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Fiscal Grants Management & Compliance Office

Fiscal Grants Management & Compliance Office
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I. How to Manage a Grant or Contract Award

Types of Awards

There are five basic types of awards utilized by the federal government and other funding entities.

Grant: A written agreement with a specific scope of work which is legally enforceable with administrative terms and conditions for the use of funds and may provide provisions for intellectual property reporting and publication rights.  It is can be the result of either a solicited or unsolicited proposal.  A grant is an agreement to carry out specific projects or service in which the sponsor and recipient share a common goal.  There is normally latitude in meeting the stated goals and objectives, especially on a research grant since the outcomes are often unknown.  OMB circulars govern federal grants.  Grants are an assistance mechanism.

Contract:  An acquisition or procurement instrument that has specific terms, deliverables, and conditions subject to negotiation.  A contract is enforceable by law, normally involves a deliverable and may contain provisions of exclusive or proprietary use of results by the sponsor.  There is a significant level of accountability and performance standards.  Federal contracts are governed by FAR.  A contract is an acquisition action.

Cooperative Agreement:  A legal agreement providing funds to accomplish a public purpose that anticipates substantial involvement of the sponsor which is detailed in the proposal/award.  Cooperative agreements are subject to OMB circulars and are a hybrid of grants and contracts.

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Memorandum of Agreement: Not a grant, contract or cooperative agreement.  A MOA embodies a spirit of cooperation and may or may not include funding.  A MOA is not intended to justify “sole source”.

Subagreement:  An agreement between two entities, one of which normally receives funds from the prime sponsor and some of those funds are “passed-through” to a second organization.  Subagreements are basically subject to all the restrictions and expectations placed on the prime recipient.

Award Notification and Setup

Upon the University’s official award notification and it’s acceptance of a grant or contract award (further known as the ‘project’), the award documents, along with the Sponsor’s terms and conditions, URS’s Fiscal Grants Management’s Office (FGMO) shall proceed with the required setup. The setup process includes the review of all award documents as well as the required internal setup and controls necessary to maintain and monitor the account for compliance and accountability. Additionally, a People Soft project number assignment and financial budget setup must occur prior to the use of any new award. Once a PeopleSoft number has been assigned and the budget setup completed, the URS-FGMO shall notify the project investigator or administrator (PI or PA) to schedule a required appointment to discuss the new award, its setup, the new project account code, terms and conditions as well as necessary requirements for compliance to federal, state, USM and SU policies. This process should normally take 3-7 days from the time the URS-FGMO receives the final, hard copy award documents.

Project Implementation

Once the project has been setup and officially ready to begin, the URS-FGMO notifies the PI to schedule a required, official ‘grant setup meeting’. This meeting’s purpose will basically discuss the grant’s overall management process from beginning to end, the PI’s responsibility as well as the services the URS Office provides towards the project management. At the initial meeting, the PI will be given his/her new project account number, discuss the type of award issued, the award documents as well as the terms and conditions of the award as set forth by the Sponsor, federal/state/university policy and procedures (includes human resources, procurement, accounts payable, etc. where applicable), all report requirements and the proper use of specified university grant forms required for this project. Also discussed is the budget setup on People Soft as well as the creation and maintenance of the project’s specialized shadow system created and which can be maintained by the URS-FGMO.

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Continuation and Renewal Process

A project that is to be continued or extended will be communicated to the URS Office, in writing, by the Sponsor. The continuation document will detail the project’s new end date and any additional funding awarded. The written document may be in the form of an amendment to a grant, contract or cooperative agreement or could be in the form of a New Notification of Award from a Federal Sponsor. There should be an approved, amended budget when increased funding or a re budgeting modification occurs. These updated budgets are necessary for input into the University’s financial system and ensuring the project’s accurate management and accountability.

Project Activities

Most grant and contract agreements follow OMB’s 2 CFR, part 215, A-21 Cost Principles, A-110 Administrative Regulations and A-133 Audit Guidelines. While A-21 determines what is considered allowable costs and unallowable costs, A-110 explains the ‘process’ that must be followed by college and universities in financial and program management. The A-133 audit annually reviews how well you are doing what you have certified to be doing from pre-award to post-award requirements for financial and program management. This audit includes verification of direct costs, indirect costs, cost share, matching and in-kind as well as any program income earned.

As indicated the university is currently bound under federal regulations to adhere to Cost Accounting Standards 501, 502, 505, 506 which has now been incorporated into OMB Circular A-21. Circulars A-110 and A-133  (which apply to all non profit colleges and universities) must also be adhered too. The original intention of the CAS was to achieve uniformity and consistency in the cost accounting practices governing measurement, assignment and allocation of costs to contracts with the United States government.  These standards have now been incorporated into OMB A-21 and other types of awards (grants, contracts and cooperative agreements).  To read the full text version of each regulation, please visit:

www.whitehouse.gov/omb/circulars

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Additional Information Regarding Cost Accounting Standards (CAS):

What is the CAS’ applicability since being incorporated in OMB 2 CFR, part 215, A-21. 
The government is looking for more explicit regulation governing the consistent application of cost accounting practices at colleges and universities for all of its sponsored projects.

What are the significant implications of each of the four standards to universities? CAS 501 – consistency in estimating, accumulating and reporting costs implies more thought must be given to the method used to propose costs on sponsored awards. Questions such as the following should be raised:

  • How were the percentages of effort for personnel determined?
  • Are these percentages reasonable given the individual’s other commitments?
  • How were the “supply” costs estimated?
  • Is there a direct “casual-beneficial” relationship between the costs proposed and the objectives of the project?
  • Additionally, with CAS 501, we must ask, does our current financial accounting system accumulate costs to the level of detail which was proposed on the sponsored award?

    Under CAS 501, if we propose costs at a fine level of detail (i.e. test tubes) but our system can only report those costs as ‘scientific supplies’, we have a CAS problem.

    This office encourages the use of object code terminology (People Soft numbers) in the budget proposal that is consistent with our current accounting system. A footnote can be provided in the budget proposal indicating that “supplies” include a more specific definition such as test tubes, petri dishes, etc.). In all circumstances, the proposed and approved budget narrative should be detailed and justified enough to comply with CAS requirements. Detailed expenditure documents should be available to support the approved budget narrative within the required guidelines.

    Another implication of CAS 501 is cost sharing. If a principal/project investigator promises the match of equipment or quantifies another participant’s effort on the project, then the URS-FGMO must obtain accurate corresponding documentation and salary information where the match was charged to another department code and was specifically used for this project or the URS-FGMO recognized the need to set up a separate cash match/companion account for each sponsored program necessary for accountability. Additionally as another example, equipment matched on a specific project cannot be duplicated on another project. The equipment must be identified in the University’s Asset (Inventory) System and proper documentation obtained as to when the equipment was purchased (must be within the actual project period), its cost and the department charged for the equipment.

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    CAS 502 – consistency in allocating costs incurred for the same purpose implies again, more thought be taken before costs considered “indirect (or F&A)” be directly charged to a sponsored project.  If a proposed project can affirmatively answer whether the project costs can be identified with the project to a high degree of accuracy and is the project considered one that has a different purpose or circumstance and has the cost been included in the project budget with significant justification and approved by the sponsor, then a legitimate argument might be made under CAS 502.  Ultimately, we the university, are stewards of the funds we receive for sponsored programs which makes us accountable for its appropriate management. Failure to comply with regulations may result in penalties to the institution ranging from repayment of funds to loss of the right to receive future funding.  Please note, we can be in violation of CAS and OMB A-21 even if the sponsor approved unallowable costs in the proposed budget.

    CAS 505 – accounting for all unallowable costs basically states “in circumstances where unallowable costs would be part of a regular indirect cost allocation (F&A), they shall remain in such base”.  This provision is aimed at is the concept of direct costs overruns.  Many of us have not considered these to be unallowable costs – until now. Past practices suggested we clear out cost overruns with unrestricted funds to bring the deficit balance to zero.  However CAS 505 suggests this past practice would be inconsistent and we need to alter our procedures to endure that these items remain coded as direct research costs and thereby included in the organized research base. (Please note, this example correlates directly to CAS 501 as indicated above).

    CAS 506 – consistency in cost accounting periods implies a college or university must be able to set up any grant or sponsored program as a 'project year(s)' which is the exact term of the grant. This setup period would not interfere with the university's official accounting fiscal year. 

    Departmental Administration

    Although the URS Office provides various type of administrative support to project PI’s, some departments choose to have department personnel prepare paperwork as it might relate to the project. The URS is available to train any departmental personnel in the grant requirements for creating purchasing requests. In all cases, the PI or his/her designated authorizer still must submit all paperwork to the URS-FGMO for budget review and final approval before the purchase or service may occur. The URS-FGMO will proceed to process any requests for procurement and services. Contingent II personnel contracts will continue to be completed by the URS-FGMO.

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    Project Reporting

    Any required financial project reporting is completed by the URS-FGMO. Programmatic reporting must be completed by the PI. A copy of the programmatic report must be submitted to the URS-FGMO for required audit retention. In all circumstances, reports must be submitted in a timely manner. Report requirements will normally be included in the Sponsor’s terms and conditions upon award notification. Sponsors frown negatively upon agencies filing reports after deadline requirements.

    Project Billing

    Grant/contract project invoicing (billing) for restricted accounts is completed by the URS-FGMO. The project PI never has to worry about the ‘cash-on-hand’ balance in the project account. The PI’s responsibility is to complete the approved project while expending funds within budgetary guidelines.

    Project Cash Match/Cost Share/In-kind (General)

    Cash Match: In some cases a Federal, state or local sponsor may require the campus make a contribution towards the total cost of a project. The amount of such contribution may be as little as 3% or more than 50% of the total project costs. The campus’ share of such costs may come from several sources:

  • Other support for the same project (i.e. from non-federal sources), if the project is to be federally funded;
  • A portion of the faculty member’s project time for which no support funds are being requested;
  • Facilities & Administrative (F*A a/k/a indirect costs) previously earned or unrecovered;
  • Contributed resources from a department(s), the university or an external partner.
  • Cost sharing should be included only where absolutely required by the agency.  It is never to be assumed that cost share is a voluntary or gratuitous gesture. Briefly stated, current federal regulations (section C23 of OMB A-110) not only specifies what types of project costs are acceptable for cost sharing but also requires the University to substantiate, through adequate record keeping, cost sharing expenditures for both direct and F&A (indirect) cost purposes. The records must show that direct cost sharing expenditures are appropriate, necessary and incurred in conjunction with the related project period.  The records must also provide clear evidence that the cost sharing expenditures incurred in a particular fiscal year are included in the development of the University’s F&A costs rate for that same fiscal year.  Cost sharing imposes a substantial burden on the principal investigator to provide accurate supporting documentation to the URS-FGMO and must be in accordance with Federal Regulation and Cost Accounting Standards (CAS).

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    In order to adequately budget, capture and document cost sharing expenditures required for reporting under State and Federal Grants/Sponsored Programs, the University will attempt to record cost sharing expenditures in separately identified general ledger accounts, if it deems necessary for tracking purposes  Once cost sharing has been committed and approved by the funding agency, it becomes a required component for the success of the entire project.

    External cost share must also be adequately documented and reported to the university in a timely manner and as indicated in any University agreement and as required under OMB’s A-110 requirements.   Please Note: University compliance requirements must automatically be passed on to any subrecipient under a grant, contract or sponsored agreement.

    When cost sharing is required on an award, the program or project budget will need to specifically identify the source of University funds (i.e. PeopleSoft department number) that will be used to satisfy the cost sharing commitment.  Spending will not be permitted on an award until all cost sharing resources have been identified. State appropriated funds are generally not allowed to be used as a cost share.

    Terms & Definitions for Cost sharing: Under the Office of Management and Budget (OMB) Circular A-110, section .23 defines cost sharing, as “that portion of project or program costs not borne by the federal government.”  Similarly, State of Maryland agencies and departments follow the federal rule and define cost sharing in their grant and contract agreements as that portion of the project or program costs not usually borne by the State agency or department sponsoring the project or program. The University will define, budget and account for cost sharing as the amount of program or project costs that the University and its partners, if any, will contribute to the sponsored program or project.

    In-Kind: In-kind documentation requirements must be in accordance with OMB’s A-110 guidelines under section .23

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    Reporting Cost Sharing/Cash Match/In-Kind: The URS-FGMO, in accordance with requirements from the Project Sponsor, will report cost-sharing expenditures back to the sponsor based on adequate documentation (see OMB A-110, section .23) submitted from the project administrator and approved by the URS-FGMO. Cost sharing expenditures should occur proportionately with direct expenditures.  All program cost sharing costs need to be identified, finalized and recorded in the appropriate project cost sharing account (if setup) within 30 days after the close of the grant period but always before the final financial report is submitted to the sponsor.

    Project Support Systems (Human Resources, Procurement, Payroll and Asset Management)

    Human Resources: Personnel assigned to sponsored projects, like all other personnel, must be interviewed, hired and compensated in accordance with State and University personnel policies. Regular staff (exempt and non exempt) and Contingent Staff processes and benefits are covered by the SU Employee Handbook issued by the University’s Human Resources Office while faculty employment and compensation is determined by SU’s office of Academic Affairs and published in the SU Faculty Handbook.

    For more specific employment information on policy and procedure, please contact the URS-FGMO directly. Contingent II employment documents will be created and approved by the URS-FGMO.

    Procurement: All project procurement (the purchase of any supplies, materials, equipment and services) shall follow the USM, SU purchasing guidelines. All procurement documents involving spending project funds must be reviewed and approved for budgetary appropriateness by the URS-FGMO before proceeding to purchase. In rare instances, the Sponsor’s project procurement guidelines may be more lenient than the University’s but the PI will be required to adhere to University guidelines in all cases.

    For more specific procurement information on policy and procedure, please contact the URS-FGMO directly.

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    Payroll: In order for any faculty or staff person to be paid by the University’s Payroll Office, certain project (grant) Human Resource documents must be in place for the process to begin. All project related activity involving faculty and staff payments shall be processed and paid on the University’s Contractual Payroll System (note: this is a different payment system than the University’s Regular Payroll System which is used to pay all faculty and staff PIN positions) once approved by the URS-FGMO. Supplemental payments to faculty will be paid from the Contractual Payroll System by project (grant or contract employment contract) and must include a (grant or contract) payment authorization form. Contingent staff salaries will be paid from the Contractual Payroll System by approved, project positive time reporting (timesheet).

    For more specific payroll processing information on procedure and its relationship to the approved Human Resource Office contract processing, please contact the URS-FGMO directly.

    Asset Management (inventory): Any item(s) purchased with project (grant) funds that costs $500 or above should normally be tagged as ‘Capital’ SU Inventory. Other minor equipment costing less than $500 could be tagged as ‘Non-Capital’ SU Inventory. Unless the Sponsor specifies that ownership of any equipment purchased with project funds resides back with the Sponsor, after the project has been completed, ownership will reside with the University. Inventory purchased with project funds would normally be identified and accounted for under the department where the PI works. An SU Asset Management Report must be verified and completed each year by the department which details where the equipment resides.

    Program Income

    Income derived from services or goods that form part of a project supported in whole or in part by a sponsoring agency must be reported to the agency, with few exceptions. Such income should be deposited to the appropriate account.

    Any Principal Investigator expecting to recover income through a sponsored project should discuss this with the URS-FGMO beforehand in order to ensure compliance with sponsor agency requirements.

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    Export Controls

    The Export Administration Regulations (EAR), promulgated and enforced by the Department of Commerce, and the International Traffic in Arms Regulations (ITAR), promulgated and enforced by the Department of State, prohibit the export of specific unlicensed technologies for reasons of national security or protection of trade.

    University research is controlled under EAR or ITAR. The University may be obligated to obtain a license from the Department of Commerce or the Department of State in order for foreign nationals to participate in the research, research to be conducted in cooperation with a foreign company or foreign colleagues, research equipment to be sent to foreign countries, or research to be shared – either verbally, visually, or in writing – with persons who are non United States citizens or permanent resident aliens.

    Additionally, the Office of Foreign Assets Control (OFAC) at the Treasury Department, administers and enforces boycotts against specific countries. The scope of the boycott varies depending on the country and may change from time to time. Full descriptions of all countries currently subject to boycott programs are available.

    The University is responsible for assisting the PI access the application of export control regulations and OFAC boycotts to specific projects, however, the primary responsibility for compliance rests with the PI.

    Principal Investigators have the responsibility to cooperate with URS to determine the applicability of export control before starting any research and notifying URS of any change in the scope or staffing of any research project that could alter the determinations about the applicability of export control regulations. Additionally, the PI must notify URS well in advance of sending scientific equipment, including GPS equipment and encrypted software, out of the country. All nondisclosure agreements must be sent to URS for review and modification, where necessary.

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    Faculty and Staff Project Time & Effort (and Reporting)

    OMB A-21, section J. requires the University maintain records that will substantiate the effort of each individual charged to a sponsored project. Therefore, time records must be carefully maintained. For faculty, effort must be verified and recorded on the Time & Effort Activity Report created and generated for each fall, spring and summer sessions by the URS-FGMO. Contingent exempt and non exempt staff are required to submit bi-weekly timesheets, which in essence are the required Time & Effort Report. Regular PIN staff (can be either exempt or non exempt staff) being charged to another department and where a project is purchasing a percent of the employee’s time to work on a ‘project’ must also complete a Time & Effort Report created by the URS-FGMO. Since the great majority of costs associated with sponsored projects are attributable to labor charges, it is incumbent upon the Campus to assure that these records are properly created, completed and approved by both the employee and his or her supervisor and maintained for auditing purposes by the URS-FGMO for a specified number of years.

    For more specific Time & Effort Reporting information on procedure and its relationship to an approved project, please contact the URS-FGMO directly.

    Project Closeout

    The URS-FGMO, a division of Finance & Administration is responsible for all project closeouts. Financially, any project eligible for closing must have certain criteria in place before the closing may occur on the University’s Financial System. These criteria consists of 1) the project end date has occurred and all grant expenditure activity has ceased (only ‘official’ university obligated expenses will qualify as outstanding items; 2) expenditures occurring after the project end date cannot be charged to the project unless a continuation and renewal process has been approved; 3) the PI has arranged a closeout meeting with the URS-FGMO to discuss any outstanding expenses not processed and/or determine if all project expenses are accounted for; 4) adhere to the sponsoring agency requirements that will allow for proper closeout (normally 30-45 days after the project ending date) and to complete all required closeout reports by the designated date (check award terms and conditions for exact report due dates as the time allowed varies from agency to agency); 5) URS-FGMO has invoiced and received funds from the Sponsor for any unpaid expenses; 6) URS-FGMO has reconciled all expenses against cash received; 7) URS-FGMO authorizes a cash refund back to the sponsor for any cash overpayments; and 8) all final programmatic and financial reports are submitted by the PI and the URS-FGMO (copies of all reports must be retained in the URS-FGMO files).

    If items 1-8 have been satisfied, then the URS-FGMO will close the project.

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    Project Record Retention

    Federal agreements follow OMB’s A-110 requirement (section .53 retention and access requirement for records) for retention 3 years after final payment and final reports have been filed and accepted. Terms and conditions of each award should be reviewed carefully for any deviations. In addition, the State of Maryland’s retention schedule includes maintaining records at least 3 years and audited by State Legislative Auditors.

    In other cases, other non-profit federal programs or miscellaneous state/local programs often have record retention up to five (5) years and must be coordinated properly to coincide with State of MD and other requirements.

    Project Audit

    An audit management system is in place, which demonstrates SU, the URS-FGMO and the project department is well managed in accordance with its internal policies as well as the necessary federal, state and USM policies. Internal and external auditors, under appropriate circumstances, shall have full access to institutional grant/contract related records (programmatic, financial and personnel records).

    The URS-FGMO shall be the first point of contact for any project audit or site visit and will respond promptly to any record review and request. The URS-FGMO along with the Associate VP for Administration & Finance shall officially respond to any cited control deficiency, material weakness or finding that may exist.

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