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Sponsored Project Account Closing

Index

Introduction

Sponsoring Agency Closing Requirements

Closing Responsibilities

Closing Memorandum

Final Invoice

Final Financial Report

Carry Over

Final Budget Adjustments

Balancing Accounts

Residual Funds on Sponsored Projects

Final Closing Documents

Records Retention

 

Introduction

Once a sponsored project is complete and the project end date has passed, the sponsored project must be administratively and financially closed in the University’s administrative and financial systems.  This process is referred to as the sponsored project account closing process, and this process can vary by sponsoring agency.  Federal and non-federal sponsor regulations require the University to financially close sponsored projects in a timely manner, within a predetermined period of time after the project end date provided the award is not being extended.  The timeliness and accuracy of sponsored project closing in accordance with sponsoring agency requirements is integral to the University’s system of internal controls for sponsored projects and represents sound sponsored projects administrative and financial management.

Sponsoring Agency Closing Requirements

Generally, the University must administratively and financially close sponsored projects within a 90 calendar day time frame after the sponsored project end date with the exception of the NIH and the NSF.  Specifically, some of our major University sponsors codify their sponsored project closing requirements as follows:

Uniform Guidance

  • 200.343  Closeout
  • 200.344  Post-closeout adjustments and continuing responsibilities

NIH Grants Policy Statement – Section 8. Administrative Requirements

  • Section 8.6 Closeout

NSF Proposal & Award Policies & Procedures Guide (PAPPG)

  • Chapter II. D. 5.  Grant Closeout
  • Chapter III. E.  Award Financial Reporting Requirements -Final Disbursement Reporting

Other sponsoring agencies have their own guidelines establishing closing requirements and can include clauses in their NOAs that delineate their closing requirements on a project-by-project basis.

Three months prior to the sponsored project end date, a Sponsored Project Termination Notice is automatically distributed to the Departments with the RPAR001 Accounting Summary of Activities report for the sponsored project notifying the Department Administrator and the PI that the sponsored project is about to end.  The notice also states that the Certification of Award Closing Memorandum (see Closing Memorandum below) needs to be submitted to Sponsored Projects Accounting after the sponsored project end date.

Closing Responsibilities

Principal Investigators, Department Administrators, Sponsored Projects Accounting and the Office of Research all share in the responsibilities for closing sponsored projects.  Specific responsibilities are as follows:

Principal Investigators

  • Approval of all project expense-related invoices
  • Identification of any sponsored project unpaid expenses (trailing charges)
  • Verification of final labor distribution
  • Preparation and submission of final project technical reports
  • Preparation and submission of final sponsored project Intellectual Property reporting to the sponsor
  • Request carry over of unexpended funds

 

Department Administrators

  • Processing and recording of all project-related expense invoices
  • Review of sponsored project Level Reports
  • Identification of any sponsored project unpaid expenses (trailing charges)
  • Verification of final labor distribution
  • Verification of final cost allowability, allocability and reasonableness
  • Verification of proper application of F&A and fringe benefit rates
  • Preparation and submission of sponsored project Closing Memorandum (see below)
  • Providing general ledger account for write-off journal entry of any overdrafted or overspent account balance
  • Request carry over of unexpended funds
  • Monitoring Level Reports to ensure all charges are recorded and budget, revenue and expense are all equal upon project closing

 

Sponsored Projects Accounting

  • Review of sponsored project Closing Memorandum
  • “Mark-up” of final Level Report for final invoice preparation
  • Recalculation of F&A application
  • Preparation and submission of final invoice to sponsor
  • Reduce the project budget to match project expenditures
  • Collection on all outstanding sponsored project accounts receivable
  • Preparation and submission of final sponsored project financial reporting to the sponsor
  • Preparation and submission of final sponsored project property reporting to the sponsor, if any
  • Preparation and submission of final sponsored project Contractor’s Release to the sponsor in coordination with the Associate Secretary’s Office of the Board of Trustees, if any
  • Preparation and submission of final sponsored project Contractor’s Assignment of Refunds, Rebates and Credits to the sponsor in coordination with the Associate Secretary’s Office of the Board of Trustees, if any
  • Preparation of write-off journal entry of any overdrafted or overspent account balance
  • Record minor adjustments to bring sponsored project account into balance
  • Monitoring Level Reports to ensure all charges are recorded and budget, revenue and expense are all equal upon project closing

 

Office of Research

  • Facilitate completion of final Intellectual Property Report (i.e. Final Invention Statements)

In advance of the financial sponsored project closing, at the Department level:

Once the sponsored project has ended, at the Department level:

Closing Memorandum

The Closing Memorandum is a courtesy to the PI and the Department Administrator in that it affords the departments the opportunity to accrue and record all appropriate and allowable unrecorded or trailing costs for a sponsored project so that Sponsored Projects Accounting can invoice and report the total costs of a project in final and mitigate the need for future revisions of the final invoice and financial reports which are discouraged by the sponsoring agencies and higher-tier contractors.  The Closing Memorandum accounting tool was devised to facilitate the:

Federal and other sponsoring agencies regulations and requirements often times require the University to operationally and financially close a sponsored project within 90 days after the period of performance of the sponsored project expires.  This includes the submission of the final sponsored project financial report.  Accordingly, Department Administrators have half the time of the closing period after the sponsored project has expired to complete their closing responsibilities, and submit the required information to Sponsored Projects Accounting so that the final financial report can be completed and submitted timely.  (If the final financial report is due in 30 days, the department would have 15 days to submit the Closing Memorandum, etc.)  Sponsored Projects Accounting takes the other half of the closing period in order to manage its workload.

Accordingly, the Department Administrator’s timely attention to and monitoring of sponsored project closings and preparation of well-crafted Closing Memorandums is of paramount importance to the proper accounting, administration and reporting of sponsored project awards at our University.

The Closing Memorandum is utilized by Sponsored Projects Accounting primarily to prepare and remit the final invoice to the sponsor, balance the sponsored project in the general ledger, and prepare the final financial report to the sponsor.  Execution of these financial responsibilities without subsequent revision represent a proper system of financial internal control over sponsored projects; the integrity of which must be respected and maintained to ensure adherence to University sponsored project financial internal controls.

Upon receipt of the Closing Memorandum by Sponsored Projects Accounting, Sponsored Projects Accounting performs the following procedures:

See the Closing Memorandum spreadsheet at: (LINK)

Please do not alter the format of the Closing Memorandum, or create your own template as the consistency of the utilization of this accounting tool represents an internal accounting control of Sponsored Projects Accounting.

Trailing Costs

 

Costs that have been obligated on sponsored projects, but have yet to be recorded and paid at the end of a project or project year are referred to estimated, accrued or trailing costs.  Sponsoring agencies allow the University to include such trailing costs on our final invoices and final financial reports to ensure costs are reimbursed by and reported to the sponsoring agencies in the accounting and budgetary period in which the funds were awarded.

 

After the sponsored project closes, and the final invoice and final financial report are prepared and submitted to the sponsor, the Department Administrator must monitor their Level Reports to ensure that all proposed trailing costs included in the final invoice and final financial report are recorded on the project and paid within the 90 day timeframe to close and report on the sponsored project.  If this does not occur, Sponsored Projects Accounting will follow-up with the Department Administrator.  Revising previously submitted final invoices and final financial reports can result in the potential loss of current and future funding and goodwill between the University and the affected sponsor so the proper inclusion/exclusion of trailing charges is very important.

 

If additional costs are identified after the final invoice and financial report are submitted to the sponsor, and the Department would like to revise the final project costs, it is the Department Administrator’s responsibility to contact the sponsor and obtain advance approval for the revision.  If approval is granted by the sponsor, Sponsored Projects Accounting will accept a revised Closing Memorandum from the Department and resubmit the final invoice and final financial report to the sponsor.  A pattern of late revisions is discouraged.

 

 

No Closing Memorandum

 

As previously stated, the Closing Memorandum is a courtesy to the PI and Department Administrator in that it affords the departments the opportunity to accrue and record all appropriate and allowable unrecorded or trailing costs for a sponsored project so Sponsored Projects Accounting can invoice and report the total costs of a project in final and minimize the need for future revisions of the financial reports which are discouraged by the sponsoring agencies.  If a Closing Memorandum is not completed and submitted by the Department, Sponsored Projects Accounting will report the costs on the final Level Report on the final invoice and financial report.  No revisions to either will be accepted after-the-fact when no Closing Memorandum is offered by the Department and any additional, unrecovered costs will be borne by the Department.

 

 

Final Invoice

It is the responsibility of Sponsored Projects Accounting to submit the majority of the final invoices on sponsored projects in a timely manner.  Where the financial information required by the sponsor on the final invoices is not cost based, but is operational, scientific milestone or deliverable based, the Department Administrator must complete the final invoice with the assistance of the PI.

Sponsoring agencies require final invoices for the vast majority of sponsored projects. Many sponsors require their own standardized format for invoicing, while other sponsors accept a standard University format.  Final invoices are usually always required to be submitted at least 90 days after the end date of the project. When the University is a subcontractor to a prime agency at another institution, final invoices are typically due to the prime agency 60 days after the end of the project period.  A small number of sponsoring agencies can require financial invoices 15, 30 or 45 days after the sponsored project end date.  Final invoices can vary from a single, installment-based amount to a detailed invoicing of cost incurred by budgeted line item, operational milestone, scientific milestone, etc.

Once the department completes and submits the necessary Closing Memorandum to Sponsored Projects Accounting, Sponsored Projects Accounting will prepare the required final invoice and forward it to the sponsoring agency to meet the requirements of the NOA.  Specifically, Sponsored Projects Accounting:

Timeliness of filing of final invoices insures proper and timely payment of all sponsored project costs by our sponsors, helps eliminate outstanding accounts receivable and related collection efforts.

Final Financial Report

It is the responsibility of Sponsored Projects Accounting to submit the majority of the financial reports on sponsored projects in a timely manner.  Federal, state and local governmental agencies, as well as private companies and foundations generally require the University to submit final financial reports related to the projects they sponsor.  Where the financial information required by the sponsor on the financial reports is not cost based, but is operational, scientific milestone or deliverable based, the Department Administrator must complete the final financial report with the assistance of the PI.

Sponsoring agencies require final financial reporting for the vast majority of sponsored projects. Many sponsors require their own standardized format for reporting, while other sponsors accept a standard University format.  Financial reports can be required on an interim basis throughout the life of a sponsored project, and final financial reports are usually always required to be submitted at least 90 days after the end date of the project. When the University is a subcontractor to a prime agency at another institution, final financial reports as well as final invoices are typically due to the prime agency 60 days after the end of the project period.  A small number of sponsoring agencies can require final financial reports 15, 30 or 45 days after the sponsored project end date.  Financial reports can vary from a reporting of summary costs incurred and budgeted funds available to a detailed reporting of cost incurred by budgeted line item, operational milestone, scientific milestone, etc.

Once the department completes and submits the necessary Closing Memorandum to Sponsored Projects Accounting in a timely manner, Sponsored Projects Accounting will prepare the required financial report and forward it to the sponsoring agency to meet the requirements of the NOA.  Sponsored Projects Accounting will forward a copy of the financial report to departments upon request.  Specifically:

Timeliness of filing of federal financial reports is tested annually as part of our Single Audit by our public accounting firm.  Findings of this nature are included in this audit report and are not only reviewed by our Board of Trustees, but are also viewed nationally by sponsors and other institutions.  Accordingly, recurring audit findings of this nature can be an embarrassment to our University if we fail to consistently submit federal and non-federal financial reports in a timely manner.  In order for Sponsored Projects Accounting to meet its financial reporting responsibilities timely, we require Department Administrators to meet their sponsored projects closing responsibilities timely.

Carry Over

Requests to University sponsors for carry over of unobligated or unspent funds on sponsored projects is the responsibility of the Department Administrator.  Sponsored projects having more than a one year project period of performance, may have unspent funds at the end of a given award year that can require a request for carryover of unspent funds made to the sponsor.  Request for carry over of funds is an extremely important responsibility that must be executed in accordance with sponsor requirements that vary between sponsors, and between NOAs from sponsors that include automatic to online to written requests.  Therefore, sponsoring agency regulations, guidelines and requirements, as well as NOAs, need to be reviewed to ensure carry over is properly requested and received by the University.

Time is of the essence when it comes to University requests for carry over and failure to do so can result in the loss of funds to the performing department.  Regardless of sponsoring agency, all requests for carryover (other than automatic) must be in writing.  Verbal authorizations of carry over will not be accepted.  The Office of Research and Sponsored Projects Accounting must be copied on all approved carry over requests, and be accompanied by a BMR that increases the budget on the sponsored project in the subsequent year.

Some sponsors restrict the University’s authority to carryover an unobligated balance from one grant year to the next and therefore require advance approval of any carry over.

Per the NIH Grants Policy Statement carryover of unobligated balances requires prior approval on awards for centers (P50, P60, P30, and other awards), cooperative agreements (U awards), Kirschstein-NRSA institutional research training grants (T awards), non-Fast Track Phase I SBIR and STTR awards (R43 and R41 awards), and clinical trials (regardless of activity code), unless otherwise noted in the NOA. In addition, other awards may be excluded from carryover authority. You must refer to the terms in the NOA.

Regardless of any direction we receive from our pass-through agencies, our University must follow the terms and conditions of the award being passed-through to us.Since carry over must be approved in advance, related accounts can never extend more than one year in length, unless a no-cost-extension is awarded to the prime award.

Regardless of contract type, it is University procedure to establish new accounts annually in PRISM for BOTH cost reimbursable and fixed price awards. This is the standard procedure followed by the University for awards with restrictions on carryover for both federal and non-federal sponsors. Examples of non-federal sponsors with carryover restrictions includes American Heart Association, Cystic Fibrosis Foundation, Howard Hughes Medical Institute, Breast Cancer Research Foundation, as well as others.

Final Budget Adjustments

Final budget modification adjustments to the original NOA budget can be required in the following instances:

Balancing Accounts

A sponsored project account is considered in-balance when budget, revenue and expense are all equal and accounts receivable are zero 120 days after the award period of performance has expired.  A sponsored project account is considered out-of-balance when budget, revenue and expense are not all equal or there is a balance in accounts receivable 120 days after the award period of performance has expired.  A proper system of internal control over sponsored project accounts requires accounts to be balanced and closed timely in the University’s general ledger.  Therefore, the University has a responsibility to clear final out-of-balance conditions and close sponsored projects in a timely manner.

Actions that need to be taken to clear final out-of-balance conditions include:

Condition:

  • Project Expenses Less Than Project Budget – Sponsored Projects Accounting completes BMRs to reduce sponsored project budgets to equal sponsored project revenue/expense
  • Project Expenses Greater Than Project Budget
    • Sponsored Projects Accounting processes write-off journal entry and charge departmental account to reduce sponsored project expenses to equal sponsored project budget
    • Department Administrator transfers any new follow-on project year costs to new follow-on project year account
  • Project Expenses Less Than Project Revenues (residual funds)
    • Sponsored Projects Accounting process disbursement authorization to return residual funds (excess revenue) to sponsor
    • Sponsored Projects Accounting process journal entry to transfer minor residual fund balances to departmental gift account if in accordance with University policy
  • Open Accounts Receivable Balance – Sponsored Projects Accounting determines propriety of outstanding invoices.  If appropriate, continue collection efforts on sponsored project accounts receivable and apply cash to eliminate open accounts receivable balance.  Delete invoices created on account that are unnecessary
  • Miscellaneous Adjustment – Sponsored Projects Accounting process miscellaneous adjusting journal entry on immaterial balances to bring sponsored project account into balance

Residual Funds on Sponsored Projects

Residual or unspent funds on sponsored projects occur when the receipt of revenue (cash) from a sponsor exceeds the costs identified and recorded on the project.  Since the majority of sponsored projects received by the University are cost reimbursable from a financial accounting perspective, these residual funds on sponsored projects must be returned to the sponsor unless otherwise instructed by the sponsor.  Funds cannot be unilaterally retained by the University. 

Please see the University’s Sponsored Project Financial Guideline on Residual Funds on Sponsored Projects at: http://www.cfo.pitt.edu/policies/guideline/residual_funds_on_sponsored_projects.pdf

The University’s standard practice is to return any residual funds to the original payer.  This ensures that all parties accounting records are accurate for IRS 1099 reporting purposes.  In the case of a transfer of funds due to the departure of a PI from the University, if a sponsor designates that the transferred funds be directed to a new institution, Sponsored Projects Accounting transmits the transferred funds to the new institution provided we are instructed to do so by the awarding agency in writing.

Final Closing Documents

The University can be required to prepare the following documents upon final closing of a sponsored project depending upon sponsor requirements.  An explanation of these documents follows:

Property Reporting

 

Property reporting on sponsored projects is the responsibility of Sponsored Projects Accounting.  Property reporting usually applies to federal sponsors, but can apply to certain non-federal sponsors as well.  Property reporting typically consists of reviewing subcode 61XX, Equipment, for any capital asset activity on the sponsored project.  When there are expenditures in the 61XX subcodes on an award, Sponsored Projects Accounting requests the detail information from the Capital Asset Specialist in the Payment Processing and Compliance Office.  That person reviews all of the 61XX subcodes and provides Sponsored Projects Accounting with an Asset List from INSITE (University capital asset and space system) of the items included in the 61XX subcodes assigned to that project in INSITE.

 

Sponsors often times provide their own standard form for reporting property. When this is the case, Sponsored Projects Accounting uses the sponsor’s specific form to report property. The listing provided by the Capital Asset Specialist is used to complete the form showing each item description, its purchase price and the total cost of all of the listed assets. If there was no property acquired on the award, Sponsored Projects Accounting notes “NONE” on the sponsor’s form, obtains the appropriate approval signature and submits the form to the sponsor.  A form with “zero” property reported is considered a Negative Property Report.

 

Sponsors that don’t provide a specific reporting form for property receive a letter from Sponsored Projects Accounting listing any property acquired on the project using the INSITE asset list provided by the Capital Asset Specialist.  Again, if no property was acquired on the project, then the letter simply states “NONE”.  This is also considered a Negative Property Report.

 

Intellectual Property

Intellectual property reporting on sponsored projects is the responsibility of the performing departmental PI and Department Administrator.  Intellectual property includes inventions, patents, copyrights, etc. emanating from the sponsored project.  The PI and Department Administrator works with the University’s Innovation Institute Department to complete the intellectual property report for any intellectual property developed under the sponsored project.

Contractor’s Release

The Sponsor provides the Contractor’s Release form to Sponsored Projects Accounting who is responsible for completing the form, obtaining the appropriate signatures and submitting the completed document to the sponsor.  The Contractor’s Release normally requires the Contract Number, the total of all amounts paid and payable (see below), the University’s name and address, the Controller’s signature and the Certification of the Controller’s signature by the Associate Secretary of the Board of Trustees.  In addition, there is normally a question on the Release with this wording:  “Specified claims in stated amounts or in estimated amounts where the amounts are not susceptible of exact statement by the Contractor, as follows: (if none, so state).”  The response to this question is always “NONE.”

 

Sometimes the language in the Contractor’s Release says “Amounts Paid” and sometimes the language says “Amounts Paid or to be Paid.”  If there are still open invoices on the award, then it is important to be sure that the language says “Amounts Paid or to be Paid” before the Release is signed and submitted.  If the form only says “Amounts Paid,” then all open invoices must be paid before the Contractor’s Release is signed and submitted

Contractor’s Assignment of Refunds, Rebates and Credits

The Sponsor provides the Contractor’s Assignment of Refunds, Rebates and Credits form to Sponsored Projects Accounting who is responsible for completing the form, obtaining the appropriate signatures and submitting the completed document to the sponsor.  The Contractor’s Assignment form normally only requires the University’s name and address, the contract number, the Controller’s signature and the Certification of the Controller’s signature by the Associate Secretary of the Board of Trustees.

 

The Contractors Release and the Contractor’s Assignment of Refunds, Rebates and Credits come in different formats according to different sponsors.  However the information that is needed to complete the form, is normally the same.

Records Retention

Records retention is the responsibility of the Financial Records Service Department under the Office of the CFO.  Reference their Financial Record Retention Schedule on their website.

The OMB Uniform Guidance require a minimum 3 year retention period from the date of submission of the final financial report.  In consideration of the potential for sponsored program audit, tax audit and requirements of state escheat laws, the University adopts a conservative retention period of 7 years regardless of cost of record keeping as the cost of not retaining these records for these oversight authorities and related embarrassment is deemed to be far greater.

If there are any active litigation, claims, or audit matters related to a sponsored project that extend beyond the expiration of the 3-year retention period, then records must be retained until all litigation, claims, or audit findings involving the records related to the sponsored project have been resolved and final action taken.