Managing Expenditures

Federal research funds are generally provided as cost reimbursable awards, i.e., the university bills the sponsor for costs incurred and is reimbursed for allowable costs. It is the goal of the university to maximize research award reimbursement by ensuring that costs incurred follow sponsor policy. The primary source of guidance on all aspects of federal sponsored awards is Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, commonly known as 2 CFR 200 or Uniform Guidance. The Cost Principles, which govern allowable costs are included in Subpart E of the Uniform Guidance.  

Some federal awards may have restrictions more specific than the Uniform Guidance, such as contracts subject to Cost Accounting Standards (CAS). Such restrictions are noted in the Award Overview tab in the PI Portal. Non-federal sponsors may also have specific restriction that will be noted in the PI Portal. If a sponsor does not have spending guidance, the university’s purchasing policy applies.

In order to be reimbursable by a federal sponsor, a cost must be

• allowable, i.e., be necessary and reasonable for the performance of the award activities
• reasonable, i.e., not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost
• allocable, i.e., be charged or assigned to the award in accordance with the relative benefits received.

Direct cost allocation

Goods and services purchased under a sponsored award may often benefit more than one award. Such costs must be allocated to sponsored awards in proportion to the actual benefit received by the awards. If it is impractical to determine how much of the goods or services are actually used for each award, an allocation methodology must be developed and documented that reasonably estimates the actual benefit to each award. Costs are then distributed to each benefiting sponsored award using the allocation methodology. For on-going allocations, the methodology should be reviewed and documented no less often than annually.

Direct Costs

Direct Costs are costs that can be identified specifically with a particular sponsored award, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.

Facilities and Administrative Costs (F&A Costs)

F&A (Facilities and Administrative) costs (formerly known as Indirect or Overhead Costs) are costs that support the sponsored project enterprise but that cannot be identified readily and specifically with a particular sponsored award. Facilities costs include building and equipment depreciation and operation and maintenance expenses. Administrative costs include general and administrative expenses; library expenses; and student administration and services. F&A costs are reimbursed in accordance with the university’s current F&A rate agreement.  

The total cost of a federal award is the sum of the allowable direct cost and the allocable F&A costs.  

Generally, for allowable costs to be charged to federal awards, they must be treated consistently i.e., costs incurred for the same purpose, in like circumstances, must be treated uniformly as either direct costs or F&A costs. However, under certain circumstances costs that would normally be charged as F&A may be charged as direct costs. The two criteria that allow F&A costs to be reclassified as direct cost are:

• the cost must be incurred under “unlike circumstances” rather than the normal or typical circumstances that dictate that a cost be classified as an F&A cost.
• the cost must be specifically associated with the subject award with a high degree of accuracy.

Examples

Administrative/Clerical Salaries are generally unallowable as direct charges. However, direct charging may be appropriate if:

• administrative or clerical services are integral to a project or activity
• individuals involved can be specifically identified with the project or activity
• such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency, and
• the costs are not also recovered as indirect costs

Examples of when direct charging may be appropriate include:

• large complex projects such as NIH Program Projects and Center awards, NSF Research Center awards and other projects that require coordinating the activities of investigators from a number of different departments and, possibly, different institutions
• projects such as conference grants that require making travel and meeting arrangements for large numbers of participants

In each case, the administrative person should be named in the proposal budget and a clear justification provided for why the increased level of administrative support is required by the project.

One of a principal investigator’s responsibilities is to monitor project expenditures and commitments to ensure that they do not exceed the project budget. To support this activity, the Office of Sponsored Programs provides current project financial data through the PI Portal.

While a principal investigator may designate other persons as “authorized signers” for the project, he or she retains responsibility for ensuring that the project is conducted within the authorized budget. If a project ends with an overexpenditure, the Office of Sponsored Programs transfers the direct cost portion of the overexpenditure to the cost centers listed in the expenditure allocation section of the PA-005. 

The budget is the financial expression of the project or program as approved during the proposal to award process. After a grant or contract has been awarded, the principal investigator (PI) may determine that the approved budget allocations are not consistent with actual project requirements and may need to move funds from one budget category to another (Budget Revision or Rebudgeting).

Informal rebudgeting occurs when project expenditures differ from the approved budget: when they exceed or fall short of the amount in a budget category, or when they occur in a budget category that has no budget allocation.

Sponsors may allow rebudgeting without prior approval, or may require approval for:

• some or all changes, 
• when rebudgeting into or out of a spending category exceeds a specified threshold. 

If prior approval is not required, then changes to budget categories within Workday are not necessary, though may be requested by the PI.

It is important to note that rebudgeting may impact F&A costs.

Procedure

1. The PI contacts the Office of Sponsored Programs sponsored program officer (SPO) to request a budget revision.  
2. The SPO gathers relevant information from the PI, evaluates it according to the award terms/agency terms and applicable legislation, and advises the PI accordingly. 
3. If sponsor approval is not required, and the SPO determines the change is allowable, the SPO enters the revision into Workday and the SPO’s supervisor (Associate Manager, Office of Grants and Contracts) reviews and approves the change before going live in the system.
4. If the sponsor approves the budget revision, the SPO modifies the award and budget in Workday via an award amendment, and the modification workflows to the SPO manager for review and approval before going live.
5. The SPO uploads applicable documentation to Workday and/or stores the documentation in the official award file. Documentation may be an email exchange, a revised notice of award or other sponsor system notification, as well as the award modification within Workday for the approved revisions.

If the PI requests a revision via Workday, such as in a request to purchase unbudgeted capital equipment, the Grants Shared Services Center staff will contact the SPO concerning allowability before processing the order. The SPO will contact the PI and follow the above procedure.
 
The Office of Sponsored Programs (OSP) will deny requests for items that are not allowable, that are not allocable, that the Sponsor does not approve (when applicable), or that represent an unapproved change in scope of work.

OSP sets up awards and grants for the time period and funding amount provided in the original award notice. Once the end date has passed, OSP begins the closeout process for the award. As part of final closeout, after all payments are received from the sponsor, any direct cost expenses in excess of funds available at the time of closeout are transferred to the cost centers listed in the expenditure allocation section of the award’s PA-005. 

However, there are situations in which additional time and funding are anticipated but not yet received.  Among these are:

• Sponsor delays in issuing award amendment documents, and
• pass-through entity (i.e., sponsors from whom Ohio State receives funding as a subaward) delays in processing funding increments.

In order to minimize the need for cost transfers, in particular Payroll Accounting Adjustments (PAAs),  in these situations, OSP can extend the grant end date and allow expenditures in excess of funds available, or, if the sponsor requires each funding increment to be managed separately, issue a new preliminary grant number.  To initiate such actions, the PI/department completes an Authorization for Expenditures/Commitments in Excess of Funds Available (OGC-005) form. By approving the form, the principal investigator’s department is agreeing to accept responsibility for any costs incurred if, for some reason, the additional funding is not received.