Contracts & Grants
1.0 PURPOSE
The purpose of this procedure is to document the major policies governing the accounting of contracts and grants at UTD.
2.0 SCOPE
This document covers procedures performed by the accounting staff and provides references to other contract and grant administration procedures performed by other departments, (see Responsibilities).
3.0 DEFINITIONS
Contracts & Grants are restricted funds that are received from various types of sponsors. The purpose for these funds is to provide resources for research, student support, instruction, scholarships and public service. Various rules and regulations depending upon the type of sponsor govern these restricted funds. Strict adherence to these rules and regulations must be maintained in order to comply with the various sponsor requirements and governing regulations.
Financial Records System (FRS)
The name of the financial accounting system
FBM090 Report
Monthly financial budget, cost and commitment report
IDT (Intra/Inter Departmental Transfer)
A source document used to transfer cost from one account to another
OSP
Office of Sponsored Projects
BAF (Budget Adjustment Form)
A budget document
TARP/TAPT
Texas Advanced Research Program/Texas Advanced Technology Program
There are five types of contract and grants administered at UTD:
- Federal Grants Account Range (630000 - 636999)
- State Grants Account Range (637000 - 637999)
- Local Grants Account Range (638000 - 638999)
- Private Grants Account Range (639000 - 644999)
- TARP/TAPT Account Range (223000 - 223500)
4.0 PROCEDURES
4.1 Opening a Contract or Grant Account in the Financial System
The account is assigned and opened by the Office of Sponsored Projects (OSP). This includes the entering of all the account information on FINS screens #2, #5, #6, and #9. OSP enters the budget into the financial system. The Budget Office enters the budget for all TARP/TAPT accounts. Once the account is opened, OSP sends a copy of the contract brief to Contract & Grant Accounting. This brief provides all the detailed information about the contract or grant. When accounting receives the brief, the accounts receivable table is updated, the indirect cost rate is entered into FRS, a billing type log is set up and a file folder for the account is established.
4.2 Budget Policy
If an account is overrun by budget pool, but not overrun overall, Contracts & Grants Accounting notifies the OSP office and the P.I. A revised budget will be processed within 5 business days after initiation of the process. Prior to receipt of the revised budget, an SOS, Petty Cash Reimbursement or Travel reimbursement will be approved; but a Purchase Requisition will be held until budget has been processed.
If an account is truly overrun, Contracts & Grants Accounting contacts the OSP office to find out if more funding is expected. If the P.I. will be getting more funds, OSP and the P.I budget the funds and provide Contracts & Grants Accounting with the revised budget.
If there is no more funding, Contracts & Grants Accounting contact the P.I to find out if another account should be charged.
4.3 Restricted Research Expenditures
The standards established in "Standards and Accounting Methods for Reporting Restricted Research Expenditures" issued August 6, 2001 (Attachment E) by The Texas Higher Education Coordinating Board are followed in determining what qualifies as restricted research.
UTD has implemented the use of a "Research Expenditure Determination Process and Checklist" for this purpose. Both the Office of Sponsored Projects and Contracts & Grants Accounting must agree that, per this checklist, the contract or grant is restricted research in order for it to be recorded as research.
4.4 Subcontract Audit Certification
As a recipient of Federal assistance and expenditures, UT Dallas is subject to the Office of Management and Budget Circular A-133, and the Federal Acquisition Regulations (FAR). We are required to monitor our sub-recipients of Federal awards and determine whether sub-recipients have met the audit requirements of these circulars and are, therefore, in compliance with Federal laws and regulations.
The OSP office is responsible for monitoring our sub-contractors. They have designed a Subcontract Audit Certification form for this purpose.
4.5 Cost Sharing
When a new brief is received which requires cost sharing, cost share account information is included in the Contracts & Grants Accounting master log. The database is queried quarterly for cost-share information and any non-compliance issues are reported. At the end of the award, the cost share account is reviewed to determine that the cost share threshold has been met. If the cost share threshold has not been met, the PI/School is contacted.
4.6 Processing Expenditures
4.6.1 Direct and Indirect Costs
Direct costs are: Salaries, Benefits, Maintenance & Operations, Travel, Subcontracts and Capital. These costs are charged to the accounts in accordance with set University procedures for recording of expenditures.
Indirect costs are applied to the accounts based upon a percentage of the direct costs for the month. The indirect cost rate is a negotiated rate. The rate that is used for each account is dependent upon the type of research and/or agreement. Not every agreement calls for indirect costs and there are variations, depending upon the agreement, as to which direct costs, indirect costs are applied.
Indirect costs are recorded on a monthly basis through an automated process, in which the current month costs are multiplied by the applicable indirect rate. The resulting amount is posted as a cost in the particular grant account, with a corresponding revenue entry being posted in the appropriate account within the Education and General fund.
The entry to record the indirect costs is:
- Dr. 6XXXXX-9100
- Cr. 014XXX-0500
4.6.2 Indirect Costs Relating to Sub-Contracts
Pursuant to OMB Circular A-21 section G.2, The University of Texas at Dallas adopts the following procedure:
For each contract or grant account that subcontracts work to vendors outside UTD, indirect cost (F & A) will be charged up to the first $25,000 for each subcontract per vendor, regardless of the period covered or the number of subcontract renewals during the life of the contract or grant. Vendor expenses in excess of $25,000 will not be charged indirect cost.
4.6.3 Review of Requisitions
It is the PI's responsibility to ensure that all purchases on contract and grant accounts are in compliance with contract provisions. Procurement sends all requisitions to Contract & Grant Accounting for approval. These requisitions are checked for: allowability of the items to be purchased, expiration date of the contract, and the available amount per expense category of the award. Upon the resolution of the issue, the requisition is either forwarded to procurement as is, charged to another account, or returned to the requisitioner. Requests for reimbursement are only forwarded to Contracts & Grants Accounting for approval if they include food, alcohol, or entertainment expenses.
4.6.4 NIH Salary Limitations
OSP identifies NIH salary limitations and notes them on applicable documents. They also notify the Payroll division, Contracts & Grants Accounting, and the Principal Investigator.
If the payroll amount exceeds the salary cap, the Payroll division notifies the PI's division. The Grant is charged only the allowable portion. Contracts & Grants Accounting monitors compliance to the salary cap during the billing process.
4.6.5 Sponsored Funding Restrictions
When using the p-card on a sponsored project account, the cardholder is responsible for ensuring that all purchases meet the requirements and regulations of the specific contract or grant. The federal government places additional restrictions on the expenditure of federal funds for sponsored research and the retention of supporting documentation. For specific questions about using sponsored project funds, cardholders should contact the Office of Grant and Contract Accounting at ext. 2173.
In addition to the above commodities, the p-card cannot be used for the following items on federally funded sponsored programs:
General office supplies* (i.e. paper, pens, tape, etc.) General office equipment (i.e. chairs, desks, bookcases) Postage/Federal Express* Copy and reprographic services*
* In some cases these expenditures may be allowed as a result of the specific nature of the grant (i.e. the grant requires large mailings or the preparation and production of large reports). Please contact the Office of Grant and Contract Accounting if you believe that your sponsored program may qualify for this exemption.
4.7 Recording of Accounts Receivable
Accounts Receivable are recorded on a monthly basis at month end close through an automated process. The entries are recorded in the individual contract general ledger accounts, which mirror each subsidiary account with first digit of the account being a "0". Refer to the chart of accounts listing for the detail account numbers. The entry to record the receivables is as follows:
- Debit 03XXXX-13XX
- Credit 03XXXX-42XX
4.8 Billing
The contract brief, which is received from OSP, dictates the type of billing/payment for the account. The following are the different ways in which payment is to be received or billed.
4.8.1 Prepayments
Prepayments, otherwise known as "Advance Pays", are when the sponsor pays according to a pre-arranged plan that is specified in the brief. This can be either paying the entire award in advance, or paying installments by specified dates.
4.8.2 Expenditure Vouchers
Certain federal sponsors require to be invoiced on a Federal Form 1034, (see Attachment C). This is a monthly invoice, and is based on expenditures reflected on the FBM090 report.
4.8.3 Invoicing
These invoices are in a UT Dallas developed format and are prepared either monthly, quarterly, or at specified times based upon the contract or grant contractual agreement. The invoiced amount can be based on accumulated monthly expenditures or it can be for a specified amount as reflected in the contract brief. The actual costs to be invoiced are obtained from the FBMO90 financial report.
4.8.4 Cash Drawdowns
Drawdowns are electronic requests for payment that are done on a monthly basis. The request for funds is based on the monthly expenditures from the FBM090 report. Cash drawdowns are done against Letters of Credit from the following sponsors: NASA HQ, NASA Goddard, The National Science Foundation, The Division of Health & Human Services and the Division of Education.
TARP/TAPT accounts are reimbursed by the UT System. Gerald Gray of the Finance Division initiates these draws based on expenditures.
4.8.5 Reimbursements
Certain federal agencies require to be billed on Federal Form 270, (see Attachment D). This billing is performed on a monthly basis and is based on actual costs reflected on FBMO90 report.
4.8.6 Aging of Invoices and Collection Procedure
Invoices are logged in numerical order in an Excel spreadsheet. The spreadsheet is then updated when payment is received. The unpaid invoices from the invoice log and the scheduled invoices log are aged by sorting on the invoice date filed. If an invoice is over 60 days old, a letter along with a new invoice is sent to the customer. If no response is received within one month, the collection process continues by calling the sponsor. In the event that this process does not result in the collection of the debt, usually after two or three follow up phone calls, the matter is brought to the attention of the Vice President for Business Affairs, and subsequently to the UT System Office of General Council.
The allowance for doubtful accounts is adjusted at year-end to equal 50% of receivables over ninety days old.
4.9 Financial Status Reports
There are different types of financial status reports required to be submitted, depending upon the agency. Most of the reports are required by federal agencies, although private grantors may require specific reports as well. Quarterly financial reports are required by: NASA HQ, NASA Goddard, The National Science Foundation, and The Division of Health & Human Services. The Division of Education requires a monthly report, as well as an annual Fiscal Operation Report (FISOP). The Division of Energy requires an annual report. The Welch Foundation, which is a private grantor, requires an annual report. TARP/TAPT reporting is done to the Texas Coordinating Board, their website is also monitored. These are all of the main agencies that require reports, however there are several other federal agencies that require quarterly or annual reports, but they only fund one contract or grant.
4.10 Closing of Contracts
4.10.1 Initiation of Close-Out Procedures
A month prior to an award closing, a pre-close-out checklist is sent to the Principal Investigator (PI) by Contracts & Grants Accounting. The checklist is based on a report provided by OSP, which includes all contracts or grants that will be ending the next month. This checklist will remind the PI that the award is about to end and what actions need to be taken in order to ensure a smooth close-out of the account, (see attachment A).
These steps include:
- Stop telecommunications charges, (if applicable).
- Stop office equipment rental charges, (if applicable).
- Stop postage charges, (if applicable).
- Initiate PAF's to move future salary/benefit charges to a new account.
- Evaluate the account to ensure there is enough budget to cover known future expenditures.
- Analyze the account for any charges that may be in question. If account is overrun, initiate IDT's to eliminate the deficit. (See item 4.7.1)
4.10.2 Close-Out Process
A Contract or Grant will be closed out once it is determined that it will not be extended or any money added to the award. The close out process begins by OSP zeroing out the remaining budget on the subsidiary ledger. Contract & Grant Accounting checks the general ledger to ensure that all receivables have been collected. Once the remaining budget in the subsidiary ledger has been made equal to zero, Contract & Grant Accounting will freeze the account. This will prevent any more charges or commitments from being applied to the account. In the event that an adjustment needs to be made, Contract & Grant Accounting will unfreeze the account. Any final financial status reports are completed, forwarded to OSP for review, and sent to the sponsor(s). Upon receipt of a close-out notice from OSP, the account is officially closed and the file is moved to the "Closed" accounts filing cabinet.
4.10.3 Over/short Amounts in Accounts to be Closed
Any credit balance remaining in Fund Balance, which should not be returned to the vendor, transferred to the Principal Investigator's Departmental account, or otherwise cleared, can be used to cover uncollectible overruns within the same school.
4.11 Budgetary Compliance Procedures
4.11.1 Monthly Review of Accounts
It is the responsibility of the Principal Investigator (PI) to ensure that budgets are not exceeded on contract and grant accounts. To facilitate this process, Contracts & Grants Accounting performs a review of the accounts on a monthly basis. Accounts with negative remaining budgets are copied into a database and analyzed in greater detail in conjunction with OSP. If it is determined that the account is overspent, Contracts & Grants Accounting notifies the applicable Principal Investigator, and freezes the account immediately. If there are outstanding purchase orders, accounts payable is notified to flag them. Payment is to be made only upon Contracts & Grants Accounting's approval.
The notification process has three stages. First notice goes to the PI with a copy to Office of Research Administration and Sponsored Projects, the Provost's office, and the unit Administrator. If no action has been taken by the following month, a second notice is sent to the same recipients with a copy to the Program Head, Department Chair, Dean, or Director, and Provost's office. In the event that no action has been taken at the end of the second month, a third notice is sent to the same recipients with additional copies to the Provost, or Vice President for Student Affairs, whichever is appropriate. In the event that no action has been taken at the end of the third month, the account is reported on the Non-Compliance Report. Final disposition of the overrun is determined by the Vice President for Business Affairs and the Provost or the Vice President for Student Affairs.
4.12 Data Quality Control
4.12.1 Post Closing Review
The review process is in essence the ongoing reconciliation of all of the Contract & Grant accounts. This includes all active and non-active accounts.
The reconciliation process includes the following:
- Checking the general ledger to insure that all payments have been received to date.
- Checking the subsidiary ledger to insure that the account is not overspent and that all charges are legitimate, (i.e. the charges are allowable).
- Making necessary adjustments/journal entries to correct any errors that have been discovered in the reconciliation process.
4.14 Annual Financial Report
It is the responsibility of Contract & Grant Accounting, as a unit of Financial Reporting, to aid in the preparation of the Annual Financial Report. The restricted funds schedules (B-4, D-5, S-4a, S-4b, S-4c & S-4d) are the responsibility of Contract & Grant Accounting. During the course of the year, these schedules are updated with new accounts for ongoing preparation of the annual financial report.
5.0 RESPONSIBILITIES
Contract & Grant Accounting has the following responsibilities:
- Billing and collection of receivables due the University on the accounts specified in contract and grant briefs.
- Ensuring the timeliness and accuracy of all financial status reports.
- Providing assistance to the University user community on matters relating to Contract & Grant costs and receivables data.
- Facilitating the process of ensuring that contracts are not overrun by establishing procedures for systematic and timely notification of the responsible PI's, Divisions or Schools.
6.0 REFERENCES
OMB Circular A-21
7.0 ATTACHMENTS
- Attachment A - Pre-Close Checklist
- Attachment B - Contract & Grant Account Overrun Notification
- Attachment C - Federal Form 1034
- Attachment D - Federal Form 270
- Attachment E - Standards and Accounting Methods for Reporting Restricted Research Expenditures
- Attachment F - Budget Policy Addendum - Expenditures Control
- Attachment G - Subcontract Audit Certification form
Last Updated: August 8, 2012
