Ask an expert: tips and tools of the trade, series 3.
Q: Where is the regulation allowing me to ...?
A: It is fundamental to our society that we can do anything that is not prohibited or controlled by law or regulation. We research administrators spend so much time dealing with limiting regulations that we forget this fundamental freedom. Assume an activity is permitted unless prohibited or regulated.
2. Learn Foreign Business and Cultural Practices
Q: Our institution has a few agreements that require subawarding with other countries whose business practices are different from the U.S. practices we take for granted. How can we learn about those foreign practices and determine what controls we must put in place to protect our institution?
A: Use your institution's resources! It is likely that some faculty member in the business school knows about these different practices and how to adapt U.S. practices to meet them. Graduate students from those countries may also be a resource. Your institution's strengths in multiculturalism will help make better international agreements. Also, if USAID or some other experienced agency is the prime sponsor, review their resources on foreign practices and listen to their suggestions.
3. Foreign Agreements
Q: Are there special concerns for foreign subawardees?
A: The following ones are the most important. Some subawardees have systems similar enough to those of the U.S. that few problems occur. Others may not. Co-mingling of funds is con]n]on in many foreign entities, so ensuring that the subaward be set up in an account not co-mingled with any other funds is extremely important. If nothing else works, require a separate bank account. Foreign entities often do not measure or track effort. Be sure the foreign institution has an appropriate way to measure time and effort. You may have to provide advice on how to do that. I recommend that you include a clause warranting that the individual who signs the agreement has the authority to execute on behalf of the institution. Also be sure to include a clause under which the subrecipient will reimburse you any costs paid but later found to be unallowable by audit.
4. Flow Down to Foreign Entities
Q: A foreign subcontractor wants to say that it will comply only with those "federal laws provided to it by us"! If a foreign entity applies as a subcontractor, shouldn't it be responsible for knowing which regulations apply to it? Should we just refer them to the "dot gov" web site and tell them all the regulations they need are there? If it is an NIH sub, is the NIH Grants Policy Manual (GPS) comprehensive enough?
A: You should treat a foreign recipient without previous experience with your prime agency as completely unknowledgeable. Be explicit about applicable regulations. You should specify applicable CFR's and OMB Circulars as well as award language. Provide URLs rather than copying, or even worse, paraphrasing, the material. Also inform them what does not apply; you need to know those things anyway to ensure proper monitoring of them. For example, specify that "requests to the sponsor agency" come to you, not the sponsor. You will have to add some clauses to your stock subagreement to handle these special matters. The NIH GPM is a good place to understand generally what is required in foreign subawards; a section is devoted to it. Also provide your foreign partner a contact to answer specific questions about applicability. Remember, YOU are responsible for the performance of the sub, in all ways.
5. Applicable Cost Principles
Q: How does subawarding affect cost principles?
A: For federal funds, the nature of the recipient determines which cost principles apply. OMB Circular A-21 applies to Educational Institutions. OMB Circular A-87 covers State, Local and Indian Tribal Governments. OMB Circular A-122 covers Non-Profit Organizations. FPR (Federal Procurement Regulations) and its required accounting practices disclosures cover for-profits. For non-federal sponsors you should check the award instrument or the agency's regulations to determine if they are relaxed or more stringent than federal cost principles. A few non-profits specify cost principles that apply to their awards. So an institution should determine the type of any subawardee it deals with when preparing the subaward. Also, you should watch on subawards you receive that the cost principles that apply to you are correct. For example, a university should receive A-21; state agencies are notorious for trying to apply A-87 to university subrecipients.
6. Administrative Principles
Q: What regulations other than cost differ in application based on the nature of the recipient?
A: Federal grant administrative regulations: OMB Circular A-102 applies to Grants and Cooperative Agreements with State and Local Governments, while OMB Circular A-110 applies to Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations. A university subrecipient should receive A-110 as administrative regulations for any subaward under a federal grant.
7. Policy and Procedure Fundamentals
Q: How should policies and procedures be drafted?
A: Policies should be broad, and simply stated. They should not change frequently. Procedures can be much more detailed and can be changed more frequently to meet changing needs and externalities. Posting them to web sites makes promulgation easy. It is important to state them so everyone can understand them.
8. Writing Policies and Procedures
Q: Preparing policies and procedures takes time; where do we find time?
A: You probably follow some good practices which can be written up as policies and procedures. Taking the time to document these and publish them is very important to a successful A-133 audit. You might take advantage of your own institution's resources to do this. For example, a senior or graduate student from the business school might do an independent study documenting policies and procedures in your office. An old administrator's trick is to remember as you are writing a memo, etc. that states policy or procedure, to put a copy of that information in a "bucket" and review the bucket once a month--a little editing will quickly produce those policies and procedures.
9. Making Life Easy For Faculty Members
Q: How can we help the faculty understand what costs are allowable and how to manage a project?
A: PIs want to do things right--they just don't know how. Put an Informal Guide for PIs on the web. With hyperlink technology, it is easy to develop links to underlying policy and practice that will provide greater detail. Give a listing of what costs are allowable on the web and refer individual questions to it. This will allow faculty members to budget their projects correctly, and a properly budgeted proposal becomes a simple award to manage fiscally. Emphasize "allocable" and that it means the expenditure is for this grant's purposes, in the post award guidance. Running a project is like running a small business in that it is not a skill most faculty members learn as they progress through graduate school. Yet they can, and will, learn this new skill quickly if given guidance and references--learning new things is just what their education prepared them to do.
There is a range of administrative actions, and a quantity of them, and 10% of the range covers 90% of the quantity of actions. Faculty members should know to do that 10% of the range they use daily, and that will cover 90% of the cases they experience. They should know to call on the expertise of college business managers, Office of Sponsored Programs, or Finance for something less usual. The Informal Guide for PIs should focus on the 10% of actions that faculty members need to know and provide some guidance on how to recognize when they need expert advice.
10. Late Request for a No-Cost Extension
Q: How should we deal with faculty members who do not spend their funds during the project period and need no-cost time extensions (NCTE) at the last minute?
A: This is an academic management problem, and chairs and deans are responsible for overseeing faculty performance. "Because funds are left over" is not an acceptable reason for an NCTE. If the funds were not used, generally it means that the project was not performed timely, or that its costs were "bootlegged" elsewhere. If there was a reasonable delay, an NCTE can be obtained "to complete the goals of the project." Whether the award requires specific permission or allows the institution to exercise expanded authorities, there should be an internal document from the PI requesting the NCTE, approved by the chair, before OSP acts on it. This will give academic management an opportunity to judge the appropriateness of the request, as neither OSP nor Finance can judge that. Routinely providing academic management with the same monthly financial reports the PI gets will allow more timely oversight by academic management.
11. Rebudgeting Effect on Cost Sharing
Q: How do we keep the PI from messing up cost sharing by rebudgeting?
A: First, do not offer cost sharing needlessly, and avoid cost sharing by reducing F&A. Second, determine what rebudgeting actions affect mandatory or voluntary committed cost-sharing commitments, and require these to be approved by OSP. When NSF first delegated to institutions certain changes (now "expanded authorities"), they required the institution to designate an individual to approve changes. This is still a good practice for a small institution or one with faculty and business managers who are not experienced.
12. Contract Details
Q: Should you include a Scope of Work (SOW) and a Schedule of Deliverables for a subaward?
A: Always! Require the PI to prepare these, based on the proposal's statement of goals and division of work. A SOW is verb centered: "Sub will do X"; "Sub will measure X." Often these can be taken almost directly from the proposal. A Schedule of Deliverables is noun centered, has a timeline, and should be objectively measurable: "Sub will deliver a written report on X date"; "Sub will deliver A on date X, B on date Y...." Be satisfied that these are prepared properly before writing them into the agreement.
13. F&A Rate for Subawardee
Q: What F&A rate is used for a subawardee?
A: The subawardee's approved F&A rate applies to direct costs expended by the subawardee. If no approved rate exists, the NIH Grants Policy Manual has guidance that can be used in cases where there is no approved F&A rate as long as the substitute rate is in the proposal for your prime to see. However, some sponsors may reject F&A for a subcontractor with no established rate. Watch out for use of the term "indirect" in a for-profit's quote or billing, because this may be a proportional allocation of direct costs instead of being calculated as a university's F&A is.
14. Withholding Final Payment for a Subcontractor
Q: Should we withhold final payment pending receipt of the final deliverable?
A: YES--and write it into the agreement! I find 10% is the most you need to withhold unless you have good reason to withhold more for that particular subawardee. This is also the most you should agree to for incoming sponsored programs.
15. Be Sure You Are Paid!
Q: How should we require payment from an entity with an unknown or bad track record?
A: Require payment periodically in advance; quarterly is usually reasonable (applies mostly to for-profit sponsors).
16. Working Capital
Q: How do we provide working capital if the subawardee cannot provide its own?
A: In the agreement, specify an advance payment (typically one, or certainly no more than two, times the estimated cost to complete the work of an average billing period), and require that the advance be closed out as a reduction from the final invoice(s).
17. Fixed Price Agreements
Q: What are the merits and dangers of Fixed Price or Fixed Unit Price agreements?
A: Fixed Price agreements are essentially, "You deliver X and we will pay you Y." From an accounting point of view these are wonderfully simple because if there is no delivery, there is no payment! There can be audit or review of the process for setting the price, but once set, delivered, and paid, there can be no audit of how the funds are spent. Fixed Price can be good for agreements with for-profits, because they like to know the price going into an agreement. The drawback is that you must cost out the offer carefully, so that no unexpected costs appear later. You should add 10-20% to be sure. Be certain that the PI certifies that all deliverables have been met before billing on a fixed price agreement, or paying on a fixed price subaward. Also, keep the account on a fixed price agreement as you would a cost reimbursement agreement, because a fixed price agreement should revert to cost reimbursement in case of termination before completion.
18. Fixed Level of Effort Agreement
Q: What is a fixed level of effort agreement?
A: Fixed level of effort is a special case of fixed price in which the effort to be expended and billed is agreed to in advance. This is especially convenient in research, where the outcome cannot be predicted. You should be sure that the PI, Chair, and Finance understand that an agreement is fixed level of effort, so that your obligation is met when it becomes time to bill. Do not allow changes from proposed named personnel to be made. This can be a good reason to quote effort by category of performer rather than name of personnel.
19. Regulation and Compliance
Q: Can you clarify the difference between Assistance and Procurement?
A: By federal law, "assistance" is to assist the grantee institution in performing an activity it wants to perform and which serves a public purpose but which the institution cannot complete with its own resources. Federal assistance is awarded by a grant instrument and follows A-1 10 for administrative regulations. Federal Procurement is obtaining goods or services that benefit the agency and is awarded by contract, following Federal Procurement Regulations (FPR). Foundations and other non-profits follow the same system, but seldom have to procure. For-profit sponsors (not to be confused with the non-profit arms set up by for-profits) will often "procure" rather "grant" sponsored programs simply because the), have no other means of supporting a project. If a for-profit entity sponsors an activity under its federal prime award, be sure whether it is procuring under FPR or subawarding under grant regulations; that affects how you administer it. State and local government agencies can use either.
20. Waiving/Amending Award Terms
Q: Who has authority to waive or amend award terms and regulations?
A: The sponsor's grants officer or contracting officer can approve various changes. They cannot change regulations, but they can give guidance. Sometimes one has to read very carefully to discover that a person is saying "Yes," while still carefully walking a tightrope to keep from appearing to permit something he has no authority to approve. Note that for U. S. Department of Education and NSF, many changes can be allowed by the Program Manager. Obviously, you should always get approval to waive or amend in writing, but c-mail is the preferred communication. Be careful to understand the difference between regulation and administrative guidance.
21. Retention of Technical Reports
Q: Should OSP keep copies of technical reports?
A: No, at least not paper copies because keeping paper copies creates a significant storage problem for a central office. However, procedures should require the PI to provide OSP a copy of the document transmitting the report and to retain a record copy of the report itself: The retention period for federal grants is three years after the final fiscal report is made. I suggest that five years after submittal is a wise retention period. This will allow OSP to inform a sponsor when they submitted a report and to whom, and the PI will still have it if another copy is required. Note that in some cases the technical report for a period is also the proposal for the next. You may need to point out to inexperienced auditors that agency regulations provide for that.
22. Closely Related Projects
Q: We have a brilliant young PI who won two major awards to conduct research and perform motivational interventions on campus to combat alcohol abuse among college students. The Dept of Education grant focuses on issues relating to men and the NIH grant focuses on women. Now the PI is close to running out of funds on one grant, so he proposes to bill "similar activities" to the other grant. He believes that since this is all government money and because the projects are essentially similar, it is permissible to pay for activities and personnel from one grant to another. Also the salary of a member of the key personnel listed on the one grant budget was billed for a few months to the other grant on which the person was not listed. This seems to be a fundamentally flawed view of how to manage grants. Do you know of a reference for the prohibition of co-mingling grant funds that I could share with the parties concerned?
A: A-21 C.2 states that costs should be "allocable" to be allowable. The three basics of costing are reasonableness, allow-ability, and consistency of treatment. A-21 B.3 defines allocation as "the process of assigning a cost, or a group of costs, to one or more cost objectives, in reasonable and realistic proportion to the benefit provided or other equitable relationship." In short, costs charged to a project should result only from goods and services expended for that project.
This can cause a management problem where projects are closely related. You may have closely related goods and services that benefit more than one project. But they must be allocated between accounts "in reasonable and realistic proportion." Hence you should have careful planning before spending, rather than rushing to "fix" things after the fact. The coding for physical supplies for closely related projects can be split. Other than the PI, you can change the level of effort of assigned personnel on most grants; if they are named key personnel there may be limits to the change, or requirements to justify it. But you must be sure that changes in assignment are documented, and also that you do not have conflicting records. For example, if Dr. Jones is working 20% on grant A and 20% on grant B during the year, it is better to charge each grant 20% all year rather than charging A 40% for the first half a year and B 40% for the second half, because the lab notebooks will certainly show that Dr. Jones did actually work on both projects simultaneously.
But note that "closely related projects" is a special category or relationship which does allow transfers with less precision. The distribution can be by any "reasonable" method, but be sure to document the method if it differs from your usual one or involves after the fact cost transfers. In my experience, this cannot be invoked in situations where the support comes from two different agencies without the express permission of both grants officers. NIH has provisions for closely related work in its GPS that allow the institution to make the closely related work decision and distribution, but they need to be looked at carefully and they do not apply between two different agencies. And "because I ran out of money on one grant" is not reasonable.
Herbert "Chuck" Chermside, CRA
1915 Robindale Rd.
Richmond, VA 23235-3931
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|Publication:||Journal of Research Administration|
|Date:||Apr 1, 2005|
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