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There are five overall principles to managing the financial transactions of
sponsored research funds. Policies and procedures within the OSP have been
developed in support of these principles. The five principles are:
- Consistency
- Timeliness
- Justification
- Documentation
- Certification
Consistency: Transactions must be handled in a consistent
manner. That is, policies and procedures have been established to address
similar types of transactions in a routine manner.
Timeliness: Transactions must be handled within a
reasonable period of time consistent with time frames outlined for federal
agencies, a private sponsor, and Dartmouth College.
Justification: There must be a reason for the transaction
that supports the project's goals, and adheres to guidelines outlined by
federal agencies, a private sponsor, and Dartmouth College.
Documentation: Sufficient documentation to support the
transaction must exist. The documentation must be retained, organized, and
complete enough to stand up to an audit.
Certification: Transactions must be approved and carry all
the correct authorizing signatures.
ALLOWABLE, ALLOCABLE, AND REASONABLE COSTS
The concepts of allowability, allocability, and reasonableness of costs
address directly the legitimacy of a cost charged against a specific sponsored
research PTAEO account. Determination of allowability, allocability, and
reasonableness of a given expense is based on specific guidelines of the
sponsor and according to federal cost principles.
Allowability, allocability and reasonableness are defined and determined by
the Office of Management and Budget (OMB), the sponsor's requirements and/or
College policy. OMB Circular A-21, Section C, states that "The recipient
institution is responsible for ensuring that costs charged to a sponsored
research agreement are allowable, allocable, and reasonable ..." Each financial
transaction charged against a sponsored research PTAEO account is evaluated
against these three concepts.
A primary responsibility of the Office of Sponsored Projects is to
insure that all costs charged to the sponsored research award are allowable and
allocable. A determination of allowability and allocability for a given cost is
based on the specific guidelines of the sponsoring agency and according to
federal cost principles.
Allowability: Expenses charged to a sponsored
research award must meet the following allowability criteria:
- The costs must be reasonable.
- The costs must be given consistent treatment through application of those
generally accepted accounting principles appropriate to the circumstances.
- The costs must conform to any limitations or exclusions set forth in the
sponsored agreement or in the Federal Cost Principles (OMB Circular A-21).
Allocability: Once allowability criteria have been met, the
cost must be evaluated against the criterion of allocability. That is, the cost
has been incurred solely to support or advance the work of a specific sponsored
research award. It also means the process of assigning a cost, or a group of
costs, to one or more cost objectives, in reasonable and realistic proportion
to the benefit provided or other equitable relationship. A cost objective may
be a major function of the institution, a particular service or project, a
sponsored agreement, or Facilities and Administration Cost activity. The
process may entail assigning a cost(s) directly to a final cost objective or
through one or more intermediate cost objectives.
Reasonableness: The cost must be able to withstand public
scrutiny, i.e. objective individuals not affiliated with the institution would
agree that a cost is appropriate on a sponsored research award or as a
component in its Facilities and Administration Cost proposal.
Once a determination of allowability, allocability and reasonableness has
been made, it is important that all expenses (those charged to sponsored
research PTAEO accounts or department GL accounts) be charged to the
appropriate expenditure type/natural class. Budget and expenditure information
recorded in the accounting system serves the basis for: (a) the preparation of
yearly financial statements for the College; (b) departmental-level planning
and reporting; (c) project/account specific planning and reporting; (d)
Facilities and Administration Cost proposal preparation and rate calculation;
and (e) audit reviews and many other uses.
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