All About Costs A Post-Award Primer Division of

All About Costs A Post-Award Primer Division of Grants Compliance and Oversight Office of Policy for Extramural Research Administration, OER National Institutes of Health, DHHS NIH Regional Seminar – Indianapolis, IN – April 2012 Diane Dean, Director Kathy Hancock, Assistant Grants Compliance Officer Joel Snyderman, Assistant Grants Compliance Officer 1

Discussion Topics • Cost Principles • Administrative Standards • Audit Requirements • Grant Award Basics • Award Restrictions • Responsibilities • Accounting Basics 2 • Monitoring Basics • Subrecipient Monitoring • Other Cost Considerations • NIH Financial Reporting Basics • Closeout

Federal Requirements

Cost Principles • • • OMB Circular A-21 (2 CFR Part 220) - Educational Institutions OMB Circular A-122 (2 CFR Part 230) – Non-Profits OMB Circular A-87 (2 CFR Part 225) – State/Local Governments 45 CFR Part 74, Appendix E - Hospitals 48 CFR Subpart 31. 2 (FAR) – For-profits • Foreign institutions comply with the applicable cost principles depending on the type of organization http: //www. whitehouse. gov/omb/circulars/ http: //www. gpoaccess. gov/cfr/index. html 4

A-21/A-122 (2 CFR 220/230) Cost Principles • Establishes principles for determining costs applicable to grants, contracts, and other agreements • Direct costs • F&A/indirect costs • Selected items of cost o allowable/unallowable costs o time and effort reporting 5

Administrative Standards • OMB Circular A-110 – relocated to 2 CFR Part 215 - Uniform Administrative Requirements for Grants and Agreements with Universities, Hospitals and Other Non-Profit Organizations (domestic and foreign) 6

OMB Circular A-110 Administrative Requirements Prescribes: • • Preaward requirements Postaward requirements Also includes requirements for: o o o Payment Matching or Cost sharing Accounting for program income Revision of budget and program plans Non-Federal audits Allowable costs • Financial management systems standards • • • 7 Property standards Procurement standards Reports and records

Audit Requirements • In general, OMB Circular A-133 requires a State government, local government, or non-profit organization (including institutions of higher education) that expends $500, 000 or more per year under Federal grants, cooperative agreements, and/or procurement contracts to have an annual audit by a public accountant or a Federal, State, or local government audit organization. • Foreign and Commercial (for-profit) organizations are subject to audit provisions contained in 45 CFR 74. 26(d) and the NIH Grants Policy Statement (GPS). 8

Summary of Applicable Regulations Grantee Type Administrative Requirements Cost Principles State & Local Governments A-102 (45 CFR Part 92) A-87 (2 CFR Part 225) Colleges & Universities A-110 (2 CFR Part 215) A-21 (2 CFR Part 220) Non-Profits 45 CFR Part 74, Appendix E A-133 A-122 (2 CFR Part 230) Hospitals Audit Requirements For-Profits FAR 31. 2 (48 CFR Subpart 31. 2) Foreign As stated above for the grantee type 9 _________ 45 CFR Part 74. 26(d) NIH GPS, uses 45 CFR Part 74. 26(d)

Grant Award Basics ********** /24/2010 D***** te: 06 F AWAR Issue Da TICE O * NO ***** NT ER GRA CENT vices man Ser nd Hu Health a th nt of Heal epartme D itutes Of Inst National 10

Read the Notice of Award • Terms of Award – Section III o 45 CFR Part 74 or 92 - HHS rules and o o requirements that govern the administration of grants NIH Grants Policy Statement (GPS) – policy requirements that serve as the terms and conditions of NIH awards (latest version 10/01/11) Program legislation Appropriation acts Program regulations 42 CFR Part 52 - Grants for Research Projects • Special Terms and Conditions – Section IV 11

Award Restrictions (Section IV) • Only applied to a particular grant for cause • Shown on the Notice of Award (No. A) after Section III – Institute and/or Center specific terms of award • Funds usually are not restricted in the Payment Management System • Restricted funds must be tracked by grantee to ensure compliance o EXAMPLE of Award Restriction: Funds may not be used to purchase equipment without the written prior approval of the NIH awarding component. 12

Who is Responsible for Post-Award Financial Management? • A. The Principal Investigator • B. The Departmental Administrator • C. The Department Chair • D. The Institution 13

Accounting Basics 14

Accounting • Requires that: o Separate account is established for each project o Program Income is identified and accounted for by project o Program Income is used in accordance with the appropriate alternative, i. e. , § § 15 Additive Deductive Combination Matching

Accounting (cont. ) • Requires that: o Expenses are charged in accordance with § § § No. A Terms and Conditions NIH Grants Policy Statement Salary Cap / Rate Limitation Cost Accounting Standards OMB Circulars o ALL expenses are appropriately documented 16

Monitoring Basics 17

Monitoring • Requires that: o Actual expenses are periodically compared with budget o Actual expenses are accurate, i. e. , reasonable, allocable, allowable and consistently charged o Mischarges are corrected in a timely manner (cost transfers) o Prior approvals are obtained when required o Subrecipient expenses are monitored – (Grantee’s responsibility to monitor expenses) 18

Budget vs. Actual • Actual expenses should be compared at least monthly to the budget to ensure: o Total funds on the grant have not been exceeded o Total funds are used appropriately o Total funds for any cost category have not been exceeded if restricted on the No. A 19

Accurate Charges • Actual expenses should be reviewed to ensure they are accurate and allowable o Reasonable (including necessary) o Allocable o Consistently applied o Conforms to any limitations or exclusions 20

What does “reasonable” mean? • A cost may be considered reasonable if the nature of the goods or services acquired or applied reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made. 21

Example – Reasonable? • Dr. Grant needed a specialized microscope for his research supported by an NIH grant from the National Cancer Institute. When deciding on the model that would best suit his needs, he received several price quotes on various models that were all within the same general price range. However, one microscope in particular appealed to him – it met all of the necessary specifications plus many additional features. Although it was about $8, 500 more than the others, he ordered it. 22

What does “allocable” mean? • A cost is allocable to a specific grant if it is incurred solely in order to advance work under the grant and is deemed assignable, at least in part, to the grant. 23

Example – Allocable? • When Dr. Grant’s microscope finally arrived, he found that equipment funds for his National Cancer Institute grant were fully expended. Since the microscope was for use on an NIH grant, he decided to charge the cost to another one of his NIH grants that was funded by the National Eye Institute. 24

What does “consistently applied” mean? • Grantees must be consistent in assigning costs to cost objectives. • Costs may be charged as either direct costs or F&A costs, depending on their identifiable benefit to a particular project or program. • All costs must be treated consistently for all work of the organization under similar circumstances, regardless of the source of funding. 25

Example – Consistently Applied? • Dr. Grant’s lab was running low on office supplies and postage stamps. Since he couldn’t wait any longer for his institution to provide the supplies, he purchased them and charged them to his NIH grant account. 26

What does “conformance” mean? • A cost is allowable if it is reasonable, allocable and conforms to the cost principles and the sponsored agreement AND is not prohibited by law, regulation or term of award. • This type of allowability -- conformance with limitations and exclusions as contained in the terms and conditions of award including those in the cost principles—varies by type of activity, type of recipient, and other characteristics of individual awards. 27

Example – Conformance? • Dr. Grant decided to host a very important Departmental meeting at his home and serve beer and pizza hoping that everyone would attend. The purpose of the meeting was to discuss changes in NIH grants policy, which affected the work of the entire Department. Therefore, he decided to charge the cost of the beer and pizza to his grant, especially since he was providing the use of his home. 28

Cost Transfers • Used to correct: o Erroneous charges o Unreasonable charges o Unallocable charges o Inconsistently applied charges o Unallowable charges • Must be well documented • Must be made within 90 days from the time error was discovered 29

Other Cost Considerations 30

Selected Items Requiring Prior Approval • NIH Grants Policy Statement defines actions requiring NIH prior approval. • Some prior approval actions affecting cost include the following: o Carryover of funds (if required-see Section III of No. A) o Incurrence of preaward costs greater than 90 days o Deviation from award terms and conditions o Activities disapproved or restricted as a condition of award • For a complete listing of prior approval requirements see: 31 http: //grants. nih. gov/grants/policy/nihgps_2011/nihgps _ch 8. htm#prior_approval_requirements

Carryover of Funds • Requests for carryover of funds should be signed by Authorized Representative. • Request must be sent to GMO and include: o Detailed budget by direct cost category with F&A cost information (base and rate). If personnel costs are requested, include § § a detailed breakdown of personnel costs base salary requested effort to be spent on the project o A scientific justification for the use of funds o The reason for the unobligated balance 32

NIH Financial Reporting Basics 33

Financial Reporting Federal Financial Report (FFR)(SF-425) Expenditure Data • Timely - Must adhere to submission deadlines: o Annual – (Non-SNAP Awards) § FFR submitted for each budget period no later than 90 days after the end of the calendar quarter (CQ) in which the budget period ended. § Budget period ends 1/31/2011 – FFR due 6/30/11 (90 days after the end of the CQ of 3/31/11) o Final (End of Competitive Segment) – (SNAP and Non-SNAP Awards) § FFR submitted within 90 days following the end of the project period 34 (SNAP – Streamlined Non-competing Award Process)

Financial Reporting • FFRs should be submitted accurately • Reported expenses and program income must agree with institutional accounting records • Routine Revisions to correct FFRs are not appropriate • Any revisions must be submitted in the same format as the original submission. For example: If the original report was submitted as a Financial Status Report (FSR)(SF-269), the revised report must be submitted as an FSR. 35

Financial Reporting • Information and NIH Guide Notices related to Financial Reporting: See FFR (SF 425) Instructions for NIH Grantees available at http: //grants. nih. gov/grants/forms. htm See NIH Guide, January 4, 2011, Implementation of Federal Financial Report – Upcoming Mandatory Use of the Federal Financial Report System in the e. RA Commons beginning February 1, 2011 (NOT-OD-11 -017) http: //grants. nih. gov/grants/guide/notice-files/NOT-OD-11 -017. html See NIH Guide, July 27, 2007, NIH Requiring Mandatory Use of the Electronic Financial Status Report System in the e. RA Commons Beginning October 1, 2007 http: //grants. nih. gov/grants/guide/notice-files/NOT-OD-07 -078. html See NIH Guide, February 22, 2001, FINANCIAL STATUS REPORTS: REMINDER AND INFORMATION ON TIMELINESS AND ACCURACY REQUIREMENTS http: //grants. nih. gov/grants/guide/notice-files/NOT-OD-01 -021. html 36

er nd i Closeout: Final Reports em R • Failure to submit timely final reports may affect future funding to the organization o o o Final Federal Financial Report (FFR) SF-425 Expenditure Data Final Invention Statement and Certification Final Progress Report • Final Reports are due within 90 days of the end of grant support. • Grantee must ensure there are no discrepancies between final FFR expenditure data (in e. RA Commons) and FFR cash disbursement data in the Payment Management System. April 2, 2008, NIH Announces New Centralized Processing Center for Receipt of Grant Closeout Documents and Reminds Grantees of Required Closeout Reports for NIH Assistance Awards http: //grants. nih. gov/grants/guide/notice-files/NOT-OD-08 -061. html June 17, 2005, NIH Announces New Closeout Feature in the e. RA Commons and Reminds Grantees of Required Closeout Reports for NIH Assistance Awards http: //grants 2. nih. gov/grants/guide/notice-files/NOT-OD-05 -051. html 37

A Rule of Thumb Whenever you are contemplating a significant postaward change, and you are uncertain about the need for prior approval, consult in advance with: • The Notice of Award (terms and conditions) • Your Office for Sponsored Research/Projects • NIH awarding component Grants Management Officer/Specialist 38

Questions? Diane Dean, Director, Division of Grants Compliance and Oversight diane. dean@nih. gov 301 -435 -0949 Kathy Hancock, Assistant Grants Compliance Officer kathy. hancock@nih. gov 301 -435 -1962 Joel Snyderman, Assistant Grants Compliance Officer joel. snyderman@nih. gov 301 -594 -0524 Grants. Compliance@nih. gov