Financial Compliance & Subaward Monitoring

Financial compliance in RFS is the observance of Federal statues, regulations, and requirements.  This is crucial to maintain funding sources in order to continue research.  In cooperation with sponsors and department personnel, we coordinate audits, desk reviews, and site visits of sponsored projects (externally funded projects).  Working closely with our campus partners, our staff processes journal voucher cost transfers that include sponsored projects.  Financial compliance also performs subrecipient monitoring reviews.

Staff

For general inquiries, please email darin.cecil@uky.edu

Cost Transfer General Information

The WHAT and WHY of Cost Transfers

Cost accounting standards (CAS) are the standards for consistent application of cost accounting principles.  Costs incurred for the same purpose in like circumstances must be treated consistently.  The codification of general and permanent rules are published in the Federal Register by the departments and agencies of the Federal Government.  Part 200 is Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal awards.  This is also referred to as Uniform Guidance or UG.

Financial management of sponsored funds is the efficient and effective control over, and accountability for, all funds, property and other assets and assure they are used solely for authorized purposes.  Uniform Guidance states documentation of expended funds is to demonstrate financial compliance with Federal statues, regulations and terms and conditions of the award.

What are allowable costs (applicability)

For a cost to be allowable, it must be relevant or appropriate cost to perform the scope of work on a project.  The cost must be allocable, reasonable, and necessary for the performance of the award.  Allocable means the cost is chargeable or assignable to perform the scope of work and have relative benefit the project.  The cost is specific, necessary, and identifiable to accomplish project goals.  Reasonable means the goods and services acquired and the amount involved reflect the action to perform the scope of work.  Cost should be ordinary and priced comparable to other goods or services.  Purchaser must act with due prudence in the decision to incur the cost.  Necessary means the essential goods or services was required to accomplish the scope of work.  Expenditures for cost share and program income follow the same applicability requirements as direct expenditures.  An expenditure deemed unallowable as a direct expense is also unallowable to be recorded as a cost share and program income expense.  Note:  Sponsor award terms may deem specific costs as unallowable that are normally considered allowable such as travel, employee benefit costs, etc.

Documentation

Documentation is the proper records identifying and containing appropriate information to support an expenditure.  Uniform Guidance states documentation for costs must be adequately documented, clear and legible.  Documentation for cost share has the same documentation requirements as direct expenditures.  UG sets retention of documentation at three years, however, sponsors may set a longer period in the terms and conditions.  Documentation must be made available through the award’s retention period.

Procedures and Guidelines

Procedures and guidelines are the formal guidance needed to coordinate and execute activity.  These provide the operational framework for grant management.  Procedures and guidelines are the foundation of regulations and internal controls.

• Business Procedures Manual (BPM)
  • Procedures set forth by the University of Kentucky.  The policy is WHAT needs to be done and the procedures are HOW to accomplish the requirement.
  • Section E University Financial Services includes procedures for sponsored fund management
  • https://ufs.uky.edu/bpm 
• Office of Sponsored Projects Administration (OSPA)
  • Responsible for administering extramural grants and contracts awarded through the University of Kentucky Research Foundation.  Services include advice and assistance with budget preparation and other administrative requirement of proposals; review, negotiation and acceptance of awards; information regarding sponsor polices and regulations; preparation of subcontract documents.
  • https://www.research.uky.edu/office-sponsored-projects-administration/policies-procedures

Regulation References

• Uniform Guidance
  • Uniform Guidance is a government wide framework for grants management and provides an authoritative set of rules and requirements for federal awards.  This is the foundation used to develop policies for grants and agreements. 
  • https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200?toc=1
• HHS grants policy statement 
  • Frequently used sections
    • Cost Transfers - Cost transfers by recipients between grants, whether as a means to compensate for cost overruns or for other reasons, generally are unallowable; however, cost transfers by recipients (or subrecipients or cost-type contractors) may sometimes be necessary to correct bookkeeping or clerical errors. Recipients (and subrecipients and contractors) should have systems in place to detect such errors within a reasonable time frame. Untimely discovery of errors could be an indication of poor internal controls.
    • Permissible cost transfers should be made promptly after the error occurs but no later than 90 days following occurrence unless a longer period is approved in advance by the GMO. The transfer must be supported by documentation, pursuant to 45 CFR 74.53 or 92.42, that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible official of the recipient, subrecipient, or contractor. An explanation merely stating that the transfer was made “to correct error” or “to transfer to correct project” is not sufficient. This information need not be submitted to the GMO but is subject to audit. If the transfer affects a previously submitted FSR, a revised FSR must be submitted.
    • Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both. If such errors occur, II-43 organizations are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. An awarding office also may require a recipient to take corrective action by imposing additional terms and conditions on an award.
  • https://www.hhs.gov/grants/grants/grants-policies-regulations/index.html
  • https://www.hhs.gov/sites/default/files/grants/grants/policies-regulations/hhsgps107.pdf
• NIH grants policy statement
  •  The policy requirements that serve as the terms and conditions of NIH grant awards.  These terms not only apply to the prime recipients, but also flow down to any subawards as well as to subrecipients unless specified otherwise in the regulation or the terms and conditions of the specific NIH award.
  • Frequently used sections
    • 7.2 The Cost Principles - In general, NIH grant awards provide for reimbursement of actual, allowable costs incurred and are sub-ject to Federal cost principles.
    • 7.5 Cost Transfers, Overruns and Accelerated and Delayed Expenditures - Cost transfers to NIH grants by recipients, consortium participants, or contractors under grants that rep-resent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official of the recipient, consortium participant, or contractor. An explanation merely stating that the transfer was made “to correct error” or “to transfer to correct project” is not sufficient. Transfers of costs from one project to another or from one competitive segment to the next solely to cover cost overruns are not allowable.
  • https://grants.nih.gov/policy/nihgps/index.htm
  • https://grants.nih.gov/grants/policy/nihgps/nihgps.pdf

Cost Transfer Procedural Support

The following section is to provide guidance and links to specific or frequently used topics.  For a complete reference, please refer to the BPM.

Cost Share Funding

Cost sharing, often referred to as matching or in-kind, are expenses paid by the University or third-party contributors for costs applicable, allocable, reasonable and necessary to accomplish project objectives.  Expenses paid by the University must be posted against the grant’s cost share fund.  Departments may elect for cost share funding to automatically process monthly or may submit JVs to fund the account.

Cost Share Funding References

Cost share funding JVs are not a true cost transfer and does not follow the cost transfer policy.  Therefore, documentation and signatures are not required unless an unordinary circumstance occurs.  Note:  Cost share funding JVs should not be confused with an expense being moved on or off a grant which does follow the cost transfer policy.

• Cost Sharing BPM E-50-2 
• QRC Cost Share Funding by Account and/or Individual 
• Below are the cost share funding GLs used depending on the type of expense.  The debit entry will be the cost center from which you are moving the funds and will use GL 750XXX.  The credit entry will be to the grant and cost share fund and will use GL 740XXX.  Don’t forget to manually update the fund associated with the grant (001189XXXX) as the JV defaults to the external sponsor fund.  Cost share fund can be located using tcode GMGRANT in the Dimensions tab.

Subaward Invoice Monitoring

Subaward Online Invoice Review and Approval Process

Online Subaward Invoice Frequently Asked Questions

Presentations

Subaward Online Invoice Review Pilot Presentation

Subaward Online Invoice Review UBO Presentation

Quick Reference Cards

QRC - PI Approval Process 

QRC - PI Hold Process

QRC - SIR Approval Process

QRC - SIR Hold Process

QRC - Supplemental Invoice Information

QRC - Subaward Invoice Auto Block

QRC - Subaward PO Transaction Codes (T-codes)

Audits, Desk Reviews and Site Visits

Single Audit is an organization wide financial statement and federal awards audit of a non-federal entity that expends $750,000 or more in federal funds in one year; previously known as the OMB Circular A-133 audit.  It is intended to provide assurance to the Federal Government that a non-federal entity has adequate internal controls in place and is generally in compliance with program requirements.

Through the Single Audit, professional auditors review UK’s financial management process, including the financial management system and its compliance with all its federal grant requirements.  It is called the “Single Audit” because it combines one audit covering all the federal grants. 

Each area is responsible for ensuring compliance with UK governing regulations as well as state, federal and sponsor requirements.  UK policies and procedures supersede sponsor requirements. 

Desk reviews and site visits is the monitoring of sponsor funds for good stewardship of funds.  Recipients are responsible for managing the day-to-day operations of grant supported activity using their established controls and polices.  This monitoring is accomplished through review of reports and correspondence from the recipient, audit reports, site visits and other information.

Subrecipient Monitoring Desk Reviews

Just like sponsors and Federal programs monitor the University’s stewardship of funds, Uniform Guidance States we are to do likewise.  UG regulations on Subrecipient monitoring begins with 2 CFR 200.331.  Below are noted regulation highlights.

• 2 CFR 200.332 (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include:

1. Reviewing financial and performance reports required by the pass-through entity.
2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.
3. Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521.
4. The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section § 200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward.

• 2 CFR 200.332 (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations.