Santa Clara University
Sponsored Projects Office
Financial Polices and Procedures
Table of Contents
Introduction to Cost Accounting and Financial Compliance
Advances
Allowability of Cost
Audits
Budget and Expenditure Monitoring
Budget Revisions
Cash Management
Cost Sharing
Direct Charging Practices
Expenditure Authorization
Expense Transfers
Financial Reporting
Grant Closeout and Year End Requirements
Indirect Costs
Other Reporting
Program Income
Record Retention
Residual Funds
Time and Effort Reporting
Travel Expenses and Reimbursement
Introduction to Cost Accounting and Financial Compliance
Cost accounting and financial compliance for sponsored projects at Santa Clara University is dictated by the Code of Federal Regulations (CFR), Part 220, Cost Principles for Educational Institutions; Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; CFR, Part 215, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations; and other specific sponsor requirements and regulations. Further, policies and procedures of the University must also be followed. Ensuring compliance with the financial terms and conditions of the sponsored award including compliance with federal and agency regulations and requirements is the responsibility of both the Principal Investigator and the Sponsored Projects Office (SPO). The intent of the following policies and procedures are to assist in incorporating the requirements of CFR Part 220 and other federal regulations into the accounting and administration of sponsored awards at the University.
Advances
SPO follows the University policies and procedures for cash advances. (hyperlink to http://www.scu.edu/finance/forms )
Allowability of Cost
Policy. CFR Parts 220 as well as related Cost Accounting Standards require the University to determine whether costs are allowable, allocable, and reasonable on sponsored awards. Determination of allowability, allocability, and reasonableness of a given expense is based on specific sponsor requirements and according to federal cost principles. A primary responsibility of the Sponsored Projects Office is to insure that all costs charged to the sponsored research award are allowable and allocable.
1. Allowability. Expenses charged to a sponsored research award must meet the following allowability criteria:
· The costs must be reasonable.
· The cost must be allocable.
· The costs must be given consistent treatment through application of those generally accepting accounting principles appropriate to the circumstances.
· The costs must conform to any limitations or exclusions set forth in the sponsored agreement or in the Federal Cost Principles (CFR Part 220).
(link to Allowable Costs table on our webpage)
2. Allocability. Once allowability criteria have been met, the cost must be evaluated against the criterion of allocability. That is, the cost has been incurred solely to support or advance the work of a specific sponsored research award. It also means the process of assigning a cost, or a group of costs, to one or more cost objectives, in reasonable and realistic proportion to the benefit provided or other equitable relationship. A cost objective may be a major function of the institution, a particular service or project, or a sponsored agreement.
3. Reasonableness. A cost is reasonable if the nature of the good or service and the amount involved reflect the action of a prudent person. Considerations in determining reasonableness may include if the cost is
· Necessary for the performance of the sponsored agreement;
· Determined to be reasonable by arm’s length bargaining of a prudent person;
· In accordance with the sponsored agreement terms and conditions; and
· Consistent with established institutional policies and practices.
Unallowable Costs. An “unallowable” cost is one that is not eligible for reimbursement by a Federal sponsor, either directly or indirectly (through the F&A rate). Costs that are “unallowable” for reimbursement by Federal sponsors may still be permissible charges against department or institution funds. Examples of “unallowable” costs are:
· Advertising (some types allowed)
· Alcoholic beverages
· Entertainment (including meals with inadequate substantiation of business purpose)
· Fines and penalties
· Memorabilia, promotional materials (allowable if used for employee morale)
· Certain travel costs (i.e., first class)
· Charitable contributions, donations and gifts
· Student activity costs
Audits
Policy and Procedures. Direct cost audits are done either on a random sampling basis or at the request of the sponsoring agency. The aims of the audit are to test the effectiveness of the University's internal system for monitoring expenses, and to confirm that expenses were incurred as required by government wide regulations on the allowability of costs and by the specific award provisions. The audit also ensures that the government was charged for the proper portion of the total project costs on projects for which there is a University cost-sharing contribution or those that are partially supported by other sources.
A common audit inquiry concerns costs incurred in the latter stages or processed after the termination of an agreement. This includes purchases made from outside vendors as well as transactions within the University. The contention of the auditors is that late purchases do not significantly benefit the project. Large volume purchases or single purchases of a significant amount at the end of a project usually are not allowable since it appears that the intent is to expend remaining funds. Copies of all records should be attached to the initiating documents and also maintained on file in the department until the final audit is completed, even though this may take several years.
A useful method of supporting appropriate late purchases on a project is to obtain a no-cost extension from the sponsor through SPO. Timeliness or dating problems are then not relevant to the auditors for the extension period.
Closing audits normally are completed within one year of the termination of the agreement (although the period may extend to four or five years). The audit agency obtains information on the project available within SPO and other administrative offices. If these offices are unable to provide the necessary information, the principal investigator is contacted for further clarifications.
The auditors submit their report to the sponsor, usually with a copy of the draft report to the Director of Sponsored Projects. The sponsor then determines the allowability of items questioned in the auditor's report. If the audit uncovers questionable charges on the agreement, the sponsor submits a letter to the University reiterating the findings and requesting a reply. SPO reviews results of the audit against available records and determines the nature of the University's response to the sponsor. If SPO does not have sufficient information, it contacts the principal investigator and the department for additional explanations to support the charges. After these explanations have been provided for the questioned and/or disallowed costs, SPO presents the University's position and supporting documentation to the sponsor. The contract or grant officer reviews the initial audit with the University's response and determines the total amount allowable on the agreement.
Budget and Expenditure Monitoring
Policy. The Principal Investigator and Sponsored Projects Office both monitor the budget and expenditures of a project grant.
Procedure. Although the SPO will assist the Principal Investigator with the day to day administration of all grants and contracts. The following are the PI requirements for all awards:
1. Monitoring of Funds. The PI is responsible for the ongoing management of award projects, including regular monitoring against the budget.
2. Approval of All Expenditures. Salary, purchasing, travel, etc. all need to be approved as described in the Expenditure Authorization policy and procedure.
- Monthly Review of Projects Expenditures. Monthly Project Summary reports are prepared by Sponsored Projects Office and sent to the PI for review so the expenditures can be monitored to assure availability of funds and expense transfers can be made in a timely manner if error(s) are detected. Regular monitoring of sponsored project funds helps to:
· confirm the availability of project funds;
· ensure that costs are consistent with the project reports and incurred within the period of performance of the project;
· discover errors in the sponsored project budget, encumbrances, or expenditures;
· avoid overspending;
· provide high degree of confidence that the project complies with the sponsor's spending terms and conditions;
· verify that cost transfers and corrections are processed in a timely manner; and
· maintain a clear audit trail.
Resolving Budget or Expense Issues. After review of the monthly reports, if the PI has questions on the remaining budget, or any expenses that were charged to the grant, the Sponsored Projects Accountant should be contacted.
Clearing an Overdraft
If an account is in overdraft upon expiration of the project's performance period and additional funds are not available from the sponsor, the principal investigator, in consultation with his or her department and school, must clear the overdraft by transferring charges to an appropriate fund account. The school is responsible for clearing of any unfunded expenditures from its departmental resources.
Budget Revisions
Policy. Sponsor terms and conditions, as well as, University policies and federal regulations are followed for budget revisions.
Procedures. The Principal Investigator submits a request for a budget revision to a Sponsored Projects accountant. The SPO accountant reviews the request. The Director of SPO approves all budget revisions even those of low value (<10%) or between two discretionary expense categories. If the revision requires sponsor approval, then the SPO Director seeks such approval before a revision is processed.
Cash Management
Policy. CFR Part 220, A110, and various agency regulations require the University to follow cash management practices that are explained, documented, consistent, timely and appropriate under the circumstances.
Procedure. SPO submits invoices and processes payments. SPO submits a request for
reimbursement monthly or quarterly, depending on the terms and conditions of the award,
when electronic funds transfer are not used. For Federal grants, funds are drawdown
electronically based a cost reimbursable basis monthly or quarterly. For Federal
Subcontracts, SPO invoices monthly or quarterly or as specified by the contract. Federal
invoices always are based on expenses incurred and, therefore, MUST be reconciled to
the University’s financial system, PeopleSoft.
· Processing Steps for Method of Reimbursement and Requesting Funds. Reimbursement is the preferred method for Santa Clara University and is required for all Federal Awards. The drawdown method and format and reporting intervals follow sponsor terms and conditions. The SPO Accountant notifies the University Finance Office when drawdown requests are submitted so the UFO staff will know which accounting strings should receive the credits when funds are received.
· Receipt of Funds. Funds are received electronically in Santa Clara University’s Bank of America Concentration account. When received, the UFO makes a journal entry to record the amounts in the PeopleSoft financial system to the accounting strings provided by SPO.
· Depositing cash. When cash is received, a deposit slip is prepared, listing the current date, the accounting distribution(s) to be used, date of service, and the department name. One copy of the deposit slip is retained by the SPO. The cash and the remaining copies of the deposit slip are personally delivered (not mailed) to the University Cashier. The Cashier records the deposit and returns a validated copy of the deposit slip to SPO for its records.
· Depositing Checks. All checks should be endorsed "For Deposit Only" as soon as they are received. The Sponsored Projects Office uses a stamp for this purpose. An SPO Accountant completes a deposit slip for each award. The date, accounting distribution(s), date of service, total amount of the deposit and the department name are included on the deposit slip. A copy of the deposit slip is retained by SPO and added to the appropriate award accounting file. The deposit slip and the checks are then hand-delivered by the SPO Accountant to the University Cashier. The Cashier provides a validated copy of the deposit slip to SPO Accountant.
· Required Forms. Cash deposit slip and check deposit slips are used.
Cost Sharing
Policy. CFR Part 220, A110, and various agency regulations require University cost sharing to be identified, documented and verifiable to the formal or informal accounting records and auditable by the sponsor.
Procedure. Cost sharing, sometimes referred to as “matching,” represents that portion of the total projects costs of a sponsored agreement borne by the University, rather than the sponsor. A spreadsheet may be established to track committed cost sharing.
The PI must identify and provide resources to fund the cost-sharing amount. Funds from other federal awards may not be used as the source of cost sharing except as authorized by statute. Funds generally come from unrestricted, gift, endowment income, or designated funds.
The signed award document indicates whether the project involves cost sharing. If cost share/matching is absolutely necessary for the awarded project, these steps must be followed.
· PI needs to track cost share related expenditures as they occur.
· Payroll related cost share must be identified and provided to Sponsored Projects Office up front (Time and Effort Report - Name and % of effort). Sponsored Projects Accountant will calculate cost sharing amount for each individual.
· All information must be provided to the Sponsored Projects Office prior to the reporting deadline.
· The cost-sharing activity is closed at the same time as the related grant or contract closed.
Direct Charging Practices
Policy. CFR Part 220 and related Cost Accounting Standards require the University to consistently account for direct and indirect costs across all sponsors. Clarification is sometimes necessary to ensure certain costs are recovered consistently as either direct or indirect costs, but not both.
Expenditure Authorization
Policy. To provide appropriate levels of management and oversight for all expenditures on externally sponsored projects, the following signature approvals are required.
Procedure. The Principal Investigator and the Sponsored Projects Director or Sponsored Projects accountants must approve all expenditures.
· For expenditures $10,000 or more, the approval of an Associate or Assistant Dean is required.
· For expenditures $100,000 or more, the approval of a Dean is required.
· For expenditures $250,000 or more, the approval of an Associate or Assistant Provost or and Associate or Assistant Vice President is required.