Critical Administrative Compliance Areas
The following list is not meant to be exhaustive, but highlights some of the key areas administrators should manage and monitor to ensure compliant administration of sponsored awards. Educational institutions follow the principles described in the OMB Uniform Guidance, Cost Principles for Educational Institutions, as their guide for determining costs applicable to grants, contracts and other agreements. VCU also provides detailed guidance in the Post Award Financial Administration Policies for direct and indirect costs.
Determining if expenses are allowable, allocable and reasonable for a project
Good questions to ask when determining if an expense should be directly charged to a project would include: is the expense allowable under OMB Uniform Guidance principles and sponsor terms and conditions? Was the expense part of the approved budget? Is the expense clearly identifiable as necessary for the conduct of the project? Is the expense consistently treated as a direct cost by your institution?
Direct charging of administrative costs
Administrative costs such as clerical or administrator salaries, general office supplies, computer supplies, basic telephone, and memberships and subscriptions generally should not be directly charged to a sponsored project. These items are most often treated as indirect costs and are included in the calculations used to negotiate an institution’s finance and administration rate agreement. Some projects, however, require a heightened amount of administrative attention/support where direct charging administrative costs may be reasonable and allowable. It is important that any administrative costs direct charged to a project are clearly proposed and approved in the award. Examples of why direct charging administrative salaries may be appropriate can be found in VCU’s Post Award Financial Administration Policies, Treatment of Administrative and Clerical Costs.
Effort reporting is required under OMB Circular A-21. Effort reporting is done retrospectively as a means to ensure salary charged to a sponsored project reasonably reflects the level of work performed. The best way to ensure effort reports are accurate is to proactively manage labor assigned to a project by having open communication lines between the PI, other project staff and administrators, as well as conducting a monthly reconciliation of expenses to include PI-level review. See Allocation and Monitoring of Effort on Sponsored Projects for more detail.
Having an audit finding of non-compliance in effort reporting can place an institution and the individual certifier at significant risk which could result in loss of sponsored funding, large fines and damage to reputation. Key areas of risk include:
- Individuals certifying effort that do not understand the requirements
- Individuals certifying effort of those that they do not have first-hand knowledge of actual work performed
- Late certifications
- Actual effort performed is not accurately reflected by salary charged
- Certifying to budgeted effort, not actual effort performed
- Certifying 100 percent time toward sponsored projects and not charging non-sponsored activities to university sources (e.g., time spent writing new grant proposals)
Salary cap compliance
Department administrators are responsible for ensuring compliance with any salary limitation imposed by a sponsor. When an award or agency has a salary cap restriction, such as the NIH salary cap, it is expected the department of the faculty member who is over the salary cap will provide the appropriate amount of cost share salary in accordance with committed effort on the project and the amount of salary that is above the salary cap. See NIH Salary Cap Cost Share for more details.
Institutions that do not comply with salary caps are at risk for loss of sponsored funding, large fines and damage to their reputation. Key areas of risk include:
- Direct charging salary above the cap to the restricted project
- Calculating the amount to be cost shared incorrectly
- Failure to properly document salary cap cost share
- Failure to update cost share allocations when salary changes or the salary cap changes
Department administrators are responsible for working with investigators to identify erroneous charges on projects during the monthly reconciliation process and make any necessary cost transfers within 60 days of the charge appearing on a monthly expense report. See Grants and Contracts Accounting’s cost transfer procedures for more detail.
Appropriate documentation and justification to support cost transfers must always be maintained at the department level. It is essential to make any necessary cost transfer as soon as possible after the error is discovered. Auditors pay increased attention to cost transfers occurring on sponsored projects that: (1) are more than three months after the actual cost was incurred, (2) are during the final month of the budget period (see accelerated spending) and (3) occur after the budget period has expired.
Departments should create advance indexes when they have received unofficial notice that a project will be awarded or the agreement is in negotiation. If work on a project has begun and expenses are incurred, requesting an advance index will ensure all project expenses are accounted for appropriately and avoid the risk of untimely cost transfers.
Increased spending of funds toward the end of a project or after the budget period end date is an area where auditors commonly focus attention. It is imperative spending on a project is allowable and considered reasonable and necessary to complete the objectives of the project. Purchasing items such as equipment, computers and large amounts of supplies on a project that is near its end date are red flags for auditors to more closely scrutinize the expenses and question the direct benefit the expenses would have on the project.
Unacceptable justifications for accelerated spending on a project include: (1) to spend down the unallocated budget, (2) because another project ended or (3) to offset cost-overruns on another sponsored project.
Joint VA appointments and externally funded research
The federal government requires that Faculty Investigators who hold joint university and VAMC appointments define their total professional responsibility between the two institutions by disclosing and documenting their time spent on research and other activities at both institutions no less than annually. This disclosure is done through a Memorandum of Understanding (MOU) approved by appropriate individuals at both the university and VAMC.
For more information and a MOU Template please see: Requirements & FAQs for Faculty with Joint VCU/VAMC Appointments.