University of Georgia Athens
Cost Accounting Disclosure Statement
“What is the Issue”
August 10, 2004
Jim Vitale & Associates, Inc
Agenda
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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
August 10, 2004
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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 S&W 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
August 10, 2004
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Federal History – cont’d
• 1996 - 2003 Additional changes –
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F&A cost pools
Animal care space
Cost sharing
Tuition remission
• 2004 – Codification of A-21
– DCA selects DCAA to complete OIG’s role
• Audit scope to be defined
• Project teams to be defined
• DCAA staffed differently than OIG
August 10, 2004
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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:
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Direct cost
Inconsistent departmental costing
Time and Effort
Service centers
Cost Transfers
August 10, 2004
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UGA History – cont’d
• 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
August 10, 2004
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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
August 10, 2004
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Who is going to do this?
Cont’d
• Cross-campus teams supported by
personnel from Contracts and Grants
Sponsored Projects and Accounting
• Teams will have ongoing access to
University’s DS-2 consultant
• Campus members selected based on
experience, skills and knowledge
August 10, 2004
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UGA Committees
Core (Res Comm Group)
1. Alan Darvil
2. Joe Crim
3. Steve Beech
4. Clif Pannell
5. Jerry Cherry
6. Jim Sweeney
7. Regina Smith
8. Chad Cleveland
9. Tracy Walters
10. Dale Wetzelberger
August 10, 2004
1.
2.
3.
4.
5.
6.
7.
Effort Reporting/Cost
Sharing
Mike Padilla
Kathy Shelnut
Tonia Gantt
Paula Tolbert
Mike Mispagel
Vicki Smith
Diana Shelnutt
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UGA Committees cont’d
1.
2.
3.
4.
5.
6.
Service Centers
Chris King
Jerry Nesmith
Tammy Andros
Bill Stauff
Karen Barger
TBA
August 10, 2004
1.
2.
3.
4.
5.
6.
Direct Cost
Ted Gragson
Chiki George
Anuj Sinha
Peggy Peters
Kathy Vinson
Debra Rucker
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Major Issues
1.
2.
3.
4.
5.
Time and Effort/Cost
Sharing
Timeliness
Accuracy
Appropriate signatures
Transfers
Committed cost sharing
vs. uncommitted
August 10, 2004
1.
2.
3.
4.
5.
6.
Service Centers
User base
Rate discrimination
Costing vs. pricing
Business plan
Rate review and
approval
UBIT
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Major Issues – cont’d
1.
2.
3.
4.
5.
6.
7.
Direct Costing
Clerical salaries
General purpose equipment
Office supplies (inc computers & supplies
P-cards
JV – 90 days/explanations
Account close out
Exceptions – major projects
August 10, 2004
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What are we going to
do? Cont’d
• 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
August 10, 2004
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What are we going to
do? Cont’d
• 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
August 10, 2004
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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
August 10, 2004
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How will the process
move forward? Cont’d
• Initial team meeting
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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
August 10, 2004
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How will the process
move forward? Cont’d
• 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
August 10, 2004
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How will the process
move forward? Cont’d
• 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
August 10, 2004
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How will the process
move forward? Cont’d
• 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
August 10, 2004
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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
August 10, 2004
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Objectives of OMB
Circular A-21
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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
August 10, 2004
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General Standards for Cost
Allowability
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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
August 10, 2004
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A-21 Terms
• F&A – 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.
August 10, 2004
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F&A Rate
• Facilities and Administrative Cost Rate Formula
(Facilities and Administrative* components)
(Sponsored Research MTDC)
Equals
The Calculated F&A (indirect cost) Rate
* Administrative caps – 3.6% on faculty administrative
salaries (1986) and 26% maximum admin. Component
(1993)
August 10, 2004
Jim Vitale & Associates, Inc
Cost Accounting
Standards
• Nothing New!
• OMB Circular A-21 requires:
– Consistency
– Allowability
– Certification
August 10, 2004
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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?
August 10, 2004
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What is a Disclosure
Statement?
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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.
August 10, 2004
Jim Vitale & Associates, Inc
What is a Disclosure
Statement? Cont’d
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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”
August 10, 2004
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Disclosure Statement is
a Fiscal Roadmap
A comprehensive description of an organization’s cost
accounting practices
General Information
Central systems and
Group Expenses
Deferred
Compensation/
Insurance Costs
Leave Costs
and Applicable
Credits
Direct Costs
CASB
Indirect Costs
Depreciation
and Use
Allowances
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.
August 10, 2004
Jim Vitale & Associates, Inc
Major Audit Issues
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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
August 10, 2004
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Cost Sharing
• January 5, 2001 interpretation– Mandatory and voluntary committed cost sharing is
specifically pledged in the proposal’s 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.
August 10, 2004
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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
August 10, 2004
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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
August 10, 2004
Jim Vitale & Associates, Inc
Work/Project Meetings
• Initial meeting
– Web-page
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DS-2
A-21
PowerPoint Presentations
Meeting minutes
– Work group specific issues
– Example policies
August 10, 2004
Jim Vitale & Associates, Inc
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?
August 10, 2004
Jim Vitale & Associates, Inc