Section 6: Accounting for Grants and Contracts
Grants and Contracts Accounting Practices
Lenora Chapman, Associate Vice President, Financial Affairs
Last Revised On:
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In addition to Generally Accepted Accounting Principles (GAAP), Code of Federal Regulations Title 2 Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, governs accounting practices for grants and contracts.
NOTE: 2 CFR 200 is effective 12/26/14. For information on implementation timing and treatment of existing awards see the applicable provisions of 2 CFR 200.
Table of Contents
B. Project Activation
C. Project Closeout Accounts Receivable Services
G. CASB Disclosure Statement (DS-2)
H. Cost Sharing
I. Facilities and Administrative (F&A) Costs
J. Financial Reporting
K. Fiscal Year End Accounting
L. Program Income
Grants and Contracts Financial Services (GCFS) is responsible for the financial management of sponsored projects including cost accounting practices and consistency in the recording and reporting of financial data. Specific accountability includes:
- Ensuring consistency and adherence to the University of San Antonio's (UTSA’s) financial policies in project activation, closeout and fiscal year-end accounting activities
- Maintenance of the cash position for each sponsored project per the applicable terms and conditions governing each project through cash management and accounts receivable services
- Effective communication with sponsors through the judicious submission of accurate financial reports and invoices
- Compliance with 2 CFR 200 requirements as applicable in execution of these responsibilities
Upon receipt of an award notice from the Office of Sponsored Project Administration (OSPA)/Research Service Center (RSC), GCFS initiates the assignment of a Project ID in UTShare/PeopleSoft.
Externally funded sponsored projects are classified as current restricted funds in accordance with GAAP. Project IDs are assigned to sponsored projects to ensure that the restricted resources are allocated correctly to specific projects.
Project ID Structure
Projects converted from legacy system (DEFINE):
26xxxxxx (DEFINE Budget Group)
0 (“C” for sponsored projects that involve cost sharing)
Sponsored projects are also assigned a Fund, Function and Department ID depending on the characteristics of each project, and all sponsored projects have an Activity ID of “1” (Activity ID is not significant for sponsored projects). Related Cost Centers may also be assigned for projects that involve cost sharing. For more information on Project ID and other Chart of Accounts elements, see FMOG - Chart of Accounts.
The monitoring of expenditures is the responsibility of the OSPA/RSC. Edits exist within UTShare/PeopleSoft to aid in ensuring that expenditures are allowable and incurred within the specified performance period, and that sufficient funds are available.
UTSA must close out projects within sponsor deadlines and promote efficient collection of all accounts receivable. To ensure the effectiveness of this process, all outstanding financial issues must be resolved in a timely manner.
The closeout of sponsored projects within UTShare/PeopleSoft is not governed solely by available balances, level of activity or termination dates. In fact, the closeout criteria may vary among projects depending upon the requirements of each sponsoring agency. Primary factors include:
- Acceptance of deliverables/final report by the sponsor
- Resolution of compliance issues such as cost sharing, time and effort reporting and program income
- Assurance that all project charges have been posted appropriately in UTShare/PeopleSoft
- Assurance that all matters pertaining to sub-recipients have been addressed
- Disposition of remaining cash balances
- Completion of all financial reports, as well as invention reports, inventory, equipment and property reports
The OSPA/RSC initiates the project closeout process by sending a Closeout Certification form to GCFS. With this form, the OSPA/RSC certifies that the factors listed above have been satisfied, in particular that:
- All financial activity has been posted;
- All required reports have been submitted; and
- Any cost sharing commitments have been documented.
For fixed price contracts, there is a closeout period of not less than 90 days during which unexpended funds may not be transferred to another UTSA Project ID/Cost Center.
For these contracts, payments are not based on cost reimbursement but rather on an agreed (fixed) sum in support of the project. After the completion of the project, if there is a balance of funds, the revenue is retained by UTSA.
- Closeout procedures are initiated by notification from OSPA/RSC to GCFS.
- UTSA will be reimbursed for unrecovered Facilities and Administrative (F&A) costs on the remaining unexpended balance.
- After F&A is taken, unexpended balances greater than or equal to 25% of the total contract amount will revert to the college, institute or center that administered the project.
- Unexpended balances less than 25% (after F&A is taken) will revert to the principal investigator (PI).
Sponsored projects are inactivated in UTShare/PeopleSoft at the close of the fiscal year. Prior to inactivation, GCFS reviews all identified projects to insure that the project is eligible for inactivation.
- Even after the Project IDs (and related Cost Centers, if any) are financially closed, they remain in UTShare/PeopleSoft. This is to ensure that all compliance issues have been resolved and that any cost disallowances by the sponsor have been corrected.
- In addition, some Project IDs/Cost Centers may belong to a series of Project IDs/Cost Centers servicing one project. For consistency and clarity, these Project IDs/Cost Centers may remain active until the termination of the entire project.
GCFS is primarily responsible for the collection of grants and contracts receivable. The prompt collection of receivables is important and a defined sequence of collection efforts is necessary.
- Monthly invoices are prepared and recorded for sponsored projects. Final invoices are submitted within the time frame dictated by the terms of the grant, contract or other agreement.
- Grant and contract receivables are reconciled on a monthly basis. An aging list is maintained and a monthly review of past due receivables is conducted.
- GCFS staff exercise due diligence in collection efforts for all outstanding receivables.
GCFS begins pro-active collection efforts when a receivable from a sponsor is past due (defined as 60 days from the invoice date).
When a receivable becomes 60 days past due:
- A dunning letter is sent to the sponsor with copies to the PI and OSPA/RSC.
- During the next 30 days, GCFS personnel will perform a follow-up with the sponsor via e-mail and phone contacts.
When a receivable becomes 90 days past due:
- A second letter is sent to the sponsor (return receipt) with copies to the PI and the OSPA/RSC .
- Due diligence on the part of GCFS shall include two documented instances where letter/e-mail and/or phone contact with the sponsor have been made within the first 90 days.
If no response is received from the sponsor for collections that are greater than 90 days past due:
- The GCFS Director contacts the OSPA/RSC and the PI, if necessary, for consultation and possible assistance.
- The Project ID/Cost Centers may be frozen and no further expenses allowed, if there is no acceptable response from the delinquent agency.
NOTE: An acceptable response would include payment and/or a mutually agreed upon payment schedule.
If no response is received within 120 days:
- GCFS consults with the University Controller to determine a course of action. This may include a request to UTSA’s legal counsel to review the contractual documents and/or the submission of the receivable to a collection agency or another course of action suitable to the specific circumstances.
- If problems are encountered collecting funds from a federal sponsor, GCFS will inform the PI and the OSPA/RSC Director. All efforts will be made to resolve disputes and ensure that UTSA is reimbursed.
- If problems are encountered collecting funds from a private foundation with which UTSA may have other projects, GCFS will contact the Office of Development for advice and/or assistance in addition to notifying the OSPA/RSC.
Sponsored projects with automatic payment schedules require special attention. Whenever the Internal Notice of Award, transmitted by the OSPA/RSC, indicates that the payment is “automatic,” GCFS reviews the accompanying documentation and takes the following actions.
- Call the funding entity to determine if an invoice is required to initiate payment. If so, an invoice will be sent immediately. Thereafter, standard collection procedures will be followed.
- If the entity does not require an invoice, a payment date will be determined. If payment is not received as specified, a dunning letter will be sent.
An allowance for doubtful accounts is an estimate of invoiced amounts (receivables) that may not be collected.
Receivables are presented in the financial statements net of this allowance. GCFS calculates the allowance for the estimated uncollectible balance on non-federal grants and contracts receivable. The allowance is a contra-revenue and is recorded by a reduction of revenues and a credit to the allowance. Subsequently, any write-offs deemed necessary are recorded by a debit to the allowance and a credit to the receivable.
The allowance is adjusted at year end based on the calculated estimate of uncollectible receivables. The estimate is based on past history and an analysis of current grants and contracts receivable at August 31. The method of calculation used is a percentage of accounts receivable. The calculation is based on the percentage of uncollectible receivables over a three-year average of grants and contracts receivable at August 31.
After the collection process is followed and it is determined that an invoice is not collectible, the balance is no longer considered an asset. The write off is the removal of the receivable and a reduction of the allowance.
At year end, after reviewing the estimate for uncollectible receivables, GCFS records an adjustment to the allowance as necessary.
It is imperative that UTSA receive all funds to which it is entitled and that the university’s cash position be maximized while also adhering to federal cash management regulations. GCFS monitors the cash position of all sponsored projects. The cash position is analyzed on a monthly basis.
Funding methods and reimbursement requirements vary according to the terms and conditions of the grant or contract.
- For cost reimbursable projects, monthly invoices are generated.
- Generally, federal funds are requested either by Letter of Credit or Request for Advance or Reimbursement.
- For fixed price projects, a payment schedule is negotiated with the sponsor.
To minimize the time between the transfer of funds from the federal government to UTSA and the expenditure of those funds, the following practices apply:
- As a general rule, UTSA requests payment after funds have been expended ( i.e., on a reimbursable basis rather than in advance of expenditures)
- Reimbursement and Letter of Credit requests are based on expenditures posted to the project in UTShare/PeopleSoft. Accruals are not included in the fund requests.
Despite efforts to ensure that funds are not drawn in advance, UTSA may receive federal funds for a particular project prior to the expenditures being incurred. An example of this is U.S. Department of Defense contracts for which a payment schedule is provided and adhered to by the sponsor, regardless of the timing of expenditures. Another example would be the receipt of Direct Loan funds from the U.S. Department of Education versus the release of those funds to the students.
If federal funds are on hand prior to expenditures, an interest liability may accrue. The potential for the accrual of an interest liability on federal grants and contracts is identified by GCFS. The information is forwarded to Accounting Services which monitors cash deposits and posts accrued interest on a monthly basis.
In coordination with the Office of Student Financial Aid, the Office of Financial Services tracks the potential accrual of interest on the Direct Loan Program.
If required, interest over the amount of $250 per year is remitted to the appropriate federal agency at the close of the federal fiscal year.
The Cost Accounting Standards Board (CASB) has issued four cost accounting standards for colleges and universities.
These standards are:
- Consistency in Estimating, Accumulating, and Reporting Costs.
- Consistency in Allocating Costs Incurred for the Same Purpose.
- Accounting for Unallowable Costs
- Cost Accounting Period.
The federal government requires a Disclosure Statement of cost accounting practices from any institution of higher education that receives $50 million or more Federal awards. Universities must demonstrate adherence to cost accounting standards as stated in 2 CFR 200.
The DS-2 outlines the cost accounting practices that the university follows or proposes to follow. UTSA submitted a Disclosure Statement to the Department of Health and Human Services in September 2008.
Cost sharing is that portion of a sponsored project’s costs not borne by the sponsoring agency. Either UTSA or a third party may contribute cost sharing to a sponsored project.
The OSPA/RSC will:
- Inform GCFS if an award includes cost sharing and provide the cost sharing source Cost Center
- Provide the written authorization from the Department Manager allowing GCFS to initiate the budget transfer
- Monitor and document that the cost sharing has been met
- Create the cost sharing Cost Center and inform all concerned parties
- Report cost sharing to the sponsoring agencies upon receipt of documentation from the OSPA/RSC
- Terminate cost sharing Cost Centers at the same end date as the associated Project ID.
For additional information, see FMOG – Accounting for Cost Sharing.
GCFS coordinate the preparation and submission of UTSA’s F&A Cost Proposal to the U.S. Department of Health and Human Services. Rates are expressed as a percentage of modified total direct costs (MTDC). By definition, MTDC excludes equipment, capital expenditures, patient care costs, tuition remission, rental costs of off-site facilities, scholarships and fellowships as well as the portion of each subgrant and subcontract in excess of $25,000.
The current F&A Agreement covers the period September 1, 2011 through August 31, 2015. Current rates are:
- Research - on campus – 47% MTDC
- Other Sponsored Activities - on campus – 35% MTDC
- All Programs - off campus- 26% MTDC
F&A revenue is recorded in a designated fund on a monthly basis as earned. The calculation and posting is automated through the UTShare/PeopleSoft system.
On an annual basis, F&A is allocated as specified in a Memorandum of Understanding for the Distribution of Facilities and Administrative Indirect Cost Recovery, (MOU) signed by the Vice President for Research, the Provost and Vice President for Academic Affairs and the Vice President for Business Affairs. GCFS also assists in the preparation of the Annual F&A Report to recap the uses and amounts of funds distributed pursuant to the MOU.
GCFS is responsible for submission of financial reports to outside agencies for all grants and contracts that are set up as sponsored projects. Financial reporting requirements and due dates for projects vary based on the specific terms and conditions of the sponsor, for example monthly or quarterly based on the achievement of milestones, or annually based on the project’s budget period. Internal statistics and reports are generally based on the university’s fiscal year.
The basis for all financial reporting is the UTShare/PeopleSoft system. The submission of accurate financial reports and invoices is necessary to minimize negative outcomes such as:
- Loss or delay of renewal funding due to failure to meet sponsor reporting requirements
- Increase of uncollectible receivable amounts due to the late submission of financial reports
Even for projects with unresolved allocability issues, financial reports will be sent no later than the final due date. When appropriate, GCFS will address any unresolved issues through a revised report.
- Formal financial reports to sponsoring agencies per the terms and conditions of the award
- Quarterly reconciliation reports to the Department of Health and Human Services and the National Science Foundation
- Expenditure reports to the Department of Education via the G5 payment system
- Reports to the Texas Higher Education Coordinating Board
- Annual Survey of Research Expenditures
- Research Development Fund Certification
- National Science Foundation Academic R+D Survey
- Data requests from the UTSA community
- Performance Indicators for the Legislative Budget Board
- Annual Financial Report
The following summarizes specific year-end accounting activities conducted by GCFS:
- Inactivation of closed Project IDs/Cost Centers in UTShare/PeopleSoft
- Preparation of schedules for the Annual Financial Report
- Confirmation of pass-through funds with other agencies and institutions
- Accounting adjustments (e.g., deferred revenue, unbilled accounts receivable).
UTSA is accountable for program income generated from sponsored project activities.
Examples of program income are:
- Income from fees for services performed
- Usage or rental fees charged for use of facilities or equipment
- Funds generated by the sale of commodities developed by the project ( e.g., tissue cultures, cell lines)
Program income earned during the project period is retained by UTSA and must be:
- Added to the funds committed to the project to further eligible project or program objectives;
- Used to finance the non-federal share of the project or program; or
- Deducted from the total project or program allowable cost to determine the net allowable costs on which the federal share of costs is based.
If the awarding agency does not specify how program income is to be used, the first bullet above applies to all projects or programs. Federal awards require prior approval from the awarding agency.
UTSA must account for program income using the same rules that apply to federal grant funds. GCFS must be informed whenever it is determined that program income will be generated. GCFS will determine the appropriate method of accounting for the income and establish Project IDs/Cost Centers to record the income.
GCFS will include program income in financial reports as required by the awarding agencies.
- UTSA Handbook of Operating Procedures, Chapter 9.32, Sponsored Program Administration
- UT System Policy UTS142 - Accounting Policies
- UT System Policy UTS142.2 - Policy for Accounting and Financial Reporting for Nonexchange Transactions(http://www.utsystem.edu/bor/procedures/policy/policies/uts142_2.html)
- UT System Administration Internal Policy INT152 - Cost Transfer Policy
- UT System Administration Internal Policy INT153 - Time and Effort Management and Reporting Policy
- Code of Federal Regulations Title 2 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
None at this time.
Update additional information from DEFINE to PeopleSoft.
Revise references from CFR to applicable Circulars
Updated DEFINE information for transition to PeopleSoft.
Revised the Facilities and Administrative (F&A) rates, effective September 1, 2011 through August 31, 2015.
Revised Section E. Cash Management and added subsections 1 and 2. Removed "Cognizant Agency" entry from Definitions section. Conducted consistency edits throughout document.
Added business process and procedure details to the Accounts Receivable Services section.