.. Financial Operations F&A Underrecovery on Research WBS Elements Last revised: 06/07/2007 Contents Overview Proposal Phase Award Phase Monitoring Phase Closeout Phase Who to Contact with Questions Data Warehouse Reports Related Links Overview The overhead rates for federal awards and sub-awards are determined in accordance with the provisions of section G-7 of the OMB Circular A-21 (effective May 1996). Federal policy requires fixing rates for the life of the award at rates in effect (including negotiated provisional rates that will be revised when the federal rates are negotiated) at the time of the award. See OSP's policy Implementation of "Fixed Rate" Requirements of A-21. Most non-federal awards are established at MIT billing rates which change each FY to the current FY’s federal negotiated rates. However, both federal and nonfederal sponsors occasionally specify a rate and/or base which differs from those which would normally be applied under federal and/or Institute policies. This document describes the practices for departments, laboratories and centers (DLCs) related to handling overhead information on research WBS elements. It particularly focuses on the funding of underrecovery (U/R) incurred by Research WBS elements (other than U/R resulting from Federal A-21 "Fixed Rate" requirements or Training Grants). The DLC’s U/R posts to the DLC's U/R cost center. U/R resulting from Federal A-21 "Fixed Rate" requirements and Training Grants post directly to the Institute, not to the DLC’s U/R cost center. U/R may occur in any research WBS element where overhead specifications are established at less than the current federal negotiated rates. See OSP's Indirect Cost Rates page on the web. Note: Overhead (OH) is also referred to as Facilities and Administration (F&A) costs or Indirect costs. The terms overhead and F&A will be used interchangeably throughout this document. MIT prefers the term F&A to be consistent with the Federal government, but the SAP system refers to overhead.   top Proposal Phase With proposal preparation, DLCs complete most research budgets utilizing current federal negotiated research overhead rates on a modified total direct cost (MTDC) base. However, occasionally sponsor policies dictate a rate and/or base that will result in overhead recovery below that which would be produced using the federal negotiated research rates. When this occurs, the DLC also prepares an estimate of the U/R of overhead for each year of the project period. This estimate is for internal purposes only and is not submitted to the sponsor with the proposal. On the MIT Proposal Summary Form, the DLC enters the sponsor's overhead rate and base. DLC also enters the anticipated U/R of overhead for each year of the proposal with the source of funds identified to cover the U/R. The funding source may be one or more of the following: Discretionary cost object(s) identified by the DLC, School, or Provost Released general (The use of released general for F&A U/R requires approval by a representative of the appropriate Dean.) Sponsor-funded facility costs in lieu of, or in addition to, F&A Vice President for Research’s (VPR’s) U/R budget, 1733000 (the proposal summary form requires an approval signature by a representative of the appropriate Dean or Vice President for Research) If a funding source other than the above is negotiated, please email CAO at ur-issues@mit.edu to determine the correct journal entries to process funding. A copy of every MIT Proposal Summary Form for proposals incurring U/R, independent of funding source, should be sent to Charlene Placido, VPR’s Office, 3-240; for the School of Humanities, Arts, and Social Sciences, the proposals incurring U/R should also be routed to Charlene.   top Award Phase OSP administrators are responsible for determining and entering the costing sheets and rates on Coeus input sheets. If the WBS element will incur U/R (other than U/R resulting from Federal A-21 "Fixed Rate" requirements or Training Grants), OSP administrators are also responsible for entering by Project Year the U/R amount and source of funding as entered by the DLC on the MIT Proposal Summary Form. See the OSP documentation on Research WBS Elements.   top Monitoring Phase Overview of Responsibilities OSP Assigns and corrects a WBS element’s costing sheet and adjustment keys. An 001 and Notice of Award (NoA) will be generated for new and changed WBS elements and sent to DLCs. CAO Calculates and processes corrections and/or adjustments to posted F&A resulting from a change to the costing sheet and/or adjustment keys and from the assignment of a costing sheet that only approximates the sponsor's base. CAO notifies DLCs of document number for correcting JV entries after posting. See the CAO documentation, New Underrecovery Process. DLC Reviews the WBS elements costing sheet and adjustment key assignments on 001 and NoA and reports to OSP any concerns. Monthly, reviews the Summary Statements to verify accuracy of all entries. DLC is not required to recalculate F&A on all its cost objects each month, but to review for major errors such as: no F&A posting when cost object is subject to F&A, or the reverse; or that a cost object is incorrectly assigned an off campus costing sheet when it should be on campus, or vice versa. Responsible for all entries that post to its U/R cost center. The F&A cost elements are used as follows: The SAP costing sheets post the system calculated F&A at MIT billing rates to the following cost elements: 600304 F&A On 600305 F&A Off   Cost Object Cost Element Debit WBS Element see above Credit Institute F&A see above If the wrong costing sheet had been assigned resulting in an error in the posted MIT billing rate amount, a JV must be prepared by CAO to correct the billing rate amount. Since manual JV entries cannot post to 600304 or 600305 (6-series cost elements), the following (4-series) cost elements are used: 490310 Correct Current Yr F&A On 490311 Correct Current Yr F&A Off 490312 Correct Prior Yr F&A On 490313 Correct Prior Yr F&A Off   Cost Object Cost Element Debit Institute F&A see above Credit WBS Element see above Note: The SAP system uses the 6-series cost elements for posting system calculated costs such as F&A, EB, or settlements. Manual entries such as JV's cannot post to the 6-series cost elements, but instead must use the corresponding 4-series cost elements. If the sponsor funds F&A at a base/rate other than MIT billing rates, the SAP costing sheets post an adjustment to the billing rate amount to net F&A to the sponsor's base/rate amount using the following cost elements: 600316 Adj F&A On to Spon Base/Rate 600317 Adj F&A Off to Spon Base/Rate   Cost Object Cost Element Debit DLC U/R Cost Center see above Credit WBS Element see above If the wrong costing sheet and/or adjustment key had been assigned resulting in an error in the posted adjustment amount: DLC notifies OSP to correct the costing sheet and/or rates to avoid errors in future months OSP corrects the costing sheet and/or rates. An 001 and NoA will be generated for corrections and sent to DLC. Within two weeks of month-end close, CAO calculates the necessary overhead corrections to prior months for posted F&A, and notifies DLC of document numbers for any JV correcting entries after posting. CAO's correction entry reverses the incorrect U/R amount using the following cost elements: 490318 Adj CY F&A On to Spon Base/Rate 490319 Adj CY F&A Off to Spon Base/Rate 490320 Adj PY F&A On to Spon Base/Rate 490321 Adj PY F&A Off to Spon Base/Rate   Cost Object Cost Element Cost Element Name Allocation # Debit WBS Element see above Adjust F&A to Sponsor Base/Rate WBS which incurred U/R Credit DLC U/R Cost Center see above Adjust F&A to Sponsor Base/Rate WBS which incurred U/R Note: CY (Current Year) is used for posting adjusting F&A calculations applicable to the current MIT fiscal year F&A. PY (Prior Year) is used for posting adjusting F&A calculations in the current MIT fiscal year but applicable to prior fiscal years F&A. If an SAP costing sheet has not been created for a sponsor's base, OSP will assign a costing sheet that most closely matches the sponsor's base. Since the sponsor's base for F&A is different than the costing sheet base on which the sponsor's F&A is being calculated, OSP will enter a note in Coeus and notify CAO to process a monthly JV to manually adjust the F&A to the sponsor's base/rate. Within two weeks of monthly closing, CAO will calculate and post these F&A adjustment JV entries. After posting CAO will email to DLCs the JV document number for the adjusting JV entries. If you have a WBS that has been assigned a costing sheet that only approximates the sponsor's base, please wait for CAO email notice before funding the U/R for this type WBS. (Note: Until CAO adjustment entries post, the F&A U/R amount and the WBS uncommitted balance will not be accurate.) If the F&A at billing rates has correctly posted to the WBS element but the total net F&A charged to sponsor is incorrect as a result of the assignment of a costing sheet that only approximates the sponsor's base, CAO will process the following JV entry: If the WBS net F&A is understated,   Cost Object Cost Element Name Allocation # Debit WBS Element Adj CY F&A to Sponsor Base/Rate WBS which incurred U/R Credit DLC U/R Cost Center Adj CY F&A to Sponsor Base/Rate WBS which incurred U/R If the WBS net F&A is overstated,   Cost Object Cost Element Name Allocation # Debit DLC U/R Cost Center Adj CY F&A to Sponsor Base/Rate WBS which incurred U/R Credit WBS Element Adj CY F&A to Sponsor Base/Rate WBS which incurred U/R OSP is responsible for assigning and correcting a WBS element’s costing sheet and adjustment keys and notifying DLCs of corrective action via a Coeus NoA. For all changes to costing sheets and/or adjustment keys, monthly CAO reviews the financial data to determine whether overhead charges posted to the cost object need to be corrected. Within two weeks of month-end close, CAO is responsible for calculating and processing the necessary overhead corrections to posted F&A resulting from the assignment of a wrong costing sheet and/or adjustment key. After posting JV entries, CAO will email the JV document number to the DLC. DLC U/R Cost Center Monthly, DLCs will: Review accuracy of the SAP Costing Sheet U/R entries which post to one or more of the following cost elements: 600316 Adj F&A On to Spon Base/Rate 600317 Adj F&A Off to Spon Base/Rate and Process a journal voucher to fund the posted U/R with funds from one or more of the following sources (please see Data Warehouse Reports at the end of this document). DLC Discretionary Cost Object:   Cost Object Cost Element Cost Element Name Allocation # Debit DLC Discretionary 800704 F&A UR Funded Transfer Out WBS which incurred U/R Credit DLC U/R Cost Center 800703 F&A UR Funded Transfer In WBS which incurred U/R Vice President for Research’s (VPR's) U/R Budget (also referred to as School's U/R Allocation):   Cost Object Cost Element Cost Element Name Allocation # Debit VPR Cost Center 1733000 800704 F&A UR Funded Transfer Out WBS which incurred U/R Credit DLC U/R Cost Center 800703 F&A UR Funded Transfer In WBS which incurred U/R By Released General:   Cost Object Cost Element Cost Element Name Allocation # Debit DLC General 800704 F&A UR Funded Transfer Out WBS which incurred U/R Credit DLC U/R Cost Center 800703 F&A UR Funded Transfer In WBS which incurred U/R When WBS U/R exceeds the released general funds, DLC should process additional funding entry:   Cost Object Cost Element Cost Element Name Allocation # Debit Funding Source 800704 F&A UR Funded Transfer Out WBS which incurred U/R Credit DLC U/R Cost Center 800703 F&A UR Funded Transfer In WBS which incurred U/R By Sponsor funding of facility costs:   Cost Object Cost Element Cost Element Name Allocation # Debit WBS Element 420316 Other Sponsor Funded Costs -not MTDC WBS which incurred U/R Credit DLC U/R Cost Center 420316 Other Sponsor Funded Costs -not MTDC WBS which incurred U/R If at FY-end the sponsor-funded facility costs exceed the F&A U/R, the DLC should process the following entries to carry forward the credit balance to the next FY: "FY" JV, Period "13" , Document Date "6/30/YY"   Cost Object Cost Element Allocation # Debit DLC U/R Cost Center 420316 WBS which incurred U/R Credit DLC Discretionary Cost Object 420316 WBS which incurred U/R And "SA" JV, Period "1", Document Date (Current Date)   Cost Object Cost Element Allocation # Debit DLC Discretionary Cost Object 420316 WBS which incurred U/R Credit DLC U/R Cost Center 420316 WBS which incurred U/R When WBS exceeds the facility costs, DLC should process additional funding entry:   Cost Object Cost Element Cost Element Name Allocation # Debit Funding Source 800704 F&A UR Funded Transfer Out WBS which incurred U/R Credit DLC U/R Cost Center 800703 F&A UR Funded Transfer In WBS which incurred U/R When U/R has been cited as cost sharing, CAO will process the following entry at the time the WBS element is created and yearly thereafter:   Cost Object Cost Element Cost Element Name Allocation # Debit DLC Discretionary 800702 Cost Sharing-Transfer Out WBS which incurred U/R Credit WBS Element 800701 Cost Sharing-Transfer In WBS which incurred U/R Debit WBS Element 420317 Cost Shared F&A Underrecovery - not MTDC WBS which incurred U/R Credit DLC U/R Cost Center 420317 Cost Shared F&A Underrecovery - not MTDC WBS which incurred U/R Since the full year’s cost sharing amount is posted to the DLC’s U/R Cost Center in the first month of the project year, the net postings for this WBS element in the DLC’s U/R Cost Center will be in credit status until such time the actual U/R equals the cost sharing amount. If at FY-end the funded costs exceed the F&A U/R, the DLC should process the following entries to carry forward the credit balance to the next FY: "FY" JV, Period "13" , Document Date "6/30/YY"   Cost Object Cost Element Allocation # Debit DLC U/R Cost Center 420317 WBS which incurred U/R Credit DLC Discretionary Cost Object 420317 WBS which incurred U/R And "SA" JV, Period "1", Document Date (Current Date)   Cost Object Cost Element Allocation # Debit DLC Discretionary Cost Object 420317 WBS which incurred U/R Credit DLC U/R Cost Center 420317 WBS which incurred U/R For guidance on preparing final June entries to clear the U/R cost center, send email to ur-issues@mit.edu. Reminder: The F&A U/R cost center must net to zero at the end of each fiscal year. Therefore, funding for June F&A U/R must be processed as a final June entry in period 13, that is: Document Date "06/30/YY" (YY=fiscal year that just ended) Document Type "FY" Period "13" Posting Date "06/30/YY" (YY=fiscal year that just ended)   top   Closeout Phase CAO final audit of overhead will be based on overhead specifications in Coeus. Any questions CAO accountants have related to this information should be directed to the appropriate OSP Contract Administrator and DLC Administrator. After processing any overhead correction entries, CAO will send email with the JV document number to the DLC Administrator. top   Who to Contact with Questions: U/R Funding Source: DLC AO Assigned Costing Sheet and Rates: Your OSP Administrator Postings to U/R Cost Center: ur-issues@mit.edu Preparing U/R JV Entries: ur-issues@mit.edu Using Data Warehouse U/R Reports: warehouse@mit.edu CAO Final Audit Entries: ur-issues@mit.edu The following CAO personnel receive emails addressed to ur-issues@mit.edu:   Betty Trammell Dale Twomey   top Data Warehouse Reports To assist DLCs in monitoring U/R, four Data Warehouse (DW) reports have been created. See Data Warehouse Reports. 1. Research F&A U/R Cost Center For the DLC’s U/R Cost Center, the FYTD DTR entries are sorted and subtotaled by WBS. This report will assist administrators in determining the U/R amount to be funded.   2. Research F&A U/R - Coeus IDC Information For a DLC, displays Coeus IDC data for all research WBS elements that may incur F&A U/R (excluding training grants and Federal "Fixed Rate" competitive segments). This report will assist administrators in determining the source of funding for F&A U/R.   3. Research F&A U/R - JV Template DLCs may complete either the online SAP JV or the DW JV template to fund U/R. A new JV rule has been implemented for each entry that uses an U/R cost element (420316, 490318-490321, 800703-800704). The new rule requires the user to enter the WBS element number (referred to as "Allocation WBS") to which the entry refers (that is, the WBS element that incurred the U/R). The Allocation WBS is entered in column J for the JV upload; in the WBS dialog box for the online JV. For a selected month, the DW template will produce a partially completed JV to be reviewed, completed, and uploaded to SAP by the DLC administrator. The JV template includes entries to clear the U/R cost center’s current month postings to cost elements 600316 (Adj F&A On to Spon Base/Rate) and 600317 (Adj F&A Off to Spon Base/Rate). The JV template is created based on the assumption that all debit entries to cost elements 600316 and 600317 will be cleared with a credit entry to 800704 (F&A U/R Funded Transfer In); all credit entries to 600316 and 600317 will be cleared with a debit entry to 800703 (F&A U/R Funded Transfer Out). The DLC must enter a line for the other side of the entry; that is, the debit cost object that will fund the U/R or the credit cost object to which funds will be returned.   The DLC reviews the template for completeness and accuracy. Template entries may not be correct, requiring change, for example: U/R resulting from the assignment of an incorrect costing sheet and/or adjustment key is corrected by CAO, not DLC. This type entry should be deleted from template. U/R funded by sponsor facility budget in lieu of F&A, the cost element should be changed to 420316. See #4 in the Monitoring Phase of the F&A U/R documentation. 4. Research F&A U/R - Change in Master Data For DLCs’ WBS elements, the monthly changes to costing sheets and adjustment keys are sorted by WBS element. This report will assist administrators in identifying the WBS that may require F&A correcting or adjusting JV entries resulting from the assignment of a wrong costing sheet and/or adjustment key. These JV entries will be prepared and processed by CAO within two weeks of month-end close. top   Related Links Web Site Related Links Description Controller's Accounting Office (CAO)   Documentation for New Underrecovery Process Documentation for use in training CAO Sponsored Accounting staff. Costing Sheets Describes how secondary costs are applied within each costing sheet. EB and F&A Adjustment Keys and Rates Lists the employee benefit and overhead adjustment keys and rates. Office of Sponsored Programs (OSP)     OSP Documentation on Research WBS Elements Explains how OSP handles F&A information on research WBS elements, especially underrecovery of indirect costs. Implementation of "Fixed Rate" Requirements of A-21 Explains OSP's policy for implementing the A-21 fixed rate requirement. Employee Benefit Rates Lists the EB on-campus and off-campus rates by fiscal year(s). Indirect Cost Rates Lists F&A on-campus and off-campus rates for research and fund accounts by fiscal year(s). U.S. Office of Management and Budget OMB Circular A-21 See Section G-7 for provision on fixed rates for the life of the sponsored agreement. Data Warehouse Downloading Instructions Instructions for downloading and running Brioquery reports from the web. Research F&A U/R Reports Data Warehouse reports available for monitoring underrecovery. When you access the Data Warehouse Reports web page, scroll down the list of Research Administration reports to find individual U/R reports: Research F&A U/R Cost Center Research F&A U/R - Coeus IDC Information Research F&A U/R - JV Template Research F&A U/R - Change in Master Data SAP for MIT Documentation on the Web Journal Vouchers Documentation on how to create journal vouchers including a JV to transfer funds to the DLC's F&A cost center from the U/R funding source. Journal Voucher Uploads Documentation on how to prepare journal voucher uploads including how to upload a JV to transfer funds to the DLC's F&A cost center from the U/R funding source. CEMIT-9 Cost Element Group Instructions to display all cost elements grouped as MTDC Base/NonBase. CEMIT-G Cost Element Group Instructions to display all cost elements grouped as Fund Fee Base/NonBase. CEMIT-H Cost Element Group Instructions to display all cost elements grouped as TDC Base/NonBase. SAP Lab Allocation Keys Lists the laboratory allocation keys and rates. top Copyright 2001 © Massachusetts Institute of Technology SAP for MIT Documentation on the Web Last Revised: 06/07/2007