Contracts and Grants: Federal Contract and Grant Administration
Funds--Allocations for Administrative and Disallowed Costs
UC Accounting Manual
IX. Current Funds Accounting
C-557-23 (TL 41, 5/1/84)
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CONTRACTS AND GRANTS: FEDERAL CONTRACT AND
GRANT ADMINISTRATION FUNDS--ALLOCATIONS
FOR ADMINISTRATIVE AND DISALLOWED COSTS
Contents
Page
I. INTRODUCTION 2
II. ACCOUNTING PROCEDURES FOR ALLOCATIONS
PERTAINING TO FEDERAL CONTRACT AND GRANT
INDIRECT COST REIMBURSEMENTS--FUND 69750 2
A. BUDGETED ALLOCATIONS 3
B. DISALLOWED CLAIMS 3
III. ACCOUNTING PROCEDURES FOR ALLOCATIONS
PERTAINING TO THE MAJOR DOE LABORATORIES
INDIRECT COST REIMBURSEMENTS--FUND 69751 5
IV. REFERENCES 6
APPENDIX: Current Memorandum of Understanding for
Disposition of Receipts from Overhead
(Indirect Cost Recovery) on Federal
Government Contracts and Grants Between the
University and The California State
Department of Finance. 8
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CONTRACTS AND GRANTS: FEDERAL CONTRACT AND
GRANT ADMINISTRATION FUNDS--ALLOCATIONS
FOR ADMINISTRATIVE AND DISALLOWED COSTS
I. INTRODUCTION
The allocation and use of indirect cost reimbursements from
the Federal government are governed by a Memorandum of
Understanding (see Appendix) between the University and the
California State Department of Finance. This agreement
encompasses indirect cost reimbursements from all Federal
contracts and grants, including the contracts for the
management of the major research laboratories supported by
the Department of Energy (DOE). The agreement provides for
the application of certain "off-the-top" allocations for
administrative and disallowed costs prior to the actual
disposition of receipts. These allocations are estimated in
advance annually in the budget negotiations between the
University and the State. "Off-the-top" allocations
pertaining to Federal contract and grant indirect cost
reimbursements are identified as fund 69750. "Off-the top"
allocations pertaining to the major DOE laboratories
indirect cost reimbursements are identified as fund 69751.
II. ACCOUNTING PROCEDURES FOR ALLOCATIONS PERTAINING TO FEDERAL
CONTRACT AND GRANT INDIRECT COST REIMBURSEMENTS--FUND 69750
The amounts allocated to fund 69750, excepting amounts for
disallowed costs under item 4), below, are determined
annually in the budget negotiations between the University
and the State. The costs for which these allocations may be
used, which are specified by the agreement between the
University and the State Department of Finance, are as
follows:
1) The University's Washington, D.C., Office
2) The Financial Analysis section of the University
Controller's Office, Office of the Vice President--
Financial and Business Management.
3) Campus and Systemwide contract and grant offices.
4) Federal contract and grant costs disallowed by the
government. Disallowed costs will be considered to
include (a) expenditures that would normally be proper
charges against contract and grant funds but for the
fact that the contract or grant has terminated and
funds are no longer available, and (b) expenditures
that the government has disallowed as proper charges.
NOTE: In the normal funding of these disallowed claims
(cost disallowances):
a) An appropriate fund source is selected by the
campus depending on the nature and circumstances
of the audit and disallowance.
b) If the appropriate fund source selected is Federal
Contract and Grant Overhead (fund 69750), then the
procedures set forth in paragraph II.B. should be
followed
5) Any additional costs directly related to Federal
contract and grant activity as mutually agreed to by
the University and the State. This can include
salaries of faculty and staff who are involved in the
administration of Federal contracts and grants and
other related expenses.
Allocations for disallowed claims, under item 4), above, may
be made to any function according to where the disallowed
costs were incurred. Funds to cover this contingency are
not included in the Current Operating Budget, but may be
allocated from indirect cost recovery funds through fund
69750.
Allocations for items 1), 2), 3), and 5), above, are made
only within three functions: Instruction, Research, and
Institutional Support. They may be accounted for by either
of two methods. The first method is to establish specific
accounts against which personnel and other costs may be
charged; this is used for items 1), 2), and, in some cases,
3) and 5). The second method is to make allocations to
departments from General Funds (fund 19900); the total
amount allocated within each function is then recharged from
General Funds to Federal Contract and Grant Administration
funds (fund 69750). The recharge entry is made within one
specially established account in each function. This method
is used as an alternative to the first method for items 3)
and 5). The choice between the first and second methods is
made by the campuses in consultation with the Systemwide
Budget, Analysis, and Planning Office.
A. BUDGETED ALLOCATIONS
1) The University Controller will make financial transfers
from the appropriate sources to fund budgeted
allocations of Federal Contract and Grant
Administration funds (fund 69750) for the campuses.
2) As part of the annual fiscal closing, the accounting
officers will send to the University Controller their
respective journal entries returning all unencumbered
fund balances of departments and programs financed by
fund 69750.
3) The University Controller will in turn return the
unencumbered fund balances to the original source of
funding.
B. DISALLOWED CLAIMS
In section 100.4(x) of their Standing Orders, The
Regents have delegated to the President the authority
to write off routine disallowed claims under grants and
contracts against indirect cost reimbursement funds.
The President has redelegated this authority to the
chancellors for amounts up to and including $1,000 per
claim and to the Vice President--Financial and Business
Management for amounts over $1,000 per claim. This
latter authority has been further redelegated to the
University Controller.
The following procedures will govern the write-off of
such disallowed claims:
_________________________________________________________________
Procedure Responsibility
_________________________________________________________________
1. Transfer of Funds Request
Prepare Transfer of Funds Request Accounting
(UFIN 1520) appropriating funds from Officer
Systemwide Unexpended Balances--
Federal Contract and Grant Overhead
funds (fund 69750) to the depart-
mental account charged for the
expenditures to be financed.
(Note: Include justification for
charging indirect cost recovery
funds. This justification must
satisfactorily answer the Questions
* listed in Appendix II.)
2. Claims of $1,000 or Less
a) Send transfer to chancellor Accounting
for approval. Officer
b) Approve or disapprove transfer Chancellor
and return to accounting officer.
c) If approved by chancellor, pro- Accounting
cess transfer locally and send Officer
copy of the approved transfer to
the University Controller, re-
questing indirect cost recovery
funds to finance the disallowed
claim.
d) If disapproved by chancellor, Accounting
determine an alternative source Officer
of funding for the disallowed
claim.
3. Claims Over $1,000 and Claims of Any Amount
Attributable to University Extension and Other
Systemwide Administration Units or Offices.
a) Send transfer to University Accounting
Controller for approval. Officer
b) In coordination with the Univer- University
sity Auditor and the University Controller
Contracts and Grants Coordinator,
determine propriety of the trans-
fer. Approve or disapprove
transfer and return to
accounting officer.
c) If approved by University Con- Accounting
troller, process transfer locally Officer
and return copy of the approved
transfer to the University
Controller requesting indirect
cost recovery funds to finance
the disallowed claim.
d) If approved by University Con- Accounting
troller, determine an alternate Officer
source of funding for the
disallowed claim.
4. Processing of Request for Approved Indirect
Cost Recovery Funds to Finance the Disallowed
Claim (with Copy of the Approved Transfer of
Funds Request Attached)
a) Upon receipt of request, prepare University
a financial journal transferring Controller
funds from the appropriate System-
wide source to the campus.
b) Prepare the following financial Accounting
journal entries in response to Officer
the Systemwide financial journal:
1) Dr. Financial Control X-1195X0
Cr. X-119850-69750
2) Transfer the disallowed charges
to 69750 funds within the de-
partmental account.
III. ACCOUNTING PROCEDURES FOR ALLOCATIONS PERTAINING TO THE
MAJOR DOE LABORATORIES INDIRECT COST REIMBURSEMENTS--FUND
69751
The amounts allocated fund 69751 are also determined
annually in the budget negotiations between the University
and the State. On April 20, 1967, as amended later on
September 18, 1970, The Regents authorized the President
"...to approve allocations from the overhead received under
the Atomic Energy Commission(1) contracts to finance travel
cost incurred by members of the Board of Regents and by
administrative officers in connection with the performance
of duties related to Atomic Energy Commission (Intentionally
so written as contained in the source document; Atomic
Energy Commission is now the Department of Energy.) contract
operations..." and"...the financing of other incidental and
administrative costs related to the administration of these
contracts." Funds to cover these anticipated allocations
are transferred from the DOE laboratories' indirect cost
receipts to fund number 69751 at the beginning of each year.
Costs as incurred are charged against fund 69751 within the
departmental accounts and against account J-664700-69751 for
the President's Scientific Advisory Committee (PSAC).
Procedures are as follows:
_________________________________________________________________
Procedure Responsibility
_________________________________________________________________
1) Prepare Travel Expense Voucher, etc., Systemwide
charging fund 69751 within the depart- Administrative
mental account for DOE connected Departments
travel and/or other related
incidental and administrative
costs, as incurred.
Send memorandum to University Controller
requesting funds to cover the above expendi-
tures. Include supporting data to justify
the charges (copy of Travel Expense Voucher
or memorandum showing inclusive dates,
destination, purpose, etc.). For PSAC
travel expenditures, account J-664700-69751
is analyzed monthly by the University
Controller's Office and then the necessary
Transfer of Funds Request (UFIN 1520) is
prepared.
(Note: In the case of funding of pre-
determined annual costs, the applicable
Systemwide administrative department pre-
pares a Transfer of Funds Request at the
beginning of the fiscal year. The request
--including supporting data justifying the
request--is forwarded to the President
(Budget, Analysis, and Planning) for re-
view, approval, and processing.)
2) Upon receipt of memorandum, prepare University
Transfer of Funds Request appropriating Controller
funds from the appropriate Systemwide
DOE administrative provision account
to the departmental account.
3) Approve transfer for processing. President
(Budget,
Analysis and
Planning)
IV. REFERENCES
Standing Orders of The Regents, section 100.4(x), as
amended, April 18, 1969.
The University and the State Department of Finance,
"Memorandum of Understanding for Disposition of Receipts
from Overhead (Indirect Cost Recovery) on Federal Government
* Contracts and Grants," July 1979 (see Appendix I).
The Regents, Minutes of April 20, 1967, and September 18,
1970.
President Saxon, Memorandum to chancellors on the subject of
"Delegation of Authority--Write Off of Disallowed Claims
Under Federal Grants and Contacts," September 19, 1977.
President Saxon, Memorandum to Vice President Lamson on
"Delegation of Authority--Write Off of Disallowed Claims
Under Federal Grants And Contacts," April 1, 1980.
______________________________
Historical note: The materials in this chapter were formerly
published in Business and Finance Bulletin A-13, revised 3/1/68.
Accounting Manual chapter first published 6/1/70; revisions:
1/1/75, 3/1/75, 1/1/76, 12/1/76, 9/1/78, 9/1/83, and 5/1/84;
analyst -- Paul Priolo.
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* APPENDIX I
Memorandum of Understanding for Disposition of
Receipts from Overhead (Indirect Cost Recovery) on Federal
Government Contracts and Grants
General
This memorandum of understanding between the University of
California and the State Department of Finance pertaining to
disposition of Federal Government Overhead funds received by the
University shall become effective with overhead received in 1979-
80.
Overhead receipts subject to this understanding shall include
overhead from all Federal contracts and grants. Overhead
receipts for the purpose of this memorandum include the fees
received by the University for the management of the three major
research laboratories reported by the United States Department of
Energy.
Formula for Disposition
Overhead received by the University in 1979-80 and in succeeding
years, together with interest earned on such overhead, shall be
subject to disposition on the following basis:
Overhead receipts from the Federal Government covered by
this understanding shall be applied first to continue the
annual workload and price increase related support currently
provided from this source for the University's Washington,
D.C., office, Cost and Financial Analysis, Campus and
Systemwide Contract and Grant offices, and Federal contract
and grant costs disallowed by the Government, and to support
any additional costs directly related to Federal contract
and grant activity as mutually agreed to by the University
and the State. The balance shall be divided 45 percent to
the University and 55 percent to the State.
Estimates of Overhead Receipts
That portion of overhead receipts to be divided between the State
and the University in any one fiscal year shall be estimated in
advance. The difference between actual net receipts and
estimates for any particular year will be assigned in the next
proposed budget year. The disposition of such difference shall
be allocated in accordance with the formula specified above. The
State will augment the operating budget to the extent required in
the event overhead receipts are less than amounts estimated. Any
adjustments of overhead receipts related to prior fiscal years
shall be applied to current receipts before division between the
University and the State .
Allocation and Reporting
The University's share of Federal overhead receipts is available
to fund high priority programs established by The Regents such as
Extension of Research Opportunities, Instructional Innovation and
Improvement, Administrative Planning, Mandated and Other
Recognized University Responsibilities, and Capital Outlay
Projects. These programs shall be outside the University's
budget request to the State, but shall be reported annually to
the Department of Finance.
The State's share of overhead shall be applied to the
University's operating budget as a source of income.
Exclusion
Overhead on private contracts and grants is to remain with the
University, and is not within the scope of this memorandum.
$377,000 of Federal overhead funds received by the
Neuropsychiatric Institutes shall be excluded from this sharing
agreement.
*
Re-negotiation
This memorandum of understanding shall be subject to re-
negotiation if the relative amounts of overhead assigned under
the formulate to the University or the State should change
significantly.
Director, Department of Finance Date
State of California
President, University of California
Date
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** APPENDIX II
Federal Contracts and Grants Disallowed
Claims Write-Off
In cases where claims for payments on expenditures connected with
federally funded programs have been disallowed, the write-off
procedures outlined in section II. of this chapter will apply.
Furthermore, the campus accounting officer will attach to the
write-off request an explanation that must satisfactorily answer
the following questions:
1. How did the campus get into the adverse situation initially?
Provide an explanation of the actions which led to the
disallowance(s).
2. Was General Counsel involved? If so, explain.
3. What facts support the conclusion that prudent business
management and judgment were used by the campus?
4. Why shouldn't the individuals(s) and/or department
responsible for the error(s), if any, bear the disallowed
cost?
5. What actions have been taken or controls instituted to
prevent recurrence of future disallowances of this nature?
.
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