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Calculating the Available Balance
License Fees and Royalties
Carryforward of Unobligated Balance
Financial Status Reporting
Refunds to Sponsor
Letter of Credit
Checks Made to UA Foundation
Financial Services Manual 6.10 Account Management identifies account roles and responsibilities. For sponsored awards, the principal investigator assumes full responsibility for all activity on the account.
The principal investigator and fiscal officers are responsible for ensuring that all expenditures from the account are:
- For the benefit and purpose of the account
- Allowable per the terms of the award
- Authorized in accordance with University policies, state and federal laws and regulations, sponsor terms and conditions
- Charged to the appropriate object code
- Fall within the available balance of the account
- Fall within the period of performance of the account
- Documented and approved according to UA business practice: https://www.fso.arizona.edu/financial-management/business-purpose
Additionally, Sponsored Projects Services reviews selected expenditures based on risk level to ensure:
- The above criteria are met
- The account is active or within the allowable closeout period to collect payment from the sponsor
The principal investigator and fiscal officers are responsible for ensuring that:
- The account is reconciled in a timely manner, i.e., within 30 days of receiving the month-end report. See the UA Financial Services Office Manual for account management requirements.
- Immediate action is taken to resolve any errors or discrepancies noted during 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
- Copies of supporting documentation for all activity processed on the account are maintained according to UA record retention guidelines.
Transfers of costs to federal and subfederal sponsored projects correcting clerical or bookkeeping errors should be made promptly after the errors are discovered and within 30 days of accounting month end. Timely transfers should contain a brief explanation of why the transfer is needed. An explanation that merely states that the transfer was made "to correct error" or "to transfer to correct project" is not sufficient. Please see https://www.fso.arizona.edu/financial-management/business-purpose for UA policy on documenting expenditures.
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 generally not sufficient. The amount of supporting descriptions explaining the cost transfer should scale accordingly with the complexity and size of the cost transfer.
University accounting system implementation:
- Operational expense corrections: The General Error Correction document will automatically require the "Error Certification" form for transactions made after 30 days. If a Distribution of Expense and Income document is used, the form should be manually added to the transaction.
- Payroll expense corrections: The Salary Expense Transfer will automatically require the "Error Certification" form for salary adjustments outside of the current or prior accounting month. Adjustments on Effort Certification documents should either include the form or similar level of detail.
Roles and Responsibilities: The administering unit is responsible for managing projects in accordance with Financial Services Manual 6.10 Account Management. All cost transfers are approved by the fiscal officer or delegate. All cost transfers on sponsored awards route to Sponsored Projects Postaward Services for review and approval. Both the administering unit and Sponsored Projects review to ensure the cost is an Allowable Cost.
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:
- The theoretical approaches are interrelated
- Studies of the same phenomena are conducted by the same or different techniques
- Or, 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 Services may require sponsor approval before processing requests for transfers of costs.
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 and fiscal managers are encouraged to evaluate the need for improvements in these areas and to make reconciliation improvements as necessary.
Cost transfers may also be used to transfer expenses from clearing accounts to grant accounts. These transfers should be strictly based on costs incurred on the clearing accounts, supported by actual usage by grant accounts, and processed on a timely basis.
"How much do I have left in my account?" This seems like a simple question; however getting an accurate answer may be the most frustrating experience the investigator faces. The departmental shadow bookkeeping system gives one figure; the University UAccess Financials system gives another. There are several reasons for the differences between the true available budget balance and the figures reported by UAccess Financials 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 and associated indirect costs (goods and services ordered but not encumbered, e.g., pending requisitions, consultants, stores orders, student stipends, unprocessed transfers)
- Posting errors
- Delay in processing budget loads
- Timing differences in posing indirect costs (UAccess Financials posts indirect costs nightly)
See the University of Arizona Research Gateway Cost Sharing page for details.
Income earned that is directly generated by the sponsored project or earned in whole or in part as a result of the award. Examples include:
- registration fees from participants attending conference or workshop
- fees earned from services performed under the project, such as laboratory tests
- charges for the use or rental of real property, equipment or supplies acquired under the grant
- income generated from sales of commodities or items fabricated
- income from sales of educational materials
- sale, rental, or usage fees, such as fees charged for the use of computing or laboratory equipment
- income generated from the sale of software, digital media, or publications
Program income is subject to federal regulations and must be accounted for separately. 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 UAccess Financials 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.
Program income should be expended as it is received and prior to expenditure of grant funds. 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.
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.
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 Senior Vice President for Research may transfer overexpenditures to the department or college indirect cost account.
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 most federal grants awarded under the Research Terms and Conditions/Federal Demonstration Partnership, funds remaining at the end of one budget period (except the final budget period) are automatically carried over to the next. Because 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 Award Document for any exceptions. The awarding agency may ask the investigator for an explanation of excessive carryover balances.
See the Reporting Page for all reporting information and procedures.
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.
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.
Funds remaining at the end of a cost-reimbursement project need to be returned to the sponsor. Sponsored Projects Services will request written concurrence from the principal investigator before refunding unspent funds to the sponsor.
Most federal grants and contracts are under the letter of credit method of payment. The federal sponsoring agencies, e.g., Department of Health and Human Services, National Science Foundation, authorize a line of credit for the university to draw funds to meet the aggregate expenditure activity of the agency.
Principal Investigators and Department Officials should consider the risk of default when submitting a proposal to a sponsor. If the 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 their Department, College and the Senior Vice President for Research. 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.
It is the responsibility of the principal investigator, department, and/or college to cover unreimbursed costs in the event of default of payment.
Checks made out to the University of Arizona Foundation must be endorsed over to The University of Arizona before depositing into a university account. Checks made out to The University of Arizona must be endorsed by the controller before depositing to the University of Arizona Foundation. In general, funds from the University of Arizona Foundation may be transferred to The University of Arizona, but not from The University of Arizona to the University of Arizona Foundation.
Sponsored research projects may be established and administered in the University of Arizona Foundation only with written approval of Research, Discovery & Innovation. Program-related income may be deposited into a University of Arizona Foundation account only with written approval of the Research, Discovery & Innovation.