WHAT IS OMB?

1. WHAT IS OMB? No, not OMG!!

2. OMB = Office of Management and Budget • The director is a cabinet level position under the President of the United States • Was initially established as Bureau of the Budget as part of the U.S. Department of Treasury • Became OMB under the Nixon Administration in 1970

3. Why do we care? • Assists President in overseeing and preparing the federal budget. • UTD receives funds from a federal agency whose program, policy and procedure effectiveness is evaluated by OMB. • So, the agency promulgates procedures and processes to make sure funds being granted are spent in accordance with public trust.

5. What are the Regulations? • OMB Circular A-21: Cost Principals for Educational Institutions – establishes principles for determining costs that are allowable, allocable and reasonable for grants, contracts and other agreements between the federal government and an educational institution.

6. DEFINITONS Allowable - As a direct or indirect cost A cost is allowable when: • It serves a University business purpose, including instruction, research, and public service. • It is permissible according to UTD policy and federal regulations (regardless of whether it is a sponsored project). • It is permissible (for a sponsored project) according to the terms and conditions of the agreement. • It complies with the rules for allowability as covered in OMB Circular A-21, which dictates that costs must be reasonable. A cost is reasonable when: • a) prudent person would purchase the item at that price; • b) the cost is necessary for the performance of the activity; and • c) incurrence of the cost is consistent with established University policies and practices.

7. Allocable - Proportionally benefits the sponsored agreement, solely advances the work, assignable to the agreement Costs must be allocable to the sponsored agreements. A cost is allocable when: • 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 accordance with OMB Circular A-21, is deemed to be assignable in part to sponsored projects. Reasonable - Does the nature of the good or service and amount applied reflect what a “prudent person” would decide under the same circumstances, Consistent- Like costs must be treated the same in like circumstances, as either direct or IDC costs.

8. How do we use it? • We use it to determine whether the costs included in a grant application or contract budget (sponsored agreement) are in accordance with the Circular’s provisions. It is also used as a guide in pricing of fixed or lump sum agreements (e.g., for a particular service or product).

10. A-110: Pre-Award Requirements • Federal awarding agency decides on appropriate award instrument (grant, cooperative agreement, contract) to accomplish a federal purpose, governs how we apply for federal funds, and makes us certify that we are in compliance with federal laws, executive orders and federal regulations.

11. A-110: Post-Award Requirements • Financial and Program Management • Standards for financial management systems • Methods for making payments • Rules for: • Satisfying cost sharing and matching requirements • Accounting for program income • Budget revision approvals • Making audits • Determining allowability of cost • Establishing fund availability

12. Standards for Financial Management Systems • Recipients’ financial management systems shall provide for the following examples: • Accurate, current and complete disclosure of the financial results of each federally-sponsored project • Records that identify adequately the source and application of funds for federally-sponsored activities • Effective control over and accountability for all funds, property and other assets • Written procedures for determining reasonableness, allocability and allowability • Accounting records including cost accounting records that are supported by source documentation

13. Payment • Payment methods shall minimize the time elapsing between the transfer of funds from the US Treasury and the issuance or redemption of checks, warrants or payment by other means by the recipients • Advance payments require maintaining • Written procedures that minimize the time elapsing • Systems that meet the standards for fund control • If standards cannot be met, then reimbursement in the preferred method

14. Rules For… • Cost share: Committed resources that are NOT funded in a research agreement. Common example include salary costs in excess of the NIH salary cap and committed but unfunded effort. This cost share is funded by a departmental account. On all grants, no cost sharing commitments may be submitted unless specifically approved by the respective Dean. • Previous Cost Sharing presentation can be found under “Previous Classes” at https://explorer.utdallas.edu/classes/ • Program Income: Income earned during the project period shall be retained by the recipient • Budget Revisions: Budget plan is the financial expression • Budgeting Class on July 30th • Recipients and sub-recipients that are institutions of higher education or other non-profit organizations shall be subject to the audit requirements in OMB A-133 • Allowable Costs: A-21 • Availability of funds: where a funding period is specified, a recipient may charge to the grant only allowable costs resulting from obligations incurred during the funding period and any pre-award costs authorized by the Federal awarding agency

15. A-133 Sets for standards for obtaining consistency and uniformity among Federal agencies for the audit of States, local governments, and non-profit organizations expending Federal awards

16. Audits Non-federal entities that expend $300,000 or more in a year in Federal awards shall have a single or program-specific audit conducted for that year

17. Auditee Responsibilities • Identify, in its accounts, all Federal awards received and expended and the Federal programs under which they were received • Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations and the provisions of contract or grant agreements that could have a material effect on each of its Federal programs • Prepare appropriate financial statements • Ensure that the audits required by this part of properly performed and submitted when due • Follow up and take corrective action on audit findings

18. Audit Perspective How do I know that the cost belongs to the specific project? • Was the cost included in the budget? • Is it generally allowable according to A-21? • Is the cost reasonable as a direct charge to this project? • Was the cost charged directly to this project? • Timing of the cost relative to the project period • No costs should ever be charged to a project to spend the money up because a project is ending • No costs should ever be charged to a project just because that is “where I have money at” • Large purchases at the end of a grant’s life indicate poor or mismanaged spending practices to the sponsor. • Computer purchases • Capital equipment purchases

19. Best Practices The Principal Investigator (PI) has overall responsibility for the technical and fiscal management of a sponsored project, including the management of the project within funding limitations, and assuring that the sponsor will be notified when significant conditions related to the project status change. While responsibility for the day to day management of project finances may be delegated to administrative or other staff, accountability for compliance with UTD policy and sponsor requirements ultimately rests with the PI The role of the Office of Post-Award Management (OPM) is to assist departments in monitoring grant cost. When working with your grant funds, always remember that you have a limited amount of money, and keep in mind your expenditure rate. Ask yourself: • Am I pacing myself? • You should make sure to set out and accomplish that which you laid out in your proposal without deviating from the approved budget • Am I spending all my money in the first month or two of the projects? • This could lead to over expenditure, OPM can help by reviewing and interpreting the information on financial reports and troubleshooting problems that may be contributing factors • Am I not spending the money fast enough? • Am I reviewing account activity on a consistent basis?

20. Summary • Take a proactive approach to fund management • It is imperative that all parties work as a team • Proper fund management involves: • Adhering to the institutional and sponsor guidelines and regulations • Establishing a proper financial accountability structure • Ensuring proper financial management with attention to the integrity of data by completing monthly Account Reconciliations on a timely basis and addressing all issues

21. Case Studies

22. Case Study #1 Determining Necessary Cost http://www.youtube.com/watch?v=CpolbxXjoE0

23. Case Study #2 Dr. Indiana Jones would like to buy breakfast muffins and coffee for a meeting to discuss his NIH project. He would like to charge this to his NIH grant. Is this allowable? Yes, if it is a formal business meeting and integral to the continuity of the conducting business and meeting the goals and objectives of the project, and the meeting includes external participants No, if meeting only includes UT-Dallas personnel and is not integral to the business and research To be directly charged to a federal grant, the food cost must be allowable, reasonable, and allocable.

24. Case Study #3 Can you buy bottled water on an NSF grant? No. If work site is an office or lab on campus or in leased commercial space off-campus. Yes, if work site is a field site in the middle of a dessert and there is no potable water.

25. Who to Contact All Others questions: Lori Taccino Direct of Post-Award Management 972-883-2173 ldt091000@utdallas.edu For questions with Award setup, budgets, cost centers, cost share and re-budgeting: Lesley Stephenson Lakeshia Stringfellow, MBA Post-Award Management Specialist Post-Award Management Specialist 972-883-4837 972-883-2689 las091000@utdallas.edulxs091000@utdallas.edu For questions on Payroll charged on Awards: Kelly McKinney Assistant Direct of Post-Award Management 972-883-4540 mellymc@utdallas.edu Cindy Sutton Natasha Hinton Financial Analyst Financial Analyst 972-883-4809 972-883-2315 csutton@utdallas.edu natasha.hinton@utdallas.edu

26. Further Information Office of Research – http://www.utdallas.edu/research Research Development, Research Compliance, Sponsored Projects, Technology Commercialization Post-Award Management – http://www.utdallas.edu/research/opm/ Allowable Cost – http://www.utdallas.edu/research/opm/admins_and_faculty/allowable_cost Office of Management & Budget Circulars http://www.whitehouse.gov/omb/circulars_default Certificate Series – https://explorer.utdallas.edu/classes Next class: Budgeting July 30th