Let’s Talk Cost Sharing Deborah Moon, AVP of Finance and Controller Derek Sommer Manager, Post Award Accounting

Agenda What is Cost Sharing?/Committed vs. Uncommitted Why Cost Share?/Decision to Cost Share What is Allowable? Cost Sharing & Allowability A-21/Administrative Requirements A-110 Do’s and Don'ts What is the cost to the institution? How is the F&A Rate Impacted? Are Some Costs Better Than Others? How to Account for Cost Share? Examples of Best Practices

What is Cost Sharing? Defined as “all contributions, including cash and third party in-kind which meet seven criteria: –Verifiable –not included as contributions for any other federally-assisted project or program – necessary and reasonable for accomplishment of objectives – allowable – not paid by the Federal Government under another award (except where authorized by statute) – provided for in the aproved budget when required by the /federal awarding agency – conform to other Circular provisions.”

What is Cost Sharing? Cash – recipient’s cash outlay In-Kind – non-cash contributions provided by non-federal third parties i.e. Volunteer services – at rates, inclusive of respective benefits, exclusive of F&A, paid for similar work Donated supplies & equipment – current FMV

What is Cost Sharing? Mandatory vs. Voluntary –Mandatory cost sharing is required by the sponsor as a condition of the award, either due to laws passed by Congress or agency program guidelines - cost sharing specifically pledged in the proposal’s budget or award –Voluntary cost sharing may be offered by a University to make a proposal more competitive - university X or faculty effort that is over and above that which is committed and budgeted for in a sponsored agreement

Committed vs. Uncommitted Committed Cost Sharing: –Whether mandatory or voluntary, commitments are a condition of the award. –Must be properly documented for cost accounting purposes (i.e., F&A rate calculation) Voluntary Uncommitted Cost Sharing: –Treated differently from committed cost sharing –Not included in organized research base for F&A rate purposes –Not reflected in any allocation of F&A Costs –Voluntary Uncommitted effort (Faculty-donated) is excluded from the effort reporting requirements of A-21 Section J.8.

Why Cost Share? Sponsors issue RFPs requiring cost sharing Scope of work requires resources greater than commitment by sponsors Competition for awards – PI’s feel that cost sharing will enhance their ability to win awards NSF Clarification on cost sharing

Decision to Cost Share Cost/Benefit Analysis A-110 and A-21 Institutional Policies / Approvals Ability to account and report “Value” to institution Don’t budget/propose if you’re not willing to cover the cost Institutional resources

NSF Cost Sharing: January 2003 NSF cost sharing beyond the statutory requirement will be clearly stated in program solicitations NSF statutory 1% cost sharing requirement for unsolicited research projects – this is an institutional aggregate commitment In budget negotiations any reduction of 10% or more should have corresponding reduction in scope Voluntary cost sharing should not be included on line M of the proposal budget – do not include cost sharing beyond the amounts specified in the solicitations Fastlane revised to mask Line M from reviewers Cost Sharing on Line M > $500K must be certified by Authorized Organizational Representative w/in 90 days of end of each budget period and within 90 days following expiration of award

Cautions All sponsored projects should have some degree of faculty effort - otherwise institutions run the risk of extrapolations for F&A bases Beware of expressions of support in budget narratives and workscope that are not included in the budget figures Remember that all direct cost sharing has a respective F&A component

What is Allowable? Equipment –YES, if newly purchased, specifically for project –previously owned equipment is already covered through IDC and may not be offered as matching Space and Facilities –NO, space and facilities typically serve joint objectives and their cost is factored into the F&A rate –YES, leased space, although the lease costs must be excluded from the facility component when calculating the F&A rate

What is Allowable? Level of Effort –YES, if the service is integral to the approved project or program. –OMB Circular A-110: “Rates for volunteer services shall be consistent with those paid for similar work in the recipient's organization….paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation.”

What is Allowable? Unrecovered Indirect Costs –YES, the difference between the amount awarded and the amount which could have been awarded under the University's approved negotiated indirect cost rate. –OMB Circular A-110: “Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency.” Other Indirect Costs –YES, those indirect costs associated with the direct costs being cost- shared are allowable

What is Allowable? Cost Overruns –YES, overruns may meet the cost sharing requirements on the project for which they were incurred. –However, it is unallowable for the cost overruns on one project to be used as cost sharing on another. OMB Circular A-21: “Any excess of costs over income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to, the institution's contributed portion by reason of cost-sharing agreements or any under-recoveries through negotiation of flat amounts for F&A costs.

Cost Sharing & Allowability OMB Circular A-21 Factors affecting allowability of costs: (a)Reasonable – necessary, prudent, consistent with institutional policies and practices (b)Allocable – incurred solely to advance the work under sponsored agreement, benefits is measurable, necessary (c)Consistent treatment through application of GAAP (d)Conform to limitations/exclusions set forth in A-21 or in sponsored agreement as to types or amounts of cost items

Administrative Requirements: OMB Circular A-110 OMB Circular A-110, Section 23 All contributions, including cash and third party in-kind, shall be accepted as part of the recipients cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the recipient’s records (2) Are not included as contributions for any other federally-assisted project or program (3) Are necessary and reasonable for proper and efficient accomplishment of project or program objectives (4) Are allowable under the applicable cost principles (5) Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching (6) Are provided for in the approved budget when required by the Federal awarding agency (7) Conform to other provisions of the circular

Do’s and Don'ts Follow the regulations outlined in OMB Circular A-110 Do… Track/document all cost- shared items for an award Include only those items necessary and reasonable for the project Include mandatory items noted in the proposed budget when required by the Federal sponsoring agency Don’t… Include items already noted as a contribution on another award Include items unallowable per the applicable cost principles Include items paid by the Federal government under another award, unless authorized

What is the Cost to the Institution? Committed salaries/wages, ODC Loss of fringe benefit and indirect cost recovery Increase in Research Base for F&A calculations Time value of accounting/reporting

How is the F&A Rate Impacted? Tracking unrecovered indirect costs helps establish the true cost of F&A expenses to the University. An accurate depiction of the indirect cost calculation will help with future rate negotiations.

Calculation of the Indirect Cost Rate Indirect Costs Overhead costs incurred in Support of Research Activities: Depreciation of Bldg.. & Equip. Operation & Maintenance of labs e.g.. utilities Cost of Research Space Administrative Services Indirect Costs Direct Costs Indirect Cost Rate $59,000$100,000 $59,000/$100,000 = 59.0% Direct Costs Costs incurred in Performing Research Activity: Salaries and fringes of laboratory personnel Research lab supplies and materials

Effect of Cost Sharing on the Indirect Cost Rate School Faculty Volunteers $10K of Time Project Direct Costs Costs incurred in Performing Research Activity: Salaries and fringes of laboratory personnel Research lab supplies and materials Indirect Costs Direct Costs Indirect Cost Rate $59,000/$110,000 = 53.64% $59,000 $100,000 + $10,000 Indirect Costs Overhead costs incurred in Support of Research Activities: Depreciation of Bldg. & Equip. Operation & Maintenance of labs e.g. utilities Cost of Research Space Administrative Services

Are Some Costs Better Than Others? Cost Sharing from non-federal sources which would already be included in the research base- and hopefully generating F&A revenue Graduate students support if graduate students are partially excluded from MTDC- smaller affect on base Equipment – excluded from MTDC for research base; but removes that equipment from depreciable pool

Accounting for Cost Sharing Companion Centers Contra GL Accounts Shadow Systems – departmental funds Gamble and Ignore

Companion Centers Benefits Costs are separately accountable and reportable by natural account classifications Ease of institutional tracking and reporting – PAR’s (effort reporting) Cost Maintenance of additional cost centers in general ledger system, payroll system, paperwork

Contra GL Accounts Benefits Costs are identifiable and reportable from accounting system records Costs Need to reconcile from GL detail to determine natural accounts Confusing for research personnel to decipher

Shadow Systems Benefits Costs are tracked and identifiable Costs Effort of maintaining and reconciling shadow system Potential to overcommit Accountability

Gamble and Ignore Benefits No additional work now Costs A-133 Audit Findings Project Audits Extrapolation techniques for F&A Base additions Effort Reporting

QUESTIONS

BREAK

CMU Cost Sharing  Cost Sharing Account Set-up  Identifying Cost Sharing  Factors Affecting Cost Sharing  Necessary Information from Department  Accounting for Cost Sharing  Coverage of Cost Sharing Costs in GL

CMU Cost Sharing Set-Up  Identifying Cost Sharing –When reviewing the executed award documentation all cost sharing specifically pledged in the proposal’s budget or award must be accounted for within an Oracle cost sharing award or matching non-federal award Cost sharing awards in Oracle begin with a 2xxxxxx Each department on campus should have at least three (3) different cost sharing award numbers (one for each sponsored award purpose) mapped to their organizations

CMU Cost Sharing Set-Up  Factors Affecting Cost Sharing –Type of Cost Sharing (matching, departmental, etc.) –Cost Sharing award purpose Sponsored Research Other Sponsored Projects Sponsored Instruction –Example: A sponsored award that’s main purpose is Sponsored Research should have a cost sharing award that matches this purpose

CMU Cost Sharing Set-Up  Factors Affecting Cost Sharing (con’t) –Cost Sharing Requirement (% of project expenses or actual $ figure) –Cost Sharing information will be input into the sponsored award DFF –The award will be marked as having cost sharing –Cost Sharing or Non-Federal matching number should be provided to your SPA Representative (if a cost sharing number is needed for your organization, please contact your SPA Representative) –The $ value of the cost sharing will be input into this field

CMU Cost Sharing Set-Up  Necessary Information from Department –Cost Sharing Award Number –Amount of Funding –Project and Task to Fund Keep in mind the task controls the organization expenses post against in grants AND GL. –Cost Sharing Budget

CMU Cost Sharing in GL  Moving Funds within GL –All Cost Sharing expenses must post in the Grants Module All expenses posting in the Grants Module flow-through to the General Ledger –Funding transfer should be completed via journal entry in the General Ledger once the CS award has been linked to a project/task in the GM Example: A charge of $5,000 in cost sharing expenses post in GM. At this point, your Cost Sharing GL Funding Source (063000) will be in deficit by $5,000. A journal entry must be completed to balance your GL string. The entry should be posted against: Dept Org.01 –Funding Transfers should be completed as soon as expenses hit the cost sharing accounts

CMU Cost Sharing in GL  Moving Funds within GL –Sample Journal Entry DEBIT Dept Org.01 DEBIT CREDIT Dept Org.01CREDIT INTERNAL TRANSFERGENERAL UNRESTRICTED ORGANIZATION WHERE EXPENSES POST INTERNAL TRANSFERCOST SHARING FSORGANIZATION WHERE EXPENSES POST

CMU Cost Sharing in GL  Moving Funds within GL –Amount of Funding to Move TUBS AND –Organizations recognized as TUBS complete funding transfers to account for Direct AND Indirect Cost Sharing expenses Non-TUBS ONLY –Organizations recognized as Non-TUBS complete funding transfers to account for Direct Cost Sharing expenses ONLY

CMU Cost Sharing Accounting for Cost Sharing Direct Charging – to a Cost Sharing PTA –Pros: Does not require a manual entry by SPA More control over what expenses are cost shared Ability to keep your GL CS account in balance –Cons: More difficult to cost share accurately Splitting charges between sponsored and CS award Manual Cost Sharing Entries – batch posted by SPA –Pros: Ability to charge on only one account (sponsored) More accurate cost sharing calculation –Cons: Time constraints on SPA in completing the entry

CMU Cost Sharing Set-Up  Accounting for Cost Sharing –% of Project Expenses Regular cost sharing entries may be needed to properly account for cost sharing when based on a % of project costs –Example: CS Requirement is 20% of Total Project Costs Sponsor Funding Obligation = $85,000 Total Project Expenses = $100,000 $100,000 X 20% = $20,000 Sponsor Pays $80,000 CMU Pays $20,000

CMU Cost Sharing Set-Up  Accounting for Cost Sharing (con’t) –Mandatory Cost Sharing Amount Cost Sharing may be based on an actual $ figure that must be paid by CMU to meet the cost sharing requirement – example would be commitment to purchase a piece of equipment costing $10K –Example: CS Requirement = $10,000 Sponsor Funding Obligation = $50,000 Total Project Expenses = $45,000 $45,000 – $10,000 = $35,000 Sponsor Pays $35,000 CMU Pays $10,000

CMU Cost Sharing Set-Up  Accounting for Cost Sharing (con’t) –Matching Cost Sharing Non-Federal awards used to meet cost sharing requirements on a Federal award must be set-up within their own sponsored award, with the funding source listed as the Non-Federal sponsor, to properly account for the expenses –Note: Once a Non-Federal award is matched against any Federal award, that Non-Federal award can not be used to match any further Federal awards

CMU Cost Sharing Set-Up  Cost Sharing Overspent Awards –Sponsor awards that become overspent must have the overspent amounts moved to cost sharing accounts when the awards are closed Accomplished via Pre-Approved Batches entered by SPA –Able to be covered in two ways »Faculty Discretionary Accounts accomplished via a Transfer to Close Entry »Funded by a GL Funding Transfer

QUESTIONS

Cost Sharing Millionaire Rules: 5 prize levels “Phone an audience member” “Ask the audience” If contestant misses question – prize goes to audience member who answers – finish round with the audience answering Volunteers………

Cost Sharing Millionaire Round 1 Level 1: Today’s session is: A – informational about cost sharing B - a good way to avoid working C – time to nap after lunch D – about earning prizes Level 2: Cost sharing expenditures must be in compliance with: A –RFP/Solicitation Requirements B – OMB A-21 / OMB A-122 C – OMB A-110 D – All of the above

Cost Sharing Millionaire Round 1 Level 3: Cost Sharing can be in all of the forms, EXCEPT: A –Cash contributions B – third party in-kind contributions C – funding from another sponsoring agency D – educational discounts Level 4: Which of the following would cost the University the most if used as cost sharing? A – capital equipment B - PI effort funded by a non-federal award C – PI effort funded by internal funds D – graduate student stipends

Cost Sharing Millionaire Round 1 Level 5: If an institution’s: F&A costs = $20,000 Research Base before CS= $100,000 Cost Sharing = $100,000 What is the F&A rate before and after CS? A – 10% before; 20% after B – 20% before; 30% after C – 20% before; 10% after D – 20% before; 25% after

Cost Sharing Millionaire Round 1 $20,000 F&A costs = 20% Before $100,000 Research Base $20, = 10% After Cost Share $100,000 + $100,000

Cost Sharing Millionaire Round 2 Level 1: Cost Sharing Award numbers begin with a: A –8xxxxxx B – 5xxxxxx C – 1xxxxxx D – 2xxxxxx Level 2: Which of the following is NOT required by SPA when setting-up cost sharing? A – Cost Sharing Budget B - Project and Task C – Funding Amount D – PI Name

Cost Sharing Millionaire Round 2 Level 3: Which of the following would be appropriate to utilize as cost sharing? A – include items already reported as costs sharing on another federal award B - include expenditures for administrative support C – include expenditures for office supplies D – include items utilized for the project which were funded by contributions Level 4: Which of the following is an appropriate cost sharing expenditure? A – 20% Educational discount on equipment purchase order B – utilization of existing space in the chemistry lab C – Volunteer services valued at rates consistent with those paid in recipients organization D – related PI effort which was funded by another federal award

Cost Sharing Millionaire Round 2 Level 5: Which of the following is not required to be included in the research base for F&A calculations: A – Voluntary Committed Cost Sharing B – Voluntary Uncommitted Cost Sharing C – Mandatory Cost Sharing D – All of the above are required to be included

Cost Sharing Millionaire Round 3 Level 1: All CS expenses should post in the: A –Grants Module B – General Ledger C – Accounts Payable Module D – Purchasing Module Level 2: Funding transfers should be completed: A – Fiscal Year End B - When Cost Sharing occurs C – Once every two years D – Never

Cost Sharing Millionaire Round 3 Level 3: Which of the following would NOT be allowable as cost sharing? A – Equipment required for the project B - Office Supplies to be used on the project C – PI Effort D – Lab supplies to be used on the project Level 4: Mandatory cost sharing is NOT: A – required to be documented and reported B – a condition of the award C – cost sharing specifically pledged in the award documents D – costs over and above that which is committed and budgeted

Cost Sharing Millionaire Round 3 Level 5: If a sponsored award which is obligated at $125,000 has: CS Requirement = $25,000 Total Project Expenses = $130,000 Which of the following is true? A – Sponsor Pays $125,000; CMU Pays $5,000 B – Sponsor Pays $100,000; CMU Pays $30,000 C – Sponsor Pays $105,000; CMU Pays $25,000 D – Sponsor Pays $0; CMU Pays $130,000

Cost Sharing Millionaire Round 4 Level 1: Institutions cost share for all of the following reasons EXCEPT: A – it’s required by the RFP or program B - Scope of work requires resources in excess of sponsor commitment C – PI’s believe they need to offer cost share to be competitive D – They have way too many resources and need to blow some money Level 2: Which of the following is NOT required for institutions to be in compliance with OMB A-110 for their cost sharing: A – costs must be verifiable from recipient’s records B – costs must be reasonable C – costs must be allowable under costs principles D – costs must be funded from non-sponsored activities

Cost Sharing Millionaire Round 4 Level 3:The Oracle award purpose on a sponsored and a cost sharing award with a Sponsored Instruction purpose would be: A –Sponsored Instruction = Sponsored Research B – Other Sponsored Project = Sponsored Instruction C – Sponsored Instruction = Sponsored Instruction D – Sponsored Research = Other Sponsored Project Level 4: What is the minimum # of CS award numbers each organization should have? A – 8 B - 3 C – 5 D – 1

Cost Sharing Millionaire Round 4 Level 5:All awards linked to a specific project can be found by going to which screen in Oracle? A –Project Funding B – Project Budget C – Funding Inquiry D – Funding Summary

Cost Sharing Millionaire Round 5 Level 1: Which is NOT a recommended method to account for Cost Sharing? A –Companion Centers B – Contra GL Centers C – Shadow Systems D – Gamble and Ignore Level 2: All of the following are allowable as Cost Sharing except: A – Equipment B – PI Effort C – Unrecovered indirect costs D – cost overruns on unrelated sponsored projects

Cost Sharing Millionaire Round 5 Level 3:The cost sharing funding source is: A – B – C – D –

Cost Sharing Millionaire Round 5 Level 4: If a Non-TUB department has: Direct CS Expenses = $50,000 F&A Rate = 50% How much should the department transfer to their cost sharing funding source in the GL? A – $33,333 B – $50,000 C – $25,000 D – $75,000

Cost Sharing Millionaire Round 5 Level 5: Which is NOT true of Voluntary Uncommitted Cost Sharing: A –Not included in organized research base for F&A purposes B – Not required to be included in effort reporting C – Not reflected in allocation of F&A costs D – Treated the same as committed cost sharing for A-133 program cost sharing testing

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