Handbook for Principal Investigators

FISCAL RESPONSIBILITIES

Recordkeeping

Account Management
Each account in FRS is assigned to a responsible person. For sponsored projects accounts, this person is the principal investigator. The principal investigator may delegate some of the duties associated with financial management of the account to a business manager or other subordinate. However, the principal investigator assumes full responsibility for all activity on the account.

The principal investigator is responsible for ensuring that all disbursements from the account are:

• for the bona fide purpose of the account;
• allowable per the terms of the award
• authorized in accordance with University policies, State and Federal laws and regulations;
• charged to the appropriate object code; and
• fall within the available funding for the account

The principal investigator is responsible for ensuring that:

• the account is reconciled on a timely basis, i.e., within 30 days of receiving the month-end report;
• immediate action is taken to resolve the errors or discrepancies noted during the report reconciliation and to follow up to ensure that errors are corrected; the account is updated for changes in authorized signers and other account information; file copies of supporting documentation for all activity processed on the account is maintained for at least five years after the final closeout of the project.

Cost Transfers

Transfers of costs to federal and subfederal sponsored projects correcting clerical or bookkeeping errors must be made promptly after the errors are discovered and within 30 days of posting to the FRS account. Transfers made after the 30 day limit are considered "late cost transfers." Federal regulations require that late cost transfers be documented by a "Correction of Error Certification," which certifies that the expenditures were incurred for the goals, objectives and benefit of the account to which the costs are being transferred. Federal regulations require that the error certification contain a full description of the cost being transferred and how the cost benefited the project, how the error occurred, why the error correction is late, and the steps being taken to ensure that the error will not happen again. A description of "research supplies" or an explanation that merely states that the transfer was made "to correct error" or "to transfer to correct project" is not sufficient. Call Sponsored Projects (626-6000) for the Correction of Error Certification Form.

Interrelated Projects or Activities . If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefited projects on any reasonable basis. The interrelationship between or among projects or activities does not have to be formally stipulated, but must be demonstrable on the basis of the following criteria. Either: (a) the theoretical approaches are interrelated; (b) studies of the same phenomena are conducted by the same or different techniques; or (c) studies of different phenomena are conducted by the same technique.

For costs transferred from one interrelated project or activity to another on a basis other than measurable proportional benefit, the criteria for determining the interrelationship and the basis for the allocation must be documented on the cost transfer.

Sponsored Projects may require sponsor approval before processing requests for transfers of costs posted to the FRS account after one year.

Any costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.

It should be noted that frequent errors in the recording of costs may indicate the need for improvements in the departmental accounting system and/or internal controls. Therefore, where such errors occur, principal investigators are encouraged and may be required to evaluate the need for improvements in these areas and to make what improvements are deemed necessary.

Calculating the Available Balance

"How much do I have left in my account?" This seems like a simple enough question; however, getting an accurate answer may be the most frustrating experience the investigator faces in the research business. The departmental shadow bookkeeping system gives one figure; the University FRS accounting system gives another. There are several reasons for the differences between the true available budget balance and the figures reported by FRS or the shadow system:

• Invalid payroll encumbrances (payroll not encumbered through the budget end date or payroll encumbered beyond the budget end date)
• Pending transactions (goods and services ordered but not encumbered, e.g., consultants, stores orders, check requests for reimbursements, student stipends, unprocessed RFAA’s)
• Posting errors
• Delay in processing budget loads
• Variation in spending pattern among cost categories (effect on indirect costs)
• Timing differences in posing indirect costs (FRS posts indirect costs weekly)

It is important to understand how the accounting system deals with the indirect cost category of the budget. The entire indirect cost budget is encumbered when the budget is loaded to the FRS spending account. The charge for indirect costs is calculated on a Modified Total Direct Cost base, i.e., the account is not charged indirect costs for capital and student support. Therefore, deviations in the spending pattern among cost categories affects the amount of indirect costs charged and must be considered when calculating the available balance. When rebudgeting capital to operations or personal services, consider that the indirect costs associated with the rebudgeted capital have not been encumbered but will be charged to the account nevertheless, and will reduce the available balance. The same is true, in reverse, when rebudgeting operations or personal services into capital. The indirect costs associated with the rebudgeted operations or personal services will not be charged on the capital, thus increasing the available balance in the account.

Cost Sharing

Documentation Guidelines
The academic department is required to maintain supporting documentation for cost sharing. The cost sharing records maintained by the academic department serve as the official University record and are auditable.

Records for contributed effort should include the names of the individuals, the percentage of contributed effort, the time period of the contributed effort, and the funding sources. Someone in the academic department who has either first-hand knowledge or a suitable means of verification of the contributed effort maintains and signs the cost sharing records. Effort should be verified no less frequently than once at the end of the budget period. Federal cost principles recognize that, in an academic setting, teaching, research, service, and administration are often inextricably intermingled. A precise assessment of factors that contribute to costs is not always feasible, nor is it expected. Therefore, it is acceptable to rely on estimates in determining the allocable effort to be charged to a project. The Cost Sharing Documentation of Compensated Effort Form is suggested for documenting cost sharing.

It is advisable for investigators with complex research, teaching, and administrative workload patterns to keep track of their commitments to ensure that their total commitments never exceed 100%. Effort is expressed as a percentage of total UA compensated activity, not hours. It is not possible to meet the cost sharing requirement expressed as a percentage of effort simply by working a longer workweek. The Worksheet for Analyzing Total Compensated Effort may be a helpful tool for analyzing an individual’s effort.

Cost sharing records for the cost categories of operations, travel, and capital should include the detail of the transactions and the funding source. The records should include purchase order numbers, item descriptions, date of purchase, account number, travel destination, travel order number, name of traveler, etc.

Sponsored Projects Services will send a certificate, Cost Sharing Certification, to the principal investigator at the end of the project budget period, requiring the investigator or a representative to certify that the cost sharing requirement was met in accordance with the terms of the award agreement. Unless the terms of the award require detailed reporting, this certificate is the only report that the department is required to submit to central administration. For principal investigators with an uncomplicated activity profile, who are contributing effort to a project whose cost sharing requirement consists only of contributed effort of the principal investigator, this certification may serve as the cost sharing documentation and the academic department is not required to maintain additional records.

Fringe benefits will be added to the direct labor cost sharing amount at the appropriate rate for the job classification in effect during the fiscal year the labor was performed. Indirect costs will be added to the direct labor and fringe benefits amounts at the appropriate rate in effect during the fiscal year the labor was performed. Note that the rates used for proposal budgeting purposes may not be the same as the actual rates used to calculate the cost sharing amount.

No Cost Extensions
No cost extensions to projects do not increase the amount of the University's original cost sharing obligation. The no cost extension does, however, extend the time period during which the University may perform the cost sharing.

Questions and Assistance
Please direct your questions and requests for assistance to Sponsored Projects Services (626-6000).

Program Income

Income earned that is directly generated by the sponsored project or earned in whole or in part as a result of the award, e.g., fees for services performed, the use or rental of real or personal property acquired under Federally-funded projects, the sale of commodities or items fabricated under an award, conference fees, is called program income. Program income is subject to Federal regulations and must be separately accounted for. The project director must deposit and account for the program income at The University of Arizona—not the UA Foundation or a private checking account. Sponsored Projects Services will set up a separate FRS account for the program income; all costs associated with the program income will be charged to the program income account.

Program income earned during the project period shall be retained by the University, under the control of the principal investigator, in accordance with Federal awarding agency regulations or the terms and conditions of the award.

Most frequently, the terms and conditions of the award allow the principal investigator to add the program income to the amount of the award, increasing the funding available to further eligible project or program objectives. Under this method, program income received in excess of the related costs associated with the project objectives is deducted from the total Federal share of project or program allowable costs. If unexpended program income remains at the end of the project, costs charged to the grant account will be transferred to the program income account to offset the cash surplus.

In the event that the Federal awarding agency does not specify in its regulations or the terms and conditions of the award how program income is to be used, the program income received is deducted from the amount of the Federal award for all programs EXCEPT research, or added to the amount of the Federal award for awards that support research.

Unless Federal awarding agency regulations or the terms and conditions of the award provide otherwise, the University has no obligation to the Federal Government regarding program income earned after the end of the project period.

License Fees and Royalties

Unless Federal awarding agency regulations or the terms and conditions of the award provide otherwise, there is no obligation to the Federal Government or non-Federal sponsor with respect to program income earned from license fees and royalties for copyrighted material, patents, patent applications, trademarks, and inventions produced under an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply to inventions made under an experimental, developmental, or research award.

Overexpenditures

Responsibility for clearing overexpenditures on sponsored projects accounts belongs to the principal investigator and department head. If the overexpenditures are not cleared in a timely manner, the Vice President for Research will offset the amount of overexpenditures from the college portion of the indirect cost revenue. This process will follow the Sponsored Projects Official Deficit Procedure.

For grants awarded under the Federal Demonstration Partnership, overexpenditures from one budget period may be absorbed by the award of the continuing non-competitive renewal. The overexpenditures, or "preaward costs," associated with the continuation award must be necessary for the conduct of the project and must be allowable under the potential award. Overexpenditures incurred less than 90 days prior to the effective date of any new or competing continuation award may be transferred without sponsor approval. Transfer of overexpenditures incurred more than 90 days prior to the effective date of any new or competing continuation award requires sponsor approval.

Carryforward of Unobligated Balance to Continuation Year

Refer to the terms of the award and sponsor guidelines to determine whether you are authorized to carryover an unobligated balance to the continuation year.

For grants awarded under the Federal Demonstration Partnership, funds remaining at the end of one budget period (except the final budget period) are automatically carried over to the next. Since the carryover of unobligated balances is automatic, no separate or specific awarding agency prior approval is required to authorize use of the funds. Refer to the Notice of Grant Award for any exceptions. The awarding agency may ask the investigator for an explanation of excessive carryover balances.

Financial Status Reporting

Sponsored Projects prepares a financial status report for the sponsor, according to the terms of the award. Before mailing the financial status report to the sponsor, the Sponsored Projects accountant will get written concurrence from the principal investigator. The principal investigator should review the financial report to ensure that the costs are allowable and accurately reported. The "bottom line" unobligated balance is usually returned to the sponsor.

Cash Management

Many principal investigators think that when the award document arrives, "the money is here." In fact, budget authority and payment terms are two separate issues. The budget authority is set up at the beginning of the budget period; cash is received throughout the budget period in accordance with the payment terms.

Invoicing
Sponsored Projects Services is responsible for preparing and sending invoices to the sponsoring agency. Only in rare circumstances will the principal investigator and academic department be permitted to invoice the sponsor. The clinical trial agreement is an example of an approved exception to policy in that the department is granted authority to prepare and send invoices.

Invoices must indicate that deposits are to be mailed to the UA Bursar:

University of Arizona
Sponsored Projects Services
P.O. Box 3520
Tucson, AZ 85722-3520

Refunds to Sponsor
Funds remaining at the end of a cost-reimbursement project need to be returned to the sponsor. Sponsored Projects will request written concurrence from the principal investigator before refunding unspent funds to the sponsor.

Letter of Credit
Most Federal grants and contracts are under the letter of credit method of payment. The Federal sponsoring agencies, e.g., DHHS, NSF, authorize a line of credit for the University to draw funds to meet the aggregate expenditure activity of the agency. The University draws approximately $15 million per month through the letter of credit method of payment.

Bad Debts
Budget authority for sponsors in unstable financial condition or sponsors with an unknown or questionable credit history should be limited to cash as it is received. Principal investigators should consider the risk of default when setting up the terms for payment and budget authority. If the principal investigator is aware of any information about a sponsor that is relevant to determining the risk of default of payment, whether for a proposed project or for a currently awarded project, it is the principal investigator’s responsibility to report the information to the Vice President for Research.

Sponsored Projects will apprise the department head of all outstanding invoices over 90 days past due. It is the responsibility of the principal investigator and department head to cover unreimbursed costs in the event of default of payment.

University of Arizona Foundation
Checks made out to the University of Arizona Foundation must be endorsed over to The University of Arizona before depositing to a University account; checks made out to The University of Arizona must be endorsed by the UA controller before depositing to the University of Arizona Foundation. In general, funds from the UA Foundation may be transferred to The University of Arizona, but not from The University of Arizona to the UA Foundation.

Sponsored research projects may be established and administered in the University of Arizona Foundation only with written approval of the Vice President for Research. Program-related income may be deposited into a University of Arizona Foundation account only with written approval of the Vice President for Research.

Mailing Address:
PO Box 3308
Tucson, AZ 85722-3308

Phone: (520) 626-6000
Proposal Fax: (520) 626-4130
Post Award Fax: (520) 626-4137
Email: sponsor@u.arizona.edu

The University of Arizona
All contents copyright © 2008. Arizona Board of Regents.