Santa Clara University
Sponsored Projects Office
Financial Polices and Procedures
Table of Contents
Introduction to Cost Accounting and Financial Compliance
Advances
Allowability of Cost
Audits
Budget and Expenditure Monitoring
Budget Revisions
Cash Management
Cost Sharing
Direct Charging Practices
Expenditure Authorization
Expense Transfers
Financial Reporting
Grant Closeout and Year End Requirements
Indirect Costs
Other Reporting
Program Income
Record Retention
Residual Funds
Time and Effort Reporting
Travel Expenses and Reimbursement
Last modified 11/2013
1
Introduction to Cost Accounting and Financial Compliance
Cost accounting and financial compliance for sponsored projects at Santa Clara
University is dictated by the Code of Federal Regulations (CFR), Part 220, Cost
Principles for Educational Institutions; Office of Management and Budget Circular A133, Audits of States, Local Governments, and Non-Profit Organizations; CFR, Part 215,
Uniform Administrative Requirements for Grants and Agreements with Institutions of
Higher Education, Hospitals, and other Non-Profit Organizations; and other specific
sponsor requirements and regulations. Further, policies and procedures of the University
must also be followed. Ensuring compliance with the financial terms and conditions of
the sponsored award including compliance with federal and agency regulations and
requirements is the responsibility of both the Principal Investigator and the Sponsored
Projects Office (SPO). The intent of the following policies and procedures are to assist in
incorporating the requirements of CFR Part 220 and other federal regulations into the
accounting and administration of sponsored awards at the University.
Advances
SPO follows the University policies and procedures for cash advances. (hyperlink to
http://www.scu.edu/finance/forms )
Allowability of Cost
Policy. CFR Parts 220 as well as related Cost Accounting Standards require the
University to determine whether costs are allowable, allocable, and reasonable on
sponsored awards. Determination of allowability, allocability, and reasonableness of a
given expense is based on specific sponsor requirements and according to federal cost
principles. A primary responsibility of the Sponsored Projects Office is to insure that all
costs charged to the sponsored research award are allowable and allocable.
1. Allowability. Expenses charged to a sponsored research award must meet
the following allowability criteria:



The costs must be reasonable.
The cost must be allocable.
The costs must be given consistent treatment through application of
those generally accepting accounting principles appropriate to the
circumstances.
 The costs must conform to any limitations or exclusions set forth in the
sponsored agreement or in the Federal Cost Principles (CFR Part 220).
(link to Allowable Costs table on our webpage)
2. Allocability. Once allowability criteria have been met, the cost must be
evaluated against the criterion of allocability. That is, the cost has been
incurred solely to support or advance the work of a specific sponsored
Last modified 11/2013
2
research award. It also means 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. A cost
objective may be a major function of the institution, a particular service or
project, or a sponsored agreement.
3. Reasonableness. A cost is reasonable if the nature of the good or service
and the amount involved reflect the action of a prudent person.
Considerations in determining reasonableness may include if the cost is




Necessary for the performance of the sponsored agreement;
Determined to be reasonable by arm’s length bargaining of a prudent
person;
In accordance with the sponsored agreement terms and conditions; and
Consistent with established institutional policies and practices.
Unallowable Costs. An “unallowable” cost is one that is not eligible for reimbursement
by a Federal sponsor, either directly or indirectly (through the F&A rate). Costs that are
“unallowable” for reimbursement by Federal sponsors may still be permissible charges
against department or institution funds. Examples of “unallowable” costs are:








Advertising (some types allowed)
Alcoholic beverages
Entertainment (including meals with inadequate substantiation of business
purpose)
Fines and penalties
Memorabilia, promotional materials (allowable if used for employee morale)
Certain travel costs (i.e., first class)
Charitable contributions, donations and gifts
Student activity costs
Audits
Policy and Procedures. Direct cost audits are done either on a random sampling basis or
at the request of the sponsoring agency. The aims of the audit are to test the effectiveness
of the University's internal system for monitoring expenses, and to confirm that expenses
were incurred as required by government wide regulations on the allowability of costs
and by the specific award provisions. The audit also ensures that the government was
charged for the proper portion of the total project costs on projects for which there is a
University cost-sharing contribution or those that are partially supported by other sources.
A common audit inquiry concerns costs incurred in the latter stages or processed after the
termination of an agreement. This includes purchases made from outside vendors as well
as transactions within the University. The contention of the auditors is that late purchases
do not significantly benefit the project. Large volume purchases or single purchases of a
significant amount at the end of a project usually are not allowable since it appears that
Last modified 11/2013
3
the intent is to expend remaining funds. Copies of all records should be attached to the
initiating documents and also maintained on file in the department until the final audit is
completed, even though this may take several years.
A useful method of supporting appropriate late purchases on a project is to obtain a nocost extension from the sponsor through SPO. Timeliness or dating problems are then not
relevant to the auditors for the extension period.
Closing audits normally are completed within one year of the termination of the
agreement (although the period may extend to four or five years). The audit agency
obtains information on the project available within SPO and other administrative offices.
If these offices are unable to provide the necessary information, the principal investigator
is contacted for further clarifications.
The auditors submit their report to the sponsor, usually with a copy of the draft report to
the Director of Sponsored Projects. The sponsor then determines the allowability of items
questioned in the auditor's report. If the audit uncovers questionable charges on the
agreement, the sponsor submits a letter to the University reiterating the findings and
requesting a reply. SPO reviews results of the audit against available records and
determines the nature of the University's response to the sponsor. If SPO does not have
sufficient information, it contacts the principal investigator and the department for
additional explanations to support the charges. After these explanations have been
provided for the questioned and/or disallowed costs, SPO presents the University's
position and supporting documentation to the sponsor. The contract or grant officer
reviews the initial audit with the University's response and determines the total amount
allowable on the agreement.
Budget and Expenditure Monitoring
Policy. The Principal Investigator and Sponsored Projects Office both monitor the budget
and expenditures of a project grant.
Procedure. Although the SPO will assist the Principal Investigator with the day to day
administration of all grants and contracts. The following are the PI requirements for all
awards:
1. Monitoring of Funds. The PI is responsible for the ongoing management
of award projects, including regular monitoring against the budget.
2. Approval of All Expenditures. Salary, purchasing, travel, etc. all need to be
approved as described in the Expenditure Authorization policy and
procedure.
3. Monthly Review of Projects Expenditures. Monthly Project Summary
reports are prepared by Sponsored Projects Office and sent to the PI for
review so the expenditures can be monitored to assure availability of funds
and expense transfers can be made in a timely manner if error(s) are
detected. Regular monitoring of sponsored project funds helps to:
Last modified 11/2013
4







confirm the availability of project funds;
ensure that costs are consistent with the project reports and
incurred within the period of performance of the project;
discover errors in the sponsored project budget, encumbrances, or
expenditures;
avoid overspending;
provide high degree of confidence that the project complies with
the sponsor's spending terms and conditions;
verify that cost transfers and corrections are processed in a timely
manner; and
maintain a clear audit trail.
Resolving Budget or Expense Issues. After review of the monthly reports, if the PI
has questions on the remaining budget, or any expenses that were charged to the
grant, the Sponsored Projects Accountant should be contacted.
Clearing an Overdraft
If an account is in overdraft upon expiration of the project's performance period
and additional funds are not available from the sponsor, the principal investigator,
in consultation with his or her department and school, must clear the overdraft by
transferring charges to an appropriate fund account. The school is responsible for
clearing of any unfunded expenditures from its departmental resources.
Budget Revisions
Policy. Sponsor terms and conditions, as well as, University policies and federal
regulations are followed for budget revisions.
Procedures. The Principal Investigator submits a request for a budget revision to a
Sponsored Projects accountant. The SPO accountant reviews the request. The Director of
SPO approves all budget revisions even those of low value (<10%) or between two
discretionary expense categories. If the revision requires sponsor approval, then the SPO
Director seeks such approval before a revision is processed.
Cash Management
Policy. CFR Part 220, A110, and various agency regulations require the University to
follow cash management practices that are explained, documented, consistent, timely and
appropriate under the circumstances.
Procedure. SPO submits invoices and processes payments. SPO submits a request for
reimbursement monthly or quarterly, depending on the terms and conditions of the award,
when electronic funds transfer are not used. For Federal grants, funds are drawdown
electronically based a cost reimbursable basis monthly or quarterly. For Federal
Subcontracts, SPO invoices monthly or quarterly or as specified by the contract. Federal
invoices always are based on expenses incurred and, therefore, MUST be reconciled to
the University’s financial system, PeopleSoft.
Last modified 11/2013
5

Processing Steps for Method of Reimbursement and Requesting Funds.
Reimbursement is the preferred method for Santa Clara University and is required
for all Federal Awards. The drawdown method and format and reporting intervals
follow sponsor terms and conditions. The SPO Accountant notifies the University
Finance Office when drawdown requests are submitted so the UFO staff will
know which accounting strings should receive the credits when funds are
received.

Receipt of Funds. Funds are received electronically in Santa Clara University’s
Bank of America Concentration account. When received, the UFO makes a
journal entry to record the amounts in the PeopleSoft financial system to the
accounting strings provided by SPO.

Depositing cash. When cash is received, a deposit slip is prepared, listing the
current date, the accounting distribution(s) to be used, date of service, and the
department name. One copy of the deposit slip is retained by the SPO. The cash
and the remaining copies of the deposit slip are personally delivered (not mailed)
to the University Cashier. The Cashier records the deposit and returns a validated
copy of the deposit slip to SPO for its records.

Depositing Checks. All checks should be endorsed "For Deposit Only" as soon as
they are received. The Sponsored Projects Office uses a stamp for this purpose.
An SPO Accountant completes a deposit slip for each award. The date,
accounting distribution(s), date of service, total amount of the deposit and the
department name are included on the deposit slip. A copy of the deposit slip is
retained by SPO and added to the appropriate award accounting file. The deposit
slip and the checks are then hand-delivered by the SPO Accountant to the
University Cashier. The Cashier provides a validated copy of the deposit slip to
SPO Accountant.

Required Forms. Cash deposit slip and check deposit slips are used.
Cost Sharing
Policy. CFR Part 220, A110, and various agency regulations require University cost
sharing to be identified, documented and verifiable to the formal or informal accounting
records and auditable by the sponsor.
Procedure. Cost sharing, sometimes referred to as “matching,” represents that portion of
the total projects costs of a sponsored agreement borne by the University, rather than the
sponsor. A spreadsheet may be established to track committed cost sharing.
The PI must identify and provide resources to fund the cost-sharing amount. Funds from
other federal awards may not be used as the source of cost sharing except as authorized
Last modified 11/2013
6
by statute. Funds generally come from unrestricted, gift, endowment income, or
designated funds.
The signed award document indicates whether the project involves cost sharing. If cost
share/matching is absolutely necessary for the awarded project, these steps must be
followed.




PI needs to track cost share related expenditures as they occur.
Payroll related cost share must be identified and provided to Sponsored Projects
Office up front (Time and Effort Report - Name and % of effort). Sponsored
Projects Accountant will calculate cost sharing amount for each individual.
All information must be provided to the Sponsored Projects Office prior to the
reporting deadline.
The cost-sharing activity is closed at the same time as the related grant or contract
closed.
Direct Charging Practices
Policy. CFR Part 220 and related Cost Accounting Standards require the University to
consistently account for direct and indirect costs across all sponsors. Clarification is
sometimes necessary to ensure certain costs are recovered consistently as either direct or
indirect costs, but not both.
Expenditure Authorization
Policy. To provide appropriate levels of management and oversight for all expenditures
on externally sponsored projects, the following signature approvals are required.
Procedure. The Principal Investigator and the Sponsored Projects Director or Sponsored
Projects accountants must approve all expenditures.





For expenditures $10,000 or more, the approval of an Associate or Assistant Dean
is required.
For expenditures $100,000 or more, the approval of a Dean is required.
For expenditures $250,000 or more, the approval of an Associate or Assistant
Provost or and Associate or Assistant Vice President is required.
For expenditures of $500,000 or more, the approval of a Vice President is
required.
For expenditures of $1,000,000 or more, the approval of the President is required.
The Principal Investigator is responsible for securing approval up to the Dean level. All
approval signatures should be on purchasing documents provided to Sponsored Projects.
Sponsored Projects will work with the Associate Provost for Research and Faculty
Affairs to seek higher level approval as needed.
Last modified 11/2013
7
Expense Transfers
Policy. CFR Part 220, A110 and various agency regulations require the University to
ensure expense transfers are explained, documented, consistent, timely and appropriate
under the circumstances.
Procedures. Expense transfers, sometimes called cost transfers, refer to the shifting of
expenses between fund accounts. The federal guidelines for cost transfers state, in part,
"any costs allocable to a particular sponsored agreement may not be shifted to other
sponsored agreements in order to meet deficiencies caused by overruns, to avoid
restrictions, or for other reasons of convenience."
To assure that timely corrections are made when expenses are mistakenly or inadvertently
charged to the wrong fund account, principal investigators are responsible for reviewing
their budget statements monthly. Expense transfers should be prepared and submitted to
SPO as soon as the need for the transfer is identified, but under most circumstances, not
later than 90 days from the original transaction date.
Adequate Documentation. An expense/revenue transfer form must be completely filled
out by the principal investigator. The debit and credit section on the form must have the
accounting string, along with description of the charge being transferred and why the cost
is being transferred. In addition, there must be sufficient back-up documentation which
includes but not limited to:



Receipts
Actual Transaction Detail report showing the original transaction of the request.
Project Summary report showing the available funding.
Approval. Expense transfers involving sponsored research projects that are processed
within 90 days of the original transaction require approval signatures from the principal
investigator and SPO accountant. Only in the case of exceptional circumstances will
expense transfers be permitted more than 90 days after the original charge. The reasons
for an expense transfer over 90 days after the original charge must be documented in
detail and will require the signature of the principal investigator(s), the departmental
chair, the associate/assistant dean, and the SPO Director. In all cases, the PI must sign the
“debit” side of the expense revenue transfer request form.
Financial Reporting
Policy. The Sponsored Projects Office prepares financial reports for submission to
funding agencies, submits invoices, and processes payments. In addition, this office
reviews charges to sponsored accounts to determine compliance with both the University
and agency regulations. Furthermore, this office is responsible for reporting on
sponsored activity at the University and for the coordination of audit activity on
sponsored accounts.
Last modified 11/2013
8
Procedures. The Sponsored Projects Accountant reconciles the general ledger accounts
and reviews expense activity monthly to provide reasonable assurance that the financial
records are not misleading or contain material errors.
Sources of financial information. The Sponsored Projects Office maintains the financial
records of the Project. Each financial transaction is recorded in the accounting system by
date, description, account, and dollar amount. This information, available online, is used
to prepare monthly, quarterly, semi-annual, and annual financial reports.
Responsibility for financial reporting for Federal Contracts and Grants. The Sponsored
Projects Accountant prepares and timely submits the Federal Financial Reports.
Grant Closeout and Year End Requirements
Policy and Procedure. Closeout is the administrative process whereby sponsors
determine whether all technical and administrative requirements of the grant or contract
have been completed. Projects are considered completed or “closed out” only after the
sponsor receives and approves all technical, financial, invention and property reports as
required by the terms and conditions of the award and notifies the University of its
acceptance and signoff. PIs are responsible for overseeing the proper closeout of
sponsored projects, including the timely submission of all required reports (including
final technical reports). PIs must assure that such documentation is adequate and readily
available. In addition, some financial reports may require the PI's signature. Reporting
requirements vary among agencies as to type, content, and timing.
At the close of a grant or contract, the PI is accountable for ensuring that all expenses
recorded are complete, allowable, allocable, and without overdrafts. Care must be taken
to ensure that charges are not made to a grant or contract beyond the close date. SPO
prepares the final financial reports and performs a review.
If an account is in overdraft upon expiration of the project's performance period and
additional funds are not available from the sponsor, the principal investigator, in
consultation with his or her department and school, must clear the overdraft by
transferring charges to an appropriate fund account. The school is responsible for
effecting the clearance of any such unfunded expenditures from within its resources.
Indirect Costs
Policy. Indirect costs are charged to all sponsored projects unless prohibited in writing by
the funding agency. The University's indirect cost rate for Federal grants is negotiated
with the U.S. Department of Health and Human Services.
Indirect costs are expenses that cannot be identified specifically with a particular project
or activity because these costs generally benefit many activities. Examples include:
 general administration expense (accounting and payroll services, etc.),
 research administration,
Last modified 11/2013
9



plant operation (including maintenance and utilities),
library expenses, and
depreciation.
The indirect cost rate is negotiated with the University's cognizant agency every three
years. This negotiated rate is the result of a complex calculation process utilizing
historical information and removing costs specifically disallowed by the Federal
government.
Other Reporting
Procedures. Responsibilities and procedures for various types of reports are described
below.
Progress Reports. Principal Investigators must submit technical/programmatic progress
reports in a timely fashion to the sponsor as required by the terms and conditions of the
award.
Final Reports. Most sponsors require a fiscal and/or technical reporting of the project.
The detail of those reports varies from sponsor to sponsor, but generally the reports are
due within 90 days from the expiration date shown on the award document. Failure to
submit reports in a timely and acceptable form can block favorable consideration and
award of pending proposals and cause final payment to be withheld.
Technical Reports. Technical reports are the responsibility of the principal investigator.
Many award documents either include the report information or incorporate, by
reference, the document that contains the information. Copies of the final technical report
usually are forwarded directly to the technical/project monitor (named on the award
document). However, SPO should be provided with a copy of the letter transmitting the
final technical report to the sponsor. This will assist SPO in closing out the account and is
helpful in tracking down reports allegedly not submitted. Some sponsors require the
submission of the final technical report along with the final fiscal report. Questions
regarding technical report requirements can be answered by the agency project monitor.
Financial Reports. See Financial Reporting section.
Equipment Inventory Reports. Equipment inventory reports, if required, are submitted to
the sponsor by SPO. However, the principal investigator and his or her department should
assist in the preparation of the report to determine the final disposition of property
acquired under the agreement.
Program Income
Policy. Program income is defined in OMB Circular A-110 as “gross income earned by
the recipient that is directly generated by a supported activity or earned as a result of an
award.” Examples of program income include the following:
Last modified 11/2013
10





Fees for services performed, such as laboratory tests,
Money received from the use, sale, or rental of equipment purchased with projects
funds,
Sale of software, tapes, or publications,
Sale of research materials such as animal models or reagents,
Fees from participants at a conference or symposia.
The use of program income is defined in the award agreement. If a research project is
being performed, program income is additive meaning any program income is treated as
additional funding available for the conduct of the research project. Other agreements
may indicate that program income is to be treated as deductive where the amount of
program income earned is subtracted from the federal obligation which leaves the
funding the same but from two sources. Finally, project income can be stipulated as being
used to meet any matching or cost-sharing requirements.
Procedure. When program income is either anticipated as part of the project or begins to
be earned as part of the project, a separate fund account is established to receive the
income. The program income budget period will coincide with the total approved project
award period. Project income may only be used for allocable project costs in accordance
with the costing regulations of the sponsor.
The amount and disposition of the program income will be reported in the final financial
report of the parent award to the sponsor. Final disposition of unexpended program
income will be made upon termination of the related sponsored project.
Record Retention
Policy. The University attempts to maintain fiscal records that will satisfy the record
keeping requirements of all agencies. Since the University maintains only fiscal records,
the principal investigator must be aware that he or she needs to keep records of the
technical operations of the project for possible future reference. Retention periods usually
are identified in the award document or in a document incorporated by reference in the
award.
Residual Funds
Policy. A proper system of internal accounting control dictates that the University must
comply with the terms and conditions of individual sponsored projects, as well as various
governmental agency regulations, with respect to the disposition of residual funds that
can result on cost reimbursable and other sponsored projects.
Procedures. Residual funds are managed by SPO as determined by the award terms and
conditions.
Last modified 11/2013
11
Time and Effort Reporting
Policy. CFR Part 220 and various agency regulations establish requirements for effort
reporting of direct and indirect salary and wage expenses on the financial accounting
records of the University.
Procedures. All faculty and exempt staff whose salary is charged, in whole or in part, to
a grant or is used to meet cost sharing or matching requirements on a grant must complete
Time and Effort Reports. For non-exempt staff, time sheets provide the necessary
documentation. The University is required by the Federal government to document effort
that is charged to sponsored projects. It is the responsibility of each department chair and
dean to see that a system is in place to ensure that the PIs in their areas fulfill the
requirements for review and certification of salaries, and to assure that salaries charged to
sponsored projects correspond to effort expended on those projects, within the
appropriate limitation for the school.
Reporting Period and Submission. These reports must be completed on a monthly basis
during the academic year and once in the summer months and should be signed by the
employee and the project director. His or her supervisory official should sign the project
director’s report.
These reports must be forwarded to the Sponsored Projects Office on a monthly basis
during the academic year and once in the summer months. SPO will review these reports
for timely submission. In addition, SPO will make any necessary adjustments for the
actual expenses charged to the grant.
Responsibility for Verification and Review. Government sponsors expect to pay only for
those portions of employee effort that are actually devoted to their projects. Periodically,
auditors review payroll charges to verify that the percentage of an employee's salary
charged to a sponsored project account reasonably approximates the actual proportion of
the employee's FTE effort that was devoted to that project.
As a general rule, exempt employees should understand how their salary charges are
being distributed, and should verify for themselves that there is a reasonably close
relationship between the allocation and the actual proportion of their effort devoted to the
functions and programs being charged. For research assistants and support staff, the PI,
who is assumed to be most knowledgeable about the relationship between effort devoted
and benefit received, often makes these allocation decisions.
Travel Expenses and Reimbursement
Policy. Travel expenses and reimbursement must comply with CFR Part 220 as well as
the University Travel & Reimbursement Policies & Procedures (hyperlink to
http://www.scu.edu/finance/forms)
Last modified 11/2013
12