COST ACCOUNTING STANDARDS

1. COST ACCOUNTING STANDARDS Office of Sponsored Projects Administration

2. OMB CIRCULAR A-21 • Issued 1979 • Defines Allowable Direct & Indirect Costs • May 1996 revision incorporated Four Cost Accounting Standards and • Required Disclosure Statement (DS-2) - a roadmap of our policies Research - Office of Sponsored Projects Administration

3. CAS Applied to Universities • CAS 501 – Consistency in Estimating, Accumulating and Reporting Costs • CAS 502 – Consistency in Allocating Costs for the Same Purpose • CAS 505 – Accounting for Unallowable Costs • CAS 506 – Cost Accounting Period Research - Office of Sponsored Projects Administration

4. A-21 Allowable Cost • Reasonable • Allocable • Consistently treated per A-21 • Conform to limits in A-21 or specific award Research - Office of Sponsored Projects Administration

5. Reasonable • Prudent person • Necessary expense • Restraints of arms-length bargaining • Consistent with institutional policy and procedure Research - Office of Sponsored Projects Administration

6. Allocable • Charged in relation to the benefit • And by the way, you can’t shift the cost around Research - Office of Sponsored Projects Administration

7. CAS 505 - Accounting for Unallowable Costs Unallowable costs must be identified and excluded from any billing, claim, application or proposal. Research - Office of Sponsored Projects Administration

8. CAS 501- Consistency in Estimating, Accumulating and Reporting Costs • Practices used to estimate costs in a proposal should be the same as the way we charge and report • Level of detail can be different, but should be able to make “sufficient and meaningful comparison” Research - Office of Sponsored Projects Administration

9. CAS 501 – Consistency in… • Classifying as Direct vs Indirect • Placing an item in an Indirect pool • Methods of allocating indirect to sponsored agreements Research - Office of Sponsored Projects Administration

10. Direct Costs Costs that can be identified specifically with a particular sponsored project, an instructional activity or any other institutional activity or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Research - Office of Sponsored Projects Administration

11. Indirect Costs Costs incurred for common or joint objectives and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity or any other institutional activity. Also called “Facilities & Administrative” costs Research - Office of Sponsored Projects Administration

12. DIRECT Salaries of PI, technician, research assistant Scientific equipment Animal care Duplicating Lab supplies Subcontracts Travel INDIRECT Salaries of secretary, dept. administrator General purpose equipment Postage Basic telephone Office supplies Expenses of SPA, OSPA, Purchasing Examples of Direct and Indirect Costs Research - Office of Sponsored Projects Administration

13. CAS 502 - Consistency in Allocating Costs Incurred for the Same Purpose Each type of cost may be allocated only once However… All costs incurred for the same purpose, in like circumstances, are either direct only or indirect costs only… Research - Office of Sponsored Projects Administration

14. DS - 2 • Sets forth our accounting practices to distinguish direct vs indirect And • If a cost is sometimes direct and sometimes indirect, spell out specific criteria and circumstances Research - Office of Sponsored Projects Administration

15. Examples of projects which could be considered special purpose or circumstance: • Industry sponsored projects • State sponsored projects • Training grants • Geographically inaccessible projects • Large, complex projects See section 3.2 of policy for complete list Research - Office of Sponsored Projects Administration

16. Criteria for Direct Charging Normally Indirect Cost to a Project The item of cost must be: • Identified specifically with the project with a high degree of accuracy • Incurred for a special purpose as described in UK Costing Policy • Explicitly budgeted, justified in proposal, and awarded Research - Office of Sponsored Projects Administration

17. Criteria, continued... • Federal projects have an additional requirement : the Budget Justification must state that the cost is normally treated as indirect by the University; it is requested due to a different or special circumstance; and the circumstance is explained. Research - Office of Sponsored Projects Administration

18. Procedures Proposal Budget • PI/department prepares budget • Draft budget to OSPA for review • PI and OSPA discuss changes to budget • Internal Approval Form completed & signed Research - Office of Sponsored Projects Administration

19. Procedures Awarded Account • Approved indirect items budgeted in specific object codes • Monthly report of federal funds with indirect object codes not approved • Remove by IDIV • Correct object code by IDIV • Justify as special purpose Research - Office of Sponsored Projects Administration

20. Cost Sharing and CAS • Treat a cost consistently as direct or indirect • Accumulate all costs consistently and only once Research - Office of Sponsored Projects Administration

21. Cost Sharing Use of institutional funds to supplement project costs not borne by the sponsoring agency. Either required by sponsor, to voluntarily reflect University financial support, or when award is less than proposal. Research - Office of Sponsored Projects Administration

22. Reasons to minimize cost sharing • Increased administrative burden - ALL cost sharing on ALL sponsored projects must be documented • Increase in cost sharing causes decrease in indirect cost rate • Depreciation on cost shared equipment may NOT contribute to indirect rate Research - Office of Sponsored Projects Administration

23. Sources of Cost Sharing • University funds • Unfunded or waived indirect cost • Another sponsored project (requires approval of both sponsors and is rare) • Third parties (non-University sources) Research - Office of Sponsored Projects Administration

24. Criteria for Cost Sharing Expenditures • Verifiable in accounting records • Each expenditure used only once • Necessary and reasonable expense • Allowable as a direct cost • Itemized in budget (if required by sponsor) • Incurred during effective dates of sponsored agreement Research - Office of Sponsored Projects Administration

25. Documenting Cost Sharing 1. Separate Ledger 3 Cost Sharing Account 2. Faculty Effort System (FES) 3. Cost Sharing Certification Report Form Research - Office of Sponsored Projects Administration