Overview of Accounting for Sponsored Projects

1. Overview of Accounting for Sponsored Projects Date Presenter Name Presenter Phone Number Presenter E-mail

2. What are sponsored projects? • Governmental agencies & private companies give $ to UT to perform technical projects and produce a deliverable • Our professors are in demand due to their expertise in their field • Some have international reputations

3. Importance ofsponsored projects • UT’s mission is instruction, research, public service • External funding pays for research work that our faculty members are interested in pursuing • Active researchers make better teachers • Pays for high-tech equipment & buildings • Attracts quality graduate students who want to work with highly-regarded faculty • Spin-off companies improve state & local economy • Boosts UT’s image / reputation / national rankings

4. How much $ is involved? • FY 2004 $315,197,533 • FY 2005 $336,364,661 • FY 2006 $339,450,751 • FY 2007 $337,004,722

5. Who is involved? Technical work Administrative & support staff External to UT

6. Support staff goal • Provide superior service to the PI so that he / she can devote maximum time to technical aspects of project & teaching students • Exceed sponsors’ expectations for fiscal responsibility & administrative performance • Promotes reputation of PI and UT • Sponsors will want to give us more money

7. PI responsibilities • The PI is responsible for all aspects of the sponsored project – his reputation is on the line • Technical • Financial • Administrative

8. PI technical responsibilities • Ensure that all technical reports / deliverables are of high quality and are submitted by sponsor deadlines • Ensure that subcontractors are performing technical tasks adequately

9. PI financial responsibilities • Ensure that all charges are reasonable, allowable, allocable, and correctly classified as direct versus F&A • Ensure that all charges post to the correct sponsored project in a timely manner – initiate Advance WBS Element, if necessary • Ensure that the budget is followed • Ensure that any sponsor-required prior approvals are obtained • Budget changes, equipment purchases, travel • Ensure that subcontractor invoices are reasonable based upon the technical work performed and are allocable, allowable and correctly classified as direct versus F&A • Don’t approve payout invoices until satisfied with technical performance

10. PI administrative responsibilities • Ensure that support staff are performing tasks adequately • Ensure that support staff are given required information in a timely manner • Ensure that all applicable Federal, sponsor and UT rules & regulations are followed • Ensure that award amendments are requested in a timely manner

11. Department Head responsibilities • The Department Head is responsible for ensuring that the PI and support staff perform their jobs in an adequate, timely, and compliant manner. • Technical • Financial • Administrative

12. Department Headtechnical responsibilities • Ensure that scope of work advances UT’s mission and the goals of the academic unit

13. Department Headfinancial responsibilities • Ensure that all charges are reasonable, allowable, allocable, and correctly classified as direct versus F&A • Ensure that all charges post to the correct sponsored project in a timely manner • Approve PI starting work before signed award document is received? • Approve Advance WBS Element, if necessary? • Pay for any charges not collected from sponsors • Including overruns, disallowances, cost sharing, uncollected or disputed sponsor invoices

14. Department Head administrative responsibilities • Ensure space exists to perform project work • Ensure that support staff are performing tasks adequately and are adequately trained • Ensure that processes and culture are present that promote financial compliance • Ensure that all applicable Federal, sponsor, and UT rules & regulations are followed

15. Dept accounting staff responsibilities • Same as for the PI, plus: • Process accounting transactions • Monthly account reconciliation • Provide PI and Department Head with adequate financial information to manage project • Solve problems • Liaison between PI and everyone else • Assist PI in compliance with regulations • Closeout in a timely manner

16. Campus / unit business office responsibilities • Set up project in IRIS • Work with PI, department accounting staff & research office to get WBS Element opened as quickly as possible • Periodic financial reporting • Periodic invoicing / cash receipts performed to maximize UT’s cash flow • Assist department accounting staff & PI with regulation compliance • Closeout in a timely manner

17. Campus / unit research office financial responsibilities • Review proposals and budgets for accuracy and financial compliance • Flow through financial rules to subcontractors • Help the PI, department accounting staff & business office get WBS Element opened as quickly as possible • Get fully executed award documents from sponsor ASAP so that invoicing can begin which maximizes UT’s cash flow • Maximize F&A recovery • Negotiate / disallow detrimental financial terms & conditions • Inconsistent costing, such as hourly rates versus % of effort • Unreasonable reporting deadlines • Non-standard invoicing and reporting forms • Backup documentation for expenditures

18. Sponsored project life cycle

19. Proposals • Proposal document prepared by PI • Includes statement of work • Includes budget & budget justification narrative • Includes known subcontractors • Submitted to the campus / unit research office • Routing / approval sheet signed by administrators • Including cost sharing and space • Research office reviews total document • Proposal submitted on behalf of the University

20. Awards • A successful proposal results in an award document between the sponsor and UT • Grant • Cooperative agreement • Contract, purchase order • Standard information included in award document • Start & end dates, award amount, budget, statement of work • Different award types have progressive levels of • Sponsor control & restrictions • Reporting requirements

21. Federal grants • “For the public good” • One or two page grant document • May not require UT to sign • Usually incorporates agency grant policies • Guide usually located on their web site

22. Flow-through awards • An award where the prime funding sponsor awards money to an awardee and the awardee awards part of the money to a sub-awardee • Example: NASA gives Vanderbilt a grant for $1 million & Vanderbilt sub-grants $100,000 to UT • UT’s sponsor is Vanderbilt, a private entity, because that is who our award agreement is with; however, it is Federal flow-through funding because we know that the prime sponsor is NASA • Same compliance requirements as direct Federal award

23. Restricted WBS Element • Restricted WBS Elements are cost collectors in IRIS • UT must spend the $ in accordance with the sponsor’s specifications • UT must maintain separate accounting of each project’s financial activity • Established by the campus / unit business office at the request of the department or upon receipt of an award document from the campus / unit research office

24. Advance WBS Element • A restricted WBS Element can be established before the executed award document is received • PI wants to start working on the project • If costs will be incurred, then where will they post? • Never to another sponsored project WBS Element!!! • Department evaluates likelihood of award and authorized PI to start work without an executed award agreement • Submits signed form to the campus / unit business office • http://admin.tennessee.edu/uwa/to/co/pdf/WBS.PDF • Risks? See next slide.

25. Risks? • Factors affecting risk of setting up an advanced WBS Element • Government or private sponsor? • Good and reliable past relationship with sponsor? • Competitive or non-competitive proposal? • Intent to award provided verbally or in writing? • Have we already started working?

26. Restricted WBSElement setup • Required information • Signed Advance WBS Element request form or fully-executed award document • COEUS proposal # (for Knoxville) • Budget in IRIS • Delays can occur • Department must monitor new account setup progress • If award amount differs from proposed amount, then department must submit revised budget to campus / unit research office or business office ASAP

27. Timeline for setup • Restricted WBS Elements need to be established in a timely manner • Ideally, before the project start date • Provide adequate time for department to assign recurring costs • Payroll PIF’s, service centers, etc. • In reality, we are not always timely • Causes more work for everyone • Sponsors & auditors not happy

28. Sponsored projects in IRIS • Master data in various IRIS modules • Project Systems module has most master data • Funds Mgmt module has some master data & budget • Sales & Distribution module has invoicing master data • Accounts Receivable module has invoicing & collection activity • You should review this information and make sure that it agrees with your award document • If not, call campus / unit business office • Errors can radically affect your project!

29. IRIS transactions • CJ20N contains many attributes • Dates, obligated award amount, F&A, cost sharing, PI, invoicing, function, sponsor, project profile, project type, etc. • Learn what all of these represent • Field names aren’t always descriptive • Read Business Process Procedure (BPP) on IRIS web site for definitions

30. Accounting structure • CJ20N work breakdown structure • Project definition • Header only, not a chargeable object • WBS elements • Chargeable objects with many attributes • Different levels & flexibility • Link to funds centers • Can cross organizational lines

31. Required structure • Award document requirements • New award document number from sponsor always requires a new Project Definition & WBS Element • Different F&A rates within one award • This always requires separate WBS Element for those charges that are treated differently for F&A computation • Example – Department of Education - participant support costs

32. Optional structure • Divide project for mgmt purposes • By technical phases of work • For different sub- or co-PI’s within UT • WBS Element linked to their funds center • They have spending control • They have accounting ledger access • You can see other IRIS accounting reports, not ledger • They get F&A recovery and research “credit” • Department must request new WBS Element • Campus / unit business office has no other way of knowing that they are needed

33. Complex structure Funds Center U013410024 Funds Center U073415055 Project Definition R011024009 WBS Element R011024009 (lead PI) WBS Element R074215115 (co-PI)

34. Charges to projects • Charges must be in compliance with the rules & regulations applicable to UT • OMB Circular A-21 and A-110 • UT Fiscal Policy • Sponsor policy manuals • Award document clauses • Responsibility of PI and department • Consequences of incorrect charges

35. Direct costs Salaries, staff benefits, supplies, long-distance phone calls, travel, equipment, subcontracts Exception to “basic support” costs Due to nature of project technical work F&A costs Facilities costs Bldgs, equip, electricity, library Admin costs “Basic support” costs Clerical & admin salaries, phone line charges, office supplies Types of charges

36. What are F&A costs? • Facilities & Administrative costs • Federally-approved rate applied to a specified cost base • Modified Total Direct Costs (MTDC) base • Salaries & Wages (S&W) base • Matrix of rates in effect • Campus, function, location, award year • Same rate for life of project (A-21 requirement) • Reimbursement for expenses already paid by UT to support research • These are real costs!

37. Facilities Buildings Sidewalks Electricity / fuel Equipment Library Security Custodial Administrative Department clerical & admin staff salaries Research & business offices Basic office supplies & expenses Portion of other admin costs – Dept Head, Dean, system charge, etc. Expenses included in F&A

38. F&A cost sharing • Must be negotiated & approved in advance by campus / unit research office • A portion of collected F&A is returned to college / unit that generated it • Financial activity • F&A is charged to WBS Element at full, audited rate during month-end closing using cost element 501000 • F&A cost sharing is credited during month-end closing using cost element 501990 in an amount sufficient so that the net F&A charge is equal to the amount or % allowed by the sponsor

39. Transfers of costs • Cost transfers should only be to correct errors • Subject to sponsor, Federal, State and internal audit disapproval • Excessive or late transfers • Cost transfers that do not document how target project benefited from the charge • New fiscal policy includes time limits and documentation requirements – similar to other universities

40. Ledger summary Remember that cumulative actual expenditures and budget variance for uses of funds includes F&A ! Obligated amount and budget for total uses of funds should match! Budget should equal zero!

41. Training classes • 1 Overview of Accounting for Sponsored Projects • 2 OMB Circulars & Cost Accounting Standards • 3 Understanding F&A Costs • 4 Direct Costing • 5 Cost Transfers & Closeout • 6 Cost Sharing • 7 Subcontract Monitoring • 8 Advanced Topics • 9 Invoicing, Reporting & Cash Receipts • 10 Sponsored Projects Reports in IRIS • Other – IRIS reporting for sponsored projects