How does CAS affect you?
The impact of CAS is felt most directly in four areas: proposal preparation, budgeting, and account creation; cost sharing on grants and contracts; departmental costing (i.e., is a cost an allowable direct cost?); and the operation of service center/recharge operations.
Proposal Preparation, Budgeting and Account Creation
One of the CAS standards (CAS 501) demands consistency between "estimating, accumulating, and reporting" on proposal budgets. The initial budget in the proposal and on the Internal Approval Form has become more important. It is necessary to confirm that the costs requested are for categories in which the investigator intends to spend these funds, that the costs are allowable as direct costs under the departmental costing policy (see discussion below), and that appropriate matching commitments, voluntary or mandatory, are identified. Changes, once the budget is set up in a University account, require written documentation in advance of expenditures. Faculty are strongly encouraged to submit budgets for review well in advance of deadlines. This gives the Office of Sponsored Projects Administration (OSPA) and the investigator the opportunity to detect, discuss, and resolve any CAS-related problems.
Hazardous Waste Disposal Costs
The University has developed a system for charging all users for the disposal of wastes, including hazardous wastes. This system is designed to fairly allocate the costs of waste disposals to University users. Specifically, when most supplies and materials are purchased on any University account, a small charge is placed directly on the expenditure. The charge is a percentage--the greater the expenditure the greater the charge for disposal and related costs. The charge (percentage) is reviewed annually to match expenditures with revenues.
Cost Sharing
The University must document its cost sharing. For example, if an investigator requests $100,000 but accepts an award of $80,000, the University may incur a cost-sharing obligation of the $20,000 difference unless UK negotiates a reduced scope of work for the $80,000 or documents the decision that the work may be accomplished within the awarded amount. In addition, any cost sharing quantified in the proposal must be formally documented.
Questions and Answers
Q. Should investigators cease to seek funds from sponsors that require matching funds?
A. No, we anticipate that such sponsors will still be an important source of funds for the institution.
Q. Are investigators prohibited from including voluntary cost sharing in proposals?
A. No, there is no such provision, but voluntary cost-sharing adversely affects the University's indirect cost rate. Investigators should refrain from pledging a large portion of their academic year salary as matching funds on grants and contracts, particularly in cases where the sponsor pays no indirect costs.
Departmental Costing: Is it Direct or Indirect?
In our current accounting system, Circular A-21 ("Cost Principles for Educational Institutions") governs the nature of charges made to grants and contracts and dictates that such costs must be allocable, reasonable, and allowable. When CAS was added it insisted on a new test: consistency. That is, we must be prepared to state, for each cost element like postage or equipment maintenance, whether it will be treated as a direct cost or an indirect cost. These cost elements cannot, under routine circumstances, be both.
We have developed a "departmental costing" policy that enumerates the division of these cost elements between the direct and indirect categories. For example, the CAS Task Force has listed "postage" as an indirect cost. Investigators are longer be able to charge routine postage costs to a federal grant or contract. Although the assignment of a particular cost element, like postage, to the "indirect cost" column generally means that it cannot be charged directly, there will be exceptions. These exceptions will be allowed if the project fits something called a "different purpose and circumstance." The Disclosure Statement (also called the DS-2) lays out our accounting practices as well as the exact language of these "different purpose and circumstance" statements. For example, projects performed for the commonwealth or for industry would be for different purpose and circumstance. In this case, an investigator can charge postage to an industrial contract because the project would fit under one of the different purpose and circumstance statements. However, the Disclosure Statement must be reviewed and approved by the Department of Health and Human Services, our cognizant audit agency, before we can assure faculty that these "different purpose and circumstance" statements will be acceptable.
Questions and Answers
Q. Does this list of allowable direct and indirect cost elements apply to every department, college, school and division in the University?
A. Yes, they are applied uniformly across the University.
Q. If an item is identified as an indirect cost, is it ever acceptable to charge it to a sponsored project?
A. Only when the project qualifies as a "special purpose or circumstance" and the item has already been adequately justified.
Q. Does "special purpose or circumstance" refer to the unit or the project?
A. The project.
Q. Who will decide that a particular project qualifies as a "special purpose or circumstance"?
A. The investigator must indicate this (on federal proposals) in the budget justification section of the proposal. OSPA is responsible for reviewing and submitting proposals and providing consistent interpretation of the policy. Disagreements will be discussed between the PI and OSPA. Early review of the budget and discussion between the PI and OSPA will facilitate this process.
Q. Is the list of 14 special purposes all-inclusive?
A. No, but the fourteenth, the "different purpose and circumstance" statement, allows for a determination on a case-by-case basis. However, to maintain the integrity of the policy, there must be legitimate, careful review and consistent decisions. This statement will not be used simply because an investigator is upset with the new policy or has "always done this in the past."
Q. Are other resources available to cover cost previously charged to grants and now identified as indirect?
A. There are no new funds in the University budget to cover these costs.
Q. If a unit is funded 100% by sponsored projects, can it charge indirect items, such as secretarial or clerical salaries, to grants and contracts?
A. The policies are not based on the nature of the unit but the nature of the project. Only projects that qualify as special purpose or circumstance may charge certain normally indirect costs as direct.
Q. Does the fact that a project is large qualify as special purpose or circumstance?
A. "More" is not "different." However, if the project is large, and the nature of the activity is different, it may qualify. Each project is reviewed separately.
Q. An investigator with more than one project often purchases a variety of lab supplies to be used by all of the projects. What level of detail is required when sharing the cost of items and documenting the use on each project?
A. There are several criteria given for a cost to be shared between two or more projects: it must be a direct cost, specifically benefit all projects, be specifically identified with the projects, and there must be a method of distributing the cost which "roughly but reasonably" reflects the benefit to each project. There must be credible documentation maintained by the department to support the distribution. Section 4 of the departmental costing policy addresses the principle of "proportional benefit."
Q. Is international travel a direct or indirect expense?
A. Direct.
Q. Will computers be a direct or indirect?
A. Computers are indirect. The departmental costing policy includes four criteria for requesting computers as a direct cost on a federal project.
Q. Can we modify the University's Disclosure Statements after they are submitted? Could we add, for example, additional statements describing "different purpose and circumstances"?
A. The answer is yes, but not without significant cost. Any change requires a study to document to the federal government that the change had no material impact on the federal grants and contracts now in force at the University.
Service Centers and Recharge Operations
At the University of Kentucky, Service Centers and Recharge Operations activities are defined in the following document titled "University of Kentucky Policy and Procedures Service Centers and Recharge Operations," which became effective July 1, 1997. The policy addresses the administration of these activities and provides examples of billing rate structures and the steps involved in determining such rates. Because the University is a recipient of federal grants and contracts and because service center and recharge operations can result in charges directly or indirectly to these projects, the University must comply with cost principles and cost-accounting standards promulgated [established by?] by the U.S. government.
The cost principles are set forth in the office of Management and Budget Circular (OMB) A-21, while the cost-accounting standards are designed to achieve uniformity and consistency in the cost-accounting practices governing measurement, assignment and allocation of costs to federal grants and contracts.
At the University of Kentucky, two categories of service centers are recognized:
1) Major service centers -- total annual direct costs exceed $500,000.
2) Minor service centers -- total annual direct costs exceed $50,000 but not greater than $500,000.
Although the annual direct costs expenditures determine whether a service center is classified as major or minor, the components that may be included in the billing rates are different. Major service centers may include indirect costs for building and equipment depreciation, and maintenance and operations; minor service centers may include indirect costs for equipment depreciation.
Recharge operations occur when departmental units provide goods and/or services for a fee and total annual direct costs are less than $50,000. Contrary to service centers, recharge operation billing rates are not allowed to include any indirect costs since they must include direct costs only.
The University has adopted a break-even policy which states that a surplus or unsubsidized deficit for a given fiscal year must not exceed +/- 10% of annual operating expenses, computed as of the final closing of the books on June 30th. If surplus amounts are in excess of 10% of the operating costs, they must be refunded to the users in proportion to their use of the service center.
Note that federal grants and contracts cannot be charged a higher rate for goods and/or services than any other users. Also, no discounts or free services may be give to any user.
Questions and Answers
Q. What can I do if the cost of a particular service exceeds that for which an investigator has currently budgeted funds?
A. There is no simple answer to this question. We expect that investigators will incorporate the new service center/recharge operations rates in their future proposals. Some investigators may need to request additional funds from sponsors where a mechanism for supplemental funding exists. In some cases, the vice chancellors for research or the vice president for Research and Graduate Studies may be able to provide some support. Each case will be reviewed individually and on its merits, but there are no guarantees of internal support.