INTRODUCTION

This office is responsible for all restricted funds sourced by grants, contracts, Federal/county appropriations, and any related cost-sharing Indexes (FOPALs). This includes the establishment of all restricted funds on Finance System (FIN), monitoring the implementation of fiscal restrictions and requirements imposed by the sponsor on grants and contracts, and the closing out of all restricted funds. Sponsored Projects Accounting (SPA) is also responsible for the distribution and maintenance of the University's Effort Reporting System reports, and assistance in compliance with Federal and Non-Federal sponsor terms and regulations. All invoicing and deposit of sponsor payments on grants and contracts are handled through the SPA office. Requests for assistance in the interpretation of fiscal requirements, or questions regarding the status of invoicing, or related financial reporting generated by the SPA office may be addressed at 646-1675 or by calling the fiscal monitor assigned to the Index (FOPAL).

NOTE: Throughout the manual, all signatures referred to must be original signatures; facsimile signatures, initials and signing another employee's name are not acceptable for internal control purposes. Throughout the manual, the term "Grant/Contract" includes any type of funding accounted for in current restricted funds, excluding gifts.

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3.05

3.05.05

Appropriations

Appropriations are broad-based Governmental allocations that generally address a large area of funding, rather than a specific task or project. Appropriations are most commonly broken into smaller, internally-designated budgets for managerial purposes, and may be either unrestricted or restricted in nature, depending on whether they are made available to the entire University, or to specific areas within the University. With certain exceptions, restricted Federal and county appropriations will be treated like grants and contracts.

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3.05.10

Gifts

For accounting purposes, gifts are defined as "Funds received for which no specific goods or services will directly benefit the sponsor." Many levels of restrictions may be placed on gifts.

Unrestricted Gift
A gift is considered "unrestricted" only if it may be used for any purpose within the University.

Restricted Gift
A gift restricted only to an area within the University, but not as to use, will be classified as "restricted," because one level of restriction has been placed on it. Examples of multi-level restricted gifts would be any form of Non-Governmental student financial aid or a private "grant" to generally benefit a program's research, where the sponsor will receive only the same benefits of that research which the general public will also receive, such as publicized results. Governmental sponsors cannot donate "gifts."

Tax Deductibility
The gift funds described above are clearly tax-deductible contributions with no benefit to the donor. The Advancement Services Office, under the Vice President for University Advancement, also accepts funds where goods or services are offered in exchange for all or part of the income received. These funds must be the result of fund-raising activities. These funds are deposited into current University gift Indexes (FOPALs) as sales/service income. The department is responsible for providing adequate documentation stating the fair market value of the goods or services received by the donor to allow the University to properly receipt the donor for any portion of the fund-raising income that is to be considered a gift. Examples of events that generate this type of income are fund-raising golf tournaments, car washes, luncheons, etc.

NOTE: The use of University facilities must be reimbursed from fund-raising income. Attendance of employees at fund-raising events is not generally considered an appropriate University expense, unless those employees are directly involved in conducting the event.

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3.05.15

Grants and Contracts

For accounting purposes, Grants and Contracts are defined as awards for which specific services and/or deliverables are to be provided directly to the sponsor for payment. The consideration must be equal to the University's approximation of cost, plus a documented, negotiated administrative fee, if applicable, agreed to by the sponsor.

Administrative Fees
Administrative fees can be made a part of fixed price with appropriate approval of the Vice Presdent for Business and Finance.

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3.10

RESTRICTED FUNDS - ACCOUNT MAINTENANCE

All grant/contract funds will reflect a budget supported by written sponsor-approved documentation or an approved internal line-item budget. Budgets will not be modified without this documentation.

The SPA Office will be responsible for the establishment of all grant/contract restricted Indexes (FOPALs) and for the coding of all Index (FOPAL) attributes. Federal pass-through Indexes (FOPALs) will be coded as Federal funds. SPA will review all new Index (FOPAL) requests prior to entry in the Finance System (FIN). A complete copy of the fully executed grant/contract and a budget document should accompany new Index (FOPAL) requests.

The SPA Office will be responsible for the establishment and maintenance of all F&A cost Journal Vouchers and computations.

The SPA Office will be responsible for entries related to the closing of a grant/contract Index (FOPAL), including the transfer of surplus balances to designated unrestricted Indexes (FOPALs) through the established surplus income codes and the deletion of the Index (FOPAL). Surpluses will be transferred only after the final payment on the grant/contract is deposited, although the Index (FOPAL) should be frozen against further activity at the end of the grant/contract period, even if the final payment is not yet received. All grant/contract Indexes (FOPALs) should be closed within six months after the established end date unless the sponsoring agency specifically requires other procedures.

Grant/contract Indexes (FOPALs) may be automatically frozen against further expenditure any time after the established end date to prevent the posting of charges without complete review. If the research center or department anticipates an extension and/or additional funding but believes that all paperwork will not be completed by the end date, they may follow the procedures as described in subsection 3.15.15. If an extension and/or additional funding is not anticipated then,

For non-payroll transactions, the following procedures will be used:

• If a Journal Voucher is proposed involving transfers from grant/contract Indexes (FOPALs) to non-grant/contract Indexes (FOPALs), other than to a cost-share Index (FOPAL), the fiscal monitor is authorized to allow the Journal Voucher to be processed. Cost overruns should be transferred to cost overrun Indexes (FOPALs), not to general unrestricted Indexes (FOPALs).
  
• If a Journal Voucher involves transfers between grant/contract Indexes (FOPALs) or from an unrestricted Index (FOPAL) to grant/contract Indexes (FOPALs), the department must first obtain the signature of SPA personnel. Sufficient support should be attached to the Journal Voucher to allow the office to make an informed decision.

For payroll transactions, the Payroll Office will work with the SPA Office to prevent unauthorized Payroll Journal Vouchers from being posted.

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3.15

RESTRICTED FUNDS - ACCOUNTING TREATMENT

The following subsections refer to areas where special treatment of restricted funds may be required due to the restrictions under which the University accepts those funds. Beyond these subsections, all policies and procedures discussed in other sections of this manual also apply to unrestricted and restricted funds.

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3.15.05

Accounts Receivable/Deferred Revenue for Restricted Funds

An entry is made which recognizes an Accounts Receivable equal to the amount of any restricted Indexes (FOPALs) fund balance deficit, and a deferred revenue equal to the amount of any restricted Indexes (FOPALs) fund balance surplus.

Accounts Receivable entries will be made during the year at each billing by the SPA office separate from this financial statement entry.

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3.15.10

Cost-Sharing for Sponsored Programs

Cost sharing may be mandated by legislation or regulation in many programs. It may represent a programmatic decision of the sponsor or the award recipients may volunteer it. Cost sharing frequently becomes a contractual obligation after being introduced in proposal verbiage voluntarily by recipients of contracts and grants. The Cost Share Close Out Form should be completed when a new fund or a change to an existing fund is being made.

Types of Cost-Sharing
Cost sharing can involve:

1. The direct outflow of cash, known as Direct Cost-Sharing
2. The reduction of charges to the Sponsored Program through reduced Facilities and Administration (F&A) rate, known as Cost-Sharing of Indirect Cost
3. The recognition of an in-kind benefit to the contract, known as In-Kind Cost-Sharing

Definitions of Cost Sharing can be found in the glossary of the Business Procedures Manual.

Cost sharing may be mandatory, which means it is required by the agency. In voluntary cost sharing, the University volunteers to provide the cost sharing. It is important to remember that all cost sharing must be an allocable cost by directly benefiting the project, and, accordingly is only to be committed one time.

Mandatory and voluntary cost sharing will be separately reported in the accounting system.

SPA will determine whether cost-shared F&A will be considered mandatory or voluntary based on the following Cost Sharing Policy effective 10/28/04:

1. If the sponsor is requiring a match and we choose to waive the indirect cost as the match - then the cost share is considered voluntary.

2. If the indirect cost is capped because the agency has an agency-wide policy to cap the indirect cost rate-then the cost share is considered mandatory.

3. If the direct cost is capped at the agreement level only by the agency-then the cost share is considered voluntary.

4. If there is a direct cost share requirement at the agreement level - then the cost share is considered mandatory.

5. If the University chooses to provide a direct cost share and is not required by the agreement - then the cost share is considered voluntary.

6. If the agreement is a fixed price contract and the agency requirement was a capped indirect cost rate (often the sponsor will pay 0% F&A) - then at the end of the agreement if there are funds remaining, the funds will be used to meet the full F&A calculation on the direct expenses. The difference between the amount of the recorded cost share and the total allowable cost share is considered voluntary cost share as allowed by available funds.

7. When the rate is capped by the agency - there is no recording of lost indirect cost.

When F&A cost is being cost-shared, entries will be made by SPA to record F&A Costs in the grant/contract Index (FOPAL) at the billable F&A cost rate under accounts 798100, with a separate entry which credits the grant/contract Index (FOPAL) under account 7982XX for the portion of the indirect rate which the sponsor will not pay.

Separate cost-sharing Indexes (FOPALs) are created and budgeted when the sharing of direct costs is required. It is important that the department use the same Index (FOPAL) for cost-sharing throughout the life of the award. Cost Sharing is not allowed on Indexes (FOPALs) that are a part of an indirect cost pool. For further information, call AFR.

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3.15.15

Expenses for Grants, Contracts and Gift Indexes (FOPALs)

Generally until an expense is formally approved in writing, through budget or narrative documentation by the sponsor, it cannot be recorded in the grant/contract or gift Index (FOPAL).

NOTE: Verbal approval will not be considered adequate. In special circumstances, the department may arrange for the sponsor to provide verbal approval directly to the SPA office, to be followed by a written confirmation of this approval. A facsimile copy is acceptable confirmation support. The responsibility for obtaining the written approval will rest with the department. If SPA does not receive written approval within 90 days of receipt of the verbal approval, the expenditure will be transferred to an unrestricted over-run Index (FOPAL) until such time as the written approval is received. In general, contact will be limited between the SPA and sponsors to routine items involving billings and financial reporting, but the SPA office will have the authority to contact the sponsor's financial personnel regarding any appropriate issue. Effort will be made to keep departmental personnel informed of all non-routine contacts.

Index (FOPAL) Creation in Anticipation of Award/Continuation
University policy does allow for the creation of Indexes (FOPALs) on waiver, if certain conditions are met.

If approved, but award documents are not received within 90 days of the Index (FOPAL) creation date, an extension of the waiver date for an additional 90 days may be submitted in writing (e-mail is acceptable) to SPA.

Expense for Continuation of Projects and/or Anticipation of Modifications
Expenses will be allowed against the existing Indexes (FOPALs) for up to 90 days after the initial end date on the award if the Principal Investigator/College states they are waiting on the continuation of the award or has requested a modification to end date. A formal waiver is no longer needed. After 90 days, if the continuation or modification has not been approved by the sponsor, the SPA office is authorized to move those expenses not included in the existing award to the college overrun Index (FOPAL).

The Fiscal Monitor is responsible for tracking expenses outside of the end date to make sure they are not invoiced to the sponsor. Also, the monitor will be responsible for alerting the college at the 90-day point in order to move expenses to the overrun Index (FOPAL).

At the discretion of the Controller, if approved award documents are not received within 90 days of the end date on the award waiting for continuation or modification, a second extension may be granted based on circumstances presented by the college.

Budgets
Grants/Contracts with specific line item budgets approved by the sponsor should adhere to those budgets, unless authority is given to the University to re-budget without sponsor approval. All sponsor guidelines should, therefore, be followed when deviating from previously approved budgets. An official internal budget document (CAS Template) should be provided through Office of the Vice Provost for Research-Office of Grants and Contracts, to the fiscal monitor in SPA for revised budgets that have been approved by the sponsor or when internally revised budgets affect new CAS Indexes (FOPALs). A CAS template will also be required if a CAS justification is expanded.

Expense Allowability
In all cases, the sponsor's documented restrictions will take precedence in determining expense allowability. Common expenses requiring special treatment are addressed below.

Consultants - The Federal Government requires that the University carefully monitor all payments made to consultants hired on sponsored projects, regardless of the source of funds. To comply with this requirement, the University has devised the procedures discussed below.

Once the decision to hire a consultant is made by the Principal Investigator, prior approval must be obtained from the Dean or Director's office. In the approval of this request, the Principal Investigator and Dean or Director certify that:

• There is evidence that the services to be provided are essential and cannot be provided by persons receiving salary support under the grant or otherwise compensated for their services.

• A selection process has been employed to secure the best-qualified person available.

• The charge is appropriate considering the qualifications of the consultant, the prevailing consultant rates, and the nature of the services rendered. Sponsor-imposed regulations concerning maximum daily rates must be adhered to in the computation of this charge.

Federal regulations require that each consultant complete an invoice and a report. The NMSU Financial Operations/Accounts Payable Office will not authorize contractor payments without submission of an invoice. It is the responsibility of the Principal Investigator to ensure that the contractor's report and internal approvals are obtained and filed for future audit purposes.

Foreign Travel - All foreign travel on grants/contracts must be pre-approved by the sponsoring agency. For additional information refer to Chapter 5C-Financial Operations/Travel. Be sure reimbursement is claimed only for those places and for those dates for which agency prior approval was received. Travel to any other locations on any other dates is not reimbursable from grant and contract funds. Even though actual expenses may be claimed for foreign travel, the charge must be reasonable and supportable.

Travel Charged to Two or More Budgets - When at least one of the Indexes (FOPALs) charged is a grant/contract Index (FOPAL), additional documentation for this kind of travel is required as follows:

• The primary purpose of the trip must be indicated as well as the project or budget that was the primary beneficiary of the trip. This information is necessary to justify the division of transportation and per diem expenses.

• All foreign travel requests must be supported by an attached copy of specific sponsor approval for the trip when required by the sponsor.

• The purpose of the trip and the distribution of charges must be clearly detailed on the Reimbursment Voucher.

Equipment - NMSU defines capital equipment as any item costing in excess of $1,000 per unit with a useful life of one year or more. The definition of capital equipment for grant/contract Indexes (FOPALs) varies from agency to agency and will sometimes conflict with NMSU's definition. When there is a difference, NMSU will record as capital using our definition per OMB A-110 (A)(2)(1)

Capital equipment purchased with restricted funds requires agency approval, unless specifically stated otherwise in the agency's guidelines/regulations. Normally approval is obtained at the time of the award through the inclusion of capital equipment in the proposal budget. If capital equipment is not originally proposed and later is deemed necessary to complete the scope of the projects, then agency approval is required.

NOTE: National Science Foundation (NSF) & National Institutes of Health (NIH) do not require agency approval for any equipment costing less than $25,000; however CAS justification will still be required by the Office of Vice Provost for Research - Office of Grants and Contracts.

Please refer to Accounting and Financial Reporting/Property section 1C.10 regarding Federal screening regulations and use of excess Government property.

Expenses Incurred Near Project End Date - In general, all materials, supplies, services and equipment should be received prior to the expiration date of a project, and would include items encumbered before the expiration date. On continuing multiple year awards purchase requisitions must be entered in Banner by the 15th of the last month of the budget period. This will ensure that the encumbrances are recorded prior to the expiration date and can be included as expenditures on the annual financial report to the sponsor. Expenditures within the last days of the grant/contract period may be subject to additional review in anticipation of sponsor audit of the period. Exceptions will be made depending on the funding agency, the type of expense, and possible continuation of the award.

Equipment purchased within the last quarter of the grant/contract period must have additional justification included on the Purchase Requisition line-item detail (On-line requisitioning PR system screen) or separate justification forwarded by a memo to SPA to be considered reasonable.

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