University of Georgia - Athens

1
University of Georgia - Athens

• Cost Accounting Disclosure Statement
• What is the Issue

2
Agenda

• Brief background why are we doing this?
• What are we going to do?
• Who is going to be involved?
• How will the process move forward?
• Overview of A-21, Cost Accounting Standards and
  DS-2
• Conclusion

3
Why - Federal History

• ONR negotiates first set of cost principles with
  Universities in 1947
• Original Circular A-21 issued in 1958
• Many revisions between 1958 and 1994 attempted to
  impose tougher requirements for accounting for
  research effort and established standard indirect
  cost allocation standards. Base changed from SW
  to MTDC. Fixed rates.
• 1994- CASB consistency standards/disclosure
  statement.
• Requirement for DS-2 submission
• Requirement for review and approval by Federal
  agency
• Document must reflect current activities

4
Federal History contd

• 1996 - 2003 Additional changes
• FA cost pools
• Animal care space
• Cost sharing
• Tuition remission
• 2004 Codification of A-21
• DCA selects DCAA to complete OIGs role
• Audit scope to be defined
• Project teams to be defined
• DCAA staffed differently than OIG

5
UGA History

• 1995-96 University prepares and submits DS-2 to
  Federal agency
• 1996-2001 University awaits OIG review of DS-2
• National review process moves slowly and
  inconsistently
• UGA creates training program for A-21
• Post Sept. 11, 2001 OIG activities redirected
• 2001 UGA management concerned about 6 year old
  DS-2
• University hires outside consultant to review
  DS-2
• Areas of weakness identified
• Direct cost
• Inconsistent departmental costing
• Time and Effort
• Service centers
• Cost Transfers

6
UGA History contd

• 2003 University reviews consultant
  recommendations and action plan
• 2004 UGA implements process to update DS-2 and
  supporting policies and procedures
• Retains consultant to provide project training
  and support
• Creates core committee to provide project
  sponsorship, final document review and approval
• Reaches agreement with DCA that FY1996 DS-2 will
  be replaced with updated version by December 31,
  2004
• Creates committees to address consultant review
  issues

7
Who is going to do this?

• Core team selected based on experience, skills
  and knowledge
• Core team provides potential candidates for
  project committees
• Cross-campus committees should include where
  possible faculty participation

8
Who is going to do this? Contd

• Cross-campus teams supported by personnel from
  Contracts and Grants Sponsored Projects and
  Accounting
• Teams will have ongoing access to Universitys
  DS-2 consultant
• Campus members selected based on experience,
  skills and knowledge

9
UGA Committees

• Core (Res Comm Group)
• Alan Darvil
• Joe Crim
• Steve Beech
• Clif Pannell
• Jerry Cherry
• Jim Sweeney
• Regina Smith
• Chad Cleveland
• Tracy Walters
• Dale Wetzelberger

• Effort Reporting/Cost Sharing
• Mike Padilla
• Kathy Shelnut
• Tonia Gantt
• Paula Tolbert
• Mike Mispagel
• Vicki Smith
• Diana Shelnutt

10
UGA Committees contd

• Service Centers
• Chris King
• Jerry Nesmith
• Tammy Andros
• Bill Stauff
• Karen Barger
• TBA

• Direct Cost
• Ted Gragson
• Chiki George
• Anuj Sinha
• Peggy Peters
• Kathy Vinson
• Debra Rucker

11
Major Issues

• Time and Effort/Cost Sharing
• Timeliness
• Accuracy
• Appropriate signatures
• Transfers
• Committed cost sharing vs. uncommitted

• Service Centers
• User base
• Rate discrimination
• Costing vs. pricing
• Business plan
• Rate review and approval
• UBIT

12
Major Issues contd

• Direct Costing
• Clerical salaries
• General purpose equipment
• Office supplies (inc computers supplies
• P-cards
• JV 90 days/explanations
• Account close out
• Exceptions major projects

13
What are we going to do? Contd

• Modify documents based on campus input
• Prepare final draft for core committee review
• Modify policies and procedures based on core
  committee feedback
• Outline training goals for implementation of new
  policies and procedures

14
What are we going to do? Contd

• Prepare new DS-2 document reflecting current
  practices
• Submit DS-2 to DCA by December 31, 2004
• Prepare campus training programs for rollout of
  new policies and procedures
• Plan for Federal audit of new DS-2
• Maintain departmental compliance with UGA
  policies and procedures

15
How will the process move forward?

• Select project team members
• Assign committee specific areas of policies and
  procedures to review
• Provide DS-2 and A-21 training to core and
  project committees
• Project committees will set timing for initial
  meeting

16
How will the process move forward? Contd

• Initial team meeting
• Select team leadership
• Identify resources
• Review team objectives
• Discuss DS-2 review report with UGA consultant
• Provide team members copies of policies and
  procedures
• Establish timeline for 12/04 submission
• Assign member responsibilities

17
How will the process move forward? Contd

• Team members review policies and procedures
• Compare current practices to existing policies
  and procedures
• Draft new policies and procedures to comply with
  Federal and State regulations
• University consultant will review policy drafts
• Make changes to draft based on consultant input

18
How will the process move forward? Contd

• Submit revised draft to core committee for review
  and comment
• Prepare final post-core committee draft for
  approval and adoption
• Outline plan for implementation and training of
  campus on new policies and procedures
• Design ongoing monitoring system to ensure
  compliance with new policies and procedures

19
How will the process move forward? Contd

• Assemble new policies and procedures
• Prepare draft DS-2 statement for review by Core
  Committee
• Finalize DS-2 language
• Prepare final DS-2 document package
• Submit DS-2 to cognizant Federal agency
• Wait for audit and approval

20
A-21 and DS-2 Overview

• This segment is designed to give project
  committee members a broad look at what drives
  this process of updating University financial
  policies and procedures
• The Cost Accounting Standards and the DS-2
  requirement are contained in A-21

21
Objectives of OMB Circular A-21

• Establish standards for cost allocation
• Establish standards for cost allowability
• Identify Federal fair share of total costs
• Require consistent treatment of costs
• Clarifications
• Does not supersede limitations imposed by law
• Does not dictate how funds received should be
  spent
• Does not dictate organizational form or
  management
• Does not provide for recovering losses resulting
  from indirect cost reimbursement

22
General Standards for Cost Allowability

• Reasonable costs
• Prudent person test
• Necessary for the operation of institution or
  project
• Consistent with established policies and
  procedures
• Allocable costs
• Benefits sponsored project whole or in part
  (equipment).
• Direct cost determined without undue effort or on
  any reasonable basis.
• Consistent treatment - direct only or indirect
  only
• Conform to limitations or exclusions under A-21
  or NGA

23
A-21 Terms

• FA facilities and administrative (replaced
  indirect cost)
• Facilities component calculated share of
  buildings, movable equipment, land improvements,
  interest, operation and maintenance and library.
• Administrative component share of system,
  central, research, student and departmental
  administrative costs
• MTDC modified total direct cost base is the
  adjusted direct dollars that the facil. And
  admin. costs are applied to calculate a rate.

24
FA Rate

• Facilities and Administrative Cost Rate Formula
• (Facilities and Administrative components)
• (Sponsored Research MTDC)
• Equals
• The Calculated FA (indirect cost) Rate
• Administrative caps 3.6 on faculty
  administrative salaries (1986) and 26 maximum
  admin. Component (1993)

25
Cost Accounting Standards

• Nothing New!
• OMB Circular A-21 requires
• Consistency
• Allowability
• Certification

26
Cost Accounting Standards

• Standards
• 501 Consistency in estimating, accumulating and
  reporting costs
• Are proposal costs consistent with actual cost
  accumulations?
• 502 Consistency in allocating costs incurred for
  the same purpose
• How is the expense related to the project?
• 505 Accounting for unallowable costs
• Will the sponsor pay for the expense?
• 506 Cost accounting period
• Is the full fiscal year used in estimating and
  accounting for costs?

27
What is a Disclosure Statement?

• Documents cost accounting practices
• Required to be submitted to cognizant agency and
  cognizant audit agency.
• Supported by Policies and procedures,
  instructions, and guidelines for individual
  investigators, department heads, and
  administrators need to be made available because
  it is their responsibility to understand and know
  them.

28
What is a Disclosure Statement? Contd

• A living document that is a timely reflection of
  University operations.
• Identifies formal guidelines for charging costs
  to sponsored awards
• Direct and Indirect costs
• Cost-sharing policies
• Time and effort reporting policies and procedures
• Policies for Service Centers

29
Disclosure Statement is a Fiscal Roadmap
A comprehensive description of an organizations
cost accounting practices
General Information
CASB
Deferred Compensation/ Insurance Costs
Indirect Costs
Depreciation and Use Allowances
Leave Costs and Applicable Credits
30
DHHS DS-2 Bulletin!

• DHHS has recently streamlined the Disclosure
  Statement (CASB Form DS-2) approval process.
• DHHS has contracted with DCAA.
• DCAA will soon begin working through the backlog
  and is contacting the colleges to perform audits
  of the DS-2s.
• UGA is part of the backlog and an audit letter
  was received.
• UGA DS-2 on hold effective June 8, 2004
  submission January 2005.

31
Major Audit Issues

• Documentation of time and effort
• Cost transfers 90 days
• Cost sharing
• NIH Cap cost sharing
• Consistent treatment of clerical and admin.
  Salaries
• Service/Recharge Centers

32
Cost Sharing

• January 5, 2001 interpretation-
• Mandatory and voluntary committed cost sharing is
  specifically pledged in the proposals budget or
  award. Does not include general expressions of
  support in proposal narrative or current and
  pending support pages. Does include of effort
  in NIH modular grant applications. Some level of
  faculty effort is expected and will be imputed,
  if absent.
• Voluntary uncommitted cost sharing is faculty
  effort that is over and above that which is
  committed and budgeted for in a sponsored
  agreement.

33
Clerical and Administrative Salaries

• Examples of Clerical and Administrative functions
• Typing and mailing correspondence
• Accounting and budgeting
• Purchasing and tracking purchasing orders
• Non-scientific software and system development
• Processing vouchers
• Routine travel related planning
• Routine data entry and database maintenance
• Typing newsletters and brochures
• Typing applications for awards

34
Work/Project Meetings

• Kick-off Week 8/16
• Time and Effort/Cost Sharing
• Tues. 8/17 3pm
• Service Center Wed. 8/18 3pm
• Direct Costing Thurs. 8/19 3pm

35
Work/Project Meetings

• Initial meeting
• Web-page
• DS-2
• A-21
• PowerPoint Presentations
• Meeting minutes
• Work group specific issues
• Example policies

36
Conclusion

• A-21 sets the standards for consistency and
  allowability
• Cost Accounting Standards require the University
  to certify their processes and be audited to
  those standards
• Policies and Procedures are the heart of the
  process
• Policies and Procedures need to reflect
  University operations and regulatory compliance
• This is an important project that needs to be
  completed on time
• Questions?