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UNIVERSITY POLICY

SUBJECT:

FINANCIAL AFFAIRS

TITLE:

FEDERAL COST  ACCOUNTING STANDARDS

CODING:

00-01-50-105:00

ADOPTED:

01/15/98

AMENDED:

01/15/98

I.        PURPOSE

To ensure compliance with federal regulations detailed in OMB Circular A-21 revised April, 1996, governing cost principles for Colleges and Universities in the area of organized sponsored research. To acknowledge, implement and enforce the following Cost Accounting Standards Board (CASB) policies regulating costing practices in the conduct of organized research:

A.    Cost Accounting Standard 9905.501 - Consistency in estimating, accumulating and
        reporting costs by educational institutions.

B.    Cost Accounting Standard 9905.502 - Consistency in allocating costs incurred for
        the same purpose by educational institutions.

C.    Cost Accounting Standard 9905.505 - Accounting for unallowable costs - -
        Educational Institutions.

D.    Cost Accounting Standard 9905.506 - Cost accounting period - - Educational
        Institutions.

Under the direction of the Senior Vice President for Administration and Finance, the Vice President for Finance and Treasurer shall ensure compliance with this policy, and the Controller shall implement this policy.

Requirements:

       1.    CAS 9905.501 - Consistency in estimating, accumulating and reporting costs by
               educational institutions.

               a.    Purpose - To ensure that the University practices employed in estimating
                      costs for a federal cost proposal are consistent with cost accounting practices
                      utilized by the University in accumulating and reporting costs. Conforming
                      with CAS 9905.501

               b.    Definitions

                       i.    Accumulating Costs - collection of cost data in an organized manner,
                             such as through a system of accounts.

                       ii.    Estimating Costs - process of forecasting a future result in terms of
                              cost, predicated on information available at the time.

                       iii.    Indirect Cost Pool - the aggregation of incurred cost identified with
                              two or more objectives but not identified specifically with any final cost
                              objective.

                       iv.   Pricing - process of establishing the amount or amounts to be paid in
                              return for goods and services.

                        v.   Proposal - submission used as a basis for pricing a sponsored
                              agreement, sponsored agreement modification or termination settlement
                              or for securing payments thereunder.

                c.     Requirements - University cost accounting methods utilized to estimate,
                        accumulate and report costs will be consistent in all federal proposals and
                        submissions.

                d.    Application - Consistent cost methodologies will be utilized with respect to
                       1) the classification of elements of costs as direct or indirect; 2) the indirect
                       cost category to which each element of cost is charged or proposed to be
                       charged; and 3) the methods of allocating indirect costs to a sponsored
                       agreement.

         2.    CAS 9905.502 - Consistency in allocating costs incurred for the same purpose
                 by educational institutions.

                a.    Purpose - To require that each type of cost is allocated only once, and on
                       only one basis to any sponsored agreement or cost objective. Criteria for
                       determining the allocation of costs to a sponsored agreement or other cost
                       objective will be the same for all similar objectives.

                b.    Definitions

                       i.    Allocate - assign an item of cost, or a group of items of cost to one or
                             more cost objects.

                       ii.   Cost Objective - a function, organizational subdivision, sponsored
                             agreement or unit for which cost data are desired.

                       iii.   Direct Cost - cost which is identified specifically with a particular final
                              cost objective or individual sponsored agreement.

                       iv.   Final Cost Objective - cost objective which has allocated to it both
                             direct and indirect costs, and in the University accumulation system, is
                             one of the final accumulation points.

                       v.    Indirect Cost - cost not directly identified with a single final cost
                              objective, but identified with two or more final cost objectives.

                       vi.   Indirect Cost Pool - grouping of incurred costs identified with two or
                              more cost objectives, but not identified with a final cost objective.

                c.     Requirements - Cost incurred for the same purpose, in like circumstances,
                        are either direct costs only or indirect costs only with respect to the
                        University's final cost objectives.

                d.     Application - The University's CAS disclosure statement, submitted to the
                        Federal government, will detail the institutions cost accounting practices with
                        regard to the distinction of indirect and direct costs. Specific criteria will be
                        detailed for the distinction of direct and indirect costs and describe
                        circumstances in assigning and allocating such costs.

 
3.   CAS 9905.505 - Accounting for unallowable costs.

       a.     Purpose - To facilitate the negotiation, audit administration and settlement
               of sponsored agreements by establishing University guidelines covering 1)
               identification of costs specifically described as unallowable and 2) the cost
               accounting treatment to be accorded such identified unallowable costs in
               order to promote consistent application of sound cost accounting
               principles covering all incurred costs.

       b.     Definitions

               i.     Unallowable Costs - any cost which, under the provisions of any
                      pertinent law, regulation, or sponsored agreement, cannot be included
                      in prices, cost reimbursements or settlements under a Government
                      sponsored agreement to which it is allocable.
 
       c.     Requirements - University costs expressly unallowable or mutually agreed
               to be unallowable, including costs mutually agreed to be unallowable
               directly associated costs, shall be identified and excluded from any billing,
               claim, application or proposal applicable to Government sponsored
               agreements. All identified unallowable costs will be allocated or burdened
               an equitable share of indirect costs, i.e., administration, depreciation and
               operation and maintenance of physical plant.

       d.    Application - In compliance with this standard the University will maintain
              thorough cost screening and monitoring practices and adequately identify
              and isolate unallowable costs. Detailed documentation, including computer
              expense screening processes, will be maintained to establish visibility of
              identified unallowable costs including directly associated costs, i.e., cost
              generated solely as a result of the unallowable activities. Unallowable costs
              will be given appropriate consideration in all University cost accounting
              determinations governing the content of allocation bases utilized for
              distributing indirect cost to cost objectives.

 
4.    CAS 9905.506 - Cost accounting period.

       a.    Purpose - Provide criteria for the selection of the time periods to be utilized
              as cost accounting periods for sponsored agreement estimating,
              accumulating and reporting.

       b.    Definitions

               i.    Fiscal Year - accounting period for which financial statements are
                     regularly prepared, generally a 52 week period.

       c.     Requirements - The University's cost accounting period and fiscal year shall
               coincide. The same cost accounting period shall be used for accumulating
               costs in an indirect cost pool as for establishing the allocation base, except
               when contracting parties agree to use a different period for establishing an
               allocation base.

       d.    Application - The University shall adhere to established appropriate
              practices for the accounting of deferrals, accruals, and other adjustments for
              inclusion in proposals, agreements, and settlements. All material exceptions
              shall be submitted to the appropriate Federal agency for review and
              approval.
 

__________________________________
Vice President for Finance and Treasurer 

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