Cost Accounting Standards
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Transcript of Cost Accounting Standards
Cost Accounting Standards
The University of Alabama
April 28, 2000
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Today’s Questions
Why did the government promulgate cost accounting standards?
Why should UA departments follow them? What standards apply? What are they likely to mean to your department? What are the new or revised policies? Where can you seek guidance?
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What are the Cost Accounting Standards (CAS)?
Designed for defense contractors In 1978, educational institutions were exempted
from CAS OMB Circular A-21 was understood to contain required guidance
Then CAS was applied to them Consequence of overhead “scandals” of early 1990s
Staggered implementation FY 2000 for UA
CAS led to refinement of other policies
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Today’s Questions
Why did the government promulgate cost accounting standards
Why should UA departments follow them? What standards apply? What are they likely to mean to your department? What are the new or revised policies? Where can you seek guidance?
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Grant-related settlements in $$MM
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Alloc. betwn awards
Phys. presence
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Today’s Questions
Why did the government promulgate cost accounting standards
Why should UA departments follow them? What standards apply? What are they likely to mean to your department? What are the new or revised policies? Where can you seek guidance?
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New CAS requires four Standards and a Disclosure Statement
501: Consistency in Estimating, Accumulating, and Reporting Costs
502: Consistency in Allocating Costs Incurred for the same purpose
505: Accounting for Unallowable Costs 506: Consistency in Using the Same Cost Accounting
Period CASB Disclosure Statement Will be audited by Office of the Inspector General
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CAS in Brief
The CAS theme is consistency Consistency difficult to enforce
Between the proposal and what's actually charged and reported
In cost treatment among departments
UA principal investigators and administrators should: Become familiar with the rules Identify inconsistencies
A-21
CAS
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What is CAS 501?
Consistency in Estimating, Accumulating, and Reporting Costs
Practices for estimating costs must be consistent with practices used in accumulating and reporting costs during contract performance
Should be able to compare budget with actual costs for any "significant" type of cost
Consistency from Proposal to proposal Proposal to award Department to department
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What is CAS 502?
Consistency in allocating costs incurred for the same purpose
Each type of cost must be allocated on only one basis to any contract or other cost objective
If a grant is charged directly for a cost, the same type of costs cannot be charged to that project, or any other project, through the indirect cost rate
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The "double screen" behind CAS 502
Chemical Engineering Department
Charges copying indirectly
ChemistryDepartment
Charges copying directly
Chemistry grants pay twice
1. Directly for Chemistry copies2. Indirectly for part of ChE copies
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CAS 505: Unallowable costs
Must be removed from grants and indirect cost pools Unallowable as direct or indirect costs
Alcohol Fund raising, etc.
Types of costs unallowable as direct costs Salaries of administrative staff Office supplies Postage and local telephone Memberships
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Today’s Questions
Why did the government promulgate cost accounting standards
Why should UA departments follow them? What standards apply? What are they likely to mean to your department? What are the new or revised policies? Where can you seek guidance?
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How might CAS 501 affect UA departments?
Cost sharing Effort reporting Categories of costs
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Cost Sharing Definition
Financial support contributed by the University to sponsored projects.
Two categories: 1) Mandatory 2) Voluntary
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Mandatory Cost Sharing
Required by legislation or by the sponsor Identified in RFP/RFA or funding opportunity as a condition for an
award, or
Quantified in proposal by investigator; e.g., 5% effort with no salary dollars
Becomes mandatory upon award Effort report needs to show 5% as coming from a non-federal
source
Should be captured in a specific cost share account for the grant
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Voluntary cost sharing
Not required by sponsor Occurs as project proceeds Account for in general cost share accounts
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Voluntary Cost Sharing and Effort Reporting
Effort not committed in the project budget But it occurs and If charged to accounts that do not reach the organized
research base...
CAS problem Inconsistent treatment
Treated differently because of fundingNot because of difference in purpose and/or circumstance
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Cost Sharing and Effort Reporting
Award Budget--
Personnel:J. Jones 25% $25,000 B. Smith 5% -0-
Award AccountingPersonnel:J. Jones 25% $25,000 B. Smith 5% -0-
B. Smith spends 5% of his or her effort on the project as budgeted, no matter what is charged. Result: cost sharing that must be recorded
Budget and propose
Accumulate and report
CAS 501
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When a contract or grant goes over budget
Cost share accounts will be used to absorb the excess cost.
The excess charge will be funded from The department operating account or Another account designated by the department when the
award is received.
If an unallowable charge is made to a contract or grant or cost share account, the unallowable charge will be transferred to the department account.
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CAS 501: Budget costs consistently or at a consolidated level
Award Budget:Less detail
Lab supplies:- Diodes- Resistors - ChemicalsSupplies:- Specialized software
Award Accouting:More detail
Budget and propose
Accumulateand Report
Lab Supplies
Supplies
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CAS 502 Issues
Direct and indirect costs Departmental administrative costs Multiple funded programs Equipment as a direct charge
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Consistent treatment--one extreme case
If one PI charges one stamp to one grant
You must remove all postage from the indirect-cost rate
(Or charge the stamp elsewhere)
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Definition of direct and indirect cost categories
Direct costs Subcodes: per policy Cost bases
InstructionOrganized researchOther sponsored activity
Indirect costs General administration Departmental administration Operating and maintenance costs Library Sponsored research administration
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Today’s Questions
Why did the government promulgate cost accounting standards
Why should UA departments follow them? What standards apply? What are they likely to mean to your department? What are the new or revised policies? Where can you seek guidance?
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What are the new or revised policies?
Cost policy Cost sharing Cost transfers Effort certification Grant and contract policy Spending policy
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Criteria for charging a direct cost per policy
Support the project’s purpose and activity Represent those costs necessary to meet the project’s
scientific and technical requirements Be included in the awarded budget, or the cost must be
permitted within rebudgeting authority granted by the sponsor.
The cost must not be restricted by the sponsor.
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Unacceptable direct costing practices
Rotation of charges among sponsored agreements by month without establishing that the rotation schedule credibly reflects the relative benefits to each sponsored agreement
Assigning charges to the sponsored agreement with the largest remaining balance
Charging the budgeted amount rather than charging an amount based on actual usage
Assigning charges to a sponsored agreement in advance of the time the cost is actually incurred
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Unacceptable practices, cont.
Identifying a cost as something other than what it actually is, such as classifying a supply as an item of equipment
Charging expenses exclusively to sponsored agreements when the expense has supported non-sponsored agreement activities
Assigning charges that are part of normal administrative support (indirect costs) for sponsored agreements (e.g., accounting, payroll).
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Allocation of a direct cost to two or more projects
Direct assignment Proportional benefit
Credible documentation.
Interrelatedness Documentation by PI Source A-21 c(4)(d)(2)
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Multiple Funding Sources - Projects as proposed
Project Admin Asst Technician
Federal A 25% 25%
Federal B 25% 25%
Non-federal 25% 50%
State funds 25%
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Multiple Funding Sources - Projects as awarded
Project Admin Asst Technician
Federal A 25% 25%
Federal B 0% 25%
Non-federal 25% 50%
State funds 25%
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When one sponsor won't pick up a certain cost:
Consequence
Proposal not = PI intention
Not allowable there
Should be counted as cost sharing
Alternative
Rebudget to project after award
Charge to another source
Charge to the departmental budget
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With these awards departments can charge normally indirect to direct
Industrial/Commercial. Based on the agreement between the sponsor and the University.
Foundations and Non-For-Profit Agencies and Associations.
Based on the agreement between the sponsor and the University.
State Sponsored Agreements. State agency regulations govern
Training Grants. “Institutional allowance”
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Charging normally indirect to direct, cont.
Geographically inaccessible projects. Projects that take place in remote site(s).
Projects that require travel and meeting arrangements for large numbers of participants.
Projects involving large, complex programs Complexity goes well beyond the normal departmental support Program project grants, center grants, (EPSCOR)
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Charging normally indirect to direct, cont.
Projects which involve extensive data management. Mailing expense
Projects whose principle focus includes extensive reports
Other Sponsored Activities (not Research or Instruction) public service, workshops, community development
Specific costs incurred for a different purpose
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Recharges: per grant and contract policy
Billing rates are based on cost and Must be applied uniformly to all users. Billing rates may not be based on what others in the
industry charge for similar services. In some cases it may be necessary to establish rates at
less than full cost, but under no circumstances may rates exceed cost over the accepted operating cycle (five years).
No capital equipment acquisitions are allowed in the operating account
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Cost transfers: per separate policy
Timely Appropriate
Reasonable Allowable Allocable Consistently treated
Adequate documentation Responsibility for compliance
PI Contract and Grant Accounting
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Documentation of Cost Transfers per policy
The cost must be identified with activity in the sponsored agreement to which the cost is charged
Documentation that links the cost incurred to the sponsored agreement activity should be done by someone who is in a position to know the sponsored agreement activity (normally the PI)
Documentation must be maintained for a period of three years
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Documentation
Basic regulation Direct costs are those costs that can be identified specifically
with a particular sponsored project...or that can be assigned [to such activity] relatively easily and with a high degree of accuracy
Goal is to document the transaction in a way that demonstrates these
Per A-21 c(4)(d) this is the responsibility of the principal investigator
The institution's documentation requirements ... (e.g., signature or initials of the principal investigator or designee or use of a password) will normally be considered sufficient.
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Equipment as a direct charge should:
Have clear and close relationship to award
Not be used in similar way to equipment treated as indirect
Not be purchased at end of award
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Conclusions
There are risks in non-compliance with costing regulations at UA
When costs are charged to a grant, the relationship to the science should be clear and close
Charging practices should be in line with UA policies and procedures. This will:
Avoid damaging inconsistency Help UA negotiate a fair overhead rate
Each project should be managed: In conjunction with departmental administrator To avoid questionable transactions
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Today’s Questions
Why did the government promulgate cost accounting standards
Why should UA departments follow them? What standards apply? What are they likely to mean to your department? What are the new or revised policies? Where can you seek guidance?
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Where to seek guidance:
Contract and Grant Accounting Office (205) 348-5592 Telephone
(205) 348-5339 FAX
Office of Sponsored Programs (205) 348-5152 Telephone
(2050 348-8882 Fax
Policy guidelines Faculty Handbook: Post-Award Policies & Procedures at
www.ua.edu/cgfac.html
UA Spending Policieswww.bama.ua.edu/~finacct/spendweb.html
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Questions and Discussion