The Uniform Guidance Cost Principles Training Presented to

The Uniform Guidance Cost Principles Training Presented to Faculty and Support Staff 0 Date

Agenda and Outcomes Agenda Introductions Background on the Uniform Guidance: Introduction to Sponsored Project Compliance, Overview and Institutional Impact The Basic Idea Cost Principles: Cost Principles, Cost Transfers Processes Roles and Responsibilities Practice Activities Key Takeaways Resources Outcome: After this training we expect that you have an understanding of the Uniform Guidance and the changes to the regulations for allowable charges, direct charging and cost transfer (aka transfers). You will know your responsibilities, and know where to find answers to any questions that may arise. 1

1. 2 Background on The Uniform Guidance

Background on Uniform Guidance OVERVIEW OF CHANGES The Uniform Guidance includes a combination of: • Current Language from Existing Circulars • Revised Language of Existing Circulars • New Language The final guidance which went into effect December 26, 2014 superseded requirements from: • OMB Circulars A-21, A-87, A-110, and A-122 (which have been placed in 2 C. F. R. Parts 220, 225, 215, and 230), • Circulars A-89, A-102, and A-133 • The guidance in Circular A-50 on Single Audit. What Act follow-up What Changed? Remained the Same? • Combined 8 Circulars into 1 • Adjusted and revised the language and added new language • Granted greater flexibility to the recipient • Placed greater emphasis on institutional policies and internal controls 3 • In many respects the guidance remains unchanged • However, just the change itself will result in increased scrutiny because of the renewed awareness and focus

Introduction to Sponsored Project Compliance PERSPECTIVE ON THE CURRENT INDUSTRY LANDSCAPE • The sponsored project administration environment grows increasingly complex with changing regulations, inconsistencies among agencies, lack of information (meaningful and timely reports), thus generating more risk than institutions recognize. • There remains a vast disconnect between: – The award environment, during which the funding agency and the PI focus primarily on the programmatic work itself – The degree of flexibility that is perceived to exist while the work is being conducted – The audit environment during the life of award through when an award is closed and subsequent audits take place • The current environment will likely place increased emphasis on accountability during a time when many institutions are faced with significant financial strain and pressures to reduce staff. – PIs are being held to a higher standard to follow regulations. – The OAGSR and Office of the Treasurer will provide oversight and answers to questions but cannot perform the work for all PIs. 4

Introduction to Sponsored Project Compliance EMPHASIZED COMPLIANCE ISSUES Diverging fiscal and regulatory compliance issues creates a complex charge for the sponsored project compliance program. Fiscal Cost Transfers Clinical Trial Billing Other Support Cost Sharing Direct charging practices Recharge Centers Effort Reporting Equipment Claims Program Income Reporting Extra Service Compensation Financial Reporting Unallowable Costs Regulatory Animal Subject protections (IACUC) Export Controls Scientific Overlap Human Subject protections (IRB) HIPAA Privacy Laws Scientific Misconduct Conflicts of Interest Environmental Health & Safety 5 Invention Disclosures and Reporting Responsible Conduct of Research Sub-recipient Monitoring

Overview of Uniform Guidance & Institutional Impact EFFECTIVE DATES – EXISTING AWARDS & GUIDANCE 6 Existing Awards Pre-Existing Guidance • Once the Uniform Guidance goes into effect for non-Federal entities, it will apply to Federal awards or funding increments after that date. It will not retroactively change the terms and conditions. • Entities will likely make changes to their own policies and procedures that will impact their existing/older awards. • Non-Federal entities wishing to implement entity-wide system changes to comply with the Uniform Guidance after the effective date of December 26, 2014 will not be penalized for doing so. • TCNJ has adopted policies and • The terms and conditions for Federal awards (i. e. 2 CFR 220, 225, and 230) always govern. • Now that the Uniform Guidance is in effect, Federal agencies still need to ensure the continued availability of access to the terms and conditions of Federal awards made prior to the Uniform Guidance becoming effective.

Overview of Uniform Guidance & Institutional Impact COST PRINCIPLES - DIRECT COSTS Guidelines promote the clarification as well as standardization of the direct cost allowability across institutions. • 7 FINAL OMB UNIFORM GUIDANCE Further clarifications made in allocability and allowability of certain direct costs. INSTITUTIONAL IMPACT AND IMPLICATIONS • A single common cost principles circular creates common accounting standards for all grant recipients, regardless of institutional type.

Overview of Uniform Guidance & Institutional Impact COST PRINCIPLES - ADMINISTRATIVE SUPPORT Institutions can charge directly allocable administrative support as a direct cost. • • FINAL OMB UNIFORM GUIDANCE INSTITUTIONAL IMPACT AND IMPLICATIONS In order for clerical costs to be allowable • Institutions may charge administrative as a direct charge, the Federal awarding and clerical salaries, as well as other agency’s prior approval is required. items of cost, directly to a Federal award when it is appropriate, allocable Additional language was added to allow and meets the conditions outlined in the for this approval after the initial Federal guidance. budget approval in order to allow for flexibility in implementation. 8 • The burden for justifying direct costs as allocable to an award remains with the institution.

Overview of Uniform Guidance & Institutional Impact COST PRINCIPLES - COMPUTING DEVICES This change includes the cost of certain computing devices as allowable direct cost supplies. • • 9 FINAL OMB UNIFORM GUIDANCE INSTITUTIONAL IMPACT AND IMPLICATIONS Computing devices are subject to the • Computing devices not considered a less burdensome administrative depreciable asset by an institution’s requirements of supplies (as opposed capitalization policy may be charged and to equipment). treated as supplies. The acquisition cost must be less than • the lesser of the capitalization level established by the non-Federal entity for financial statement purposes or $5, 000, • regardless of the length of its useful life. The burden of obtaining prior approval for such purchases is reduced. However, institutions must follow the same practices for determining and documenting allocability (direct versus indirect use) when charging computing devices to sponsored awards.

2. 10 Cost Principles

Cost Principles UNIFORM GUIDANCE • The Uniform Guidance (and previous Circulars) establish principles for determining costs applicable to Federal grants, contracts, and other agreements. Term Definition Goods or services acquired and amount Reasonable involved reflect an action a prudent person would have taken. Allocable Benefits the project or award that was charged. Allowable Items not restricted by federal regulations or the specific grant/contract. Treated Consistently Like costs in similar circumstances need to be charged directly or indirectly at the institution. Costs that do not meet these standards should not be charged to a sponsored project. 11

Cost Principles COST ACCOUNTING STANDARDS AND SPONSORED PROJECT COSTS How do the Cost Accounting Standards apply to sponsored project costs? Any costs charged to federally sponsored awards are classified as: Direct Costs F&A / Indirect Costs However, most institutions apply the federal cost principles to all sponsors, which include both federal or non-federal. 12

Cost Principles DIRECT VS. INDIRECT COSTS Cost Direct Costs Those costs that can be identified specifically with a particular sponsored project or that can be directly assigned to an activity relatively easily with a high degree of accuracy. Types / Purpose • • • Facilities & Administrative Costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project or other activity. 13 • • • Personnel: Salaries, wages, fringe benefits Materials & Supplies: Goods needed to conduct the project Purchased Services: Services needed to conduct the project Equipment: Capital equipment purchases Subcontracts: Work performed by other institutions Other Direct Costs Depreciation or use allowances on buildings and equipment Costs of operating and maintaining facilities Administrative activities (HR, payroll, accounting, executive management) Sponsored projects administration (Pre and Post award) Department administrative activities Library operations

Cost Principles THE CHALLENGE OF ADMINISTRATION COSTS • Salaries associated with normal administrative activity should be charged to general or other nonsponsored accounts • Proposal Preparation • Accounting • Purchasing Administrative • Data Entry and Clerical Salaries 14 • General office supplies (e. g. , pencils, paper, staples, etc. ) or general purpose computer supplies (e. g. , paper, toner, general purpose software) should be charged to general or other non-sponsored accounts Office Supplies • Regular postage should be charged to general or other non-sponsored accounts • Office telephone lines and individual cell phones are typically general-use and should be charged to general or other non-sponsored accounts. Postage Telephones

Cost Principles EXCEPTIONS FOR UNLIKE CIRCUMSTANCES • The examples of indirect costs mentioned on the previous slides may be directly charged to a sponsored award when they directly benefit the sponsored project – this is typically when “unlike circumstances” apply. • Unlike circumstances generally exist when a sponsored project or activity, due to its size and nature, requires administrative or clerical services, supplies, postage and/or telecommunications costs that are well beyond the core use routinely provided for with non-sponsored/administration funds. When it is ok to charge to a grant directly: 1) Administrative or clerical services are integral to a project or activity; 2) Individuals involved can be specifically identified with the project or activity; 3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and 4) The costs are not also recovered as indirect costs. 15

Cost Principles EXCEPTIONS FOR UNLIKE CIRCUMSTANCES • Excessive amounts of administration (conference travel arrangements) or data entry (survey translation) are required. Administrative and Clerical Salaries • There is a high demand for postage (mass mailings) • A meter or log is used to document the appropriateness of the charge to the sponsored project(s) • Overnight mail costs (e. g. , Fed. Ex, UPS) for expedited shipping of materials/samples Postage 16 • There is a high volume need for the supplies • Any allocation for supplies on multiple projects is reasonable and documented appropriately • Specific-purpose computer software is required Office Supplies • The size and nature of the project requires extensive use of telephones (work “in the field”). • Long distance telephone service costs (to international collaborators) can be identified and allocated appropriately to the project or projects that received the benefit • The costs are reasonable and necessary to perform the project Telephones

Cost Principles UNIFORM GUIDANCE IMPACT – ADMINISTRATIVE SALARIES The OMB Uniform Guidance clarifies that administrative and clerical support salaries can be charged directly to a sponsored project as an allowable cost. Pre-Uniform Guidance • Salaries for administrative and clerical support staff were treated as indirect costs on sponsored projects, unless they were specifically designated as a component of a “major project” or unlike circumstances prevailed. 17 Uniform Guidance Changes • If these costs are allocable, they can be directly charged, requiring no project designation • Prior approval must be obtained by the federal award agency or listed in the proposed budget • Burden for justifying direct costs as allocable to an award remains with the institution Overall Impact • Institutions can (still!) directly charge these costs to a federal award when it is appropriate and allocable. • This may better serve investigators, as their sponsored awards will likely benefit from the added skills and support of administrative and clerical staff.

Cost Principles UNIFORM GUIDANCE IMPACT – COMPUTING DEVICES Additionally, the Uniform Guidance allows computing devices to be directly charged to an award as supplies, if this cost is allowable and allocable to the specific project. . Pre-Uniform Guidance • Computers and other similar devices were not allowable as a direct cost on an award, unless they were essential to the project and preapproved in the budget 18 Uniform Guidance Changes • Computing devices that are essential and allocable, but not solely dedicated to the performance of the award, are allowable as a direct cost without the awarded agency’s approval • An institution may now classify and treat these items as they would supplies rather than capital equipment 18 Overall Impact • Institutions are no longer required to obtain special permission in order to charge computing devices directly to a sponsored project (as equipment) • However, institutions must follow the same practices for determining and documenting allocability of these costs when charging computing devices to sponsored awards

Cost Transfers INTRODUCTION – WHAT IS A COST TRANSFER? • • • Any cost that is first charged to one account and later charged to another account, where one or both of the accounts is a grant or contract, is referred to as a cost transfer, the uniform guidance refers to these as cost allocations Reclassification of charges within an award from one Account Code to another Account Code are not cost transfers • But be careful…. Reclassifications should not be made in an effort to make an unallowable cost allowable Cost transfers can be: • Salary expenditures • Non-Salary expenditures Cost transfers are a necessary and required component to managing sponsored projects, but they should be kept to a minimum! 19

Cost Transfers INTRODUCTION – WHAT IS A COST TRANSFER? Considerations and examples of cost transfers include: Differences between • Important to ensure that a actual effort % and % review of effort and followof salary charged up procedure occurs at your may require a cost institution transfer Cost transfers processed after verification may require a reverification of effort 20 • If cost transfer results in an increase to the charge to a sponsored program, this is especially important

Cost Transfers INTRODUCTION – WHAT ARE COMMON CAUSES OF COST TRANSFERS? If a cost has been charged to the incorrect project and needs to be moved to the correct project. § Data entry error § Reallocation of effort § Costs incurred prior to award notification but within grant term You should have a notice to proceed Cost transfers are NEVER an award management tool and should not be used to balance out accounts. Under no circumstances may a Cost Transfer be made with the sole intent of using up the unexpended balance in a Federal account or clearing a Federal account overdraft. 21

Cost Transfers COMPLIANCE RISK Cost transfers are consistently a very “hot topic” in sponsored projects administration Continually a focus of Federal sponsor’s Office of Inspector General work plans A key focus area of other auditors (Single Audit) A high volume of cost transfers suggests a lack of proper award management and raises questions on internal accounting practices and controls, such as: Poor spend planning 22 Lack of expenditure monitoring Charging awards for costs that they did not benefit from in a proportional way Charge “holding” or balance “floating”

Cost Transfers STRATEGIES FOR RISK MITIGATION Keep cost transfers to a minimum 23 • Charge the proper account initially - carefully double-check data entry • Monitor spending and balances on accounts and review with PIs at least quarterly Document, document! • Document a complete explanation and justification (for example, use a “Cost Transfer Justification Form”) • Explanations such as “to correct an error” or “to transfer to correct project” generally are not sufficient Be timely • Process cost transfers within 90 days after discovering the need for one • Provide additional information when transfer is not made within the 90 day period Transfer appropriately • Verify with PIs that costs charged to an account actually benefit the award • Help PIs ensure charges are allowable, allocable, reasonable, and consistently treated across all awards for like charges

Cost Transfers STRATEGIES FOR RISK MITIGATION Avoid the following practices: • Charging a cost to one sponsored award while waiting for another award to come in or be set-up in financial system • Posting a cost share charge directly to the grant until cost share funds can be identified • Charging one project for an item that benefits multiple grants because more funding is available there than on other projects • Transferring costs to use up an unspent balance at the end of an award • Transferring costs to avoid the 25% carryover approval requirement • Transferring costs from one sponsored project to another to clear an overdraft 24

Cost Transfers COMPLIANCE RISK - COMMON RED FLAGS The following list includes common red flags related to cost transfers that signal compliance concerns to potential auditors. Transfers older than 90 -120 days after original transaction Transfers in the last month of the award or after the award has expired Large numbers of cost transfers Grants or contracts with an exact zero balance at the end of the award Round numbers (may be an indicator of a plugged number) Paying summer/periodic salary late (e. g. in December) Labor distribution adjustments to previously verified effort 25

3. 26 Processes

Processes ALLOWABLE COSTS 1. The Principal Investigator reviews an applicable grant announcement, with particular attention to allowable cost parameters for budget development. 27

Processes ALLOWABLE COSTS 2. The Principal Investigator, in consultation with the Office of Academic Grants and Sponsored Research (OAGSR), as necessary, develops a budget to support a proposed project and submits the draft budget to OAGSR for review. 28

Processes ALLOWABLE COSTS 3. The OAGSR reviews the proposed budget for consistency with the grant announcement parameters and the Subpart E—Cost Principles of 2 CFR 200. 4. The cognizant school dean and department chair review the full proposal, including the proposed budget after it has been reviewed by OAGSR and deemed acceptable to advance. 5. The Principal Investigator consults with the Office of the Treasurer in ensuring that any proposed cost transfers comply fully with the grant announcement and the Subpart E—Cost Principles of 2 CFR 200. 29

Processes DIRECT CHARGING 1. Principal Investigator (or other support personnel) identifies the need for and purchase goods and services to conduct work on TCNJ sponsored projects. 2. The Office of Academic Grants and Sponsored Research reviews the paperwork and assists the PI in determining the appropriateness of the Allowable proposed allocation and assists the. YPI in determining if prior Y methodology, Allowable per Charge the sponsor approval e is required. e under TCNJ s policy? NO STOP 30 NO sponsor/gra s nt contract terms? expense to the award!

Processes DIRECT CHARGING 3. Principal Investigator (or other support personnel) determines the charge is either a direct or indirect cost based on how it benefits the project; and, if a direct charge, the PI (or other support personnel) confirms the cost is in compliance Cost with the Cost Principles. Types / Purpose Direct Costs • Personnel: Salaries, wages, fringe benefits Those costs that can be identified specifically with a particular sponsored project or that can be directly assigned to an activity relatively easily with a high degree of accuracy. • Materials & Supplies: Goods needed to conduct the project • Purchased Services: Services needed to conduct the project • Equipment: Capital equipment purchases • Subcontracts: Work performed by other institutions • Other Direct Costs Facilities & Administrative Costs • Depreciation or use allowances on buildings and equipment Costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project or other activity. • Costs of operating and maintaining facilities • Administrative activities (HR, payroll, accounting, executive management) • Sponsored projects administration (Pre and Post award) • Department administrative activities • Library operations 31

Processes DIRECT CHARGING 4. Principal Investigator (or other support personnel) identifies and documents the appropriate transfer methodology, Project ID, and Account Code to which to charge a particular cost. 5. Principal Investigator (or other support personnel) completes the requisition/grant personnel hiring paperwork, including charging instructions. 32

Processes DIRECT CHARGING 6. As necessary, Principal Investigator consults with the Office of the Treasurer regarding any requests for direct charging typically indirect expenditures under “unlike circumstances. ” 7. Principal Investigator reviews sponsored charges on a regular basis to confirm all charges conform to the cost principles. 33

Processes COST TRANSFERS For All Cost Transfers: 1. Principal Investigator (or other support personnel) identifies need for cost transfer on sponsored project during quarterly review and reconciliation of award. 34

Processes COST TRANSFERS For All Cost Transfers: 2. Principal Investigator (or project administrative support personnel) completes Journal Entry Request Form within the 90 days of the monthend close of the original transaction identifying the amount to be transferred and applicable Project ID and Account Codes, and providing appropriate justification for transfer. 35

Processes COST TRANSFERS For All Cost Transfers: 3. The Office of the Treasurer reviews the request to verify that funding is available/allocated, the expense is appropriate in accordance with the OMB Uniform Guidance, the justification is sufficient, and the appropriate authorization has been obtained, and processes the cost transfer if approved. 36

Processes COST TRANSFERS Additional Procedures for Cost Transfers Outside of the 90 -Day Timeframe: 1. If a cost transfer is requested outside of the 90 -day timeframe and, hence, is considered “late, ” the Principal Investigator (or project administrative support personnel) requests approval from the appropriate dean to approve the submission of a formal request for a late cost transfer. 37

Processes COST TRANSFERS Additional Procedures for Cost Transfers Outside of the 90 -Day Timeframe: 2. Upon receiving approval from the appropriate dean, the PI submits a request in writing (e. g. , via memo or email) to the Office of the Treasurer with details and justification, and indicating prior approval of the dean for submission. Deans must be copied on all written requests for late cost transfers. a. If approved, the Office of the Treasurer processes the journal entry to complete the cost transfer. b. If disapproved, the Office of the Treasurer coordinates with the PI/project administrative support staff to identify an alternate nonsponsored source of funds and transfers the cost to the alternative project. 38

4. 39 Roles and Responsibilities

Roles and Responsibilities PRINCIPAL INVESTIGATOR IS RESPONSIBLE FOR: 1. Complying with the grant announcement regarding cost parameters in developing and proposing a project budget. 2. Being aware of the Subpart E—Cost Principles in 2 CFR 200 that pertain to allowable costs. 3. Consulting with OAGSR, as needed, in the interpretation and application of the Subpart E— Cost Principles during the budget development process. 4. Ensuring actual sponsored project and cost share expenditures comply with the allowability requirements. 5. Understanding federal and sponsor regulations applicable to his/her award portfolio (at a high level), as well as TCNJ policy and procedure. 6. Ensuring that direct and indirect costs are appropriately identified, budgeted, and consistently charged to sponsored projects. 7. Determining and documenting transfer methodologies. 8. Identifying the appropriate Project ID and Account Codes when requesting charges on sponsored projects. 9. Reviewing sponsored project accounts on a regular basis and identifying when cost transfers are required. 10. Completing the Journal Entry Request Form with appropriate documentation that explicitly states how the cost benefited the sponsored project being debited. 11. Providing the additional justification and details and obtaining the necessary approvals if a cost transfer is being requested outside of the 90 -day timeframe. 40 12. Routing the request to the dean and the Office of the Treasurer for approval and processing.

Roles and Responsibilities PROJECT ADMINISTRATIVE SUPPORT STAFF ARE RESPONSIBLE FOR: 1. Assisting the PI in reviewing proposed costs for consistency with the grant announcement and the Subpart E—Cost Principles. 2. Assisting the PI in reviewing actual sponsored project and cost share expenditures for compliance with the allowability requirements. 3. Serving as a resource for the PI in determining how costs should be budgeted and assigned to sponsored projects. 4. Supporting the PI in documenting “unlike circumstances” and transfer methodologies, and making purchases on sponsored projects. 5. Assisting the PI in reconciling sponsored project accounts on a regular basis and identifying when cost transfers are required. 6. Assisting the PI in completing the Journal Entry Request Form with appropriate documentation that explicitly states how the cost benefited the sponsored project being debited. 7. Assisting the PI in routing the request to the Dean and the Office of the Treasurer for approval and processing. 41

Roles and Responsibilities DEPARTMENT CHAIR/DEANS ARE RESPONSIBLE FOR: 1. Reviewing and approving the proposed budget (as part of the total grant proposal) in the e. Grants system. 2. Reviewing and approving Journal Entry Request Forms and requests for cost transfers outside of the 90 -day timeframe to ensure the justification is sound and to monitor cost transfer activity within the school. OFFICE OF ACADEMIC GRANTS AND SPONSORED RESEARCH (OAGSR) 1. Reviewing sponsored project budgets and ensuring charges are appropriately reflected as direct and indirect charges. 2. Assisting the PI in requesting prior approval for specific items of cost when required. 42

Roles and Responsibilities OFFICE OF THE TREASURER IS RESPONSIBLE FOR: 1. Reviewing requests for cost transfers to ensure that such transfers are compliant with the grant announcement and the Subpart E—Cost Principles of 2 CFR 200. 2. Establishing the unique Project ID and corresponding Account Codes for use by the PI in charging costs to sponsored projects. 3. Reviewing and approving purchase/grant employee hiring requests, including charging instructions, in accordance with sponsor requirements. 4. Serving as a resource for the PI regarding how incurred costs should be charged to sponsored projects. 5. Documenting transactions in compliance with this policy, and retaining documentation, justification, and back-up for transactions. 6. Collecting post-audit examples, where they exist, of documentation for “unlike circumstances” for direct charging typically indirect expenditures. 7. Reviewing Journal Entry Request Forms and relevant documentation to ensure that they are completed appropriately. 8. Verifying the debit project has available funding and budget for the transfer. 9. Ensuring all paperwork has been submitted and verifying all cost transfer approvals are in place. 10. Processing the journal entry to process the approved cost transfer in People. Soft. 11. Reviewing requests for cost transfers outside of the 90 -day timeframe for appropriateness and approving only those cost transfers that would be considered compliant in accordance with TCNJ policy and federal regulations. 43

5. 44 Practice Activities

Practice Activities ACTIVITY 1 • Conundrum: An organization uses a 6 -month effort payroll verification period. Dr. Patterson worked only the first month of the period on Federal Award A at 17%. At the end of the period, the effort report showed 17% incorrectly attributed to Federal Award B instead of Federal Award A. Professor Patterson makes the correction on the effort report to fix the error. The resulting cost transfer will be well over 90 days. • What is the optimal course of action? • • • 45 Payroll must be transferred off Federal Award B Institutional leadership must decide whether to allow a 90 -day exception to transfer expense to Federal Award A. There are no exceptions offered in federal policy, but some institutions allow late transfers on an exception-only basis. Although cost transfers and effort reporting is linked, effort reporting should generally not be the only instrument to drive salary cost transfers.

Practice Activities ACTIVITY 2 – COST TRANSFER REQUESTS Acceptable or Unacceptable Request Justification? Section 1 – Identification of Cost: Personnel Costs Non-Personnel Costs Please transfer the $100 charge for equipment. Section 2 – Justification for Transfer Specifically, explain why the expense(s) was not originally charged to the correct project. I incorrectly charged project F 1234 instead of F 1235. This was a data-keying error that I noted once the month closed and we reconciled our accounts. Section 3 – EXCEPTION – Late Cost Transfer Request Complete this section in the space provided only if you are requesting the transfer of expenses older than 90 days. Section 4 – Certification I certify that the above-mentioned costs are appropriate charges to the project and project to which the costs are being transferred. Dept Grants Admin 46 Example A: Acceptable Date 46

Practice Activities ACTIVITY 2 – COST TRANSFER REQUESTS Acceptable or Unacceptable Request Justification? Section 1 – Identification of Cost: Personnel Costs Non-Personnel Costs Section 2 – Justification for Transfer Specifically, explain why the expense(s) was not originally charged to the correct project. “Please process this transfer. I have not been able to get to it due to my other priorities. I’m so far behind! I have had no time to reconcile my account load. ” Section 3 – EXCEPTION – Late Cost Transfer Request Complete this section in the space provided only if you are requesting the transfer of expenses older than 90 days. Section 4 – Certification I certify that the above-mentioned costs are appropriate charges to the project and project to which the costs are being transferred. Dept Grants Admin 47 Example B: Unacceptable Date 47

Practice Activities ACTIVITY 2 – COST TRANSFER REQUESTS Acceptable or Unacceptable Request Justification? Section 1 – Identification of Cost: Personnel Costs Non-Personnel Costs Please transfer salary for John Doe for July from F 1235 to F 1236. His Authorization For Employment Form has been updated with the new project number to prevent future charges from occurring. The budget period for F 1235 ended June 30 and the next year of the project, F 1236, had not been set-up. In the future, we will request an advance account setup. Section 2 – Justification for Transfer Specifically, explain why the expense(s) was not originally charged to the correct project. Section 3 – EXCEPTION – Late Cost Transfer Request Complete this section in the space provided only if you are requesting the transfer of expenses older than 90 days. Section 4 – Certification I certify that the above-mentioned costs are appropriate charges to the project and project to which the costs are being transferred. Dept Grants Admin 48 Example C: Acceptable Date 48

Practice Activities ACTIVITY 2 – COST TRANSFER REQUESTS Acceptable or Unacceptable Request Justification? Section 1 – Identification of Cost: Personnel Costs Non-Personnel Costs Request of a salary transfers for eight individuals, to/from sponsored projects, some dating back over 16 months. Section 2 – Justification for Transfer Specifically, explain why the expense(s) was not originally charged to the correct project. “The main reason for this is that two of our accounts are out of money and salaries that were charged to those accounts must be moved. " Section 3 – EXCEPTION – Late Cost Transfer Request Complete this section in the space provided only if you are requesting the transfer of expenses older than 90 days. Section 4 – Certification I certify that the above-mentioned costs are appropriate charges to the project and project to which the costs are being transferred. Dept Grants Admin 49 Example D: Unacceptable Date 49

6. 50 Key Takeaways

Cost Principles UNIFORM GUIDANCE • The Uniform Guidance (and previous Circulars) establish principles for determining costs applicable to Federal grants, contracts, and other agreements. Term Definition Goods or services acquired and amount Reasonable involved reflect an action a prudent person would have taken. Allocable Benefits the project or award that was charged. Allowable Items not restricted by federal regulations or the specific grant/contract. Treated Consistently Like costs in similar circumstances need to be charged directly or indirectly at the institution. Costs that do not meet these standards should not be charged to a sponsored project. 51

Key Takeaways COST PRINCIPLES 1. Cost Principles apply to any costs charged to the a sponsored project including direct costs and F&A/ indirect costs on sponsored projects. 2. Costs must be reasonable - the goods or services acquired and amount involved reflect an action a prudent person would have taken. 3. Costs must be allocable - the costs benefits the project or award that was charged. 4. Costs must be allowable - items are not restricted by Federal regulations, institutional policy or the specific grant/contract. 5. Costs must be treated consistently - like costs in similar circumstances need to be charged directly or indirectly at the institution. 6. Know when prior approval should be received from sponsor before incurring a cost. 7. The institution is legally responsible to the sponsor, but the PI/PD is held accountable for the proper fiscal management and conduct of the project. 8. Direct costs are costs that can be charged to a specific award. Indirect Costs are costs that can be applied to multiple awards. 9. Costs most often scrutinized by Federal auditors are those typically classified as indirect – e. g. clerical/administrative costs, office supplies, computers/ software, memberships, and postage. 52

Key Takeaways COST TRANSFERS 1. A cost transfer is any cost that is first charged to one source (e. g. project, department, program) and later charged to another source. 2. Cost transfers are a focus area of auditors because a high volume of cost transfers suggest lack of proper award management. 3. Providing a complete documentation and justification for a cost transfer is important for auditors and risk mitigation. 4. Process cost transfers within 90 days after the month-end close of the original transaction. 53 53

Compliance Focus: Cost Principles MONITORING COMPLIANCE c Develop monitoring techniques to focus on high risk areas (target specific Expenditure/Account Codes) c - Consider central pre-review of certain costs based on dollar amount/Expenditure Type c c 54 Develop processes to determine and document c Transfer Methodologies in advance of purchases on multiple projects Develop audit processes to review Transfer c methodologies for reasonableness

Compliance Focus: Cost Transfers MONITORING COMPLIANCE c Ensure the propriety of Cost Transfers on federally funded projects is well documented c - Utilize standard Cost Transfer Forms for documentation c Incorporate adequate internal controls into the accounting system (technology and supporting policies c and procedures) - Link cost transfers directly to the original charge - Control for cost transfer data entry/posting/approval c 55 Put an appropriate review and authorization process is in place for cost transfers on sponsored projects (specifically federal projects)c - Institute central review and approval for late, high dollar and/or highrisk transfers - Incorporate investigators and department/division heads to emphasize the exceptional nature - Use post-audit sampling to retroactively review the full cost transfer

7. 56 Resources

Resources WHERE TO GET HELP 1. Reference updated policies and procedures on the OAGSR website (http: //academicgrants. tcnj. edu/) 2. Sign up for additional trainings 3. Review the Uniform Guidance Language (http: //www. ecfr. gov/cgi-bin/textidx? tpl=/ecfrbrowse/Title 02/2 cfr 200_main_02. tpl ) 4. Ask your colleagues 5. Contact OAGSR Green Hall, Room 202 P) 609. 771. 3255 E) grants@tcnj. edu 6. Contact the Office of the Treasurer Green Hall, Room 207 P) 609. 771. 2186 57

8. 58 Appendix

Introduction to the Uniform Guidance ORGANIZATION - SUBPARTS Subpart A Subpart B Subpart C Subpart D Subpart E Subpart F 59 • Acronyms and Definitions • General Provisions • Pre-Federal Award Requirements and Contents of Federal Awards • Post Federal Award Requirements • Cost Principles • Audit Requirements

Introduction to the Uniform Guidance ORGANIZATION - APPENDIX TO PART 200 60 Appendix I • Full Text of Notice of Funding Opportunity Appendix II • Contract Provisions for Non-Federal Entity Contracts Under Federal Awards Appendix III • Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) Appendix IV • Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations Appendix V • State/Local Government and Indian Tribe-Wide Central Service Cost Allocation (Transfer) Plans Appendix VIII Appendix IX • Public Assistance Cost Allocation (Transfer) Plans Appendix X • Data Collection Form (Form SF–SAC) Appendix XI • Compliance Supplement • States and Local Government and Indian Tribe Indirect Cost Proposals • Nonprofit Organizations Exempted From Subpart E— Cost Principles of Part 200 • Hospital Cost Principles

Overview of Uniform Guidance & Institutional Impact POST-AWARD REQUIREMENTS - COST SHARING Establishes positive cost sharing policy, which limits when cost sharing can be required as well as eliminates cost share as a factor during the review of an application. • 61 FINAL OMB UNIFORM GUIDANCE Cost sharing can only be required when clearly defined in the funding opportunity notice. • Voluntary committed cost sharing should not be used as a factor in the review of applications. • Voluntary committed cost sharing is prohibited for Federal project proposals except where otherwise required by statute. INSTITUTIONAL IMPACT AND IMPLICATIONS • Federally required institutional cost share will be limited. • Institutions will have additional regulations-based support to discourage voluntary cost share commitments.

Overview of Uniform Guidance & Institutional Impact POST-AWARD REQUIREMENTS - SUBCONTRACT MONITORING The prime awardee sets requirements and leads subcontract monitoring. • INSTITUTIONAL IMPACT AND IMPLICATIONS • 10% MTDC minimum rate facilitates collaboration with subrecipients. • • Pass-through entities must honor either a negotiated or minimum 10% of MTDC indirect cost rate for sub-recipients. • Subrecipient monitoring via the review of performance and financial reports is limited to what the pass-through entity • has deemed necessary to meet their own requirements under the Federal award. • 62 FINAL OMB UNIFORM GUIDANCE Subrecipient monitoring tools currently in the Compliance Supplement are integrated. Only when findings pertain to Federal award funds provided to the subrecipient by the pass-through entity does the pass -through entity have to follow up, ensure corrective action, and issue management decisions on weaknesses. Prime awardee institutions decide what is necessary for monitoring subrecipients, including the review of financial and programmatic reports, in order to meet their own obligations under Federal awards. Only when findings pertain to federal funds provided to sub-recipients, must the pass-through entity manage corrective actions.

Overview of Uniform Guidance & Institutional Impact POST-AWARD REQUIREMENTS – SUBCONTRACT / VENDOR CLARIFICATION Provides clarification between subrecipient and vendors and assigns responsibility for determination to mitigate disagreements with sponsor classification. FINAL OMB UNIFORM GUIDANCE INSTITUTIONAL IMPACT AND IMPLICATIONS 63 • The agreement characteristics • necessary to determine subrecipients vs. vendors on Federal awards are clarified. • Responsibility for making this determination is assigned to the passthrough entity. Clarification should help mitigate agency retrospective disagreement of determination.

Overview of Uniform Guidance & Institutional COST PRINCIPLES - TIME & EFFORT (T&E) Impact As long as institutions comply with general principles of T&E, they can apply unique practices of maintenance, which will lessen the administrative. INSTITUTIONAL burden. FINAL OMB UNIFORM GUIDANCE IMPACT AND IMPLICATIONS 64 • Non-Federal entities are required to maintain high standards for internal controls over salaries and wages but are provided additional flexibility on how to implement processes to meet those standards. • The general principles of time and effort still apply, but all institution types have the ability to implement independent practices for verifying payroll as long as they follow the Federal guidelines. • Reporting requirements are consolidated across entities and specific methodologies for IHEs are eliminated. • The complex language and example methods have been eliminated. • Different allowable and unallowable compensation activities are defined and include special considerations for different types of non-Federal entities.

Overview of Uniform Guidance & Institutional Impact COST PRINCIPLES - PROCUREMENT Institutions will have additional procurement standards such as required competition and equipment screening requirements. • • FINAL OMB UNIFORM GUIDANCE INSTITUTIONAL IMPACT AND IMPLICATIONS A “bearclaw” of procurement method • The cost or price analysis threshold, set requirements is outlined. in accordance with the simplified acquisition threshold, will streamline The threshold for small purchase institutional procurement processes. procedures is raised to $150, 000 to be consistent with the simplified acquisition threshold in the Federal Acquisition Regulation (FAR). • 65 • Non-Federal entities are required to avoid duplicative purchases and • encouraged to enter into agreements for shared goods and services. • All A-110 language on procurement is replaced by A-102 section. 36. • Minor clarification to language requires non-Federal entities to maintain “oversight” rather than a “system” that ensures contractor performance. However, other actions will require additional administration in procurement areas, such as inter-entity agreements for shared services. Institutional P-Card policies, especially for purchases over $3, 000 may be in conflict with Federal requirements.

Cost Principles COST ACCOUNTING STANDARDS • The Cost Accounting Standards (CAS) were established to promote consistency and prevent “double dipping” of costs as direct and indirect on federal grants. • The four Cost Accounting Standards include the following: 401/501: Consistency in Estimating, Accumulating and Reporting Costs 66 • An institution’s practices for estimating costs in pricing a proposal must be consistent with the practices used in accumulating and reporting costs • An institution’s cost accounting practices to accumulate and report actual costs for sponsored projects must be consistent with practices used to estimate costs in pricing the proposal or application 402/502: Consistency in Allocating Costs Incurred for the Same Purpose • All costs incurred for the same purpose, in like circumstances, must be treated as either direct costs only or F&A costs only with respect to final cost objectives 405/505: Accounting for Unallowable Costs • Unallowable costs must be identified and excluded from any billing, claim, application, or proposal applicable to a sponsored agreement 406/506: Consistency in Using the Same Cost Accounting Period • Institutions and organizations must use their fiscal year as the cost accounting period

Cost Principles UNIFORM GUIDANCE - REASONABLE • A cost is reasonable if: • The nature of the goods or services acquired or applied, and the amount involved therefore, reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made. Major Considerations to Determine Reasonable Costs • Is the cost of a type generally recognized as necessary for the operation of the institution or the performance of the sponsored agreement? • Whether or not individuals concerned acted with due prudence under the circumstances. • The extent to which the actions are consistent with established institutional policies and practices, including sponsored agreements. 67

Cost Principles UNIFORM GUIDANCE - ALLOCABLE • A cost is allocable if: • The goods or services involved are chargeable or assignable to such cost objectives in accordance with relative benefits received • Incurred for the benefit of only one project or can be readily assigned to multiple projects which benefit from cost Major Considerations to Determine Allocable Costs • It is incurred solely to advance the work under the sponsored award? • It benefits both the sponsored award and other work of the institution? • It is necessary to the overall operation of the recipient institution? 68

Cost Principles UNIFORM GUIDANCE - ALLOCABLE Additional considerations for determining allocability of sponsored project costs include: Costs must be assigned to a project in proportion to the benefit received. Costs allocable to a project may not be shifted to another project to eliminate deficits or other reasons of convenience. If a cost benefits two or more projects or activities in proportions that can be determined, the cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, the costs may be allocated or transferred to benefited projects on any reasonable basis. 69

Cost Principles UNIFORM GUIDANCE - ALLOWABLE • A cost is allowable if: • It conforms to any limitations or exclusions set forth in the regulations that govern the award (Uniform Guidance, institution or system policies, etc. ) or specific terms within the sponsored award Major Considerations to Determine Allowable Costs • Is the cost allowed on the sponsor project per institutional and award agency regulations? • Are there special award terms and conditions that apply? 70

Cost Principles UNIFORM GUIDANCE – CONSISTENT TREATMENT • A cost is treated consistently if: • Costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only with respect to final cost objectives. • This assures that the same types of costs are not charged to awards both as direct costs AND as F&A costs Major Considerations to Determine Consistent Treatment • Is it treated consistently in estimating, accumulating and reporting costs? • Is it treated consistently (across the institution) as either a direct cost or a F&A (indirect) cost? CONSISTENT VS. circumstances? INDIRECT) • Are there(DIRECT any unlike So what is a direct cost or an indirect cost anyway? 71

Cost Principles THE CHALLENGE OF ADMINISTRATION COSTS What costs are most scrutinized by federal auditors? • Clerical and Administrative Costs • Office Supplies • Why Computers Softwareto is it aand problem • charge Memberships these costs • Postage directly to sponsored programs? 72 • Each of these cost categories are included in the Departmental Administration component of institutions’ F&A Rates (generally in large amounts) • Auditors recognize that economic factors may preclude doing the right thing • In all but “exceptional circumstances”, these costs benefit multiple activities, and therefore meet the definition of

Cost Transfers FEDERAL REQUIREMENTS The Government expects documentation and an authorization process for all cost transfers on Federally assisted projects 73 The Federal Government questions the propriety of cost transfers on Federally funded projects Cost Transfers can cast doubt on a grantee’s accounting system and internal controls • The HHS Grants Policy Statement states: • “Permissible cost transfers should be made promptly after the error occurs but no later than 90 days following occurrence unless a longer period is approved in advance by the GMO. • The transfer must be supported by documentation, pursuant to 45 CFR 74. 53 or 92. 42, that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible official of the recipient, subrecipient, or contractor. • An explanation merely stating that the transfer was made “to correct error” or “to transfer to correct project” is not sufficient. • This information need not be submitted to the GMO but is subject to audit. If the transfer affects a previously submitted FSR, a revised FSR must be submitted”