Allowable Cost and Purchasing
- Allowable,Reasonable, Allocable Costs
- Authorizing Expeditures
- Salary Authorizations, Procurement, Subawards, and Faculty Compensation
- Contracts for Services
- Travel, Procard Purchases
Financial Post-Award Administration
Awards are issued to the University with the Principal Investigator (PI) as the responsible individual. The PI is responsible not only for the technical completion of the project but for fiscal management as well. The PI is responsible for ensuring that only allowable costs are charged to projects. To be allowable, costs must be a necessary cost incurred for the direct benefit of the project. In addition, the federal government has determined that certain costs can only be recovered through the indirect cost recovery. That means those costs are included in the calculation of the indirect cost rate rather than direct charged to projects. See the UMass Dartmouth Policy on Direct and Facilities and Administrative costs.
The ORA will send periodic reports identifying those expenditures not typically allowed as direct expenditures on sponsored projects to the PI. The PI will be asked to review and justify the exceptional reason why these costs should be allowed. Any cost not approved by ORA will have to be transferred to an unrestricted account of the PI.
The PI is responsible for assigning allowable costs to projects. The PI or designee should monitor expenditures to the approved budget on an ongoing basis. The budget approved by the sponsor will be the basis for the budgets in PeopleSoft. Deviations from the approved budget should be discussed with ORA staff prior to incurring expenditures to avoid unallowable expenditures. While many of the federal agencies have given prior approval to UMD for rebudgeting purposes, there are some circumstances in which the sponsor must be contacted for approval. Other sponsors, including some state agencies, require sponsor approval for all rebudgets. In cases where sponsor approval is required, ORA will submit the request to the sponsor. Expenditures should be monitored to avoid overdrafts as well. Account balances can be viewed through PeopleSoft reports and online. Any questions should be directed to ORA staff.
The Uniform Grant Guidance 2 CFR 200 also sets forth requirements under which a cost is considered allowable to be direct charged to a federal project. The cost principles in the Uniform Grant Guidance 2 CFR 200 require a cost to be reasonable, allocable, consistently treated as a direct or indirect cost and conform to any limitations or exclusions set forth in the Uniform Grant Guidance 2 CFR 200 or in the sponsored agreement.
Per the Uniform Grant Guidance 2 CFR 200 a cost is considered reasonable if the nature of the goods or services acquired or applied and the amount involved reflects the actions a prudent person would have taken under the circumstances at the time of the purchase.
Major considerations involved in determining reasonableness are:
- Is the cost of a type generally recognized as necessary for the operation of the institution or the performance of the sponsored project?
- Have the restraints or requirements imposed by such factors as arm's length bargaining, Federal, state laws and regulations and the specific terms and conditions of the sponsored agreement been met?
- Did the individuals making the decision act with due prudence in the circumstances' considering their responsibilities to the institution, its employees, its students, the Federal government and the public at large?
- Were the actions taken with respect to incurring the costs consistent with established institutional policies and practices applicable to the work of the institution, including sponsored projects?
The Uniform Grant Guidance 2 CFR 200 states a cost is allocatable to a particular cost objective (a specific function, project, sponsored agreement, etc.) if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received or other equitable relationship. There must be a direct benefit to the project from the cost incurred. The Uniform Grant Guidance 2 CFR 200 provides that a cost is allocatable to a project if one of the following conditions is met.
- The cost is incurred solely to advance the work under the sponsored agreement.
- The cost benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.
- It is necessary to the overall operation of the institution and, in light of the principles provided in the Uniform Grant Guidance 2 CFR 200 is deemed to be assignable in part to sponsored projects.
If a cost benefits two or more projects in proportions that can be determined without undue effort or costs, the cost should be allocated to the projects on the proportional benefit. If a cost benefits two or more projects or activities that cannot be determined because of the interrelationship of the work involved, then the cost may be allocated or transferred to benefited projects on any reasonable basis consistent with the cost principles. Common acceptable reasonable methods of allocating common use items include proportional benefit, FTE's on each award, based on the non salary budgets in each award, number of experiments or tests. If a reasonable method cannot ultimately be determined the costs may be charged to one project. In addition, supporting documentation explaining the allocation is required for all costs allocations that benefit more than one project whether charged to multiple projects or one project.
- Allocation methods must be consistent and take into account all relative projects benefiting from the costs. For example if a PI has 3 projects using test tubes for which the cost is being allocated the same method should be used to allocate the costs to all 3 projects.
- The allocation method must be identified in advance of incurring the costs and documented in an easily understood way. This documentation must be maintained by the PI and provided to ORA, other administrative offices, auditors and others as requested.
- Rotating costs through projects is not acceptable nor is using up the remaining funds in an award budget.
- Having the cost in the approved budget does not alleviate the requirements listed above.
The PI is responsible for initiating expenditures on sponsored projects and is the authorized signatory on project expenditures. If this authority is delegated to another individual, the PI remains responsible for expenditures charged to sponsored projects. All expenditures must be processed following UMD policies and procedures.
Salaries charged to sponsored projects must be allocable as described in the above section on allocable costs. The salaries to be charged to the project must be based on the individual’s base salary and reflect the percentage of effort expected to be devoted to the project during the period of pay. The PI is responsible for preparing the paperwork required to hire an individual and to record the salary to the correct account. The PI and department chair original signature must be on new hire and change in compensation forms. The PI original signature is required on all other payroll change forms. Employees must be working on the project from which their salary is paid in proportion to the salary distribution. A payroll change must be processed if an employee's effort changes. Payroll account code changes should be processed as soon as possible once an individual begins to work on another project. See the section below on Cost transfers for additional information. All effort charged to a sponsored project must be certified. See section on Effort Reporting. The ORA approves all salary charged to sponsored projects prior to processing in payroll.
Faculty Additional Compensation on Grants
Federal cost accounting principles do not allow faculty to receive additional compensation during the academic year or period of appointment except under strict exceptions. Faculty are allowed to earn additional compensation during the summer months at a rate not to exceed 2.5 months of their academic year base salary. Additional compensation in excess of 2.5 months requires approval by the Provost, the Associate Provost for Research and Economic Development, and/or the Office of Research Administration. Because work charged to a specific sponsored project must be specifically related to meeting the project’s goals and objectives during the summer the University limits summer salary on grants to 95% of three months base salary. This allows the PI and other faculty to have time for other activities such as proposal preparation. The NSF further limits faculty salary charged to grants to two months during the year un less specifically requested and allowed in the grant. Faculty with a twelve month appointment are not eligible.
Additional compensation forms are sent to ORA for review. Review includes eligibility for additional compensation, including type of appointment, dollar and effort limitations.
Participant Support Costs
Participant Support costs are direct costs incurred for items such as stipends or subsistence allowances, travel allowances and fees paid on behalf of participants or trainees (but not employees) in connection with meetings, conferences or symposia or training projects. The NSF and some other federal agencies limit rebudgeting from participant costs to other budgetary lines without prior approval.
The PI or Project Director is responsible for ensuring that participant costs charged are allowable per the above guidelines. Participant support purchase requisitions approved by ORA should be supported by the number and names of participants. All participants are required to sign an attendance sheet at meetings, conferences, etc. This list is to be used to support the actual invoice payment. If the actual number of participants listed on the requisition changes the invoice must be adjusted
accordingly. The final list of attendees must be submitted to ORA.
Purchases made via purchase order are processed through the PeopleSoft online system. The ORA should be contacted if budget errors are encountered. Purchases made via procard should be reallocated to the correct account code on a monthly basis. All vendors must be approved vendors. University procedures must be followed if there is a need for a specific vendor or service provider, sole source justification must be provided to the purchasing department. The chain of approvals for Purchase orders includes the PI and ORA.
Subrecipients must be approved in the proposal budget and award. If the need for a subaward is determined after proposal submission and receipt of the award, the sponsor must be notified and usually must approve the subaward. The ORA is responsible for negotiating the subaward with the subrecipient and ensuring all sponsor requirements are adhered to. Once a subaward has been approved, the purchase order can be entered into PeopleSoft by the department. Invoices are reviewed by ORA for adherence to the contract terms and conditions. The PI reviews the invoice for payment to ensure percent work completed is in line with the reimbursement request. Final payments should not be approved until the final technical report has been received and approved.
Subrecipient Monitoring Procedures
Contracts for Services must also be included in the original proposal and budget. These agreements are processed through the purchasing department and must conform to University purchasing requirements. All services $5,000 or more require a contract for services. ORA approves the requisition once it has been entered into PeopleSoft. The budget in the project account must be adequate to support the contract in order for ORA to approve.
Travel authorizations and expense reports are approved by ORA. Correct identification of the project to be charged should be done on the authorization.Changes on the expense report from the authorization in projects or to a project from an unrestricted account will require documentation as will any changes in purpose from the authorization to the expense report. Travel as with all expenses charged to a project must be related to the project.
Fly America Act
The Fly America Act enacted in 1974 mandates the use of U.S. flag carrier aircraft on all travel funded by federal dollars, including travel supported by federally funded grants and contracts.
The federal travel regulations can be found at: www.ewatravel.com
The act was amended to allow foreign air travel when code sharing is present. Under a code share agreement the U.S. airline puts its code on the flights of foreign airline. Tickets under code share agreements must be purchased from the U.S. carrier.
The act allows for exceptions and the use of foreign carriers in certain circumstances. For example if U.S. flag carriers are not reasonably available to avoid undue delays or if a U.S airliner is not available on particular legs of a journey or medical reasons. To document and determine if an exception applies please complete the Fly America Checklist and return to ORA.
To review the Fly America Act Waiver Checklist.
ProCard purchases should be made only for allowable expenditures on a project. These purchases are not approved by ORA at the time of purchase. ORA does review expenditures periodically and during closeout for allowability. Federal guidelines for charging office expenses and other indirect costs should be carefully considered prior to purchase. Consult ORA with any questions prior to purchase. Any purchases deemed unallowable will be transferred to an unrestricted account of the PI.
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