Principal Investigator

Unit Administrator

Dean’s Office (or Designee)

University Compliance Office

Internal Audit

Division of Finance, including Cost Accounting Services

Sponsored Project Administration

Questions:

PeopleSoft Tools and Best Practices (PDF)

Designed specifically for Investigators and research administrators who need fiscal information quickly and easily to help answer questions such as:

• How much money do I have left to spend?
• Can I hire another lab tech or graduate student this summer?
• Will I have Carryforward?
• Will I have funds available for a No Cost Extension?

PI Portal

    • Read the Award document
         o Identify the applicable regulations and terms and conditions
         o Note any special terms and conditions
         o Note reporting requirements
              a. Note systems used and ensure access to them
              b. Required format or forms
              c. Due dates
    • Understand Sponsor terms, conditions  and/or regulations
    • Understand the applicable regulations & deadlines
    • Request a New Award Kickoff Meeting
    • Ask for assistance
    • Establish and document departmental internal controls
         o Roles and Responsibilities
              a. Authorities
              b. Delegations
         o Perform regular and routine budget reconciliations
              a. Review expenditures with PI for allowability, allocability, and reasonableness
              b. Maintain documentation to support costs

Allocation is the process of assigning a cost, or a group of costs, to one or more budgets, in reasonable proportion to the benefit provided to each budget. A cost is allocable to a particular project if the goods or services involved are chargeable or assignable to that project in accordance with relative benefits received.  For more details refer to Reasonable, Allocable, Allowable Costs, Examples, FAQs.

If an expenditure solely benefits one award, it should be charged entirely to that award. However, sometimes an expenditure can benefit more than one award or other activity.  When this occurs, the expenditure must be charged in the same proportion as it benefits each of the awards or activities.

Sponsored project costs may not be allocated based on:

1. Amount of available funds on an award;
2. Budgetary convenience (to accommodate an award that is either over or under budget, the budget is ending soon, etc.);
3. Avoidance of restrictions imposed by law or terms of the award;
4. Offset (costs charged to award A one-time and award B the next time).

There are two general methods for allocating a cost to multiple funding sources:

    • The Proportional Benefit Rule:  when it is possible to determine the exact benefit of the cost to each funding source. The cost is allocated according to the determined proportion of the benefit provided.
         o Example: A lab uses 3 gallons of a solution on award A and 9 gallons of a solution on award B.  12 gallons of a solution are purchased. 3/12th of the total cost of the solution is charged to award A, and 9/12th is charged to award B.
    • The Interrelationship Rule:   when it is not possible to determine the proportional benefit to each funding source because of the interrelationship of the work involved. The cost is distributed on any reasonable and rational basis.
         o Example:  A lab purchases syringes for use on experiments for two awards.  As it is impossible to tell in advance exactly how many syringes will be used for each award, and it would not be cost-effective to track the use of each syringe, the lab allocates the cost of the syringes based on the amount of effort the lab tech (who uses the syringes) expands on each award.  If the lab tech allocates his time on a 70/30 allocation between award A and B, the cost of syringes is allocated using a 70/30 allocation.

Please refer to Cost Accounting Services examples of Direct Cost Allocation Methods.  Usage-based allocation methods are typically used on sponsored projects, but please be sure to document your allocation method when other allocation methods are necessary.

Allocation Best Practices:

    • Document the allocation methodology.  Documentation should include support for the specific costs allocated and indicate how the allocation methodology is logically related to the cost being allocated. This support should be retained by the department and be made available for review. Document why measures such as headcount, square footage or hours directly related to the benefit received.
    • The allocation methodology established must be used consistently in like circumstances.
    • Review allocations on a routine basis. This is to ensure that the methodology continues to represent a reasonable basis for distributing the cost. If it is determined that the allocation method no longer represents a reasonable distribution of the cost it should be changed.
    • Review estimated allocations on a routine basis.  If a cost has been allocated based on an estimate, the costs can be reallocated using a cost transfer if the estimate is later determined to be inaccurate.  Be sure that re-allocations are completed promptly so that accurate costs are being recorded on the award/budget, and so that cost transfers are not completed more than 90 days from the original expense posting date.
    • Update allocations when a project begins and ends.  Allocations will need to be modified when a project ends and if a new project begins.  The basis should not change unless it no longer provides a reasonable representation of the benefit provided.
    • Take award period of performance end date into consideration.  If a cost is being allocated between multiple awards, the one award that has an end date that is disproportionate to the other, the end date of all awards should be taken into consideration when determining proportional allocation, or document why the award with a closed end date is still being charged at the regular rate.

The concepts of allowability, allocability, and reasonableness of costs address directly the legitimacy of a cost charged against a specific sponsored award. Determination of allowability, allocability, and reasonableness of a given expense is based on specific guidelines of the sponsor and according to Federal Cost Principles.  Allowability, allocability, and reasonableness are defined and determined by the Office of Management and Budget (OMB), the sponsor's requirements and UVM’s policy. Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Programs, states that "The recipient institution is responsible for ensuring that costs charged to a sponsored research agreement are allowable, allocable, and reasonable…" Each financial transaction charged against a sponsored project is evaluated against these three concepts.

A primary responsibility of UVM’s research administration community, including PIs, Department Research Administrators and Sponsored Project Administration, is to ensure that all costs charged to the sponsored research award are allowable and allocable.  Federal sponsors require that expenditures are incurred, received, and provide necessary benefit between the start and end date of the applicable period of performance. When SPA Financial Analysts prepare final financial reports, one of the items they look at very closely is spending, including cost transfers to the award, near the end of an award period, which is commonly defined as 90 days prior to the end of the period of performance. This is because spending near the end of an award period may not be benefitting the award itself. 

In summary, sponsors require that expenditures are incurred, received, and provide necessary benefit during the applicable period of performance.  Therefore purchases near the end of an award period are subject to review, as it can be difficult to show how the expenditure benefitted the award in a limited amount of time.  All purchases incurred within the last 90 days of an award period or project period (if automatic carryover is now allowed) need to be reviewed to:

•  Ensure the item/service was received during the period of performance.
• Determine how the item/service provided benefit to the award, given that it was purchased close to the applicable end date. Providing benefit means having a reasonable amount of use during the period of performance.

Scenario:  An Award has a period of performance on January 1, 2018 – December 31, 2019. 

•  Allowable Expense: Lab supplies were incurred, received, in June 2018 and used (provided benefit) between the end date of December 31, 2019.
• Unallowable Expense:  Lab supplies were ordered (incurred) in December 2019 but they did not provide benefit during the period of performance.
• Unallowable Expense:  An airline ticket is purchased (incurred and received) in November 2019 for travel to a conference in February 2020.  The benefit (conference) is not received during the period of performance.
• Unallowable Expense.  A laptop was purchased (incurred) December 2019 and received in January 2020.  The laptop was received after the end date of the period of performance. The laptop could not provide benefit to the Award under which it was purchased.

Most federal and non-federal awards allow for carry forward of unspent funds from one budget period to the next within the award period of performance. Carryforward may be automatic or it may require prior approval from the sponsor; the Notice of Award (NOA) will dictate the terms of carryforward requests.

For information on roles and responsibilities and the process flow, please see SPA’s Procedure for Carryforward of Unobligated Balances.

The University of Vermont requires that all expenses and financial obligations made in support of federal and non-federal sponsored projects be charged to the appropriate project when incurred. There are a few situations when an expense should be transferred from the chart string where it was initially charged. In these cases, a cost transfer is generated to ensure the expense is appropriately re-allocated.

The Principal Investigator, and/or the Unit Administrator is responsible to review expenses on a consistent basis at least every 30 days to verify that all financial transactions are accurately and appropriately charged to the correct project. The guiding principles for allowable cost requirements are outlined in the Uniform Guidance (200.400 - Subpart E - Cost Principles).

A Cost Transfer is

• Moving an expenditure from one budget to another.
• Moving an expense from one object code to another.
• Correct other transaction coding errors.

A Cost Transfer should only be done for the following reasons:

• To correct an erroneous charge to an incorrect budget or object code.
• Re-allocate expenses where the expense can only be initially coded to one or a few budgets.

A Cost Transfer is NOT a Financial Management tool to be used to:

• Move costs for budgetary convenience.
• Temporarily post costs in a sponsored budget until a budget number becomes available (use department budget or request an Advance Account).

Best Practices - How to avoid Cost Transfers

• Ensure there are good Internal Controls for coding of expenditures.
• Reconcile budgets in a timely manner.
• Review the award document and applicable regulations to ensure all costs are allowable.
• Ensure that costs allocated across more than one budget are treated consistently with other allocated costs.
• Monitor award budgets to ensure funds are expended in accordance with the award.
• Monitor award budgets to track expenditures and available funds.

Best Practices for Cost Transfer Documentation

All documentation on Cost Transfers should include the following information:

• Why the error was incurred and which internal control broke down.
• Steps the department is taking to ensure the error will not happen again.
• The tangible benefit to the recipient budget.

Non- Payroll Cost Transfers

• Sponsored Project Administration (SPA) is the central unit that reviews/approves non-payroll cost transfers.
• To initiate a Non-Payroll Cost Transfer request, please follow the Non-Payroll Cost Transfers Procedure.
• Refer to the SPA Cost Transfer web page for procedures.

Payroll Cost Transfers

• Division of Finance and Accounting (DFA) is the central unit that reviews/approves payroll cost transfers.
• Refer to the DFA Cost Transfer web page for procedures.

The financial closeout steps set forth in SPA’s Procedure for Financial Closeout are intended to facilitate the timely and accurate closeout of sponsored projects in accordance with the terms and conditions of the award.
Maintaining a timely and accurate closeout process within 120 days after award end date substantiates:

• Compliance with the terms and conditions of the award and sponsor specific guidelines.
• Completion and submission of all administrative and financial deliverables.
• Confirmation of required effort commitment.
• Completion of accounting adjustments to ensure revenues and expenditures reconcile.
• Collection and reconciliation of outstanding account receivables.
• Confirming appropriate record retention measures.
• Closing out projects that have ended.

Overall

When a project or award has ended, it is important to ensure financial closeout is completed in the UVM financial and administrative systems in accordance with sponsor guidelines. The Unit Administrator refers to the terms of the award and consults with the PI and if appropriate SPA to determine when closeout is required and initiates the closeout process as outlined below.

• PI and UA ensure that spending within the last 90 days of the award will provide the necessary benefit to the project during the applicable period of performance.
• For large supply, equipment or computer purchases within the last 90 days, a written justification must be submitted to the SPA FA explaining the circumstances or the reason they are essential to support the scope of the project close to the end of the award.
• Any time during this process, the PI and UA can initiate a No Cost Extension (NCE) if the project’s scope of work will not be completed on time, in accordance with SPA’s Procedure for No-Cost Extension.

Federal and non-federal agencies normally require a final financial report (FFR) and/or invoice to be submitted within a specified period of time after the project ends. It is based on actual expenditures posted to the general ledger (GL), as well as a reconciliation of payments received.

Federal awards need to be completed in accordance with 2 CFR 200.327 - Financial Reporting and 2 CFR 200 Subpart E - Cost Principles. Payment delay or loss of current or future funding may occur if the FFR is not reported accurately or filed in a timely fashion.

The FFR and the final invoice is a shared responsibility involving the Unit Administrator (UA), and Sponsored Project Administration Financial Analyst (SPA FA). It is the Sponsored Project Administration’s responsibility to prepare FFR and final invoices that accurately reflect the use of sponsored fund as recorded in the institution’s financial system (PeopleSoft) and in compliance with sponsor terms and conditions.

Overall

The final financial report and invoice are to be completed by the SPA within 60-90 days after the project end date. If a sponsor requires that the final report be submitted sooner, the timelines in PeopleSoft will be adjusted accordingly to meet the requirements set forth in the award document.
Before the submission of the final financial report and invoice, the SPA FA and UA will work together to ensure the following have occurred as outlined in the SPA’s Financial Closeout: 

• Any unallowable expenses or expenses in excess of the budget authorized by the sponsor should be identified and adjusting entries must be posted in PeopleSoft.
• All sponsored and cost share expenses should be reviewed for allowability and properly posted in PeopleSoft. Refer to the Cost Share Procedure for further guidance.
• All effort should be reviewed and commitments met per the proposal/award document.
• All subrecipient final invoices and progress reports should be received and processed for payment. Refer to the Outgoing Subaward Invoice Processing Procedure for further guidance.
• All unpaid vouchers should be resolved and scheduled for payment within 3 days of the report submission

For information on roles and responsibilities and the process flow, please see SPA’s Procedure for Final Financial Report.

Three main mechanisms sponsors utilize for reimbursing institutions for the sponsored work they perform are: (1) cost reimbursement, (2) fixed price, and (3) fixed rate agreements.  In cost reimbursable agreements, institutions are compensated for the actual allowable costs incurred, up to the total awarded amount.  Fixed price agreements are based on an agreed upon budget amount (fixed price), and this amount is paid by the sponsor regardless of the actual costs of conducting the sponsored project. Fixed rate agreements (budget bump awards) are based upon a fixed rate per unit rather than a fixed amount.

Most fixed price and fixed rate agreements accepted by the University are with industry partners; however, federal and non-federal sponsors, including foundations, can issue a fixed price award.

• Proposal budgets and budget justifications for fixed price sponsored awards are developed by Principal Investigators and departments in the same manner as all other proposal budgets.
• Typically there will be little or no unspent balance on fixed price agreements if proposed costs have been correctly estimated and charged and all deliverables have been met.
• When the project costs are above the fixed price award amount in the case of a fixed price agreement or the fixed rate per unit in the case of fixed rate agreements, the sponsor will not provide additional funds to the University to support the additional costs.
• When the project costs are below the fixed price award amount or a fixed rate per unit, the University may keep the unspent, residual balance. The residual balance must be treated in accordance with the terms and conditions of the award and/or the sponsor’s written policies relating to the disposition of residual balances.

Agreements that usually permit the University to retain the funds after the work is completed may include the following activities: (1) service delivery in fixed payment increments, (2) deliverables or milestone completion, or (3) patient enrollment payments.  Any unspent balance on a fixed price and fixed rate agreements is subject to the SPA’s Procedure for Residual Balance Transfers.  The procedure establishes a process that provides access to residual funds remaining on sponsored awards that are considered fixed price agreements, provides a consistent method for obtaining approval for the transfer of residual funds, and ensures that transfers of residual funds to non-sponsored accounts are not prohibited by any requirements provided by the original sponsor.

When sponsored agreements are entered into PeopleSoft, the entire awarded budget becomes immediately available for spending.  The Principal Investigator (PI) with assistance from his or her unit administrators (UA) may begin posting expenses up to the total authorized amount.  It is important to keep in mind, however, that the University essentially advances funds to each sponsored project until reimbursement from the funding organization is received. 

In order for billing to commence, UVM must first receive an award document from the sponsoring organization.  The agreement must be accepted by the University, and the project must get established in PeopleSoft.  Awards that are set up prior to award receipt (Advance Accounts) remain on hold for billing until the authorization is received and processed by SPA.

Contract Types

Sponsored projects can be grouped into three major categories – (1) cost reimbursable, (2) fixed price, and (3) fixed rate agreements.  Cost reimbursable agreements are paid based on actual allowable costs incurred up to the total awarded amount.  Fixed price agreements are reimbursed based on programmatic work completed regardless of actual expenses.  Fixed rate agreements are most commonly known as clinical trial awards where reimbursement occurs on a fixed amount per unit of measure (e.g. study participants, tissue or blood samples, office visits, completed surveys, etc.).  Any unspent balance on a fixed price and fixed rate agreements is subject to SPA Procedure for Residual Balances on Sponsored Agreements.  

Billing Methods

SPA’s Cash Management team bears the primary responsibility for all sponsored billing and accounts receivables activities, which are done through UVM’s financial system of record PeopleSoft.  Reimbursement requests must adhere to the terms and conditions, which are outlined in every agreement.  There are two primary methods for requesting reimbursements.

      1. Letter of Credit (LOC) Draws

LOC draws, which are performed for the majority of federal agreements, are by far the most efficient and least burdensome way of requesting payments.  Utilized by federal agencies only at this time, this method allows grantees to request a reimbursement for multiple awards funded by the same agency via one transaction.  Drawdowns are performed either once or twice per month for each federal agency.  Once the draw request is submitted, the University is reimbursed within a day or two, with funds being transferred via Automated Clearing House (ACH) into UVM’s bank account.  LOC draws do not typically require any follow-up or collections activities.

      2. Paper Billing

This method of billing requires an actual invoice, which gets submitted either electronically or via mail to the sponsor along with any required back-up documentation.  PeopleSoft has a batch billing functionality, which allows to create and print multiple invoices at the same time.  Depending on the terms of the agreement, invoices can represent costs incurred grouped by cost category (cost reimbursable invoices) or grant deliverables completed (milestone based invoices).  SPA’s AR Specialist follows up at least monthly on all receivables older than 60-90 days.  At times, SPA may require assistance from PIs and unit administrators to help us secure payments; however, this doesn’t happen often.

Cost reimbursable awards can only be billed after expenses have posted in PeopleSoft, which may result in a time lag between when the award is first set up and when the initial invoice is created.  Milestone based payments are requested once the deliverables outlined in the agreement have been completed.  SPA staff will contact unit administrators or PIs to confirm deliverables’ completion prior to issuing such invoices.

Negotiating Invoicing/Billing Terms with Sponsors

During the negotiation period, SPA Award Acceptance Officers review and, if necessary, negotiate invoicing terms with sponsors.  The goal is to increase efficiency and reduce the administrative burden on central offices, departments, and PIs.  Examples of burdensome invoicing terms include requirements to submit receipts, progress reports and other types of back-up with each invoice; reclassify costs in a way different than how they are grouped in PeopleSoft; create invoices on sponsor specific (rather than UVM standard) templates.  SPA may require assistance from PIs and unit administrators to collect back-up, reclassify costs, coordinate invoice and progress report submission.

How to View Invoices Submitted to Sponsors

All invoices submitted to sponsors can be located in the PI Portal, Financial Documents tab.

For more information and for any billing/accounts receivable questions, please contact SPA’s Sponsored Revenue & Cash Management Team.

The University of Vermont is subject to financial audits, including those performed by internal, external, state and federal audit offices. This document describes the various types of audits of sponsored awards and the associated roles and responsibilities.  The terms of the award dictate the requirement for and what type of audit may be necessary. Federal and federal pass-through awards are included in the annual Single Audit mandated by Uniform Guidance 2 CFR 200 Subpart F. In addition, individual sponsors may require further reviews such as desk reviews of selected invoices or site visits.

Primary management of all audits, desk reviews and site visits connected with sponsored awards resides with SPA Compliance Analyst.

Guidelines for being Audit and Site Visit Ready

• Create and maintain documented Internal Controls.  Auditors want to see that you have procedures documented and that the project staff follows them.
• Ensure that all purchase receipts and supporting documentation are in one place and can be linked to the expense transaction.
• Ensure that each expense transaction can stand alone. This means that anyone can read the documentation and confirm that it is reasonable, allowable, allocable, and consistently treated.
• Be prepared to describe how specific expense transactions are tied to the program objectives.
• Keep organized and complete accounting, contract, and project files.
• Ensure that all Cost Transfers are documented. 
• Ensure that bids and consultant contracts are on file in the appropriate place.
• Keep a list of personnel authorized to approve expenses.
• Resolve issues when they arise, do not wait for an audit or Award end.

Best Practices in an Audit

• Contact the SPA Compliance Analyst Angie Leahey at angie.leahey@uvm.edu, if you or your department are notified of an audit or contacted by an Auditor.
• Be prompt in responding to requests from SPA Compliance Analyst.
• Keep original documentation on site; Auditors can have copies if they want to retain any documentation.
• Only provide information that is asked for, do not elaborate.
• Do not include office politics or other departmental issues in the response.
• Only answer questions you know the answer to; do not hesitate to defer.
• Do not return any documentation to archive/off-site storage until the audit has been resolved.

Please see SPA’s Procedure for Supporting Sponsored Project Audits and Site Visits

History

Requirements

Risk Assessment

UVM Single Audit

Compliance Supplement

Schedule of Expenditure of Federal Awards (SEFA)