All federally funded projects must adhere to the guidelines set forth by the federal government for managing federal funds through the Office of Management and Budget (OMB) Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards.
Section 2 CFR 200 outlines a number of policies, procedures, and requirements that grant managers must follow. One of these is a section on allowable and unallowable costs that is relevant to nearly all federally funded projects, regardless of department and intent. Unless specifically noted in the Grant Award Agreement, the rules apply to all federal grant programs, including federal monies passed through a state entity.
Allowability of Costs Statement:
Santa Rosa Junior College will ensure that all expenses charged to federally funded projects are in adherence with District policy and the policies, procedures and requirements described in Office of Management and Budget (OMB) Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards.
Procedures for determining allowability of costs in accordance with Subpart E Cost Principles:
This section outlines the allowable costs for grants and sub-awards at Santa Rosa Junior College District. The procedure follows the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) 2CFR Part 200, which provides the basic criteria to determine direct costs on federally sponsored projects.
Regardless of the funding agency, costs for sponsored programs are based on answering the question: Are costs allocable, allowable, consistent, and reasonable in like circumstances? Each financial transaction charged against a federal award is evaluated against these concepts.
Prior to incurring an expense, the cost must be allowable, and reasonable, and the cost allocation must be determined. Allowable costs can vary by each grant; to ensure allowability, refer to your grant’s rules and regulations. For Federal awards, refer to Uniform Guidance §200.403. To meet the test of allocability, costs incurred that benefits two or more projects or activities must be allocated to the projects based on the proportional benefit. For Federal awards, refer to Uniform Guidance §200.405. Finally, the costs must be what a “prudent person” would consider reasonable for the products or services purchased. It is important to remember that all three tests, (allowable, allocable, and reasonable) must be met before charging an expense to your grant.
Failing to do so can lead to audit disallowance, and if the inappropriate expense is seen as being willful, charges of fraud can be placed against the District, program director, and/or administrative staff members.
Procedure for Expense Approval:
All grant expenses are reviewed and approved by the grant manager prior to being charged to the grant account. If a cost is determined to be unallowable, the grant manager will be required to provide a non-grant account for the expense. If an expense is determined to be unallowable or is disallowed after it is posted to the grant account, the expense will be moved by the Accountant of Restricted Programs to a non-grant account designated by the grant manager’s Dean or Vice President.
Allocable: The cost is incurred for the benefit of only one project, or the item can be easily assigned to multiple benefitting projects. A specific project may only be charged that portion of the cost that represents the direct benefit to that project.
Allowable: Costs must conform to any limitations or exclusions stated in the federal cost principles or in the sponsored agreement. The cost must not specifically be designated as “unallowable” by regulation or grant award conditions.
Consistent: Similar costs are treated as direct or indirect costs when incurred in like circumstances. Costs that are direct charged to a grant should not be included as indirect costs on other projects when incurred for the same purposes.
Reasonable: The cost is generally recognized as reasonable if the item purchased and the cost of the item reflects the action that a prudent person would take under similar circumstances at the
time the individual makes the purchase. The cost must be necessary to the College’s operations and/or the sponsored project’s performance. The purchase must comply with established College policies and the purchaser must be acting with due prudence in carrying out their responsibilities to the College.
Indirect Costs: Costs that are incurred for common or joint objectives and, therefore, cannot be identified readily and specifically with a particular grant project, an instructional activity, or any other institutional activity. Indirect costs are also referred to as Facilities & Administrative (F&A) costs.
Unlike Circumstances: When a cost is incurred for a purpose outside of the normal practices or activities for that type of cost.
Facilities And Administrative Cost Rates
SRJC's Facilities And Administrative Current Cost Rate Agreement
Personnel Costs: Time and Effort Reporting
As a recipient of federal funds, Santa Rosa Junior College District must comply with the Office of Management and Budget (OMB) Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards.
Section 2 CFR 200 requires certification of effort to document salary expenses charged directly or indirectly against federally-sponsored projects. This process ensures that salaries and wages are properly expended and that actual effort is consistent with the originally anticipated (budgeted) effort. Santa Rosa Junior College District’s effort reporting policies and procedures are intended to meet this requirement.
Time and Effort Reporting Statement:
Time and effort reporting shall reasonably reflect the percentage distribution of effort expended by Santa Rosa Junior College employees involved in federally funded grants, contracts, and cooperative agreements, and shall be incorporated into the records of the College. These reports shall reasonably reflect the activities for which the employee is compensated and shall encompass all activities on an integrated basis.
Santa Rosa Junior College uses the After-the-fact-Activity Records method of payroll documentation/verification for Federal Programs.
Program managers receive and approve Payroll Certification Reports for each employee being charged to their program each pay cycle. This gives them immediate notice of activities that are being charged to the program and an opportunity to make adjustments.
Payroll Certification Reports (time and effort reporting) and monthly payroll distributions are NOT the same. The effort reporting process is a method for confirming salary charges made to all sponsored awards. Payroll distributions are estimates of how effort is anticipated to be expended. Payroll policy and procedure shall follow District policy and procedure in addition to time and effort verification.
The federal government can impose severe penalties and funding disallowances as a result of missing, inaccurate, incomplete, or untimely effort reporting. Santa Rosa Junior College expects that all departments involved with employees who are working on federally-funded projects have an internal tracking system to confirm the payroll distributions should the program be audited. In the event of an audit, it is the program/department's responsibility to provide documentation to support payroll-related expenses.
Each month, the Project Director/Program Manager shall receive a “Payroll Certification for Federal Programs” letter with a Pay 09 report detailing each employee’s salary and benefits charged to that program for the previous month.
The Project Director/Program Manager shall review and verify the accuracy of the information provided. The program manager will "confirm that the distribution of activity represents a reasonable estimate of the work performed by the employee during the period" by approving each Payroll Certification Report by the 15th of the following month.
If adjustments are needed, due to an error or time and effort on a program has changed, the program manager must reach out to the Accountant to request adjustments. A copy of each adjustment (payroll transfer) shall then be placed in the files of the programs involved.
This page was updated 4/25/2022