Are You Ready for the New NIH Payment Management System?

imagesNot the NIH, Not Again. (Sigh.)

You’ll have to forgive me, I know there is more to research administration than the NIH. (DOD, anyone? NSF?) It’s not that I choose to ignore the rest of the agencies out there funding the Federal share of academic research….really. It’s just that the NIH is in many ways, the canary in the coal mine for new policy at the Federal level. So I figure it’s going to be helpful to more than those of us working in the biomedical research area to talk about some of these issues.

The August Freak Out

In August and September 2013, NIH announced that their grants management systems would transition awardees to a new payment management process in order to allow the agency and their institutes and centers to better track award spending. They provided some preliminary details – enough to make every central office at every university with NIH funding to freak out – how is this going to work? Subsequent communications clarified the process, which have allowed schools to prepare and plan.

changeImplementation in Two Phases

The transition from PMS pooled (G) accounts to PMS (P) sub-accounts will occur over two fiscal years, and it started in October of 2013. There is an excellent FAQ on the transition, which will occur in two phases.

  • Phase 1 – Effective October 2013: Transition of Awards with New Document Number
  • Phase 2 – Effective October 2014: Transition of Continuing Domestic Awards

The notice of grant award will contain additional information to indicate the type of account (G to P) that is being used to award the funds in the transition year. The transition year will require a new award type (Type 4) and administratively shortened segments – for competitive awards in FY14 and FY 15.

Financial reporting requirements will be affected during these changes (there will be additional closing periods) and the reporting requirements for awards will be affected by whether or not the award was made under SNAP (now RPPR). During the transition, it looks like non-competing continuations under SNAP may need to submit two FFRs in FY14.

Importantly – carryover authority is not automatically available during this time frame. Grantees will report unobligated balances and receive approval for these funds to be re-obligated to the new sub-account. NIH states that even if the award was issued with “automatic carryover authority” the grantee has to receive approval through a new NOGA before funds are drawn down.

What You Need to Do Right Now

Review your award portfolio and take steps to ensure awards are appropriately charged for direct costs up front, reducing the need for cost transfers. This saves time, heightens compliance and allows your institution to meet the challenge of shortened reporting time frames.

  1. How many awards are under SNAP? How many are not under SNAP? (This will affect the calculation of your unliquidated obligations and unobligated balances – which, in this new world of payment management should be minimal.)
  2. What are their project dates, and how are they looking financially? (Are all expenses hitting the project in a timely manner?) If not, why not?
  3. What systems are in place to ensure direct charging of appropriate expenses (salary and non-salary) to awards, and reconciling expenses on a monthly basis? If these systems don’t yet exist, what needs to be done to set them up?
  4. Is there a process to regularly meet with investigators to review award activity and plan for changes in allocation of expenses proactively (to prevent cost transfers)?
  5. What reporting and queries can you utilize to easily manage your portfolio and provide updates to your investigators?
  6. Start to develop great relationships with your subcontract sites now – if you haven’t already. You’ll need to have them generate their final invoices faster than they have in the past.

What Your Investigators Need to Know

money-under-mattress-300x217We all know PI’s who think of Federal grants like funds stuffed between a mattress for a rainy day. Yet for every investigator who thinks like that, there are two that understand and have a very keen appreciation for managing awards. However, the new payment management system, combined with the shortened time frame for closing out awards is creating a new environment for managing sponsored funds.  We have to impress upon our most studious investigators that if they do not use their Federal funding, they will lose it.

This is the time when we can help our investigators by providing administrative leadership:

  • Clearly outlining what our investigators need to know about the policy and how we need to work with them to administer their projects.
  • Providing them with financial information regularly so they can make decisions about their research plan and strategy (and we can ensure administrative actions regarding purchasing, effort and salary administration and reimbursements are managed in a timely manner).
  • Updating our investigators regarding policy changes and trends in the availability of carry forward funds, additional reporting requirements, and other trends to assist them in managing their current awards and planning for new applications.

The Department of Defense already has a strong payment management system in place, but it stands to reason that the Department of Health and Human Services, and other federal agencies will look to adopt more stringent monitoring of federal grants. Have you seen the Do Not Pay website? The Obama administration, in creating a government that utilizes data and analytics to generate accountability, is creating a network of systems to ensure that funds are distributed, tracked and paid to the proper recipients.

One Part Challenge, Two Parts Opportunity

To be sure, the next 18 months aren’t going to be easy – but working together we’ll transition to the new payment management system. More importantly – it’s an opportunity to introduce new ways of managing sponsored projects that can remain in place to meet the challenges of tighter Federal funding in the future.

Happy New Year! A81 Is Here!

It’s 2014! Our holiday wishes came true – at least some of them, any way. No shutdown in Washington D.C. – check. At the same time, Congress decided to roll back part of the sequestration cuts and restore funding to many areas of the Federal Government affected by last years deep spending cuts – check. And the Office of Management and Budget – gave us that mega-circular they had been promising for 2 years – CHECK!

That’s a Mouthful!

The new mega-circular, known as Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, Final Rule, aims to tame the avalanche of  overlapping or contradictory guidance that was previously in effect with the eight separate circulars published by the OMB over a series of many years. These circulars, (including A-133, A-21, and A-110) applied toinformation overload hospitals, institutions of higher education, non-profit institutions, cities, states, tribal organizations, and other types of organizations, and over the years, interpreting the guidance in these documents became more difficult. A working group came together to combine the circulars into one document that would apply to all non-Federal agencies and aim to simplify the process of managing grants and contracts. These organizations worked with COFAR (the Council on Financial Assistance Reform) and the administration to develop new guidance that reflected the current reality of managing Federal awards.

The new guidance was published on December 26, 2013 in the Federal Register, and it’s over 100 pages long. It is well organized, easy to read and search online, and has a lot of familiar information for research administrators. However, in revising and updating the guidance for managing grants and contracts, the Federal government took the opportunity to incorporate input from organizations and change policies and processes regarding grants management.

What You Should Know

Key aspects of the new guidance include the following:

  • Performance over Compliance for Accountability

The emphasis in the new guidance is definitely on generating results and outcomes that can be shared with other award recipients. The Federal government is not going to allow non-compliance, but they do not want overly burdensome rules to prevent an investigator or a collaborating team from accomplishing a stack-of-paperstheir research aims. As you read the guidance, you’ll see that this is the goal.

  • Family-Friendly Policies Encouraged

The guidance definitely encourages organizations that receive Federal funding to develop (if they do not already have) family-friendly policies. They have updated their policies to include family-friendly issues such as costs related to the identification of day-care providers, and the need to allow parents to document  time out of the workforce on their biosketches.

  • Increasing de minimis Threshold for Indirect Costs to 10%

The new guidance allows organizations that cannot afford to negotiate an indirect rate to budget a 10% de minimis indirect rate with the Federal government. Previously the rate was 8%.

  • Administrative Costs can be Charged as Direct Costs

The guidance also provides specific information, in many ways, for the first time, about how to manage administrative costs as a direct cost. This issue can be difficult because it is often charged as an indirect cost (an in most cases it should be charged that way). This guidance correctly acknowledges the need for charging administrative costs as a direct cost and how to manage this situation.

  • Payment Management System Clues 

The circular provides more information than before on ensuring consistency in allocating costs, and when to secure written approval for assigning a cost to an award. The cost principles  and audit sections of the document are very useful, and it states that there is now a limit of three years for the Federal government to review awards in order to disallow costs. This, combined with the new 90 day rule for reporting on awards at the end of the project period gives us an indicator of how the Federal government will be managing award dollars in the future. Can you say “use it or lose it?”

  • Focus on Delivering Results and Outcomes

There is an entire section in the document that discusses how RFAs  and PAs will be written and what must be included in them. The circular states that RFAs and PAs have to be available 60 days before the opportunity closes – which is an interesting development. It will be fascinating to see if the language on “outcomes” and “milestones” translates into a new format for the funding announcements. Stay tuned.

To see a webcast about the new guidance click here.

Here’s to a great start to 2014 – may your New Year be productive and fulfilling!

The Fallout from October Has Just Begun: Here’s What You Need to Know

United States Capitol BuildingSHUTDOWN FALLOUT

Congress has opened its doors for business again after a two-week political roller coaster ride. The impact of this legislative hissy fit, however is still being assessed. While the media has focused on the patients in Washington DC that weren’t registered for trials at the NIH (truly a heartache) and the researchers in Antarctica and other extreme climes, research administrators have feverishly worked to meet a crushing load of November application deadlines.

In addition, research administrators and faculty have worked to assess the impact of missed application reviews on previous submissions from the last cycle, and how this will impact the upcoming review schedules. Meetings for 200 review committees scheduled for October at the NIH were canceled during the shutdown, and the impact of rescheduling these meetings (and therefore bumping the schedule of awarding these grants and holding future reviews for the upcoming cycle) is breathtakingly frightening for academic institutions across the country. Fortunately reviewers stepped forward and have volunteered to make time to participate (as institutions like the NIH originally announced revised schedules several months out, causing widespread alarm). NIH reviews are resuming in January instead of May.

NEW PAYMENT MANAGEMENT SYSTEM AT NIH

As if the shutdown didn’t give us enough excitement to manage, we are looking to the new NIH payment images (1)management system which is going into effect as we speak. The new payment management system is a process that accomplishes 2 things. First, it allows the NIH to transition current domestic awards from PMS pooled accounts (type G) to a new type of account called a PMS type G subaccount. Second, it will allow the NIH to award all new grants and contracts as the PMS type G subaccount and allow the agency to administer all awards with new payment management rules.

Starting in November, notices of award will list the type of award (type P or G). To facilitate the transfer process, the NIH will transfer new awards into the new PMS system in FY14 (which has already started. In FY15, the NIH will transfer continuing awards.

hound dogSome changes to the management of awards and closeouts have already taken place, and if you don’t know about them, you should:

1. Depending on your institution’s standard operating procedures, the NIH policy previously afforded additional time for reconciling and closing out the award before completing the annual or final financial report. The new policy requires that awards be ready for closeout at the end of the award period for a prompt production of the annual or final financial report. If your expenses have not hit the proper account when they were supposed to, you will not have enough time to fix it at the end of the budget period or award period.

2. As awards shift from the old to the new payment system, competitive segments will be shortened for one year and new awards will be given new identifiers on the NOA. Get ready for some fancy footwork – tracking and reporting on these awards will be F-U-N.

3. Prepare to bid goodbye to unliquidated obligations from previous award segments/periods. Either encumber funds, and use them, or plan to lose them at the end of the budget period. PERIOD. The new FFR format calls out the unexpended balance from prior project period right up front. (They might as well call it “funds to cut from this project budget”).

4. Automatic carry forward can be requested – but funds are not permitted to be drawn down until they are formally approved and appear on the new NOA. (Read between the lines: carry forward isn’t so automatic anymore.)

These new requirements require a laser focus on direct charging salary to sponsored projects, and encumbering salary and project expenses appropriately to awards. Research administrators need to reconcile projects on a monthly basis to ensure that charges are hitting correctly to have the grants and contracts awarded to their investigators managed to a successful close.

AN END TO SEQUESTRATION?

Congress is talking now about how they will come together in January to pass a budget – and believe it or not, they are talking about adjusting the terms of the sequester. It’s hard to believe that sequestration is back on the table (for more information about sequestration, check out my previous post). Everyone seems to agree that the across-the-board cuts have been a disaster, but, as you can guess, nobody in Congress agrees on a way to restore cuts in a fashion that can be voted on to pass in both the House and the Senate. (Does this sound familiar?) While it would be fantastic to have improvements in sequestration funding, and there appears to be bi-partisan support for doing so, this seems to be linked to passing a budget in January, and if that is the case, I’d put money on the likelihood of another government shutdown.

The DOD would be a likely target for increased funding (relief of sequestration) but its hard to tell how the NSF, NIH, FDA or other agencies would fare given the history of divisiveness that exists.

WHAT YOU CAN DO

  1. Assess your investigators’ research portfolios now; analyze your investigators’ salary and effort plans using the proposed data and effort certified to project out their current commitments if you haven’t already done this.
  2. Analyze the salary and effort of staff in the laboratories or on the projects that your investigators support.
  3. Assess the status of your investigators’ applications, if possible, to know where they are in the pipeline. Create a projection based on likelihood of funding, planned applications and current funding.
  4. Work with faculty and staff to assess potential gaps in funding for your faculty and staff. Begin to plan and request appropriate resources to cover faculty and staff salary and research during any time when the faculty member is not covered by sponsored funding.
  5. Create a budget and plan to support the request, and work with the faculty member and his/her department to request support.
  6. Assess institutional resources available to submit new applications early – should it be that we face additional gridlock in DC. Plan with your investigators to do this, if possible. (Adios, December!)
  7. Keep an eye on DC politics – and hope that this time around it’s not as bad. (Check out these resources from my previous post.)

By using our unique resources and perspective, we can help our institutions support the faculty and staff that are performing research in a wide variety of fields that make our world a better place to live. This is a really tough time, and we need to step up and make it possible for the research community to concentrate on their work – and not on the political struggles in Washington.

Preparation Nation: Shut Down Week 3 – What Happens Now?

Fiscal Cliff 2I’m following the latest on the back and forth negotiations in Washington DC on my iPad like a devotee of Scandal (or Breaking Bad for you guys out there). Will they or won’t they? Who is doing what to whom? When will they open the government? Are we going over the cliff? Oh the drama!

It would be entertaining – if it weren’t so high stakes for the scientists doing research around the world. And not just for the graduate student who traveled all the way from Boston to Antarctica and had to travel all the way home again once he got there (because his research project was cancelled during his trip). Scientists are reporting that the shutdown is having a devastating impact on the ability to obtain specimens, recruit participants, and collect and analyze data – which could set back research in a variety of fields from months to years. You can tap in to conversations that researchers are having online on Reddit here. (Note the team that is working at the South Pole!) You can also follow #shutscience on twitter for more stories from scientists who are on experiencing the shutdown’s devastating impact on their work.

The Status of Negotiations

While it appears that Congress and the President are making some headway towards an agreement that will keep us away from the fiscal cliff (and perhaps negotiating a budget to open the government in the meantime) they will need to achieve that in the next three days. If memory serves, this Congress likes to take us to the last second, we’ll see. If you’d like to track the status of discussions in Washington, a few helpful resources include a visual guide to the negotiations; a series of articles on the shutdown and its impact on science, and to remind us what we’ve lost in all of this, a tally of what the shutdown has cost.

The Washington Post has a live update on the negotiations on their website if you can stomach the roller coaster ride.

Resources To Keep Going During The Shutdown

You may have already figured out some quick fixes when the NSF, NIH and other government websites went dark. Google cache is one easy way to find program announcements, RFAs and access to other website pages that are currently unavailable. There are other homegrown websites and links (see resources above) with additional links and documents. While Federal government agencies have stopped accepting applications (you can submit to grants.gov, but they won’t reach the agency, so most agencies have said not to submit)  preparations for completing grant submissions should continue on schedule.

However, we are learning from NCI Director Howard Varmus just how long it may take for most Federal agencies to come back on-line after the shut down is over.

When the Shutdown is Over

By law, Federal employees had to vacate the premises and leave behind their work computers and devices on the last day of the fiscal year. The shut down was completed within 1/2 day (in reality, I’m sure most agencies saw it coming and were prepared for some time).

Since then, we’ve not heard much, until now, about how the shutdown is affecting agencies and their ability to fund and manage research and how things might work after the shutdown is over. This memo from Harold Varmus gives us a leg up on how we can get ready for questions from our investigators – and as you’d suspect, the news isn’t great. Large and small agencies are going to have a tough time catching up from just a couple of weeks – and as we know, these weeks contained crucial grant and contract deadlines.

We’ll be ready to submit applications, but the systems to accept them will have to be ready for every application, all at once. Grant review meetings will need to be rescheduled as quickly as possible – and all of the missed deadlines and missed meetings will have a cascading effect on upcoming deadlines for every type of extramural application. All of these activities depend on hundreds, if not thousands of faculty and staff altering their plans to participate in rescheduled reviews to bring the process back on-line.

And the longer we’re waiting, the worse the problem becomes.

What Can You Do to Help Your Investigators?

As most program officers are unavailable (they have been furloughed) it’s important to keep up with the latest news in Washington to identify potential impact on your investigator’s research.

  1. Talk to your investigator regularly to determine his/her concerns – a lot of investigators have concerns that are time-dependent. (If the shutdown lasts until X date, I’ll be fine, but if it goes until Y date, this will happen…)
  2. Read academic media to learn what your investigator’s colleagues are doing to cope in the face of the shutdown.
  3. Discuss fiscal strategies for managing research projects given a delayed payment cycle – if you have projects that are in the process of being renewed, how will your investigator manage with his/her current budget?
  4. Investigate available institutional resources, if you’re that fortunate, for these types of situations. Perhaps you can pool institutional resources to care for animals, or share staffing to keep gathering data, etc.
  5. Talk to central offices about what they are hearing regarding the shutdown, and how you can prepare for next steps.
  6. If you find something that was especially effective to assist your investigator in weathering the storm, remember what you did, because you’ll need to do it again in six months!

Remember – expect the worst – and hope for the best, and maybe we’ll end up somewhere in between.

Capitol Hill Showdown: What Will October Bring?

preparationI don’t know about you, but when I’m working on an application deadline, I’d like to think about helping my investigator submit a quality application – not whether the government will be open for business to accept the application on the due date.

Unfortunately, it’s mid-September, so that means our elected officials are squabbling again about whether or not they’d like to fund the federal government through the end of the calendar year.

Unfortunately, this political tango has very real consequences for scientific research – both the currently funded kind, and the research in-need-of-support kind. And for this go-around, we have another hurdle to face with an anticipated battle over the definition and scope of the debt ceiling. Our national legislators are seeking to tie this discussion to other mandates, such as reducing or eliminating funding for the Affordable Care Act, or adjusting the terms of sequestration. Regardless of the outcome, the effect is likely to create uncertainty in federal agencies, and if it goes on too long, could lead to belt-tightening.

This drama is likely to play out during the last few days of September, when Congress considers legislation to fund the President’s 2014 budget, or not. For the past 5 years, we have funded the government on continuing resolutions, which are a series of appropriations bills that have passed both houses of Congress and been authorized to fund the nation’s work for a period of time (from weeks to months, to a year). These appropriations bills are sometimes cobbled together and approved in chunks.

After we pass the first hurdle of keeping the government running (and can submit our applications), we must address the debt ceiling hurdle – which has a decision deadline of October 15, after which the Federal government goes into default on its financial obligations, and cannot pay its bills, such as student loans and Social Security checks. There is some discussion that prudent management of the deficit has given the Treasury some wiggle room for the November 1 pay period, but agencies that have “discretionary” payments are already starting to look at the next couple of months and plan for a battle in Washington.

The political environment is even more complicated – a primary election underway in the state of Kentucky has effectively silenced Senate Majority Leader Mitch McConnell as a more moderate force between Democrats and Republicans in the Senate (as was the case during the last debt ceiling debate in 2011). Similarly, House Speaker John Boehner is in a difficult position between a very conservative wing in the House that is attempting to de-fund Obamacare as a condition for raising the debt ceiling and keeping the government open – which if the government shuts down, may cost him his Speakership.

What does this mean for research administrators?

If you are waiting for a non-competing continuation, a subcontract, or a notice of award – don’t hold your breath. Everyone is going to be in a holding pattern until this is sorted out. If your investigator decides to start work, be prepared to open pre-spending accounts, and direct charge expenses (conservatively) until you know what your funding will look like. Encourage your investigators to talk to their program officers and get a read on what’s going on at their funding agency. Monitor activity and costs closely to manage potential cost share commitments until funding comes through. Keep your PI’s and departments updated on developments – and while you’re at it, load up on the antacid.

Buckle up. It’s going to be a bumpy ride.

Be a Spreadsheet Superhero!

h84236603 YOU CAN BE A SPREADSHEET SUPERHERO.

It’s the heart of every budget – the spreadsheet. How it is written and constructed sets the course, not only of the few weeks it takes to submit the proposal – but of the years it takes to manage the project when it is funded. The spreadsheet starts off innocently enough, as a draft that one or two people (usually the PI and the research administrator) work to edit as the proposal is constructed. Carefully planned and well constructed – this can be a time when decisions are made, and documented to set the life of the project off on the right course. Or…not.

CREATING CALM OR CHAOS IN GOTHAM CITY

It’s quite common to learn research administration from the inside out – that is, you join a project mid-stream, and pick up the documentation that a previous team generated for you to work with. That means that your success in helping to administer the research in a department or division depends on the communication that has been left for you by the previous RA, and the internal budgets you’re responsible to manage. It’s more than just written communication – it’s the budget spreadsheets that allow you to help guide your investigators to make decisions about how their projects will be managed in the coming project period.

IT’S A BIRD…IT’S A PLANE….IT’S….EXACTLY THE ANSWER I WAS LOOKING FOR

So how does one become a spreadsheet superhero? It requires some practice and dedication, and a commitment to consistency – knowing that you’ll be serving your investigators long after you leave your position and move on to your next job if you take on this alter ego.

ATTAINING A SPIDEY-SENSE FOR SPREADSHEET SUCCESS

1. Always use formulas and references when budgeting in Excel. Hard enter numbers only when absolutely necessary. Make your spreadsheets work for you, and your investigators.

2. Ask your colleagues for the best budget spreadsheets out there – and if one doesn’t exist (rest assured it does) create one. Find one that works best for your investigators’ applications and use it consistently. Time and date stamp it. Improve it as you use it for each application.

3. Budget based on institutional base salary. If you don’t know what institutional base salary is for your institution, find out. If your spreadsheet doesn’t start or takes you off course from the IBS at your institution, you will be managing cost-sharing on the award if it is awarded.

4. Try very hard to help your investigators to break the habit of doing their own budgets. You can draft them and let them play with the numbers. Many investigators forget elements of budgets – and others don’t understand why certain costs need to be included. In all cases, they need to focus on the science, and that’s why we’re there, to help with the administrative aspects of the application. It’s hard for them to depend on us. Try to help them learn to depend on you.

5. Check your math. Have a colleague review your budget and justification, just to make sure. These things are often developed very quickly and often under pressure. It’s easy to make transposition errors, etc. Have someone with fresh eyes who has had a bit more sleep take a look at your work.

6. Spend a lot of time on the budget justification. Flesh it out for the PI, to help explain the nature of each expense. Include an explanation of the calculations involved if there is a question about how the funds are to be spent.

7. Include the names of individuals working on the project in your budget spreadsheet – even if they are not included in the official proposal documents. Simple details like this are very helpful when administering salary on funded projects.

8. When creating budget spreadsheets, put yourself in the recipient’s shoes – what does the reviewer need to see? Present the budget with that in mind and keep it clean and tight. Present supporting information in sheets behind the summary page of the workbook, linking totals to the summary page. Crowding everything into one page dilutes the information you are providing and adds to the reviewer’s job. (It can also increase the chance of error and cost-sharing.)

9. Use your spreadsheets consistently – for applications, award management (clinical trial tracking, grants management, contract management, salary and effort management, and reporting to investigators). Create roll up reports to identify areas of concern (projected deficits) and manage no-cost extensions prior to them coming due.

10. Create a shared repository for this information for the investigators you work with, as well as the business administration team and central office staff you interact with. As you maintain these records, they will serve to document the active management of your investigators’ activities, help you manage their awards, and hand off their accounts easily to the next person who steps into your role. And that’s customer service!

It’s not easy to keep up with these types of records, especially when things get busy – but its harder not to – especially when there is a need for the information. Take the time to learn Excel well, and share your knowledge and time with your colleagues. Spend the time to develop the systems and processes to support your investigators and develop the spreadsheets that will serve you – and them well – now and far into the future.

How Many People Does It Take To Allocate An Expense To A Sponsored Project?

ideaWhen Your Office’s Cost Allocation Processes  Resemble the Punchline of that Familiar Joke, it’s Time to Take a Look at Your Decision Methods

We recently had a situation in our office where a question was raised about the method of allocating an allowable supply cost to a sponsored project. The supply cost was $30. The “answer” generated more than one week’s worth of discussion involving the time of eight employees in three different offices. In other words, more than $30 worth of F&A was spent on deciding whether or not it could or should be charged as a direct cost on the award. (It was direct charged, and it should have been, it was the right thing to do.)

You’ve Hammered The Nail Down. How Many More Times Do You Need To Hit It?

This is not a discussion about whether or not we want to be compliant – this is a discussion about the BEST way to be compliant. The reality is, that there is often MORE than one way to allocate costs in a compliant manner, and the fact of the matter is that we can allocate costs as effectively as possible, following all the rules and guidelines provided by the funding agency and OMB circulars – and an auditor can still request to remove the charge for a particular reason on an audit. (They may, or may not be successful.) At the end of the day, we need to realize that we are going to make the best decisions possible, according to policies, decide who is responsible for decision making, and move on. So how do we do this, and how can we avoid the black and white thinking that so often comes along with cost allocation processes – and makes the process so PAINFUL and time consuming?

A Starting Place for Understanding Cost Allocation: Three Questions

1. Who decides if the charge goes on the award, and who reviews/approves this decision?

It’s been my experience that the best cost allocation decisions are made at the department level – they are usually initiated by the investigator, and followed up on by a research administrator, who determines how best to allocate the cost to the award – and confirms this with the investigator. The RA might consult with a central office, but a central office role is usually to review and approve the charge once it is placed on the award, and that’s the appropriate role for the central office. It’s good to make sure we’re charging the award appropriately before we’ve touched it – but the local department knows more about the research and how the award is being conducted. The investigator also knows their program officer’s expectations, and grants management officer’s guidelines about how the award should be spent.

2. What information helps guide the decision making process?

The OMB circulars, the award documentation, and the agency guidance regarding allowable costs, as well as institutional policies and procedures regarding cost allocation. Whew! That’s a lot of information that is sometimes contradictory – so where do you start? The most specific guidance for the award pertains first.

3. What documentation supports the decision, and how is this documentation generated and maintained?

There is nothing WORSE than cost allocation processes that are not consistently followed – think A21. Following processes that document purchasing, and the allocation of costs on awards and document these costs consistently so that administrators can follow your thought processes are vital (everything from always using formulas in Excel spreadsheets to entering in justifications to every computer system that you use to execute financial transactions).

Fundamental Knowledge for Successful Cost Allocation

  • The research administrator needs to know the units for accepting costs (this sounds trivial and simple, but it really is quite important). Are costs to be allocated by project, lab, employee, etc?
  • Roles need to be maintained – it is surprising how often central office staff regularly allocate costs to account codes that are inappropriate or feel that they know best how to allocate costs, when they know little about the research itself or the cost item being allocated.
  • The consistency principle for A21 should be (in my opinion) maintained by research unit – similar types of research. Again, this is something that departments know better than central offices – allocation of expenses for wet labs is going to be different than allocation of expenses for dry labs, or clinical research labs. Explaining this to a central office accountant is important to ensure the correct allocation method for the sponsored research account.
  • Allowability and reasonableness are usually easier terms to work through, based on the award information.

When in Doubt – Double Check and Documentgroup-of-small-business-people

If you have a particularly unusual situation, work with your investigator to talk with your central office, and his or her grants management specialist about the question to receive approval. Document the decision if it is favorable. It’s still no guarantee – but it’s a good indication that it’s an allowable cost. Document all of the justification material and correspondence for future reference.

The Best Defense Is A Good Offense

As always, the investigator is always in the best position to support his or her cost allocations when the budget and budget justification are well developed in the proposal stage, and his or her progress reports, financial reports, and updates are well tracked and presented. Our cost allocation decisions should make sense, and be defensible when we are asked about them by our internal and external auditors. And it shouldn’t take a village to allocate the cost of a $30 item to a sponsored project – because there’s more work to be done!