Research Policy Analysis and Coordination
Chapter 7-300: Justification and Documentation of Expenditures
Expenditures may be charged to extramural awards as long as the expenditures are allowable, have been authorized in accordance with University policy, funds are available, formal prior approval has been secured if needed, and any required special reviews required have been completed. (See Chapter 6 of this Manual and Accounting Manual Chapter D-371-16, "Disbursements: Approvals Required". Of paramount concern in justifying a particular expenditure on an extramurally-funded grant, contract, or cooperative agreement is the question of benefit: only those costs which advance the goals of a project may be directly charged to that project. Specific information on University policies and procedures regarding direct costing and expenditure documentation is found in Business and Finance Bulletin A-47 University Direct Costing Procedures and Accounting Manual Chapter A-000-7, "Official Documentation Required in Support of University Financial Transactions."
7-310 Costs Normally Treated as Indirect
2 CFR 220 (OMB Circular A-21), Appendix A, section F.6.b. (2) and (3) require that certain costs be treated as indirect costs unless specific requirement are met. The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate when a “major project” or activity explicitly budgets for administrative or clerical services and individuals involved can be specifically identified with the project or activity. “Major project” is defined as a project that requires an amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by an academic department. (See OMB Circular A-21, Exhibit C for examples of “major projects.”)
Items such as general office supplies, postage, local telephone costs, and memberships shall normally be treated as indirect costs unless they are specifically required to perform the project, (e.g., mass mailings requiring exceptional volumes of postage, banks of telephones to conduct surveys) and would not be required in the absence of the project.
7-320 Accounting System
Various chapters of the University Accounting Manual and Business and Finance Bulletins series set forth the procedures and controls that campuses must institute to ensure that charges conform to University and sponsor policies and are sufficiently documented. A list of those Accounting Manual and Business and Finance Bulletins’ chapters relating to specific direct costs elements is found in the "References" section of this Chapter.
7-330 Effort Certification and Reporting System
For University personnel who are paid on or have commitments to work on federal contract and grant funds, a certification of effort must be completed by the employee or responsible official certifying the percentage of his or her total work effort applicable to sponsored research. Failure to certify effort accurately and on a timely basis may result in the charge being disallowed by the federal agency funding the research. Although each campus may use its own procedures for obtaining the required certification, the procedure must be consistent with the following standards:
Certification of Effort
Principal Investigators and other faculty in Professorial, Professional Research, and Management titles who are paid on or have commitments to work on federal or federal flow-through funds are required to certify their own effort since they are in the best position to understand how they are spending their time in support of the various activities in which they are engaged. This is consistent with the 2 CFR 220 (OMB Circular A-21)Appendix A. J. 10. b. (2) requirement that the distribution of salaries and wages be supported by activity reports that are confirmed by "a responsible person with suitable means of verification that the work was performed."
The effort of staff employees who are paid on or have commitments to work on federal or federal flow-through funds must be certified by "... the employee, principal investigator, or responsible official with suitable means of verification that the work was performed.”
Treatment of Effort Reporting Revisions
Changes to previously certified effort reports should be extremely rare. However, if an effort report is determined to be in error, a new one can be prepared coincident with payroll cost transfers and other extenuating circumstances. Such revisions are subject to a "facts and circumstances" review and must be processed on a timely basis consistent with federal regulations and University policy (i.e., as specified in Business and Finance Bulletin A-47, Section V) to ensure their allowability under audit. If revisions are required, the extremely unusual extenuating circumstances surrounding the need for a corrected effort report must be fully explained and documented.
Timeliness of Certifications
Timely certification of effort reports is a condition of acceptance of federal funding when direct salary charges are contemplated and incurred or cost shared salary is proposed on an award. Principal Investigators and their campus departments are responsible for ensuring full compliance with effort reporting requirements. Campus departments and Extramural Fund Accounting Offices shall take progressive action to prompt corrective action and resolution according to local campus policy when required, including:
- Notification of the Department Chair or director for resolution
- Notification of the Dean to expedite resolution
- Notification of the Vice Chancellor—Research and/or Provost/Executive
- Vice Chancellor and request intervention and resolution
The University shall require all effort to be certified within 120 days of the end of the reporting period. Effort not certified within 120 days may result in action being taken by the campus to reverse the charges on the award, may jeopardize submission of future proposals, cause a proposal to be withdrawn, and/or jeopardize the acceptance of future awards.
Certification of effort after 120 days may be allowed under certain circumstances, but must be fully explained and justified by the Principal Investigator and approved by the Vice Chancellor—Research (or his/her designee) and/or the campus Extramural Fund Accounting Office or as required by local campus policy.
Preciseness of Certifications
2 CFR 220 (OMB Circular A-21) provides for "a degree of tolerance" in the preciseness of effort reporting. Effort reports at the University may be completed with a preciseness tolerance of plus or minus 5%; that is, an individual at the University may thus certify a level of effort for an award or activity that is within five percentage points of their best estimate of the actual effort expended during the reporting period.
These effort reporting requirements are also set forth in the University’s Accounting Manual section P-196-13, “Payroll: Attendance, Time Reporting and Leave Accrual Records.”
7-340 Prior Approval Systems
Many sponsors require prior approval by an authorized official for certain programmatic or administrative actions or budgetary changes in their awards to educational institutions. When the sponsor has delegated prior approval authority to the University, the campus must, in turn, designate an authorized institutional representative (usually a Contracts and Grants Officer) to approve the particular kind of request. Each campus should develop its own procedures for processing prior approval requests and notifying sponsors of approved actions, where required. See Chapter 2 of this Manual for further information on prior approval systems. See 7-F01 for a list of cost elements requiring prior approval under A-21.
7-350 Special Reviews
Campuses have established procedures to monitor and review certain expenditures (or proposed expenditures) for which there traditionally have been questions or differences of opinion about the allocability, allowability, or reasonableness of the cost or concerns regarding the relation of an expenditure to the sponsored project or to the overall campus or University needs and resources. Types of costs that may need special review include: rearrangement, alteration and reconversion costs (7-202), consultant fees and related payments, (7-204), general purpose equipment expenditures (7-205), hazardous materials (7-210), major computer purchases (7-205), rental and lease costs (7-214), subawards (7-220), and travel (7-224). Many of these costs are also subject to sponsor terms requiring approval either by the sponsor or by the institutional prior approval authority. (See Chapter 2.)
Proposed levels or amounts of cost sharing should be reviewed in accordance with Chapter 5.
7-360 Invoice Terms in Extramural Awards
The invoicing/payment terms in extramural awards should not require more than a standard campus invoice. Requirements for back-up documentation for invoiced expenses are not acceptable. Such requirements are not within the administrative capacity of the campus Extramural Accounting Office or the Principal Investigator's department. They create an excessive administrative burden on the campus department. If a non-federal sponsor has excessive administrative requirements, personnel to fulfill such requirements should be charged to the award. Extramural sponsors have audit access to the University in accordance with campus policy and procedures. (See Chapter 4.)