6-999 Related University References

EXTERNAL REQUIREMENT--FEDERAL

6-F01 2 CFR 220 - Office of Management and Budget Circular No. A-21, Cost Principles for Educational Institutions

Purpose
A-21 establishes principles for determining allowable direct and indirect costs.

Applicability
A-21 cost principles apply to all federal awards to educational institutions.

Summary of Provisions
This Circular establishes principles for determining costs applicable to federal grants, contracts, and other agreements with educational institutions. A-21 lays out a framework for classifying various costs that might be incurred in the course of research, training, or other activities performed under the auspices of an educational institution and supported by the federal government.

  1. Major Functions of an Institution

    Since different kinds of costs are associated with different activities, A-21 first defines the major functions of an institution. These activities are (a) instruction, (b) organized research (separately budgeted and accounted for), (c) other sponsored activities (extramurally financed projects other than instruction and organized research), and (d) other institutional activities.

  2. Allowable Costs: Direct and Indirect

    Certain costs may be charged to a sponsored agreement (i.e., to a grant, contract or other agreement between an institution and the federal government) and other costs may not be so charged. The former are called allowable costs in A-21. The general factors affecting the allowability of costs are discussed in 6-530.

    Costs that can be specifically identified with a particular institutional activity (at least relatively easily with a high degree of accuracy) are called direct costs. Costs that are incurred for common or joint objectives, and therefore cannot be identified readily and specifically with a particular institutional activity, are called indirect costs. According to the Circular: "Identification with the sponsored work rather than the nature of the goods and services involved is the determining factor in distinguishing direct and indirect costs of sponsored agreements."

  3. Indirect Cost Rate Pools

    Indirect cost rate proposals are based on actual costs. A-21 defines the categories of indirect costs and the standard method of allocating each category to the major functions of the University. Alternate methods are allowed under special circumstances. The basic categories (or "pools") are: (1) depreciation and use allowance (on buildings and capital improvements to land); (2) operation and maintenance expenses(for the physical plant);

    (3) general administration and general expenses (not related solely to any major function of the institution); (4) departmental administration expenses (for common or joint departmental activities); (5) sponsored projects administration (not otherwise included in general administration expenses); (6) library expenses; and (7) student administration and services.

  4. Types of Indirect Cost Rates

    The true indirect cost rate (determined after the fact) for a particular major function (e.g., organized research) would be the sum of the costs incurred in support of that function in each indirect cost pool, divided by the total direct costs for that function. A-21 specifies that these direct costs consist of salaries and wages, fringe benefits, materials and supplies, services, travel, and subgrants and subcontracts up to $25,000 each. In practice the rates are usually negotiated in advance so that they can be applied to particular sponsored agreements when the actual direct costs are incurred. There are several options given for how rates may be negotiated. The most common choices are "predetermined fixed rates" and "fixed rates with carry-forward provisions." Predetermined rates fixed for a definite period into the future are often used when both parties (the government and the university) are reasonably confident about the probable level of indirect costs during the period. The main advantage of this type of rate is that it simplifies the calculation of the rates, i.e., there is no after-the-fact adjustment of costs recovered no matter what the true rate was for the period. A more accurate (but more complicated to administer) rate type is the fixed rate with a carry forward provision. This means that, while the rate is fixed in advance of a given period, any under- or over- recovery of indirect costs can be taken account of and built into the rate for the next period.

  5. Specific Types of Costs

    A-21, in Appendix A, also contains specific guidance on fifty-four (54) types of costs which includes a brief discussion of what the category includes and what parts of it (if any) are allowable costs. It should be emphasized that the issue here is allowability; the principles apply whether a particular item is treated as a direct or indirect cost. These sections are subject to some interpretation. The purpose of this list (and of the Circular in general), however, is not to lay down a step-by-step process; it is to provide a general framework within which universities are to use "logic and reason" in making individual determinations. The fifty-four (54) types of costs addressed are the following:

    1. Advertising and public relations costs

    2. Advisory councils

    3. Alcoholic beverages

    4. Alumni/ae activities

    5. Audit and related services

    6. Bad debts

    7. Bonding costs

    8. Commencement and convocation costs

    9. Communication costs

    10. Compensation for personal services

    11. Contingency provisions

    12. Deans of faculty and graduate schools

    13. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement

    14. Depreciation and use allowances

    15. Donations and contributions

    16. Employee morale, health, and welfare costs and credits

    17. Entertainment costs

    18. Equipment and other capital expenditures

    19. Fines and penalties

    20. Fund raising and investment costs

    21. Gains and losses on depreciable assets

    22. Goods or services for personal use

    23. Housing and personal living expenses

    24. Idle facilities and idle capacity

    25. Insurance and indemnification

    26. Interest

    27. Labor relations costs

    28. Lobbying

    29. Losses on other sponsored agreements or contracts

    30. Maintenance and repair costs

    31. Material and supplies costs

    32. Meetings and conferences

    33. Memberships, subscriptions, & professional activity costs

    34. Patent costs

    35. Plant and homeland security costs

    36. Preagreement costs

    37. Professional service costs

    38. Proposal costs

    39. Publication and printing costs

    40. Rearrangement and alteration costs

    41. Reconversion costs

    42. Recruiting costs

    43. Rental costs of buildings and equipment

    44. Royalties and other costs for use of patents

    45. Scholarships and student aid costs

    46. Selling and marketing

    47. Specialized service facilities

    48. Student activity costs

    49. Taxes

    50. Termination costs applicable to sponsored agreements

    51. Training costs

    52. Transportation costs

    53. Travel costs

    54. Trustees

  6. Compensation for Personal Services

    The cost element called "compensation for personal services", i.e. salaries and wages, is important because it makes up a large portion of both the direct and indirect costs incurred under sponsored agreements. Allowable personnel costs must be categorized in terms of the major functions of the institution (research, training, etc.) and in terms of indirect cost pools (departmental administration, student services, and so on). A-21 provides for various methods for documenting the distribution of charges for salaries and wages, and also lays down criteria which any particular method chosen by an institution must meet. The gist of these criteria is summed up in the word "confirmation;" there must be some way to verify that salary and wage charges made within the institution's payroll system represent actual costs. At most institutions the confirmation is accomplished by means of Personnel Activity Reports (PARs) completed after the fact on a regular basis by the employees themselves or other responsible persons with suitable means of verification that the work was performed.

Primary University Responsibility
It is the responsibility of the Associate Vice President and Systemwide Controller - Financial Accounting to provide guidance to ensure the University's compliance with A-21. The Costing Policy & Analysis Office is responsible for indirect costs rates and providing guidance on the Personnel Activity Report (PAR) system and on the allowability of costs to federal awards. Campus Accounting and Contract and Grant Officers are responsible for implementation of local procedures to ensure compliance.

University Policy Implementation
Regarding the general policy framework for direct cost accounting, policy implementation is incorporated into Business and Finance Bulletin A-47, "University Direct Costing Procedures."

Please see the "Reference" section of the following Manual chapters for further information on the University policy and procedures issued on specific topics:

Topic Manual Chapter

Audit and Disallowance of Costs Chapter 4

Cost Principles and Costing Policies--General Chapter 6

Cost Principles and Costing Policies--Specific Elements of Costs Chapter 7

Cost Sharing Chapter 5

Indirect Costs Chapter 8

External Requirements-Federal

6-F02 2 CFR 215, Office of Management and Budget Circular No. A-110, 215.22, Payment,(i)-(j), Standards Governing Use of Banks

Purpose
The purpose of 2 CFR (OMB Circular A-110)215.22(i)-(j) is to set forth standards governing the use of banks and other institutions as depositories of funds advanced under federally funded grants and other federally funded agreements.

Applicability
The standards promulgated by 2 CFR 215.22(i)-(j) are applicable to all federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi-public and private non-profit organizations. The term "other agreements" does not include procurement contracts, but does include cooperative agreements.

When the federal granting agency is a member of the Federal Demonstration Partnership

(FDP), the FDP A-110 Research Terms and Conditions apply.

Summary of Provisions
Subsections 2 CFR 215.22(i)-(j) set forth standards governing the use of banks and other institutions as depositories of funds advanced under grants and other agreements. It covers restrictions on government requirements for separate bank accounts, deposits in banks with FDIC insurance, and emphasis on use of minority banks.

The FDP terms implement these requirements.

Primary University Responsibility
The President is responsible for all matters relating to bank accounts and banking relationships, according to the Standing Orders of the Regents of the University of California, Section 100.4, "Duties of the President of the University." Additionally, the duties of various University Officers are outlined in:

Accounting Manual, C-173, "Cash: Cash Controls"

Accounting Manual, C-557-21, "Contracts and Grants: Cash Advance Program"

University Policy Implementation
The Treasurer has developed procedures to ensure deposits are made in banks with FDIC insurance and collateral security in the event that cash advances exceed FDIC coverage limits.

University policies regarding bank accounts and letter-of-credit agreements are outlined in the two Accounting Manual sections identified in PRIMARY UNIVERSITY RESPONSIBILITY, above.

Consistent with these policy statements, Contract and Grant Officers must collaborate with the Accounting Officer in accepting any terms on Letters of Credit.

External Requirements-Federal

6-F03 2 CFR 215, Office of Management and Budget Circular No. A-110, 215.24, Program Income

Purpose
The purpose of OMB Circular A-110, 215.24 is to set forth standards governing the use of income earned by assistance recipients from the federally supported activities.

Applicability
The standards promulgated by Circular A-110, 215.24 are applicable to all federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi- public and private non-profit organizations. The term "other agreements" does not include procurement contracts, but does include cooperative agreements.

When the federal awarding agency is a member of the Federal Demonstration Partnership (FDP), the FDP A-110 Research Terms and Conditions apply. The FDP Research Terms and Conditions implement the requirements of section 215.24 with additional clarifications.

Summary of Provisions
The following is the full text of Section 215.24 of Circular A-110:

215.24 Program income.

  1. Federal awarding agencies shall apply the standards set forth in this section in requiring recipient organizations to account for program income related to projects financed in whole or in part with Federal funds.

  2. Except as provided in paragraph (h) below, program income earned during the project period shall be retained by the recipient and, in accordance with Federal awarding agency regulations or the terms and conditions of the award, shall be used in one or more of the ways listed in the following.

    1. Added to funds committed to the project by the Federal awarding agency and recipient and used to further eligible project or program objectives.

    2. Used to finance the non-Federal share of the project or program.

    3. Deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of costs is based.

  3. When an agency authorizes the disposition of program income as described in paragraphs (b)(1) or (b)(2), program income in excess of any limits stipulated shall be used in accordance with paragraph (b)(3).

  4. In the event that the Federal awarding agency does not specify in its regulations or the terms and conditions of the award how program income is to be used, paragraph (b) (3) shall apply automatically to all projects or programs except research. For awards that support research, paragraph (b) (1) shall apply automatically unless the awarding agency indicates in the terms and conditions another alternative on the award or the recipient is subject to special award conditions, as indicated in Sec. 215.14.

  5. Unless Federal awarding agency regulations or the terms and conditions of the award provide otherwise, recipients shall have no obligation to the Federal Government regarding program income earned after the end of the project period.

  6. If authorized by Federal awarding agency regulations or the terms and conditions of the award, costs incident to the generation of program income may be deducted from gross income to determine program income, provided these costs have not been charged to the award.

  7. Proceeds from the sale of property shall be handled in accordance with the requirements of the Property Standards (see Sec.215.30 through Sec. 217.37).

  8. Unless Federal awarding agency regulations or the terms and condition of the award provide otherwise, recipients shall have no obligation to the Federal Government with respect to program income earned from license fees and royalties for copyrighted material, patents, patent applications, trademarks, and inventions produced under an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply to inventions made under an experimental, developmental, or research award.

Primary University Responsibility
Campus Contract and Grant Officer and Controller with concurrence of Principal Investigator for items (a) through (f); OP Materiel Management for item (g); and OP Office of Technology Transfer for item (h).

University Policy Implementation
Regarding royalties received as a result of copyrights or patents (Sec. 215.24 (h)), policy implementation is incorporated in the University Copyright Policy and the UniversityPatent Policy, and described in this Contract and Grant Manual, Chapter 11, Intellectual Property.

Regarding income from the sale of property, see Section 15-540 of this Manual. Regarding all other program income, use of any program income to be earned during the project period is determined by the terms of the individual award and may be subject to negotiation by the Contract and Grant Officer and implemented by the Accounting Officer, with the concurrence of the Principal Investigator, within the parameters of alternatives 2 CFR 214.24 Sections (b)(1), (b)(2) and (b)(3).

External Requirements-Federal

6-F04 2 CFR 215, Office of Management & Budget Circular No. A-110, 215.21, Standardsfor Financial Management Systems

Purpose
The purpose of 2 CFR 215, OMB Circular A-110, 215.21 is to set forth standards for financial management systems of assistance recipients, and to prevent federal sponsoring agencies from imposing stricter standards.

Applicability
The standards promulgated by2 CFR 215.21 are applicable to all federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi-public and private non- profit organizations. The term "other agreements" does not include procurement contracts, but does include cooperative agreements.

Summary of Provisions
The following is the complete text of 2 CFR 215, OMB Circular A-110, 215.21, Standards for Financial Management Systems:

215.21 Standards for financial management systems.

  1. Federal awarding agencies shall require recipients to relate financial data to performance data and develop unit cost information whenever practical.

  2. Recipients' financial management systems shall provide for the following.

    1. Accurate, current and complete disclosure of the financial results of each federally-sponsored project or program in accordance with the reporting requirements set forth in Sec. 215.52. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient shall not be required to establish an accrual accounting system. These recipients may develop such accrual data for its reports on the basis of an analysis of the documentation on hand.

    2. Records that identify adequately the source and application of funds for federally-sponsored activities. These records shall contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, outlays, income and interest.

    3. Effective control over and accountability for all funds, property and other assets. Recipients shall adequately safeguard all such assets and assure they are used solely for authorized purposes.

    4. Comparison of outlays with budget amounts for each award. Whenever appropriate, financial information should be related to performance and unit cost data.

    5. Written procedures to minimize the time elapsing between the transfer of funds to the recipient from the U.S. Treasury and the issuance or redemption of checks, warrants or payments by other means for program purposes by the recipient. To the extent that the provisions of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern, payment methods of State agencies, instrumentalities, and fiscal agents shall be consistent with CMIA Treasury-State Agreements or the CMIA default procedures codified at 31 CFR part 205, "Withdrawal of Cash from the Treasury for Advances under Federal Grant and Other Programs."

    6. Written procedures for determining the reasonableness, allocability and allowability of costs in accordance with the provisions of the applicable Federal cost principles and the terms and conditions of the award.

    7. Accounting records including cost accounting records that are supported by source documentation.

  3. Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the Federal awarding agency, at its discretion, may require adequate bonding and insurance if the bonding and insurance requirements of the recipient are not deemed adequate to protect the interest of the Federal Government.

  4. The Federal awarding agency may require adequate fidelity bond coverage where the recipient lacks sufficient coverage to protect the Federal Government's interest.

  5. Where bonds are required in the situations described above, the bonds shall be obtained from companies holding certificates of authority as acceptable sureties, as prescribed in 31 CFR part 223, "Surety Companies Doing Business with the United States."

The FDP Research Terms and Conditions in 215.21 are:

The recipient’s financial management system shall meet the standards specified in paragraph (b) of 2 CFR 215.21.

Primary University Responsibility
The Chief Financial Officer is responsible for University implementation of these financial management standards. The standards are implemented by the Associate VicePresident and Systemwide Controller - Financial Accounting and by campus Controllers.

University Policy Implementation
The general structure and process of University accounting activities are outlined in Accounting ManualChapter A-000-4, "University Accounting Program." Accounting Manual Chapter A-000-7, "Official Documentation Required in Support of University Financial Transactions," specify records which must be prepared to support financial transactions.

Accounting Manual, Chapter D-371-36, "Invoice Processing in Response to Purchase Authorizations," provides rules for verifying and certifying invoices and outlines departmental and accounting office responsibilities. Purchasing policies are detailed in Business and Finance Bulletin BUS-43, "Materiel Management," and policy for accounting for inventorial equipment is found in Business and Finance Bulletin BUS-29,"Management and Control of Inventorial Equipment."

External Requirements-Federal

6-F05 2 CFR 215, Office of Management and Budget Circular pNo. A-110, 215.52, FinancialpReporting

Purpose
The purpose of 2 CFR 215, (OMB Circular A-110), 215.52 is to prescribe uniform reporting procedures for assistance recipients, and to prevent Federal sponsoring agencies from imposing additional reporting requirements.

Applicability
The standards promulgated by 2 CFR 215, ( A-110), 215.52 are applicable to all federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi- public and private non-profit organizations. The term "other agreements" does not include procurement contracts, but does include cooperative agreements.

When the federal granting agency is a member of the Federal Demonstration Partnership

(FDP), the FDP A-110 Research Terms and Conditions apply.

Summary of Provisions
The following is the complete text of A-110, 215.52, Financial Reporting:

215.52 Financial reporting.

  1. The following forms or such other forms as may be approved by OMB are authorized for obtaining financial information from recipients.

    1. F-269 or SF-269A, Financial Status Report.

      1. Each Federal awarding agency shall require recipients to use the SF- 269 or SF-269A to report the status of funds for all nonconstruction projects or programs. A Federal awarding agency may, however, have the option of not requiring the SF-269 or SF-269A when the SF-270, Request for Advance or Reimbursement, or SF-272, Report of Federal Cash Transactions, is determined to provide adequate information to meet its needs, except that a final SF-269 or SF-269A shall be required at the completion of the project when the SF-270 is used only for advances.

      2. The Federal awarding agency shall prescribe whether the report shall be on a cash or accrual basis. If the Federal awarding agency requires accrual information and the recipient's accounting records are not normally kept on the accrual basis, the recipient shall not be required to convert its accounting

        system, but shall develop such accrual information through best estimates based on an analysis of the documentation on hand.

      3. The Federal awarding agency shall determine the frequency of the Financial Status Report for each project or program, considering the size and complexity of the particular project or program. However, the report shall not be required more frequently than quarterly or less frequently than annually. A final report shall be required at the completion of the agreement.

      4. The Federal awarding agency shall require recipients to submit the SF- 269 or SF-269A (an original and no more than two copies) no later than 30 days after the end of each specified reporting period for quarterly and semi- annual reports, and 90 calendar days for annual and final reports. Extensions of reporting due dates may be approved by the Federal awarding agency upon request of the recipient.

    2. F-272, Report of Federal Cash Transactions.

      1. When funds are advanced to recipients the Federal awarding agency shall require each recipient to submit the SF-272 and, when necessary, its continuation sheet, SF-272a. The Federal awarding agency shall use this report to monitor cash advanced to recipients and to obtain disbursement information for each agreement with the recipients.

      2. Federal awarding agencies may require forecasts of Federal cash requirements in the "Remarks" section of the report.

      3. When practical and deemed necessary, Federal awarding agencies may require recipients to report in the "Remarks" section the amount of cash advances received in excess of three days. Recipients shall provide short narrative explanations of actions taken to reduce the excess balances.

      4. Recipients shall be required to submit not more than the original and two copies of the SF-272 15 calendar days following the end of each quarter. The Federal awarding agencies may require a monthly report from those recipients receiving advances totaling $1 million or more per year.

      5. Federal awarding agencies may waive the requirement for submission of the SF-272 for any one of the following reasons:

        1. When monthly advances do not exceed $25,000 per recipient, provided that such advances are monitored through other forms contained in this section;

        2. If, in the Federal awarding agency's opinion, the recipient's accounting controls are adequate to minimize excessive Federal advances; or,

        3. When the electronic payment mechanisms provide adequate data.

  2. When the Federal awarding agency needs additional information or more frequent reports, the following shall be observed.

    1. When additional information is needed to comply with legislative requirements, Federal awarding agencies shall issue instructions to require recipients to submit such information under the "Remarks" section of the reports.

    2. When a Federal awarding agency determines that a recipient's accounting system does not meet the standards in Sec. 215.21, additional pertinent information to further monitor awards may be obtained upon written notice to the recipient until such time as the system is brought up to standard. The Federal awarding agency, in obtaining this information, shall comply with report clearance requirements of 5 CFR part 1320.

    3. Federal awarding agencies are encouraged to shade out any line item on any report if not necessary.

    4. Federal awarding agencies may accept the identical information from the recipients in machine readable format or computer printouts or electronic outputs in lieu of prescribed formats.

    5. Federal awarding agencies may provide computer or electronic outputs to recipients when such expedites or contributes to the accuracy of reporting.

The FDP Research Terms for 215.52 are:

This article specifies financial reporting requirements (it thereby implements, and does not incorporate, 2 CFR 215.52). If payments are made in advance, in accordance with Article 22.(a) of these general terms and conditions, the Federal Cash Transactions Report (SF-272) or its electronic equivalent shall be submitted within 15 days following the end of each funding quarter. If payments are made by the reimbursement method, see agency specific terms and conditions for the applicable financial reporting requirements.

Primary University Responsibility
The campus Controllers are responsible for adhering to the financial reporting requirements outlined in 215.52 utilizing financial data generated by the Principal Investigator and/or responsible Program Administrator.

University Policy Implementation
Policies and procedures governing the objectives, organization, and structure of the University Accounting program and the responsibilities of Controllers are outlined in Accounting Manual, Chapter A-000-4, "University Accounting Program." Additional guidance regarding submission of financial reports is provided in the Accounting Manual, Chapter C-557-21,"Contracts and Grants: Cash Advance Program." Policies and procedures regarding billing of charges to federally-supported contracts and grants are given in Accounting Manual, Chapter R-212-2, "Receivables Management."

External Requirements-Federal

6-F06 2 CFR 215, Office of Management and Budget Circular No. A-110, 215.25, Revisionpof Budget and Program Plans

Purpose
The purpose of 2 CFR 215 (OMB Circular A-110), 215.25 is to set forth criteria and procedures to be followed by federal sponsoring agencies in requiring recipients to report deviations from financial plans and to request approvals for financial plan revisions.

Applicability
The standards promulgated by A-110, 215.25 are applicable to all federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi-public and private non-profit organizations. The term "other agreements" does not include procurement contracts, but does include cooperative agreements.

When the federal granting agency is a member of the Federal Demonstration Partnership (FDP), the FDP A-110 Research Terms and Conditions apply. The FDP Research Terms and Conditions vary from the standard 2 CFR 215 (A-110) terms in this section 215.25.

Summary of Provisions
This section sets forth the requirements for prior approvals for rebudgeting. It incorporates the expanded authorities for pre-award costs, one time extensions, and carry forward of unobligated funds.

Primary University Responsibility
The Principal Investigator and/or Program Director is responsible for identifying any need for revision of the budget, with the assistance of the Accounting Office. Submission of requests for revisions will be coordinated by the campus Contract and Grant Officers and implemented by the campus Accounting Officers.

University Policy Implementation
The University accounting system, as detailed in Accounting Manual, Chapter A-000-4, "University Accounting Program" provides for monitoring of expenditures in the various budget categories of a sponsored project and control over expenditures in those categories which are restricted by the terms of the funding agreement. The need for internal control standards and adequate supporting documentation also is outlined in Accounting Manual, Chapter C-557-21, "Contracts and Grants: Cash Advance Program."

External Requirements-Federal

6-F07 2 CFR 215, Office of Management and Budget Circular No. A-110, 215.22, Payment

Purpose
The purpose of 2 CFR 215 (OMB Circular A-110), 215.22 is to standardize methods of making payments to assistance recipients.

Applicability
The standards promulgated by A-110, 215.22 are applicable to all federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi-public and private non-profit organizations. The term "other agreements" does not include procurement contracts, but does include cooperative agreements. Note FDP clarifications to this section. (See references above in 6-F06.)

Summary of Provisions
The following is the complete text of 215.22, Payment:

  1. Payment methods shall minimize the time elapsing between the transfer of funds from the United States Treasury and the issuance or redemption of checks, warrants, or payment by other means by the recipients. Payment methods of State agencies or instrumentalities shall be consistent with Treasury-State CMIA agreements or default procedures codified at 31 CFR part 205.

  2. Recipients are to be paid in advance, provided they maintain or demonstrate the willingness to maintain:

    1. written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient, and

    2. financial management systems that meet the standards for fund control and accountability as established in Sec.215.21. Cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs.

  3. Whenever possible, advances shall be consolidated to cover anticipated cash needs for all awards made by the Federal awarding agency to the recipient.

    1. Advance payment mechanisms include, but are not limited to, Treasury check and electronic funds transfer.

    2. Advance payment mechanisms are subject to 31 CFR part 205.

    3. Recipients shall be authorized to submit requests for advances and reimbursements at least monthly when electronic fund transfers are not used.

  4. Requests for Treasury check advance payment shall be submitted on SF-270, "Request for Advance or Reimbursement," or other forms as may be authorized by OMB. This form is not to be used when Treasury check advance payments are made to the recipient automatically through the use of a predetermined payment schedule or if precluded by special Federal awarding agency instructions for electronic funds transfer.

  5. Reimbursement is the preferred method when the requirements in paragraph 215.12 cannot be met. Federal awarding agencies may also use this method on any construction agreement, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal assistance constitutes a minor portion of the project.

    1. When the reimbursement method is used, the Federal awarding agency shall make payment within 30 days after receipt of the billing, unless the billing is improper.

    2. recipients shall be authorized to submit request for reimbursement at least monthly when electronic funds transfers are not used.

  6. If a recipient cannot meet the criteria for advance payments and the Federal awarding agency has determined that reimbursement is not feasible because the recipient lacks sufficient working capital, the Federal awarding agency may provide cash on a working capital advance basis. Under this procedure, the Federal awarding agency shall advance cash to the recipient to cover its estimated disbursement needs for an initial period generally geared to the awardee's disbursing cycle. Thereafter, the Federal awarding agency shall reimburse the recipient for its actual cash disbursements. The working

    capital advance method of payment shall not be used for recipients unwilling or unable to provide timely advances to their subrecipient to meet the subrecipient's actual cash disbursements.

  7. To the extent available, recipients shall disburse funds available from repayments to and interest earned on a revolving fund, program income, rebates, refunds, contract settlements, audit recoveries and interest earned on such funds before requesting additional cash payments.

  8. Unless otherwise required by statute, Federal awarding agencies shall not withhold payments for proper charges made by recipients at any time during the project period unless (1) or (2) apply.

    1. A recipient has failed to comply with the project objectives, the terms and conditions of the award, or Federal reporting requirements.

    2. The recipient or subrecipient is delinquent in a debt to the United States as defined in OMB Circular A-129, "Managing Federal Credit Programs," Under such conditions, the Federal awarding agency may, upon reasonable notice, inform the recipient that payments shall not be made for obligations incurred after a specified date until the conditions are corrected or the indebtedness to the Federal Government is liquidated.

  9. Standards governing the use of banks and other institutions as depositories of funds advanced under awards are as follows.

    1. Except for situations described in paragraph (i)(2), Federal awarding agencies shall not require separate depository accounts for funds provided to a recipient or establish any eligibility requirements for depositories for funds provided to a recipient. However, recipients must be able to account for the receipt, obligation and expenditure of funds.

    2. Advances of Federal funds shall be deposited and maintained in insured accounts whenever possible.

  10. Consistent with the national goal of expanding the opportunities for women-owned and minority- owned business enterprises, recipients shall be encouraged to use women- owned and minority- owned banks (a bank which is owned at least 50 percent by women or minority group members).

  11. Recipients shall maintain advances of Federal funds in interest bearing accounts, unless (1), (2) or (3) apply.

    1. The recipient receives less than $120,000 in Federal awards per year.

    2. The best reasonably available interest bearing account would not be expected to earn interest in excess of $250 per year on Federal cash balances.

    3. The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources.

  12. For those entities where CMIA and its implementing regulations do not apply, interest earned on Federal advances deposited in interest bearing accounts shall be remitted annually to Department of Health and Human Services, Payment Management System, Rockville, MD 20852. Interest amounts up to $250 per year may be retained by the recipient for administrative expense. State universities and hospitals shall comply with CMIA, as it pertains to interest. If an entity subject to CMIA uses its own funds to pay pre-award costs for discretionary awards without prior written approval from the Federal awarding agency, it waives its right to recover the interest under CMIA.

  13. Except as noted elsewhere in this Circular, only the following forms shall be authorized for the recipients in requesting advances and reimbursements. Federal agencies shall not require more than an original and two copies of these forms.

    1. SF-270, Request for Advance or Reimbursement. Each Federal awarding agency shall adopt the SF-270 as a standard form for all nonconstruction programs when electronic funds transfer or predetermined advance methods are not used. Federal awarding agencies, however, have the option of using this form for construction programs in lieu of the SF-271, "Outlay Report and Request for Reimbursement for Construction Programs."

    2. F-271, Outlay Report and Request for Reimbursement for Construction Programs. Each Federal awarding agency shall adopt the SF-271 as the standard form to be used for requesting reimbursement for construction programs. However, a Federal awarding agency may substitute the SF-270 when the Federal awarding agency determines that it provides adequate information to meet Federal needs.

Primary University Responsibility
The campus Controllers are responsible for securing payment from sponsors of extramural projects based upon payment terms and conditions accepted by campus Contract and Grant Officers.

University Policy Implementation
Detailed procedures for administering advance payment through letter of credit or Treasury Check are detailed in the Accounting Manual, Chapter C-557-21, "Contractsand Grants Cash Advance Programs."

EXTERNAL REQUIREMENT--FEDERAL

6-F08 Federal Acquisition Regulation (FAR), Parts 31 and 32 and Related Clauses

Purpose
The Federal Acquisition Regulation (FAR) is the primary regulation for use by all federal agencies in their acquisition of supplies and services with appropriated funds.

Applicability
The FAR applies to all contracts for the acquisition of supplies and services awarded by any federal agency. The FAR does not apply to grants and cooperative agreements covered by 31 USC 6301, et. seq., theFederal Grant and Cooperative Agreement Act.

Summary of Provisions
The general financial sections of the FAR are Part 31.3, "Contract Cost Principles and Procedures", and Part 32, "Contract Financing." Specific contract clauses relating to allowable cost and payment are found inParts 52.216 and 52.232.

  1. FAR Part 31, "Contract Cost Principles and Procedures"

    Subpart 31.1, "Applicability" establishes the general principles for determining applicable cost principles for a given type of recipient organization and a given type of contract. The cost principles are applicable whether the institution is a prime contractor or a subcontractor under a prime contract with another type of organization.

    Subpart 31.2 specifies the cost principles for contracts with commercial organizations; Subpart 31.3 specifies the cost principles for educational institutions; Subpart 31.6 specifies the principles for state and local governments; and Subpart 31.7 specifies the principles for nonprofit organizations.

    The Subpart 31.3 provides that the cost principles in OMB Circular No. A-21 are the applicable cost principles for educational institutions. It incorporates the provisions of A-21 by reference.

    The FAR contract clauses governing general financial issues of allowable costs are set forth at 52.216. The FAR contract clauses governing payment and limitation of funds are set forth in Part 52.232.

  2. FAR Part 32, "Contract Financing"

FAR Part 32 prescribes policies and procedures for contract financing and other payment matters, including coverage on advance payments, progress payments based

on costs, contract debts, contract funding, and assignment of claims. The FAR contract clauses governing contract financing are set forth in FAR Part 52.232.

Primary University Responsibility
Responsibilities related to FAR Part 31 are presented in Section 6-F01 above. Detailed procedures for administering advance payments through letter of credit or

Treasury Check are provided in Accounting Manual, Chapter C-557-21, "Contracts and Grants: Cash Advance Programs."

Guidance on acceptance of specific FAR clauses is issued by OP RPAC (formerly Contract and Grant) Operating Guidance Memos as well as on the RPAC (Research Administration) website, "Guide to Clauses."

External Requirement - State

6-S01 State Administrative Manual Section 8099 - Cash; Maximization of InterestEarnings and Chapter 8400 - Disbursements

Purpose
Section 8099 lists and summarizes all the other State Administrative Manual sections related to the State’s requirements to maximize interest earnings on State money. Chapter 8400 sets forth the requirements for State agencies when paying invoices.

Applicability
The State Administrative Manual (SAM) applies to all State government agencies.

Summary of Provisios
The SAM sections summarized in Section 8099 set forth (1) the procedures for State agencies to follow in order for the State to secure prompt reimbursement and deposit of funds it receives. Section 8422.104, “Invoices for Contractual Services” provides the requirements for payments under State contracts. Advance payments are permitted only when authorized by law or under interagency agreements. However, State agencies generally will not provide advance payments unless absolutely necessary for the performance of the work under the agreement.

Lead Agency
State of California Department of General Services.

Primary University Responsibility
Contract and Grant Officers are responsible for requesting start-up costs when necessary and monthly rather than quarterly payments in arrears when State agencies use interagency agreements.

University Implementation
Guidance is issued via OP RPAC Operating Guidance Memo.

External Requirement - State

6-S02 State Administrative Manual Section 8758 - Charges for Interagency Services

Purpose
Section 8758 lists the types of charges allowed on interagency agreements and sample clauses to include in such agreements.

Applicability
The section applies to all State agencies.

Summary of Provisions
Section 8758 states that charges for interagency services can include direct, indirect, and central service costs. Advance payments are allowed.

Lead Agency
State of California Department of General Services.

Primary University Responsibility
Contract and Grant Officers are responsible for requesting interagency agreements from State agencies. Accounting Officers are responsible for requesting advance payments when allowed by the terms of an interagency agreement.

University Implimintation
Guidance is issued via OP RPAC Operating Guidance Memos as needed.