Cost Sharing The Double Edge Sword 1 Dennis J. Paffrath – University of Maryland, Baltimore Executive Director, Sponsored Programs Administration [email protected] 410-706-6723
Jan 03, 2016
Cost SharingThe Double Edge Sword
1
Dennis J. Paffrath – University of Maryland, BaltimoreExecutive Director, Sponsored Programs [email protected] 410-706-6723
Pre Award Cost Sharing Issues
2
A policy should be put in place so that all parties involved in research (science and administration) have a guide as to how cost sharing should be handled
The policy should outline:Definitions and termsPurposeBackgroundProcedures, andResponsibilities
UMAB’s Policyhttp://www.ord.umaryland.edu/policies_procedures/costshare.html
3
Proposal Review
4
The Sponsor guidelines need to be reviewed for any cost sharing requirements. If required, cost sharing is considered mandatory. If not, cost sharing is considered voluntary.
Mandatory is the portion of the University contribution to a sponsored project that is required by sponsor
Voluntary is that portion of the sponsored project that the University and/or non-Federal third parties contribute to a project at their own initiative.
Proposal Review
5
If either cost sharing type is included in a proposal the following must be asked:Is an internal budget included in the proposal
outlining the costs?Are the cost sharing costs directly allocated
to the project?Are the cost sharing costs listed in the
budget allowable by the sponsor?Can F&A be included as cost sharing?Has the PI listed cost share in the abstract or
technical portion of the proposal?
Cost Share Documentation
6
Does your university require a cost sharing form to be completed?
University of Maryland Baltimore requires:Listing of Over-Salary CapCost Share commitmentsIn-kind cost sharing contributionsChartstring Information (Peoplesoft account
#)Signatures of PI, Division Chief or Center
Director, Department Chair and Dean
UMAB’s cost share formhttp://www.ord.umaryland.edu/policies_procedures/costshare.html
7
UMAB’s cost share form
8
UMAB’s cost share form
9
Award set up
10
Who handles the Award set up at your university?
At UMAB, the pre-award staff sets up the award.
Review award, if award cut then cost share should also be reduced
Companion account is set up along with the main account.
Post Award Cost Sharing Issues
11
Documenting cost sharingSpecial issues with Voluntary Committed
Cost Sharing (VCCS)Cost sharing and F&A ratesSpecial issues with voluntary uncommitted
cost sharing (VUCS)Cost sharing compliance issues and
strategies
Cost Sharing Overview
12
Cost Sharing, OMB Circular A-110, Section __.23
Cost sharing reflects the grantee’s contribution to a sponsored project
May include cash, property, equipment, and servicesUnrecovered F&A may be included with
sponsor approval
Documentation Basics
13
Costs offered in satisfaction of a cost sharing obligation:Must be verifiable, i.e., supported by adequate
documentationAllowable under the applicable Federal cost
principlesAllocableGenerally may not be paid for by the Federal
government under another awardNo “double counting”
Documenting Compensation Costs Tendered as Cost Share
14
Understand the capabilities of your T&E systemSome systems can only allocate actual salary
Reports may have to be manually adjusted to reflect committed effort expended but not charged
Use of “companion” accountsProposal budget is a guide to level of commitment, but is
not necessarily definitive
Need to educate system users on how account for cost sharing
Three Types of Cost Sharing
15
MandatoryRequired by the sponsor as a condition of award
Voluntary committedProposed by the institution but not required by
the sponsorE.g., proposal promises 30% effort but requests 20%
salary supportVoluntary uncommitted
Neither required by the sponsor nor proposed by the institution
Voluntary Committed Cost Sharing Issues
16
Investigators may have an incentive to propose cost share – ButToo much cost sharing may depress the F&A
rateThere may be inadequate sources of cost
shareFailure to document cost share may create
significant liabilityRepayment obligationPotential False Claims Act liability
Financial Treatment of VCCS
17
Voluntary committed cost sharing must be tracked and accounted forBudget proposes 30% effort, no salary support
requested – 30% must be tracked as cost sharing
30% effort commitment, 30% effort provided, grant charged 10% of IBS -- must track the 30% provided
Compare with voluntary uncommitted cost sharingBudget proposes 30% effort and salary support;
faculty member actually provides 50% effort – 20% of the effort need not be tracked
F&A and Cost Sharing
18
General rule: cost sharing is part of organized research direct costs and must be included in F&A denominator
Effect of rule: cost sharing tends to depress the F&A rate
Exception: voluntary uncommitted cost sharing need not be included in the baseJanuary 2001 OMB memo
How Indirect Cost Rates Are Determined
19
Organized research F&A rate =
(F&A costs of organized research)divided by
(Organized research direct costs)Example:
F&A costs of $6 millionOrganized research direct costs of $10
millionF&A rate = $6 million/$10 million = 60%
The Effect of Cost Sharing on Indirect Cost Recovery
20
Govt requires that all voluntary committed cost sharing go into the organized research base:$6 million in research indirect cost pool and $10
million in organized research base results in a 60% indirect cost rate ($6 mill./$10 mill.)
If $2 million in voluntary cost sharing is added to the base, rate is 50% ($6 mill./$12 mill.)
50% times $10 million = $5 million; $1 million in indirects must be absorbed by grantee
Voluntary Uncommitted Cost Sharing
21
OMB Memorandum M-01-06, January 5, 2001No requirement to document or take into
account voluntary effort over and above effort committed in grant proposal E.g., Faculty member commits to 20% effort, provides
30% effort but charges the project 20% of IBS10% of the effort need not be reported as organized
researchNo impact on F&A rateWhere and how do you report voluntary uncommitted
cost sharing?
Sources of Compliance Risk
22
Inadequate or no proceduresT&E system limitationsDepartments and centers with multiple
cost sharing obligationsAre there enough unencumbered sources of
support to go around?Increases the potential for “double counting”
Willingness to reduce or waive F&A recoveryIncreases financial pressure on the specific
department/center and the entire institution
Cost Sharing Audits
23
Georgia State UniversityAuditors reviewed $8.9 million in costs under a Cooperative
Agreement between 2003 and 2004 that required over $4 million in cost sharing.
Auditors identified significant weakness in GSU’s monitoring of subawardee costs and cost sharing that resulted in $404,211 of questioned costs.
Auditors also noted several compliance deficiencies and internal control weaknesses with respect to maintaining proper documentation of payroll and other direct expenses, as well as cost sharing.
New Mexico HighlandsNSF identified “material” internal control deficiencies including a
lack of procedures to properly track cost sharing University of Hawaii
Inadequate documentation for roughly $1.7M of labor cost sharing contributions
Compliance Guidance
24
Create policies and procedures for documenting cost sharing that are just as rigorous as those used to support direct charges
Create a separate account for each project with a cost sharing commitment
Track and report cost sharing on an ongoing basis; don’t wait until the project is over
Develop systems that can identify Federal flow-through dollars
Ensure that the effort reporting system tracks cost shared salaries
Carefully review proposals with a cost sharing commitment to ensure the commitment can be met
Require PIs to specifically identify sources of cost share
Monitor the amount of foregone F&A
Contact Information
25
For additional information please contact:
Dennis J. PafrathExecutive Director, Sponsored Programs Administration
University of Maryland [email protected]