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Allocating Charges

Allocating Charges. Taken from: The Feb 2006 NCURA (National Council of University Research Administrators) Newsletter Article written by: Robert J. Kenney, Jr., Director, Grants & Contracts Practice Hogan & Hartson LLP, Washington D.C. .

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Allocating Charges

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  1. Allocating Charges Taken from: The Feb 2006 NCURA (National Council of University Research Administrators) Newsletter Article written by: Robert J. Kenney, Jr., Director, Grants & Contracts Practice Hogan & Hartson LLP, Washington D.C.

  2. High Risk Areas As identified by Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) • Time and effort reporting • Proper allocation of charges to federal awards • Reporting of financial support from other sources

  3. Our Goal is to Reduce RiskGuide to Basic Principles OMB Circular A-21 • Reasonably necessary to perform project • Not specifically prohibited by A-21 • Consistent with treatment of like charges • Allocable to that award

  4. Allocable If . . . “Relative benefits received” or “Equitable relationship” Section C.4.a of Circular A-21

  5. Three Types of Circumstances • “It is incurred solely to advance the work under the sponsored agreement. • It 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 this Circular, is deemed to be assignable in part to sponsored projects.” Section C.4.a of circular A-21

  6. Sources of Risk • Allocating Directly to the Wrong Project • Incorrect Allocation Among Multiple Projects • Inconsistent Allocation Methods • ‘Banking’ or ‘Trading’ Costs • Advance Charging of Costs • Abusive Cost Transfers • Direct Charging of Normally Indirect (F&A) Costs

  7. Allocating Directly to the Wrong Project • Charge has nothing to do with the project • Error • Accident • Misunderstanding • Fraud • Mischarges appear to be deliberate • Part of a pattern

  8. Incorrect Allocation Among Multiple Projects • Guidelines for Charging to Multiples • Based on proportional benefit • If able to determine “without undue effort or cost” • Reasonableness

  9. Inconsistent Allocation Methods • Federal, State, Foundation, Business & Industry sponsored as well as non-sponsored accounts should be charged the same for the same costs of goods and services

  10. ‘Banking’ or ‘Trading’ Costs • Banking Costs or Trading Costs • One account is substituted for another when one is short of funds • Grant A covers costs for Grant B • Grant B “pays back” Grant A when funds for the new year come in This practice is specifically forbidden in Circular A-21

  11. Advance Charging of Costs • Costs should be charged as they occur • Costs that will occur in the next budget year should not be charged in the current year regardless of balances or the ability to carry-forward funds

  12. Abusive Cost Transfers • Misallocation of funds by transfer • Trading costs • Charging costs in advance • Charging costs to another project which has or will have extra funds • Charging costs which are unrelated to the project

  13. Direct Charging of Normally Indirect (F&A) Costs • Costs identified as indirect costs (F&A) • Clerical personnel • Recurring telephone costs • Costs for office supplies, copies, etc. • Certain allowable exceptions • Double-billing

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