Research Administration Office

University of California

August 4, 1978

DHEW AUDIT AGENCY FOLLOW-UP AUDIT ON SUPPORTING DOCUMENTATION FOR PROPOSAL BUDGETS

Most of you were informed by copy of Director Gross' memorandum of August 2, 1978, to Campus Federal Audit Coordinators that the DHEW Audit Agency will be conducting a follow-up audit on the University's proposal pricing practices. (See Attachment 1). This is to further advise that the DHEW Audit Agency has completed its initial review of policies issued by Systemwide Administration for proposal documentation and has made plans for visits to Berkeley, San Francisco, Davis, Los Angeles, San Diego and Santa Barbara campuses to review current campus procedures and practices. The Audit Agency advises that it will provide advance notice prior to arrival on your campus.

We advised the DHEW Audit Agency that the University's current proposal documentation policy which is to be republished as part of the Contract and Grant Manual is embodied in the document entitled Guidelines for Proposal Budget Support.

As you may recall, those Guidelines were prepared by the Audit Agency as a result of their initial proposal audit findings during the latter part of 1975. The Guidelines were distributed for your review and comments via C& G Memo 19-76 on February 4, 1976. We, thereafter, received your favorable responses.

In preparation for the DHEW Audit Agency's visit to your campus it may be useful for you to review the following materials:

(1) DHEW Audit Agency's 1975 audit report No. 67003-09, "Review of Support for Cost Proposals Under Federal Agreements". (Refer to C& G Memo 19-76).

(2) Guidelines for Proposal Budget Support (Reproduced as Attachment 2 to this Memo).

(3) Your written campus policies and procedures on proposal preparation and documentation

Refer: W. C. Archie, 2-2593

Index: Audits, Proposals

Attachments

Office of the Associate Vice President

August 2, 1978

CAMPUS FEDERAL AUDIT COORDINATORS:

I have been advised that the DHEW Audit Agency is going to do a follow-up audit on the University's proposal pricing practices. They plan to visit five campuses (not identified) and the UCSA Contract and Grant Office.

cc:

Associate Vice President Jenkins

T. Feuerborn

Contract and Officers

GUIDELINES FOR PROPOSAL BUDGET SUPPORT

The following guidelines are intended to serve as a basis for supporting budgets under cost proposals submitted to Federal awarding agencies by the University of California. The kind of supporting documentation specified will be the type of material that the DHEW Audit Agency will look for during cost proposal audits performed at awarding agency request, The criteria specified is not intended to be binding on the University. The University may maintain other types of supporting documentation provided that it is written and shows clearly and in sufficient detail how the proposed cost element dollar amounts were arrived at.

Salaries and Wages

Supporting documentation should indicate:

• 1. The names of all persons who will work under the project (if known).
• 2. The academic rank or title (including step) of each individual
  • a. e.g. "professor" is not sufficient. Professor (clinical) step III is sufficient.

  • b. If the individual to fill a particular position is unknown then the position should not be higher than the middle step for that title.

• 3. The current annual or monthly salary for each position to be filled
  • a. This should be based on the current published University salary and wage scales.

  • b. The nature of the appointment should be specified (9 month, 11 month, annual).

• 4. The number of months of effort on the project and/or the percentage of effort for each position
  • a. Summer effort should be marked as such

• 5. Projected cost of living increases and-the period to which they apply
  • a. Show the new annual or monthly rate for each position and the period to which it applies.

• 6. Projected merit increases and the period to which they' apply should be specified.

• 7. Show the new annual or monthly rate for each position and the period to which it applies. University cost-sharing contributions.
  • a. Indicate the percentage of cost-sharing and dollar amount for each position.

Supporting documentation should indicate:

• 1. The current fringe benefit rate for each class of employee.
  • a. The correct rate should be applied to the salary base for each position.

  • b. Since the rates are different for summer effort, the proper rate should be shown applied to the proper salary base for each position in which summer effort takes place.

Supporting documentation should indicate:

• 1. The names of the consultants (if known).

• 2. The daily rate of pay-and the number of days of pay for each consultant.
  • a. Documentation supporting the reasonableness of the daily rate of pay should be provided.

• 3. The costs of travel for each consultant, including air fare and per diem costs.

Supporting documentation should indicate class of equipment item and

• 1. Prototype of equipment by type, model number, and manufacturer (i.e. similar to XYZ Manufacturing Company, Model X)

• 2. The current price of the equipment. Estimates should be based on the latest catalog. Avoid specifying a manufacturer's name.
  • a. Catalogs should be retained as supporting documentation.

  • b. If catalogs are not available, written vendors quotes should be obtained and retained.

• 3. How inflationary factors are calculated if they are included.
  • a. Documentation supporting the estimated inflation factor should be retained.

Supporting documentation should indicate:

• 1. The nature of the equipment to be fabricated.

• 2. A cost analysis of the estimated cost for each fabricated item.
  • a. The analysis should include the cost of labor (rate times hours), cost of materials and indirect costs.

  • b. If the cost estimate is based on recent historical experience in fabricating similar. items, have documentation available to support this.

Supporting documentation should indicate:

• 1. Each item of equipment to be rented by type, model number, and manufacturer.

• 2. The current rental rate of each item of equipment, supported by vendors catalogs or written quotes.

• 3. How inflationary factors are calculated if they are included.

Supporting documentation should indicate:

• 1. The destination of each trip (if known). If the exact location is not known, the general geographic location should be specified.

• 2. The number of individuals on each trip.

• 3. The mode and cost of transportation.

• 4. The number of days of per diem and the appropriate per diem rate.
• 5. The number of days of car rental and the estimated car rental rate.

• 6. The purpose of the trip (particularly if a foreign trip).

Supporting documentation should indicate:

• 1. The major subclasses of supplies and expense (such as chemicals, mechanical items, communications, etc.) along with the estimated cost of each subclass.

• 2. How best estimates or historical estimates were arrived at for estimating supplies and expense costs.
  • a. Prior year accounting documentation (or other documentation) should be available to support these "best estimates".

• A. Publications Costs
  • 1. List the number of pages to be published and the cost per page. cost per page. Have documentation supporting the cost per page.

• B. Computer Time
  • 1. List the number of hours of time and the rate per hour. Itemize any special services required. Specify the computer type and location.

• C. Alterations and Renovations
  • 1. Have supporting documentation from the campus architects and engineers office showing how the estimate was arrived at.

• D. Any other direct costs should be supported in as much detail as possible. Written documentation supporting these costs should be maintained.

The appropriate rate and base to which the rate is to be applied should be indicated. The dollar figure for the indirect cost base should be specified.