A. SUMMARY OF ADMINISTRATIVE PROCEDURE
This policy applies to UNH, UNHM, and UNHL only. KSC, PSC, and GSC should follow the spirit of the policy to ensure the appropriate handling of costs in their indirect cost calculations.
This policy explains the handling of "departmental" costs funded by a central office. The policy is designed to ensure that all costs are captured in the appropriate cost pool for the Facilities and Administrative (F&A) cost calculation. This requirement exists, irrespective of the source of funds for a cost, because all current fund expenses are included in the development of the F&A calculation. Good accounting practices dictate that costs be charged to the benefiting department.
The policy provides partial definitions for each cost pool (e.g. Instruction, Organized Research, Departmental Administration, etc. - see Appendix 1) and speaks to appropriate budget and expense transactions. The US Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions, provides federal guidance as to which cost pool a given activity or cost belongs.
1. Definition: A centrally funded cost is any cost paid for or funded by a central office, such as a dean's office or vice president's office.
2. Why is an Allocation of Centrally Funded Costs Policy Necessary?
a. Costs must be charged to the account that benefits from the expense. When a department budget is insufficient to cover a cost, centrally maintained funds may be used to meet this need. The correct method to accomplish this is to transfer budget authority to the departmental account rather than charging the expense to the central account.
b. OMB Circular A-21, Cost Principles for Educational Institutions, requires USNH to maintain an accounting system that ensures direct and indirect costs are included in the correct cost pool.
3. Responsibility: Responsibility for adhering to this policy lies primarily with deans, vice presidents, and administrative personnel charged with financial oversight of the campuses, colleges, schools, and divisions. For clarification, interpretation, and further information, call UNH Finance & Administration Office.
B. DETAILED OPERATING PROCEDURES
1. Cost Pools: At UNH, UNHM, and UNHL, all costs fall into one of twelve cost pools. The cost pool of a given FUND/ORGN is identified within Banner in the program codes of the FTMACCI table.Appendix 1 summarizes the kinds of costs included in the pools.
2. Incorrect Accounting: Costs are charged to the wrong cost pool when an expense is charged to a central office account rather than the benefiting department. If funds are expended out of a central account, the expense could be charged to the wrong cost pool (e.g., General Administration instead of Instruction).
3. Correct Accounting: Costs must be charged to the benefiting department account whenever possible. At a minimum, costs must be included in the correct cost pool. Central departments that fund various cost objectives or activities, such as dean's or a vice president's offices, must either transfer spending authority or establish separate accounts.
a. Transferring budget authority:
i. For accounts within the same fund, transfer the budget from the central account to the departmental account. This allows the costs to be charged directly to the benefiting department.
ii. For accounts from different funds, the transfer of budget authority is via a non-mandatory transfer journal from one fund to the other (such as from the general fund dean's account to an internally designated fund account or from the general fund to a plant fund). The journal would be a debit to the source of funds side and a credit to revenue for the receiving account. The expense budget can then be increased in the recipient fund to allow the additional spending.
b. Establish separate accounts: A separate account can be set up within the central area for each cost pool that will receive centrally allocated costs (i.e., create separate Area/Org for Instruction, Departmental Administration, Organized Research, etc., expenses). In these cases, costs must be posted to the appropriate account.
4. Examples on the handling of certain kinds of costs:
a. Visiting Professor: Assume the main dean's office account is coded as Departmental Administration for F&A cost purposes, and the expenses of a visiting professor are properly charged as Instruction expenses for F&A cost purposes. If the cost of a visiting professor is expenses against the dean's office account, the cost is included incorrectly in the Departmental Administration cost pool, rather than in the Instruction cost pool where it belongs. The cost should either be charged to the academic department's instruction account, or an instruction account would need to be established under the deans' area.`
b. Associate Deans: Associate Dean positions are often held for a year by tenured senior faculty. A significant portion of the work of these individuals can be for student advising. These costs should be captured as Student Services, not Departmental Administration. Other Associate Deans serve in a more purely administrative role. Those individuals would appropriately be coded as Departmental Administration.
c. Faculty Advising: In addition to their regular instructional role, faculty members may advise students for a few hours a month. Since the salary costs allocable to advising are immaterial, an adjustment to transfer a portion of the cost from Instruction to Student Services is not necessary.
d. Release Time and Faculty Fellows: When a central office covers a portion of the salary of faculty, there is no single answer as to which cost pool should be used. A review must be made of the specific duties that are to be performed under the agreement.
i. The cost should be captured as Instruction if the faculty member is to be developing a new course, if they are working in their generalized scholarly interest area, or if they are using the time writing a new book.
ii. The cost should be captured as Departmental Administration (within a Dean's Office) or General Administration when they are serving as the manager of a unit or if they are assisting the Dean or Vice President in administrative duties.
e. Internal Research Support: Internal research support accounts represent a funding by the University of on-going faculty scholarly activities, not for a specific research project. As such, it does not meet the definition of Organized Research. It should be charged to Instruction.
f. Gift fund accounts: Many gift accounts are used for Student Financial Aid. As such, these costs would be captured in the Unallowable cost pool. If, however, the purpose of a particular Gift fund is for miscellaneous department or college instruction activities, the account should be coded Instruction.
g. Cost Sharing: In those circumstances when a general fund, internal research support fund, or a Gift fund is being used to match a portion of an active Organized Research project, a 15C% cost sharing fund should be established. The cost shared expenses should be charged to the cost share fund and a transfer in from the appropriate department should be credited to the fund. The actual expense would be charged to the cost share fund.
Appendix 1 - Cost Pools
- Instruction: Normal classroom instruction and training activities, as well as department or unfunded research, and faculty scholarship (including the Internal Research Support accounts). The Instruction cost pool also includes grants and contracts specifically for training purposes.
- Agricultural Experiment Station: All AES accounts, primarily P2 funds.
- Organized Research: Research and development activities funded by grants, contracts, and other sponsored agreements, and other separately budgeted funds for research projects (such as College and University Research Fund grant funds). This pool also includes grants and contracts for activities involving the training of individuals in research techniques (commonly called research training) where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function.
- Other Sponsored Programs: Grants and contracts that involve the performance of work other than instruction and organized research. Examples of such grants may be workshops, surveys, or projects for the dissemination, outreach, program coordination, and services. Similar activities not covered by externally sponsored agreements are included in Other Institutional Activities.
- Other Institutional Activities: Auxiliary Enterprise funds (Fund type A), Athletics, University supported portion of Public Service activities (including the Cooperative Extension Service), Alumni/Public Relations, etc.
- Operations and Maintenance of plant: Facilities Services departments (repairs, maintenance, custodial, utilities, grounds and roads, refuse, etc.), Environmental Safety, Fire Services, and Public Safety.
- Library: Library operations, including the costs of collections, library staff, and associated costs.
- Departmental Administration: Administrative and supporting services that benefit common or joint department activities within academic departments, dean's offices, institutes, and research centers. The specific costs include clerical, deans' office administrative costs, and associated costs.
- General Administration: President's Office, the Vice Presidents for Academic Affairs and Financial Affairs and Administration, Personnel, Academic and Administrative Computing, Institutional Research, Purchasing, USNH Controller's Office, Chancellor's Office costs, etc.
- Sponsored Program Administration: Sponsored Programs Administration and the Vice Provost for Research and Public Service.
- Student Services: Vice President for Student Affairs Office, the Registrar's Office, the Financial Aid Office, Admissions, Counseling, Advising, Career Services, SHARPP, Health Services, etc.
- Unallowable: Student Financial Aid, the Loan funds, Endowment and Quasi-Endowment funds, etc.
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