U.S. Federal Awards Requirements

If you are the recipient of a U.S. federally funded award, you must adhere to specific compliance requirements.

U.S. federally funded awards include all awards received directly from U.S. government agencies (e.g., NIH), as well as all funding from U.S. government agencies which is passed on through intermediate entities (e.g., NIH funding passed on by the University of Washington).

For NIH policies that cover eligibility of expenditures, audit requirements, administrative requirements, etc., please review the NIH Grants Policy Statement.

Annual Audit

Your award is subject to an annual OMB (Office of Management and Budget) Uniform Guidance audit. This guidance is a report issued by the U.S. government which sets forth standards for obtaining consistency and uniformity among federal agencies for the audit of non-federal organizations expending federal awards.

Federal agencies apply the provisions of the sections of this Uniform Guidance to non-federal entities, whether they are recipients expending federal awards received directly from U.S. federal awarding agencies, or are sub-recipients expending federal awards received from a pass-through entity (a recipient or another sub-recipient).

The OMB Uniform Guidance audit follows U.S. guidelines.

Time and Effort Reporting

The annual audit requires adequate time and effort reporting. This requires that salaries charged to research federal grants match the actual time spent applicable to said project. Please ensure a review of salary charges is done from time to time, throughout the year, to ensure a proper matching of time and effort.

If an employee does not spend time on the research project equal to the percentage of his time charged to the grant, a Change of Appointment form should be sent to payroll to reduce the cost charged to the grant in accordance with time spent on the work. On a quarterly basis, Research Financial Management Services (RFMS) will prepare a status effort report reflecting employee time charged to the grants. The Principal Investigator must review the report and certify that the effort allocated is appropriate. The external auditors will test this area.

Cost Transfer

Entries to simply transfer a deficit balance from one grant to another is not permitted on US Federal awards.

Journal transfers of actual costs into U.S. federally funded grant from other grants must identify the original invoice or expense source, and the expenses in question must be related to the research in the U.S. federally funded grant.

All transfer of expenses to US Federal grants should be accomplished within 90 days of the effective date of the original entry. The transfer must be supported by documentation that fully justifies the transfer of expense(s) in question. An explanation merely stating that a transfer was made "to correct an error" or "to transfer to correct project" is not sufficient.

Eligible Expenses

For any costs to be charged directly to a federal award, the expense must be:

1. Allowable under both the provisions of federal guidance AND the terms of a specific award.
2. Allocable: The expense can be associated to a project with a high degree of accuracy.
3. Reasonable: The cost reflects what a “prudent person” would pay in a similar circumstance.
4. Charged consistently as direct expense (versus an indirect cost).

An expense is a “direct cost” if that expense can be identified specifically with a particular sponsored project or other activity with a high degree of accuracy. “Indirect costs” (sometimes referred to as facilities and administrative (F&A) costs or overhead), are costs that benefit many activities (e.g., building operations and maintenance, IT expenses, security, administrative personnel such as grant managers, etc.). F&A costs are recovered through the federally negotiated rate. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct expenses or indirect costs.

When the Federal award is approved by the Office of Sponsored Research (OSR), the budget is set up in Banner for the dollar amounts as specified in the funding agreement (i.e., the notice of award from NIH).

A separate fund is activated for each individual grant awarded by Research Financial Management Services (RFMS). This office is responsible for financial management of Federal awards, approving expenditures for compliance and eligibility as well as for invoicing/financial reporting. All expenditures are processed using appropriate account codes which describe the type of expenditures. These are a fixed set of codes across all University funds and departments to support financial reporting.

The PI is responsible for regular reviews of expenditures charged to the Federal fund and to ensure that spending follows a plan and does not exceed available funds. The FSTs assist PIs in the timely review and reconciliation of grant expenditures. When an error is discovered, the journal adjustments will be processed to correct transactions. The PI’s prior approval is required for processing the journal entries.

In situations where the PIs and/or departments have questions on specific expenses, they are addressed to the Financial Administrator (FA) within RFMS. The FA reviews them and communicates back regarding the eligibility of such expenses.

For NIH policies that cover eligibility of expenditures, please review the NIH Grants Policy Statement.

Items to be mindful of for NIH grants:

• Undergraduate and graduate students working on the project cannot be paid a stipend. They must be hired and paid as casual research assistants.

• Foreign travel (excluding travel within North America) must comply with the Fly America Act (conducted on US flag carriers or under Open Skies Agreement). This should be taken into consideration before travel is booked. Foreign travel that does not comply with the Fly America Act would be deemed non-compliant for audit purposes and reimbursement may be requested. Guidance on the Fly America Act can be found in the NIH Grant Policy Statement.

• Equipment as per NIH regulations is defined as an item having a shell life of greater than 1 year with a purchase cost greater than $ 5000. Per US audit requirements, any equipment purchased with NIH grant funds must be easily traceable (room location, date/method of disposal). McGill will follow-up with PI on any such equipment purchases to initiate tracking process. When purchasing such items, please ensure to use the appropriate account code to assist with this process. The PI must inform OSR of any type of disposal of said equipment (sale, donation, relocation to another institution, decommissioning) prior to disposal.

The listing does not necessarily apply to all U.S. federally funded awards. Please check the individual award agreement and/or agency policy that may define specific areas of ineligible expenditures.

An approval system is in place whereby the PI, their delegate and/or Financial Services staff must approve all project related costs charged to the Federal awards before payments are released to the vendors. Consult this Approval Levels document.

Electronically approving a document signifies that the Approver (FFM/PI or their delegate) has assessed whether the expense:

• Meets the objectives of the fund(s) charged
• Is legitimate, reasonable and an appropriate use of funds
• Adheres to policies and guidelines
• Complies with any restrictions imposed by external funding sources

Procurement Services

McGill University’s Procurement Policy applies to all procurement activities carried out at the university. For more information, please review McGill Procurement Services Regulations and Policies.

Indirect Costs

Indirect costs of research are institutional costs that benefit and support research. These costs must be included in budget requests to external sponsors of research.

In case of NIH budgets, a rate of 8% is applied on total direct costs (excluding equipment over $5,000), which is in accordance with NIH Grants Policy Statement.

For more information on agency-specific overhead rates, visit McGill Indirect Costs Policy.

Budget & Re-budgeting

The comparison of the budget to actual is a continuous process that occurs on a daily basis until the completion of the project to ensure that the Federal awards are expended within the funding limits and in accordance with the applicable cost principles.

Budget and re-budgeting authority is flexible, i.e., variances from one cost category to another are allowed without prior approval from NIH, OSR or RFMS. However, significant deviations in planned budget, especially to equipment or travel, could imply a change in scope of work. If re-budgeting is due to a significant change in the initial scope of the project, the Program Officer at NIH needs to be notified to discuss such changes.

McGill has system controls in place to prevent certain transactions from causing over-expenditures. Budget availability checking, abbreviated to BAVL, is a system feature used at McGill to ensure that an adequate balance exists on a fund charged at the time a transaction is originated online. An online transaction (specifically purchasing requisitions, inter-departmental charges, journals and manual encumbrances) will be rejected by the system if it will create or contribute to an overspent fund.

Cash Management

The Research Financial Management Services (RFMS) is responsible for cash and accounts receivable management for sponsored U. S. Federal awards. The assigned Financial Administrator (FA) within RFMS performs the following duties associated with receiving funds of the Federal awards:

• Prepares invoices/financial claims based on actual expenses incurred on the Federal funds and reconciles them to the general ledger
• Submits approved invoices/financial claims to sponsors for payment
• Approves received payments from sponsor and ensures they are credited to the correct fund
• Monitors accounts receivable by reviewing the aging reports on a monthly basis and follows up on outstanding payments with sponsors
• Reconciles receivables with the general ledger
• Tracks the deadlines on submission of invoices/financial claims to sponsors

McGill advances the funds to researchers based on approved budgets by OSR to be financed by the Federal grant with the understanding that all deliverables would be met and all payments received. The invoices/financial claims submitted for reimbursement are based on actual expenditures incurred on the Federal grants on a quarterly basis and reconciled against the general ledger .The review and approval for authorizing the requests for payment to sponsors follows our pre-established process; please refer to Reporting.

Each Unit is responsible for assuring that revenues are properly recorded and posted on the ledger (by processing a “deposit” document in Banner). The segregation of duties in receiving, depositing and verifying receipts are as follows:

• For payments via wire transfers:
  • Incoming wire transfers are received by Banking Services in Financial Services on a daily basis. Once the wire is received, Banking Services will communicate with the Fund Management Team within RFMS on incoming wire transfers
• For payments via cheques:
  • Cheques are mailed to the RFMS directly. The mail is opened by the Fund Management Team on a daily basis
• The Fund Management Team sends wire transfers confirmation and the original cheques to the assigned Financial Administrator within RFMS for review and approval, and to provide the appropriate fund(s) to credit.
• The cheques/wire transfers are deposited by delegated staff member of Financial Services. Once the deposit is completed, it is posted to the ledger. The transaction will appear when querying the fund.
• These payments are deposited to the general McGill University bank account and will offset the accounts receivable amounts of the appropriate fund(s).

A scanned copy of the cheque and/or wire transfer is retained in a local RFMS directory.

Since Federal funding is received through a cost reimbursement system, the interest income is not paid/generated on Federal funds.

Subrecipients

McGill awards a cost reimbursable sub-award to the Subrecipient. When a sub-award is signed by OSR, all terms and conditions of the prime award are applied to the subrecipient organization. McGill reimburses Subrecipients on a quarterly basis for actual costs incurred on the sub-award grants. The RFMS Financial Administrator reviews subrecipient invoices for eligibility of expenses, compares these expenses to the approved budgets and compliance with terms and conditions of the subaward agreement. All invoices are subject to adjustment within the total estimated cost before being submitted for payment. The backup documentation for questionable expenditures may be requested to support and justify such costs. In the event that such adjustments are necessary, the invoices are returned to the Subrecipients for proper corrections. Re-submitted invoices are reviewed again for requested adjustments.

All subrecipient invoices are submitted to the PI for final review and approval. Once approved by the PI, they are sent to Accounts Payable for payment.

Reporting

Sponsored award management is a shared responsibility.

The Research Financial Management Services (RFMS) is responsible for preparing all required financial reports/claims and the Principal Investigator (PI) is responsible for all technical reports required under the terms of an award in the form required by the sponsor.

The RFMS Financial Administrator (FA)’s main responsibilities are:

• Performs all tasks related to the monitoring and approval of financial transactions
• Prepares, reconciles and submits the financial claims/reports within the established agency deadlines
• Ensures expenditures being processed are in compliance with sponsor guidelines and policies and/or policies and procedures of the University
• Closes the research fund ensuring all revenues have been received and financial reporting requirements have been met

The Principal Investigator (PI)’s main responsibilities are:

• Complies with sponsors’ terms and regulations and meets all deliverables and timely submission of progress reports
• Regularly reviews expenditures and discusses budget vs actual variances
• Certifies effort reporting
• Reviews and approves invoices for payment

The financial claims/reports are prepared based on actual expenditures incurred in the US Federal grants. These expenditures are verified against grant terms to highlight any potential issues before being submitted to the sponsor.

Banner is the accounting system used at McGill. Banner has four major administrative systems:

• Financial Information System (FIS)
• Human Resources / Payroll Information System (HRIS)
• Student Information System (SIS)
• Financial Aid and Awards System (FAA)

Each research project has a unique fund number that is set up in our system to record all revenues and expenses incurred during the life of the project.

The Project Leaders have access to query fund balances and transactions posted to their grants in Minerva (McGill’s Administrative System). They can review a list of expenses charged for each research grant using a Minerva statement that are automatically system generated on a monthly basis.

A dynamic Crystal Reports is also available for a more frequent review of their funds and in preparing the financial claims/reports. The Crystal Reports software queries data from the data warehouse. The data warehouse can only be used for querying (not updating) and is Fund/Org secure. This detail listing report displays the individual transactions that have been recorded in the General Ledger. By looking at individual transaction lines, an end user can determine if all expenditures are accurate and appropriate. The wrong activity/expense coding can be easily identified using this report.

The InfoEd system is available which tracks all grants awarded to McGill University.

Process for generating financial claim/report as follows:

• The RFMS Financial Administrator generates a crystal report that capture the expense details for the specific reporting period of the grant. This data is reconciled against the general ledger
• Once all the information is gathered, the RFMS Financial Administrator reviews all the transactions to be reported in order to detect ineligible expenses
• The financial claim/report is reconciled against the captured details. The details captured are reconciled against the amounts recorded in the G/L for that period
• The financial claim/report is completed by the Financial Administrator and submitted for review and approval
• Management has implemented a three level system of reviews and approvals of financial claims/reports:
  • Reviewed and approved by the Principal Investigator and/or Project Manager
  • The reviewer(s) will notify the RFMS Financial Administrator of any adjustments that may be required to the financial claim/report
  • Reviewed and approved by the Financial Administrator’s direct Supervisor for accuracy and completeness
  • Approved and signed by the Director of Research Financial Management Services
• RFMS individuals have the necessary experience, skills, and knowledge required to administer US Federal grants.

A written policy exists regarding McGill’s Research Administration Roles and Responsibilities.

McGill has several policies/regulations that document when it is appropriate for a Principal Investigator (PI) to delegate their signing authority and/or approval authority.

Period of Performance

The Research Financial Management Services (RFMS) sets up the budgeted amounts that are aligned with the performance period of Federal Awards. When the grant award is terminated, the system rejects expenses charged to the related funds outside of the period of performance. Prior to the federal awards end date, RFMS works closely with the Principal Investigator to ensure that all project related costs have been charged and incurred by the project end date in order to be included in the final invoice submission for reimbursement within the established agency deadlines.

NIH offers a maximum extension of up to one year after the expiration of the grant term provided that this is requested prior to the end date; please contact the Office of Sponsored Research (OSR) to initiate this extension.

The Unit to whom the Fund Financial Manager (Researcher) reports is responsible for the resolution of any unresolved over-expenditures.

Closeout Procedures

Award closeout is the final phase of a project in which activities are finalized, funding stream ends and administrative tasks are completed.

Responsibility for ensuring compliance with sponsored awards’ terms and conditions is shared between the Research Financial Management Services (RFMS) and the Office of Sponsored Research (OSR).

RFMS Responsibilities:

• Prepares and submits the final invoice to the sponsoring agency. The closeout documentation and the timeframes for submission are stated in the terms and conditions of the sponsored award. The general terms are as follows:
  • The final invoice must be submitted within 60 to 90 days after the award end date where McGill University is the prime recipient
  • For sub-award where McGill University is the sub-recipient, the final invoice should be submitted to the prime grantee within 60 days after the award end date
  • McGill University must receive the final invoice from sub-recipients within 30 days of the award end date to allow for proper review and timely submission of the invoice to the sponsor
• Follows up with the PI to ensure that all project costs have been charged and incurred by the project end date, and included in the final invoice
• Closes the fund once the final payment is received from the sponsor

OSR Responsibilities:

• Ensures PIs submit their final project report
• Completes and submits final invention statement (even if negative report, submission still required)
• Completes and submits other template formal reports as may be required from granting agency.

Publication Date: May 08, 2017