of expenditures must be invested and the interest income returned to the federal government.
4.Project Director Assistance.
This is the most important assignment and one of the most difficult. Project regulations are variable and complicated. To allow for informal decisions concerning expenditures, it is essential that project directors be provided with as much aid and information as possible. The Office of Financial Services is in a very delicate position: Sponsoring officials expect guidelines to be followed closely, project directors expect freedom to spend as they see fit, the University officials expect no mistakes on either side.
5.Federal Rules and Regulations
To request copies of the Federal Rules and Regulations, please write:
U. S. Govt. Printing Office
P. O. Box 371975M
Pittsburgh, PA 15250-7975
ORIGINATION OF AWARDS
Project directors, in cooperation with an administrative official from OSP, prepare a proposal for submission to a sponsor. Some proposals are at the request of the agency while others are unsolicited. The proposal will include a description of the project, the project director's resume, and a proposed budget. Negotiation with the sponsor can change overhead rates, how overhead is applied, reporting requirements, the scope of the project, and/or the budget limitations. When an agreement between the sponsor and the University is reached, a final award document is signed by both parties. The project is now ready to begin.
The award is sent from the Office of Sponsored Projects to the Office of Financial Services for set up and administration of the accounts. The Office of Financial Services reviews the award for special conditions, reporting requirements, cost sharing agreements, budgets, rules and regulations, allowable cost principles and expiration date. Each of these items are noted on the front of the award notice and the account numbers are assigned.
Sometimes approval is given for expenditures to begin before the final award is signed. This is entirely at the University's risk. Certain federal agencies allow institutions to approve pre-award costs on grants & cooperative agreements for up to ninety days prior to the award start date when necessary. This should never include proposal costs. For contracts that experience funding delays, requests to incur expenditures prior to the receipt of an executed agreement require the approval of the Vice President for Business Affairs.
Types of Awards
Fixed price, cost reimbursable, cost reimbursement, and cost-plus-fixed fee with price revision are types of contracts that the University has negotiated. This type of sponsored project has specific terms, requirements, and deliverables.
A contract is the appropriate agreement to be used in a relationship between the federal government and a recipient whenever (1) the principle purpose of the instrument is the acquisition (by purchase, lease, or barter) of property or services for the direct benefit or use of the federal government; or (2) an executive agency determines in a specific instance that the use of a type of procurement contract is appropriate.
Research, training, construction and equipment, institutional formula, and student financial aid are types of grants that the University has negotiated. This type of sponsored project has fewer restrictions than a contract.
A grant is the appropriate agreement to be used in a relationship between the federal government and a recipient whenever (1) the principal purpose of the relationship is the transfer of money, property, services, or anything of value to the state or local government or other recipient in order to accomplish a public purpose of support or stimulation authorized by federal statute; and (2) no substantial involvement is anticipated between the executive agency, acting for the federal government, and the state or local government or other recipient during performance of the contemplated activity.
Agriculture research, extension, personnel exchange, testing, and consortium are types of cooperative agreements that the University has negotiated. The sponsor usually has substantial involvement in this type of award.
A cooperative agreement is the appropriate agreement to be used in a relationship between the federal government and a recipient whenever (1)the principal purpose of the relationship is the transfer of money, property, services, or anything of value to the state or local government or other recipient in order to accomplish a public purpose of support or stimulation authorized by federal statute; and (2)substantial involvement is anticipated between the executive agency, acting for the federal government, and the state or local government or other recipient during performance of the contemplated activity.
4.Letters of Agreement
Usually few restrictions, but requires specific research effort.
A gift has no restrictions. Cash is received at the time of the award. Gifts are usually set up as 30 accounts unless they are for research. Research accounts, which have a receivable, or require a specific effort or a report of progress must be set up as a 26 account and will be administered by the Office of Financial Services.
Definitions of Grant, Contract, and Cooperative Agreement from P.L. 95- 224 (1978).
Projects are set up with the budget which was included in the proposal. Some sponsors allow considerable latitude to the project director in changing original categories. Others require authorization from the agency for changes. Most agencies have restrictions on equipment and travel.
Salary and fringe benefits. Fringe benefits are budgeted as an estimated percentage of salaries, but are charged directly as an actual expense. Fringe benefits are currently budgeted at 27% of salaries. Part time employees, appointed less than 20 hours per week, are budgeted at 17% of salaries. IMPORTANT: These rates are for BUDGETING PURPOSES ONLY. All grants and contracts will be CHARGED FOR ACTUAL fringe benefits incurred (see p 10).
Equipment is defined by the State of Texas as any single item costing over $5,000. Any item that must be added to another piece of equipment is also regarded as equipment if the unit cost of the addition is over $5,000. The federal definition of equipment is an item costing $5,000 or more and with a useful life of more than two years. General purpose equipment and all items over $5,000 need to be specifically identified in the budget. (General purpose items are things useful for purposes other that scientific research. Computer equipment is considered general purpose equipment).
An equipment fabrication account is used when an award calls for the assembly of many parts into one system. These individual parts may be more or less than the $5,000 equipment limitation (see above). No consumable supplies (gases, powders, liquids) can be charged to the equipment fabrication account. This category is not subject to overhead. It is also important to identify these charges for inventory purposes. A separate sub-account is required for each item being fabricated.
If foreign travel is anticipated it must be specified. Travel costs expected to exceed institutional guidelines must also be specified. Institutional guidelines allow $30 for meals and $80 for lodging per day in the State of Texas. Outside the state the limits are set by the federal government and vary by locality. These rates are available in the *DEFINE system on the administrative computer (GG1 command). Federal funds cannot be used to make trips for the purpose of securing additional funding. Travel vouchers should be completed for reimbursement of travel expenses.
This category should be itemized. Many agencies, including the Department of Defense, require approval for all consultants. UT employees may only be paid as a consultant if the agency approves the payment, the consultation is across departmental lines or involves a remote operation, and the work is performed in addition to regular duties. Any payments made to UT employees representing extra compensation above base salary are allowable provided that such consulting arrangements are specifically provided for in the agreement or approved in writing by the sponsoring agency.
These charges must be identified in the budget.
In most cases, subcontracts must be approved by the sponsor. They are negotiated by the Office of Sponsored Projects and should be written as cost-reimbursable with detailed invoices required. The rules which apply to the University under a specific award will also apply to any subcontractors. For example, if the University must submit a financial report, so must the subcontractor; if the University must request approval for travel, consultants, equipment purchases, etc. so must the subcontractor and so on. When the subcontractor submits an invoice for reimbursement of costs incurred, the invoice must contain these three things: the invoice must be on the subcontractor's letterhead; the invoice must be signed by an authorized official of the subcontractor; and the invoice must contain a certification that all payments requested are for appropriate purposes and in accordance with the agreements set forth in the application and award documents.
Publication costs are for printing the required reports and articles.
9.Expendable equipment and supplies
These are items costing $5,000 or less with a life expectancy of less than two years.
10.Other Direct Costs
Other direct costs include services, participant costs, communications, etc.
The current on-campus rate is 58% of Salaries and Wages.
Transfer of funds between the subaccount categories is accomplished by submission of a Request for Budget Change form. Copies of the form are available from Contract and Grants or your department can be authorized to use the VT3 automated transfer document. This is to allow adjustments between categories. Minor changes are allowed by almost every agency. Most federal agencies require approval for transfers in excess of 10% of the original category for travel and equipment.
Transfers out of categories exempt from overhead will require a transfer into overhead. For example: A project director decides not to buy a piece of equipment budgeted for $1000 and instead pay more salaries which are needed. If the project had a 49% overhead rate budgeted, the transfer would be $671.14 to the 09 or 10 subaccount and $328.86 to the 90 subaccount (Overhead). The amounts are determined by adding the rate of overhead to 1 and then dividing the result of this calculation into the amount of the transfer out of the account exempt from overhead:
1 + .49 = 1.49 1000/1.49 = 671.14
The answer is the amount of the transfer that should be made to a category subject to overhead. Conversely, if a project director needs to rebudget $1000 to an exempt category and has the appropriate approvals, it would be necessary to move $671.14 from a non-exempt category and the remainder of $328.86 should come from the overhead subaccount.
When transferring funds to salaries, you must also transfer funds into fringe benefits. The current ESTIMATED rate is 27% of salaries. The 17% rate is only to be used for salaries of employees appointed to less than 20 hours per week.
Fringe benefits are the most difficult category to properly budget. This percentage is difficult to estimate due to the fixed monthly premium-sharing amount. Projects that pay low salaries will use more than 27% because premium sharing is a flat amount. Projects that pay workstudy salaries are charged fringe on the full salary, even though they pay only 30% of the salary. Projects with high salaries will not use the 27% and they can generally rebudget to other categories. It is very important for good project management to closely monitor the fringe benefit account. It often results in a large surplus which can be moved to other accounts, while in other cases, it may be necessary to increase this category.
Transfers of excess fringe benefits must show the calculation which determines the amount of excess funds and contain a statement certifying that if an overdraft occurs, it will be covered from another account (Note: Fringe charges alone cannot be transferred to another 26 account).
1.To Calculate excess fringe benefits:
Add Salary subaccount free balance
Plus Salary changes during the month
Plus Salary encumbrances
Equals Total salary subject to fringe
Total salary subject to fringe X .27 = Fringe balance estimated
Free balance in fringe subaccount
Minus Fringe balance required (ESTIMATED)
Equals Fringe allowable for transfer
This procedure can be applied at any time but it is especially important near the end of the project when the fringe benefit charges should be examined more closely. With approval from your departmental contact, actual salary and fringe benefit charges are available on-line by account number, by voucher and by individual. Use the ODM commands in *DEMAND to view this information.
2.Fringe Rates for 02-03:
$319.11/month for employee only
$498.98/month for employee and spouse
$439.45/month for employee and children
$619.32/month for employee and family
0.4233% of salaries
6% of salaries
0.3% of salaries
8.5% of salaries (grandfather clause)
6% - of salaries (non-grandfather salaries)
6.2% of salary up to $84,900; and 1.45% of the remainder. All fringes are based on gross salary plus longevity.
Each project manager must keep internal accounting records of purchases and encumbrances to stay current with commitments made during the project. The Office of Financial Services is responsible for official University accounting records and for the preparation of fiscal reports for the various sponsors. The records in Financial Services, however, are not timely enough to be relied on entirely by the departments. Many expenses are incurred by a department several weeks before they appear on the official University records.
A monthly statement of account will be mailed to the project director or to his/her designatee for each account which has incurred expenditures during that month. The statement of account lists each transaction by date, and has an object class analysis at the bottom of each account. (See object class codes attached.) For any month without activity, there will be no statement of account prepared. The statements must be reconciled to departmental records each month.
An automated system of departmental accounting called *DEFINE is available through the administrative computer. This system provides an automated reconciliation procedure with official University statements of account. It allows each department to create individual coding schemes and use them to print any internal reports necessary.
In addition to bookkeeping capabilities, electronic personnel appointment forms, purchase forms, and payment voucher forms are also available in *DEFINE. For more information about this system, contact the Office of Financial Services at 552-2706.
Cost sharing is required on many projects. As defined by A-110, it is the portion of a project's costs not borne by the federal government. It may include project costs, services provided, and real or personal property. Cost sharing must be verifiable in the recipients' records and the basis for determining the value of non-cash items must be documented. In addition, cost sharing must be necessary and reasonable to the program. University cost sharing is usually in the form of contributed time of the project directors. This time must be certified on the personnel effort reports.
PERSONNEL EFFORT REPORTS
A labor distribution system is required by the Office of Management and Budget Circular A-21 - Cost Principles for Educational Institutions. The requirements for an effort reporting system involve an after-the-fact certification of the percentage of effort directly devoted to sponsored projects, including contributed time; support for the indirect charges of departmental administration and verification that employees are not charging more than 100% of their time to sponsored projects.
Effective for projects awarded after July, 1987, there is no longer a requirement to account for departmental administration of faculty and other professional employees. The departmental administration is now a flat 3.6% of the indirect cost calculation and no longer requires any supporting documentation.
Monthly Effort Report
This report documents the direct effort for one month's activity on a sponsored project. All direct charges and adjustments are listed per account number. It should include time charged to a project and time contributed to the project by people who are being paid from other funding sources. The contributed time specified by the project director at the beginning of the project, if any, will be listed before the reports are mailed. Other contributed time must be added by the project director. The contributed time certified for each project will be verified to ensure that one person does not contribute more time than he is paid from non-sponsored projects. The reports will be mailed monthly to each project director. The reports are generated from payroll information and will differ occasionally from the Office of Financial Services statement of account. The difference is in the timing of corrections. For example, some transactions appearing on the September personnel effort report appear on the October statement of account. The cancellation of paychecks over one year old do not appear on the reports. Also, salary transfers from a previous fiscal year do not print on the reports and will have to be added by the department.
Project Directors' Responsibilities
Each project director must verify the following the information:
1.The report includes the names of all individuals who were paid from project funds.
2.The percent time on the report is the appointed percentage. This should be corrected if the actual percent time was not the same. If the percent time on the project varied during the month this also should be reflected.
3.The payments that were made during this month should be examined.
4.The contributed time section should be filled in if the P.I. or his staff spent time on the project while being paid from non-federal sources. If commitments were made at the beginning of the project, Financial Services will fill in the section. This section should be corrected by the principal investigator if it is incorrect.
5.Any corrections made to the actual charges must be made at this time and supported by appointment forms. The original forms should be sent to the Office of Human Resources and copies should be attached to the Personnel Effort Report. Any salary transfers requested after the report has been certified will be returned unprocessed.
Description of Personnel Effort Report Columns
1.The "Salary" column will reflect the total of payments and adjustments during the month.
2.The "Notes" column is provided to assist in identifying the types of miscellaneous payroll activity (other than regular appointments):
1.PP - Payment includes prior period activity.
2.ADJ - Salary Transfer.
3.CAN - Canceled Paycheck.
4.WKS - 30% of the workstudy program month's salaries will appear on this report and will be charged to the account the following month.
5.HRY - Hourly payments. % Time on Project cannot be determined and the project director should fill this in.
6.OT - Overtime payment included in salary amount but not reflected in the percent time on the project.
3.The "% Time on Other Sponsored Projects" column is the total percent of time a person is appointed to other 26 accounts during the month being reported.
4.The "% Residual Time" column is the total percent of time a person is appointed to non-26 accounts during the month being reported.
5.The "Total Effort" column is assumed to be 100%. If a person is appointed only 50% and this is total time worked at the University, the 50% appointment represents 100% effort. The same concept applies for someone who works overtime; an individual's total effort will not exceed 100%. The column will be zero if the total payment for the month is negative or zero. This indicates a salary transfer or a refund of overpayment. The total percentages (when all three columns are added across) for full-time employees will equal 100%. The percentages for part-time employees and those who have had late appointments will not add to 100%.
Office of Management and Budget Circular A-21 established the principles for determining costs applicable to grants, contracts and other agreements with educational institutions. The principles are designed to provide that the federal government bear its fair share of the total cost, determined in accordance with generally accepted accounting principles, except where restricted or prohibited by law. The latest revision of this circular was October 3, 1991, although there are revisions currently in process. We use this document to judge all expenses on federal projects. The project director is allowed more liberal guidelines with private funds, but the expenditures to support the project must still be reasonable.
General Cost Guidelines
1.Costs must be reasonable. This is defined as the action a prudent person would have taken under the circumstances.
2.Costs must be allocable to sponsored agreements under the principles and methods described in A-21. Any costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements to clear an overdraft or for other reasons of convenience.
3.Costs must be given consistent treatment through the application of generally accepted accounting principles appropriate to the circumstances.
4.Costs must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items.
The following checklist is presented as a general guideline of costs that are usually allowable. Any special conditions are noted.
Cost Checklist (generally allowable unless otherwise noted)
Advertising - only for the recruitment of personnel required for the project and purchasing
Air conditioning - this must be charged as indirect
Alcoholic Beverages - Unallowable
Alterations, non-construction - must be budgeted or approved
Bad debts - these are unallowable
Bonus payments - allowable if part of compensation
Civil defense - must be charged as indirect cost
Commencement and convocation - these are student costs and are unallowable
Construction - unallowable unless authorized by awarding agency
Consultant services - allowable, some agencies require approval. All UT employees must be approved in advance or listed in the approved budget.
Contingent reserves - unallowable except self-insurance
Custom and import duty
Depreciation - limited to indirect costs only
Entertainment - Unallowable
Equipment - usually must be budgeted or approved in advance
Equipment maintenance and repair
Fines and penalties - Unallowable
Fund raising costs - Unallowable
Goods or services for personal use - Unallowable
Insurance - only allowed to the extent required or approved
Interest - usually allowable. Can be allowed if total cost of p