Chapter 7-300

Justification and Documentation of Expenditures

7-300 Allowable Expenditures

Expenditures may be charged to extramural awards as long as the expenditures are allowable, have been authorized in accordance with University policy, funds are available, formal prior approval has been secured if needed, and any required special reviews required have been completed. (See Chapter 6 of this Manual and Accounting Manual Chapter D-371-16, "Disbursements: Approvals Required". Of paramount concern in justifying a particular expenditure on an extramurally-funded grant, contract, or cooperative agreement is the question of benefit: only those costs which advance the goals of a project may be directly charged to that project. Specific information on University policies and procedures regarding direct costing and expenditure documentation is found in Business and Finance Bulletin A-47 University Direct Costing Procedures and Accounting Manual Chapter A-000-7, "Official Documentation Required in Support of University Financial Transactions."

7-310 Costs Normally Treated as Indirect

2 CFR 200.413 requires that certain costs be treated as indirect costs unless specific requirements are met. The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate when the following conditions are met:

1. Administrative or clerical services are integral to a project or activity;
2. Individuals involved can be specifically identified with the project or activity;
3. Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and
4. The costs are not also recovered as indirect costs.

2 CFR 200.420-475 provides specific guidance on the appropriate treatment of certain cost categories, including memberships (2 CFR 200.454) and materials and supplies costs, including costs of computing devices (2 CFR 200.453).

7-320 Accounting System

Various chapters of the University Accounting Manual and Business and Finance Bulletins series set forth the procedures and controls that campuses must institute to ensure that charges conform to University and sponsor policies and are sufficiently documented. A list of those Accounting Manual and Business and Finance Bulletins’ chapters relating to specific direct costs elements is found in the "References" section of this Chapter.

7-330 Confirmation of Personal Services

Background
Pursuant to 2 CFR 200.430, the costs associated with compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.

UC requirements for valid controls are as follows:

Standards for Confirmation
Each campus must document its own internal control processes. However, it is expected that confirmation of personal services, regardless of process used by campuses, occur no less frequently than annually.

Timeliness of Confirmation Reviews
Confirmation reviews must be completed within 120 days after the end of the reporting period; campuses may establish shorter timeframes as necessary to support their internal control framework. Timely reviews are a condition of acceptance of federal funding when direct salary charges are contemplated and incurred or cost shared salary is proposed on an award. Failure to review charges on a timely basis may result in the charge being disallowed by the federal agency funding the sponsored project. Principal Investigators are responsible for ensuring full compliance with reporting requirements with support from their department administrative staff. Campuses shall take progressive action to prompt corrective action and resolution according to local campus procedures when required. Corrective action may include the transfer of un-reviewed direct salary charges to an unrestricted funding source.

Revisions After Review
Changes to previously reviewed confirmations should be extremely rare. However, if a material error is identified, a revised report should be reviewed along with corresponding payroll cost transfers and other extenuating circumstances. Such adjustments, when increasing charges to a federal fund, are subject to a "facts and circumstances" review and must be processed on a timely basis consistent with federal regulations and University policy (i.e., Business and Finance Bulletin A-47, Section V) to ensure allowability under audit. If a revision is required, the extenuating circumstances surrounding the need for a corrected report must be fully explained, documented, and approved according to campus procedures.

Precision of Review
Per the Uniform Guidance, “it is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting. When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected.” Short term fluctuations (such as one or two months) in workload need not be considered, provided the distribution of salaries and wages is reasonable over the longer term (2 CFR 200.430(h)(8)(viii)(B)). However, each campus is responsible for establishing procedures to ensure direct salary charges to sponsored projects are reviewed on a regular basis to ensure all necessary adjustments are made timely and the final amount charged to the awards are reasonable, allowable, allocable, necessary and consistently treated.

7-340 Prior Approval Systems

Many sponsors require prior approval by an authorized official for certain programmatic or administrative actions or budgetary changes in their awards to educational institutions. When the sponsor has delegated prior approval authority to the University, the campus must, in turn, designate an authorized institutional representative (usually a Contracts and Grants Officer) to approve the particular kind of request. Each campus should develop its own procedures for processing prior approval requests and notifying sponsors of approved actions, where required. See Chapter 2 of this Manual for further information on prior approval systems. See 7-F01 for a list of cost elements requiring prior approval under A-21.

7-350 Special Reviews

Campuses have established procedures to monitor and review certain expenditures (or proposed expenditures) for which there traditionally have been questions or differences of opinion about the allocability, allowability, or reasonableness of the cost or concerns regarding the relation of an expenditure to the sponsored project or to the overall campus or University needs and resources. Types of costs that may need special review include: rearrangement, alteration and reconversion costs (7-202), consultant fees and related payments, (7-204), general purpose equipment expenditures (7-205), hazardous materials (7-210), major computer purchases (7-205), rental and lease costs (7-214), subawards (7-220), and travel (7-224). Many of these costs are also subject to sponsor terms requiring approval either by the sponsor or by the institutional prior approval authority. (See Chapter 2.)

Proposed levels or amounts of cost sharing should be reviewed in accordance with Chapter 5.

7-360 Invoice Terms in Extramural Awards

The invoicing/payment terms in extramural awards should not require more than a standard campus invoice. Requirements for back-up documentation for invoiced expenses are not acceptable. Such requirements are not within the administrative capacity of the campus Extramural Accounting Office or the Principal Investigator's department. They create an excessive administrative burden on the campus department. If a non-federal sponsor has excessive administrative requirements, personnel to fulfill such requirements should be charged to the award. Extramural sponsors have audit access to the University in accordance with campus policy and procedures. (See Chapter 4.)