TO : University of Oregon Research Community

MEMORANDUM

TO : University of Oregon Research Community

FROM: Paula J. Roberts, Associate Vice President for Research and Director, ORSA

DATE: June 25, 2008

RE: Cost Accounting Standards and OMB Circular A-21 Guidelines

As ORSA has received feedback on our recent implementation of anew process to evaluate administrative costs included in grants, we realize the need to provide the campus research community with better guidance regarding why these costs are nowbeing questioned, when they are acceptable to be direct charges and how to properly justify them to be compliant with federal regulations and university policy.

Prior to 1996 and the introduction of the Congressionally-mandated Cost Accounting Standards (CAS), researchers had the freedom to control their research funding and decide how it was to be spent. During this time, it was a common practice to submit budgetsto funding agencieswhich may have included administrative and clerical staff, supplies, telephone, copying, and postage costs without reviewing CAS and OMB Circular A-21 for guidance regarding the allowablility of such costs. Due to recent UO audit findings and impacts to our FY 2009 F&A rate negotiation process, ORSA has become very involved inthe push to closely adhere to the A-21, our Disclosure Statement (DS-2), and CAS. Your support of these efforts and implementation of the new process is critical.

History has shown that non-compliance with, or lack of awareness of, the policies and procedures cited in A-21 and DS-2 is an institution’s greatest risk for audit findings, fines and penalties. Examples of fines assessed to universities for non-compliance include: New YorkUniversity -- $5 million, NorthwesternUniversity -- $5 million, JohnsHopkinsUniversity -- $2.6 million, University of Alabama -- $3.4 million, and FloridaInternationalUniversity -- $10 million.

Minimizing our risk can only be attained with your support. We appreciate your assistance in helping us create an environment whereresearch continues to grow and our grant accounts are managedin accordance with the established standards. Collectively, our actions will demonstrate the University’s overall commitment to responsible stewardship of funds and compliance with federal rules and regulations as well as internal policies and procedures.

To clarify ORSA’s current procedure for reviewing administrative costs:

The pre-award staff will conduct a review of the project budget to determine whether any administrative costs are included. If so, a budget narrative is necessary to define and justify the inclusion of those items as direct costs. The justification must clearly identifyhow the project meets one of the exceptions noted in the A-21 circular in which direct charging of administrative costs is allowable. If the pre-award staff does not find the initial justification to be sufficient, but based on the scope of work believe an acceptable justification can be reached, they will work collaboratively with the PI and/or DGA to develop the appropriate language. If the pre-award staff does not think the costs can be justified, they will need to be removed from the budget.

Under separate cover are a set of “Questions and Answers”ORSA has prepared to assist you in understanding CAS and OMB Circular A-21. This document also contains some examples of acceptable justifications for various types of administrative costs. We believe that if you understand the what, why, and how—there will be fewer audit findings and less frustration.

Please let us know if you have additional questions or concerns. We may be contacted at346-5131 or email .