Overview of Project Management
Effective sponsored project management supports the PI in accomplishing the statement of work on time, within budget, and in compliance with University policy and sponsor regulations.
What Qualifies as a Direct Cost?
According to Stanford policy and federal regulations, an expense qualifies as a direct cost for a sponsored project when it meets all four of the following criteria.
- Allowable: as defined in OMB Circular A-21, the Uniform Guidance AND in the terms & conditions of specific awards.
- Allocable: Only those expenses that benefit a project may be charged to that project.
- Reasonable: Costs must reflect what a prudent person would pay.
- Consistent: Costs must be handled consistently across the University by following Stanford policy.Everyone who authorizes expenses at Stanford for any purpose must confirm prior to approving a transaction that the expenditures are:
- Reasonable and necessary
- Consistent with established Stanford policy and practices, as well as sponsor or donor terms & conditions
- Applicable to the work of the Stanford, which includes; instruction, research, and public service
Direct costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.
Direct costs include, but are not limited to, salaries, travel, equipment, and supplies directly benefiting the grant-supported project or activity.
Costs are defined as allowable or unallowable for reimbursement by the government. The federal government asserts that federal funds may not be used to pay unallowable expenses. Unallowable expenses may NOT be charged either directly or indirectly to the federal government.
All expenditures at Stanford, regardless of funding source, must be coded as allowable or unallowable so that they can be appropriately included or excluded from indirect cost calculations.
Are considered appropriate and reasonable by Stanford AND they are eligible for cost reimbursement by the federal government as stated in OMB Circular A-21 or the Uniform Guidance.
Are considered appropriate and reasonable business expenses by Stanford, BUT they are not eligible for reimbursement by the federal government. Departments may incur these expenses but they must code them as unallowable.
We must understand the distinction between allowable and unallowable costs. It is crucial to code and categorize expenses correctly to comply with Stanford’s obligation to the federal government for both direct and F&A or indirect cost recovery. Our ability to obtain federal grants and contracts is dependent upon meeting federal requirements.
The integrity of the Stanford's financial systems depends on the knowledge and skill of each of the individuals who process the thousands of financial transactions every day.
|Expenses that must be coded unallowable for federal reimbursement include:||University activities that federal regulations require to be coded as unallowable for federal reimbursement:|
In addition Stanford does not allow reimbursement for the following. These expenses will not be paid for by Stanford. If incurred, they must be paid for by the individual.
- Personal amusement, social activities, or entertainment (outside of activities directly related to University functions or purposes, including employee-employer relations, performance improvement, etc.)
- Stanford Faculty Club dues for individual members
- Personal, social, or travel club dues
- Stanford parking permits for employees or students
- Traffic citations for either personal or Stanford vehicles
- Personal services or personal purchases
- Interest charges incurred by individuals for late payment of their own personal bills
- Or any costs specifically disallowed by school or department policy
Example of a cost unallowable for reimbursement by Stanford:
A Senior Research Associate purchases a leather brief case and would like to use university funds to pay for the item. The designer briefcase is made of fine grain leather with brass trim and costs $1250.
Explanation: The cost is not reasonable, it is not necessary for the performance of the person's job, and is not permitted by University policy because it is a personal item. It must be paid for by the individual.
Example of a cost unallowable for reimbursement by the federal government, but allowable for reimbursement by Stanford:
An important faculty member is retiring from 35 years of service to Stanford. A party is given in his honor.
Explanation: Although this is something the federal government should not pay for as a direct or indirect cost, it certainly is an appropriate Institutional expense. This event should use the expenditure types: 52310 ALCOHOL BEV UNALW for all alcohol, and 52240 EMP MORALE for the food cost. The expenditure types designated unallowable for reimbursement by the Federal Government in both cases.
Example of a cost unallowable for reimbursement by the sponsor, but allowable for reimbursement by Stanford:
The State of California grant explicitly states no travel outside of the state of California. Professor Smart would like to travel outside the state to present a paper about her research.
Explanation: No matter how great a speaker she is or how interesting her research may be, the expense is unallowable as a direct charge to the sponsor per the award terms and conditions. If Professor Smart does travel, the expense must be charged to a PTA where the travel is Allowable, Allocable and Reasonable. The expenditure type would be: 52410 Domestic Travel Allow.
Terms and Conditions of a Sponsored Project Can Be More Restrictive
UNALLOWABLE costs may also be identified in the specific terms and conditions of a sponsored project. These can be more specific than those outlined in A-21 or the Uniform Guidance.
Example: A sponsor specifies that international travel costs cannot be charged to a particular project. Those costs may NOT be charged to that project, even though Stanford and federal regulation may allow them.
Monitoring Project Expenses within Funding Limitations
It's important for the Research Administrator to monitor the rate of expenditure on a sponsored project because PIs are responsible for the ongoing fiscal management of awarded projects, including regular monitoring against project period budgets. Federal regulations establish the approved project budget as the financial expression of the project, and sponsors may evaluate the project against the budget at any time.
Although sponsors allow certain flexibility's with respect to re-budgeting, un-obligated balances, and pre-award costs, Stanford University and sponsors expect expenditures to be reasonably consistent with the approved project and budget.
Sponsors may question or restrict expenditures that appear inconsistent with the project plan and budget. PIs are obligated to request prior approval when budget and program plan revisions indicate a significant change in scope.
Indicators of a change in scope can include, for example, significant expenditures beyond the amount authorized on the award, or requests for additional funding. PIs are obligated to request prior approval when budget and program plan revisions indicate a significant change in scope. Consult with OSR or your school based management team for additional guidance and for endorsement of the formal request to the sponsor.
For federal grants, advance written approval by the sponsor is required for:
- Change in the scope or the objective of the project or program
- Change in the PI
- Absence for more than three months or a 25% reduction in time devoted to the project, by the approved PI
- Additional federal funding
- The transfer, by contract or other means, of a significant part of the research or substantive programmatic effort (i.e. subaward).
In all cases prior approval must be in writing from the authorized grant or contract officer.
The Uniform Guidance recognizes that a PI can be absent from campus but fully engaged in his or her research team by means of Skype, video, computer or other means of communication.
PIs are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section.
- Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval).
- Change in a key person specified in the application or the Federal award.
- The disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved Project Director or Principal Investigator.
Note that number 3 above does not use the term "absence" but "disengagement" from the project. The distinction is a PI/PD can be off campus and still engaged in the research, which would not require prior written approval.
The new term "disengagement" in the Uniform Guidance will become part of Stanford Policy prospectively and retrospectively.
Specific to the School of Medicine, evidence of engagement or disengagement from a sponsored project should be documented on Attachment A of the Sabbatical Leave form which must be reviewed and approved by the School Dean's office, and forwarded to the Institutional Official who will review, countersign and uploaded it into the appropriate SeRA record(s).
The PI is working in New Zealand on coral reef research as part of the statement of work. She is absent from the Stanford Campus but still engaged in the research.
During the life of a sponsored project, it may become necessary to modify certain aspects of the original award. Such changes may involve rebudgeting of funds among expense classes or adjusting the length of a project period. Many federal agencies have transferred the authority to approve such changes to awardee institutions. Review the terms and conditions of your award.
Monitoring a Subaward
Stanford is responsible for ensuring that sponsor funds, including those provided by Stanford to other entities, are spent in accordance with all applicable laws and regulations. The University is required to monitor its subrecipients as if it were the sponsor. This monitoring requirement places Stanford in much the same position as if it were a federal agency dealing with its own primary recipient.
Principal Investigator & Departmental Responsibilities for Monitoring Subawards
It is the PI’s responsibility to monitor subrecipients so there is reasonable assurance that the subrecipient uses the award for authorized purposes, complies with laws, regulation, and the provisions of the agreement, invoices Stanford for allowable expenses in accordance with the agreement, and achieves its performance goals.
Invoice Review and Signature
The PI must review the subrecipient’s invoices and indicate approval by personally signing each invoice for payment. The following language has been developed and required to be included on each invoice:
In signing below I approve payment of this invoice and attest that charges appear reasonable, and progress to date on this project is satisfactory and in keeping with the statement of work.
You can order stamps with the above language printed on it for affixing on an invoice. Email the JP Cooke sales department directly at firstname.lastname@example.org and request the stamp ordered by Stanford University Dept. of Sponsored Research on February 7, 2013.
As part of invoice review, the PI and departmental administrators should verify that the invoice was prepared in accordance with the subaward requirements and that invoiced costs are:
- In accordance with the approved budget or permissible rebudgeting
- Incurred within the approved period of performance and overall cost limitations
- Aligned in terms of cost and type of expense with the scientific progress reported to date
- Allowable, allocable, and reasonable
The subrecipient’s invoices should reflect both current period and cumulative expenses to date. The PI and departmental administrators should also verify that the subrecipient is adequately meeting any cost-sharing commitments made for the subaward.
Clarification of Invoiced Charges: In the event the level of detail included on an invoice is not sufficient to fully understand the costs, or if it appears that some costs may be excessive or understated, the PI or departmental administrator should question the subrecipient's expenditures by requesting further documentation or explanation prior to approving an invoice. If the explanations are not sufficient to render a prudent judgment on the allowability of the cost, and the terms of the subaward permit, department grant administrators may request detailed justifications from subrecipient. Department administrators may also periodically request, if the terms of the subcontract permit, particularly from high-risk subrecipients, detailed support for selected invoiced charges to verify their appropriateness and reasonableness. Such inquiries must be done in a timely manner (e.g., within thirty days after receipt of an invoice) so that the subrecipient can be promptly paid for approved costs.
Examples of detailed justifications that may be requested from subrecipients include: payroll records, copies of paid invoices showing the cost of items purchased, descriptions of services rendered by consultants, including hourly rates and time reports and details of incurred travel charges stating the purpose, airfare, meals, ground transportation, unallowable costs, etc. Copies of all such documentation and the ultimate outcome of the investigation should be retained in the project file.
When there is a concern about the allowability of cost, the administrators can contact OSR for coordination of subsequent actions. OSR staff are available to assist the PI and their departmental staff in resolving any invoice review issues that may arise.
Technical Progress & Compliance
The PI must be in contact with the subrecipient regularly to discuss technical progress, receive and review required reports or deliverables, and verify that the subrecipient maintains current human and animal subjects approval when applicable. The subaward monitoring and compliance obligations of the PI may be shared with department administrators or other Stanford employees; however, in no event may such monitoring and compliance obligations be delegated to a non-Stanford employee.
Quarterly Review & Certification
At quarterly review and certification, the PI certifies the allowability, allocability, reasonableness, and consistency of the subrecipient's expenditures and the related sufficiency of the subrecipient's technical progress under each subaward involved in the research project, as well as expenses incurred directly at Stanford.
Regulations and Assurances
The federal regulations that describe subrecipient monitoring are general, but contain the following core elements of compliance:
- Advising subrecipients of all applicable federal laws and regulations, and all appropriate flow-down provisions from the prime agreement
- The routine receipt and review of technical performance reports
- The routine review of expenses-to-budget
- The periodic performance of on-site visits, or regular contact, if necessary
- The option to perform "audits" if necessary, review of A-133 audit reports filed by subrecipients, and any audit findings review of corrective actions cited by subrecipients in response to their audit findings
- Consideration of sanctions on subrecipients in cases of continued inability or unwillingness to have required audits or to correct non-compliant actions
The above list is not exhaustive of all compliance requirements. In addition to the general elements of compliance noted above, there may be additional sponsor or program specific requirements that mandate collecting and documenting other assurances (e.g., on lab animals, human subjects, biohazards, etc.) during the course of a project.
A cost transfer is an after-the-fact reallocation of a transaction cost from one PTA (Project-Task-Award) to another. You should charge a cost to the benefiting sponsored project PTA when it is first incurred. However, it may be necessary to transfer a cost to a sponsored project after you initially record that cost. Stanford allows cost transfers involving sponsored projects only under these circumstances.
- To correct an error (Note, the following are not considered error corrections: allocations from service centers or clearing accounts, changes caused by account setup errors, situations where new funding comes through an unexpected mechanism)
- To transfer between tasks of the same sponsored project
- To remove disallowed costs
- To clear an overdraft at the end of a project
A cost transfer invites the assumption that the transaction was not handled properly initially. The charge will be scrutinized for allowability and allocability to the benefiting sponsored project. The documentation or justification for moving charges will be scrutinized as well.
Timing is important when making cost transfers on sponsored PTAs.
- Cost transfers to correct errors should be completed within 3 months of discovering the error, and no later than 6 months after the expense is posted to an award PTA.
- Errors found during the required monthly expenditure statement review process should be corrected upon discovery.
- The 6 month deadline allows one month to correct any errors discovered by the PI during the certification process.
Example of error correction
Expenses for spring quarter (April, May, June) must be certified by the PI by the end of August. If a transaction made on April 1 were discovered during the certification process, it must be corrected by the end of September to be completed within the six month period.
If errors are discovered after certification, they must always be transferred off regardless of age. Transfers onto sponsored PTAs after six months are generally not allowed and must be transferred to a cost sharing PTA unless the expense also benefited a non-sponsored award, in which case it can be transferred to the other benefiting non-sponsored PTA.
The time restriction for cost transfers does not apply to transactions necessitated by unforeseen circumstances.
Allocations from service centers or clearing accounts, changes caused by account setup errors, situations where new funding comes through an unexpected mechanism, etc. These are not considered error corrections.
Large transfers, and transfers within the first or last 90 days of a project, receive additional central review. Detailed documentation for these transfers will facilitate timely review.
All cost transfers must be supported by documentation that fully explains the error. An explanation merely stating that the transfer was made "to correct an error" or "to transfer to correct project" is not sufficient. The cost transfer documentation for a sponsored project should be reviewed by the PI. The documentation must include a justification.
The justification must explain why you are taking an expense off of one PTA, and why it is appropriate to put it on another PTA. If you are moving the charge to another sponsored project, your explanation must make it clear why the charge is ALLOCABLE to that project, and how the project received a benefit from this expense. The justification should clearly show the following.
- The expense directly benefits the receiving PTA
- The expense is allowable on the receiving PTA
- The allocation methodology used if transferring expenses to multiple PTAs
- The reason the expense was charged incorrectly to the first PTA
- That any systematic reasons which might cause this problem to be repeated have been addressed
- The reason for any delay in the timely processing of the transfer
Tips for Writing the Justification
A good justification will allow anyone reviewing the cost transfer to understand how the expense benefits the receiving PTA. It should be easily understood by anyone reviewing the journal, and provide enough detail to inform approvers and auditors about the action taken. Think, "if I leave, will an auditor be able to understand this two years from now?" it should answer: who, what, where, when, and why.
- Who: the person, organization, or department name(s) that caused or played a role in the journal
- What: what events or circumstances are causing the journal
- When: the month of occurrence or the key date related to the cause
- Where: the location of the event or occurrence (if it is significant)
- Why: why a change is required
The trick to writing a complete justification is to try to answer all possible questions. It is important to state explicitly how the project which will pay this expense benefits from the transfer. Include a statement like: The direct benefit to Project XXX of this expense was __. Indicate whether the sponsor approved the transaction. If you wonder if you have included enough information, you probably haven't. Do not use abbreviations or acronyms in a justification. Above all, remember, you cannot transfer expenses to a new PTA just because it has money!
Examples of documentation to include: Allocation methodology, an invoice or packing slip, notes on an expenditure statement, “per PI …”
Sample Wording to Document a Salary Transfer
- Charges are being transferred onto this award because the appointment paperwork for Grad Student X was not received in time to allocate her salary correctly. Consequently, this month’s charges for Grad Student X are incorrect.
- The efforts of Grad Student X directly benefit the scope of work for Project Y - OR - Grad Student X conducted experiments related to the Project Y statement of work (be specific, but brief)
- These salary charges are allowable on this award per the Project Y agreement.
- PI Smith has reviewed the charges and assessed the efforts of Grad Student X.
- Appointment paperwork is now fully approved, and the Labor Distribution Schedule corrected for Grad Student X so that her salary will now be charged correctly.
Ask OSR, RMG or ERA for help making sure your documentation is adequate.
To allocate chemicals from an expenditure allocation PTA to appropriate project PTA
Department X expenditure allocation PTA is used to collect all department chemical charges. All charges to sponsored projects were proposed and approved consistent with Stanford and sponsor policy. Documentation, including allocation methodology, is in departmental files.
The inadequate justification does not address the questions of whether or not the chemical charges are allowable and allocable to the PTAs to which they are being charged through the cost transfer.
If an error is discovered after the end of the award, a transfer of expense should be made by removing the expense prior to award closeout.
If after the end date of an award an expense is determined to be unallowable to the project (but did benefit the project), the expense must be transferred to a Cost Sharing PTA for accounting purposes, although it cannot be counted towards a Cost Sharing commitment.
The documentation of a cost transfer made after a project end date will be closely scrutinized. In your documentation, cite specific reasons not general circumstances for the cost transfer.
These charges are for effort expended before [insert Project Y’s end date] and they are appropriate per the Project Y award agreement.
These charges could not be processed in a timely manner because PI Smith was traveling in Mongolia, and was not available to review and approve the charge.
If a Project Ends In Overdraft
An overdraft exists if after the end date of an award expenses exceed funding.
If the award is in overdraft at the end of the project period, remove the overdraft from the award according to rules outlined in Stanford Policy. Federal regulations state an overdraft is unallowable on any other sponsored project, therefore unless there was an error, the overdraft must be treated like cost sharing. This must be done in a timely manner. Expenses removed as a result of an overdraft should have been incurred during the last 6 months of the project.
- Do it in a timely manner
- If total overdraft is less than $500, transfer lump sum (net of indirect costs) Expenditure type 56135 (which allows the Cost and Management Analysis group to segregate these costs for purposes of indirect cost calculation)
- If the overdraft is greater than $500 dollars the overdraft is transferred to a cost sharing PTA.
- Explain reason for the transfer. For example: Charges are legitimate project expenses, but funds were inadequate. This is accounted for in the same manner as cost sharing.
Use journals to transfer costs.
- Use New Journals to transfer non-salary or student aid expenses.
- Use Labor Distribution Adjustments to transfer salary expenses.
- Use Allocation Journals to distribute costs based on proportional benefit to a project. Allocation Journals are used when it is difficult to determine in advance how much to charge each account for a shared supply or service. Allocations are often used to distribute costs from Service Centers, Auxiliaries, or expenditure allocation service types. Often allocations are repetitive, or are required on a repetitive basis. To process an allocation journal, you must comply with Administrative Guide Memos 3.2.2 and 3.2.3 and have written approval on file from those with signature authority over the PTAs you will charge. You must be able to certify that:
- The allocation has been processed in accordance with policy
- The cost is an appropriate charge to the PTAs sharing the expense
- The expenditure PTAs actually benefited from the cost of the goods and services
- The transaction is documented according to policy
Keep in mind: Federal regulations require an expense solely advance the work under the sponsored agreement, or benefit both the project and other work in proportions that can be approximated through reasonable methods.
A cost that benefits more than one project should be allocated at the time of the expenditure. At no time should a sponsored project be used as a holding account for costs that will subsequently be transferred elsewhere. Clearing accounts are appropriate for certain situations
Approvals Delegated to Stanford
Federal granting agencies have delegated to Stanford the ability to initiate:
It is possible to spend before the anticipated award start date if the sponsor authorizes it in writing. Check the terms and conditions of the specific award for restrictions on pre-award spending.
- Most federal sponsors allow preaward spending for grants 90 calendar days prior to the anticipated award start date.
- Other sponsors limit the dollar amount or do not allow pre-award spending.
- It is rare for contracts to include language allowing pre-award spending. Special language must be negotiated.
If the sponsor authorizes pre-award spending, you can open an early PTA (Project Task Award). If the research involves human or animal subjects or stem cells, a protocol must be submitted before an early PTA can be opened. Although you can receive an early PTA, certification is required that protocols have been filed for review and that no expenses involving those activities will be incurred until the final protocol approval is granted.
The sponsor is not obligated to fund the pre-award costs if the project is not funded, and the sponsor's authorization of pre-award spending does not guarantee that the PI will receive the award. If the award does not materialize, the PI must cover for the costs from his or her unrestricted funds.
In addition, if the start date of the project is delayed beyond the 90 day period, the award will not cover the costs if they were incurred outside the 90 day period.
Preaward Spending Risk Example 1: How the Guarantee Account Works
An award is expected in two months and a graduate student is working in this area now and needs to be funded. What should you do? If the sponsor authorized preaward spending, request an early PTA. This will require the PI to identify an unrestricted PTA to guarantee payment of the expenses, in case the sponsored project is not awarded.
Do not charge the student to another sponsored project, and then transfer costs when the benefiting award is accepted.
The student’s effort should not be charged to a project which does not benefit from that effort. Such a charge is both unallowable and unallocable, and cannot be approved, even if you intend to transfer the charges later.
Pre-award Spending Risk Example 2: Delayed Project Start Date
Anticipated award start date of March 1 is ascertained through communication with the sponsor.
The sponsor authorized pre-award spending within 90 days prior to award start date, that would be January 1. You can open an early PTA, and begin spending.
The sponsor then delays the start date to April 1. Now the pre-award spending the PI incurred in the month of January is outside the 90 day limit. The PI is obligated to cover those costs with unrestricted funds.
No Cost Extension
A no-cost extension (NCX) extends the project period beyond the original project end date. As the phrase “no cost” suggests, there is no additional funding. It allows a Principal Investigator (PI) additional time to complete the scope of work of her/his project without additional funding. The fact that funds remain at the expiration of the grant is not, in itself, sufficient justification for an extension without additional funds.
A no-cost extension may be requested by the PI when all three of the following conditions are met:
- The end of the project period is approaching, AND
- There is a programmatic need to continue the research, AND
- There are sufficient funds remaining to cover the extended effort
Many federal agencies allow for Stanford to approve a one-time no cost extension for a period of up to 12 months beyond the original expiration date shown in the NoA (Notice of Award) if all the following criteria are met.
- No term of the award specifically prohibits the extension
- Funds are left in the project budget
- There is a programmatic need
- The project's originally approved scope will not change
Contracts typically require a formal request to the sponsors contracting officer and a subsequent modification to the contract. Review the terms and conditions for guidance.
To request a NCX consult the Sponsored PTA Manager - Dept User Guide
Limitation of Funds/Cost Clause
The Limitation of Funds clause is typically inserted in to Federal contracts that are incrementally-funded cost-reimbursement contracts. The clause requires us to notify the sponsor that we are coming to the end of obligated funding, and send notification to the contract officer that obligated funds will be spent within the next 60 days. OSR will initiate the notice to the sponsor. You may also notify OSR when you will require additional incremental funding within the next 60 days. Refer to FAR 52.232-22 for additional information. The Limitation of Costs clause is inserted into federal contracts when they have been fully funded. The clause requires us to notify the sponsor when we expect in the next 60 days to have spent 75% of the estimated cost, or expect expenses to be greater or substantially less than previously estimated. Refer to FAR 52.232-20 for additional information.
imitation of Funds
Limitation of Costs
The Limitation of Funds clause is typically inserted in to Federal contracts that are incrementally-funded cost-reimbursement contracts. The clause requires us to notify the sponsor that we are coming to the end of obligated funding, and send notification to the contract officer that obligated funds will be spent within the next 60 days. OSR will initiate the notice to the sponsor. You may also notify OSR when you will require additional incremental funding within the next 60 days. Refer to FAR 52.232-22 for additional information.
The Limitation of Costs clause is inserted into federal contracts when they have been fully funded. The clause requires us to notify the sponsor when we expect in the next 60 days to have spent 75% of the estimated cost, or expect expenses to be greater or substantially less than previously estimated. Refer to FAR 52.232-20 for additional information.