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Sponsored Funds Management

Overview

This chapter focuses on sponsored revenue, and your role as a manager of sponsored revenue funds. Sponsored revenue is funding awarded by a sponsor for a specific activity, such as a particular research project, instructional activity, fellowship, workshop, and so forth.

Over 50% of the Institute's annual operating budget comes from sponsored revenue. It may come from government agencies (e.g., the National Science Foundation), companies in industry, other universities, hospitals, or any organization interested in focused work on specific research. As with the Institute, a percentage of the operating budget of your Department, Lab, or Center (DLC) comes from sponsored revenue. The amount of sponsored revenue that you will manage will depend on your DLC. Laboratories and Centers with specific volume thresholds may access Institute general funds for leadership costs and discretionary funds per the following criteria.

Mar-95
LAB/CENTER
DIRECTORS
THRESHOLD
FOR ACCESS
(3/95)		 DIRECTOR ASSOC
DIR		 SUP
STAFF		 FUNDS
$2 MILLION 1 1 $30,000
$5 MILLION 1 0.5 1 $45,000
$8 MILLION 1 1 1 $60,000
$20 MILLION 1 1 1 $75,000

Sponsored revenue is procured and managed differently from other sources of revenue. Gift revenue, for example, has fewer "strings" attached than does sponsored revenue. Gifts do not involve deliverables or elaborate reporting requirements (although informal reports or verbal communications help to further good donor relations). Gifts do not require separate accounting procedures, nor does the donor need detailed financial accounting. A gift does not require the return of unexpended funds, and it has no period of performance. Sponsored revenue, by contrast, generally involves all of these aspects as requirements.

To help you navigate these requirements, you will work with one of the Institute's key departments, the Office of Sponsored Programs (OSP). Each DLC has an OSP representative, who can help you with the administrative, business, and financial functions related to grant and contract administration. Your OSP representative can also assist your faculty, principal investigators, and their administrators in the identification of resources for the management of individual sponsored projects. Your OSP representative will ensure that these projects are consistent with MIT's academic and research policies, and with the requirements of external sponsors.

To help you navigate the proposal process, OSP has developed a sponsored programs curriculum. When you take the OSP training classes, you will learn more about important concepts in proposal development and administration, such as budget development and presentation.

Many electronic tools can help you with sponsored funds management, each with something unique to offer. The tools you will use mostly frequently are Coeus, SAP, and BrioQuery. COEUS was created at MIT to help you with proposal preparation, submission, and post-award administration (in ancient Greece, Coeus was the god of intelligence). SAP, the Institute's financial system, provides real time financial data. BrioQuery, the user interface for the Data Warehouse, can help you create customized reports to meet your reporting needs.

The chapter below provides an overview on obtaining sponsored revenue for a project, effectively managing it, then properly closing out the project when the work concludes. Hyperlinks throughout the chapter refer you to relevant OSP courses and web sites.

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Proposal Preparation and Review

A key aspect to obtaining sponsored revenue is submitting project proposals. Generally, you must submit a proposal to a potential sponsor to receive sponsored revenue. You must therefore understand sponsor requirements, the components of proposal preparation, and your role in the process of proposal submission. Fortunately, OSP has prepared a web site to help you! It's called the Basics of Proposal Preparation, and it provides simple and logical answers to a wide range of questions.

One web page in particular can help you to understand the Common Component Parts of the proposal. As you consider the component parts, you can begin to identify the tasks for which you will be responsible. For example, will you be involved in identifying sources of funding? Will you write the statement of work? Will you prepare the budget? Or will you be responsible for overseeing the entire process?

The OSP web site contains information on many sponsors who commonly offer funding opportunities. It also includes general proposal information and forms for some of MIT's more regular sponsors. Familiarize yourself with sponsor requirements, as they can vary from sponsor to sponsor.

The following highlights key points about preparing and submitting proposals.

Project Costs

Most potential sponsors require a project proposal to include an estimated budget. To simplify your job of developing a budget, you can use a standard Excel template. You can also find a budget template at the COEUS web site, which also includes many helpful guidelines for proposal preparation.

To prepare a budget, you must consider the project's primary costs, such as its personnel and operating expenses. You must also consider its secondary costs, such as employee benefits, facilities and administration costs, lab allocation costs, and fund fees (if relevant). These secondary costs are not as obvious as primary costs, but you must understand them to effectively create a budget. Otherwise, you risk underestimating your project's budgetary needs.

These secondary costs come in the form of rates that the Institute can charge an account (a project or DLC account for example) to recoup various costs. For example, MIT may apply the Employee Benefits (EB) rate to recoup the cost of medical, vacation, tuition, and retirement plans available to Institute employees. MIT may apply the Facilities and Administration (F&A) rate and Fund Fee to cover the cost of facilities use and other "overhead." MIT applies the Lab Allocation rate to any of 15 specific labs and centers around the Institute (see Lab Allocation to determine if your DLC is one of those). [You might find it helpful to think of all of these rates as "taxes" that MIT levies on some DLC or project accounts to cover various costs.] To find the current rates for each of these, visit the OSP web pages below:

*Note that the rates for on-campus and off-campus EB and F&A rates differ. For example, if a project funds a student who is pursuing research at a sponsor site or another university, then that student - from MIT's perspective - will incur substantially fewer F&A costs, or "overhead," than a student working at MIT.

OSP offers a course entitled Sponsored Programs Rates: F&A, EB and Allocation, that teaches you how the various rates are set. If you want more training in how to apply the rates and develop a research budget, we recommend the course Fundamentals of Financial Management.

If you are preparing your first proposal or have any questions about proposal preparation, contact your OSP Representative. S/he will gladly help to answer your questions and walk you through the process.

Special Budgetary Considerations

The paragraphs below explain a few matters of budget that require special consideration when you prepare a proposal.

Research Facilities and Administration (F&A) Underrecovery: The research F&A rate (often called the "overhead rate") is a rate that MIT charges to a sponsored research project for the use of Institute facilities and administration (overhead). In other words, a percentage of every dollar that a sponsor awards to a DLC pays for facilities operation and maintenance, central and academic department administration, etc.

Sometimes a sponsor declines to pay the full research F&A rate that MIT charges. The difference between the rate that MIT charges a project and the rate the sponsor is willing to pay is called underrecovery. For example, if MIT's F&A rate is 65%, and a sponsor agrees to pay only 50%, then the DLC must find a way to pay for that 15% underrecovery.

The DLC must cover the underrecovery from a discretionary source. When discretionary sources are minimal, the DLC may be able to access a small underrecovery budget that the Dean reserves for very junior faculty. For more information about that budget, contact your Assistant Dean. For more information about underrecovery, see these two documents:

Allocation expense: Fifteen labs and centers throughout the Institute have allocated expenses (referred to above as "Lab Allocation"); the Institute charges those labs and centers rates to cover various costs associated with them. If your DLC has an allocation expense, you must account for this cost in your proposal's budget. All laboratories and centers that have allocation costs are listed with their respective rates at OSP Allocation Rates. For more information on laboratory allocation expense, please see Allocation Cost Objects and Rates or contact the Director of Cost Analysis, Office of Sponsored Programs.

Cost Sharing: Cost sharing is that portion of project or program cost that is not reimbursed by the sponsor. In other words, cost sharing represents a commitment by the Institute. Cost sharing may be required by the sponsor as a condition of the award (mandatory), or it may be offered by the Institute in excess of mandatory cost sharing requirements (voluntary). In either case, whether cost sharing is mandatory or voluntary, the commitments are mandatory once an award is made. In other words, they represent obligations by which the Institute is bound.

MIT should offer cost sharing only when required by a potential sponsor. If you are unsure about cost sharing requirements or levels, check with your OSP representative. If a specific amount of cost sharing is required, MIT should not offer more than is required. The amount offered in the proposal becomes a commitment under award terms, and must be documented and reported. For information on the cost sharing rules that MIT abides by, see MIT's Cost Sharing Policy. For information on the fundamentals of cost sharing, see OSP Cost Sharing Basics. For information on cost sharing which is not funded by MIT, see "Cost Sharing Which is not Funded by MIT: Valuation and Documentation Guidelines." (downloadable Word document).

Other Considerations

Conflict of Interest: Institute policy requires that MIT officers, faculty, staff, and others acting on MIT's behalf must avoid ethical, legal, financial, or other conflicts of interest. MIT personnel must also ensure that their activities and interests do not conflict with their obligations to the Institute, or with the Institute's welfare. Essential to effective administration and adherence to this policy are:

All MIT faculty and staff must complete an annual Report on Outside Professional Activities and Interests (OPA) This revieweensures that the project's principal investigator (PI) does not have a conflict of interest. The PI may not receive a research grant or contract from a company for which s/he consults or from a company in which s/he has a significant financial interest that could result in a conflict of interest.

For proposals to the National Science Foundation (NSF) and the National Institutes of Health (NIH), OSP requires each PI and Co-PI to complete Financial Disclosure and Conflict of Interest forms (pages 3 and 4 of PDF file).

For the complete MIT policy on conflict of interest, see Policy on Conflict of Interest.

IPIA Management: MIT's Inventions and Proprietary Information Agreement (IPIA) form (PDF) must be completed by every Institute employee. On signing it, members of the MIT community - including visiting scientists and fellows - who participate in Institute research or who use significant Institute funds or facilities, agree to assign intellectual property rights to MIT.

Each DLC's administrative officer is responsible for distributing these forms, collecting signed copies, and forwarding them to the Technology Licensing Office (TLO). Contact the TLO if you have any questions about this process or about MIT's policy on intellectual property.

The full text of MIT's Intellectual Property Policy is available in MIT's Policies and Procedures Guide.

Proposal Routing Process

All proposals must go through the MIT review process before being submitted to the sponsor. Use the MIT Proposal Summary Form (PDF) for this purpose. The nature of the proposal, the sponsor requirements, and your School's Senior Officer (Dean's Office) requirements, will determine the routing protocol for your particular proposal. A signature approval from the School of Engineering Dean's Office (normally the Assistant Dean for Finance and Personnel) is required ONLY for proposals involving cost sharing, underrecovery, space change implications or budgets of $2 million or greater per year. All others my go directly to the Office of Sponsored Programs (OSP) from DLC headquarters.

You can find a full description of the generic routing and review process and the time required for the review at OSP's Basics of Proposal Preparation and Review.

Please note that special reviews are necessary when human subjects, animal use, recombinant DNA, or radioactive materials are involved. In particular, National Institutes of Health (NIH) funded projects involving human subjects require special reviews and or training. For more information, see OSP's Special Reviews.

Proposals Involving Subawards

When a sponsor funds a project with an award, the project's personnel may need outside help to complete part of the project. For example, a biotech center may need the technical expertise of an information systems company to complete a specific task. In this case, the information systems company - a subawardee- receives a fraction of the sponsor's award. The subawardee receives a subaward.

Most funding agencies require that the subaward proposal and budget be included as part of the MIT proposal. This subaward proposal must have an official signature from the subawardee's organization. In addition, an MIT OSP subaward checklist must be attached to the MIT Proposal Summary Form (PDF). For more information about subawards, see OSP Subawards.

Proposal Submission

For information on proposal submission see the "Proposal Submission" section in the Basics of Proposal Preparation.

Proposal Revision

Sometimes the sponsor requests revisions to the proposal which may include revisions to the budget. Any revision to the original proposal must be processed in the same way as was the original proposal. The revision must be reviewed and routed for appropriate signatures with a revised OSP Proposal Summary Form (PDF). For more information, see Proposal Revision in the OSP's Basics of Proposal Preparation and Review.

Proposal Status

Once your proposal has been submitted to the sponsor by OSP, it is recorded in the COEUS proposal system with "status pending." You should notify OSP when the proposal status changes - for example, if the PI withdraws the proposal from the sponsor's consideration, or the sponsor rejects the proposal. For more information see Proposal Status.

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Award Negotiation

The negotiation of sponsored project awards is established between the PI and OSP. OSP then normally negotiates the terms and conditions with the sponsor.

Disclosure of Inventions

The negotiation of research agreements with non-government sponsors has become increasingly complex. This is due in part to the Technology Licensing Office's greater role in clarifying the intellectual property rights associated with the products of Institute research. When the sponsor, PI, and TLO negotiate provisions that affect the licensing of MIT technology, those provisions could also affect a sponsor's confidentiality.

For example, MIT is an academic institution and as such thrives on the publication of its research. Yet a sponsor may require sufficient confidentiality to maintain rights over proprietary knowledge. As a result, the negotiation of a research agreement may require more time than you might anticipate. In any case, negotiation for the award must be settled before the award can be issued.

Licensing of Intellectual Property

The Technology Licensing Office (TLO) manages the patenting, licensing, trademarking, and copyrighting of intellectual property developed at MIT, Lincoln Laboratory, and the Whitehead Institute. An integral part of MIT's technology transfer program, the TLO seeks to move the results of MIT research into the public domain while providing recognition to individual inventors and encouraging the prompt and open dissemination of research results. The TLO also serves as an educational resource on intellectual property and licensing for the MIT community.

Types of Agreements at MIT

As the sponsorship award for your DLC is negotiated, you can expect to face one or more standard agreements. OSP lists several that you should be familiar with.

Types of Sponsored Awards

An organization that makes an award to MIT is a sponsoring agency. Sponsors fall into three categories: government, for-profit, and non-profit. When an organization agrees to sponsor an MIT activity, an award mechanism is put into place. That mechanism is the funding instrument that governs the relationship between the sponsor and MIT. Award types include Contracts, Cooperative Agreements, Fellowships, Grants, Industrial Agreements, and Subawards. For definitions to each of these, see Acronyms and Terms at the end of this chapter. See also the section Award Negotiation and Project Start-up at the OSP web site and OSP's listing of policies and procedures for Research Subawards.

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Project Startup

A project is authorized to begin when the Institute's Office of Sponsored Programs (OSP) and your project's PI first receive an announcement of the approved award from the sponsor. OSP then sends a Notice of Award (NOA) to your department, lab, or center for review by the PI and the administrative officer. The NOA summarizes key terms in the award, and governs how the sponsor's funds can and cannot be spent. These terms are included in the COEUS award system.

Review the NOA carefully because it includes critical information about the administration of the award. This information includes terms and conditions, the award type, the authorized total, period of performance, and cost object number. Your OSP representative may request that a responsible DLC administrator and the PI sign the NOA certifying that both have accepted the terms. NOAs for awards with standard terms and conditions do not usually require signature, indicating that expenditure of funds signals acceptance of terms. For more information about project startup, see Award Negotiation and Project Start-up.

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Post-Award Administration

This section discusses compliance standards. For more information, visit the OSP web site, which includes a very helpful section on the Basics of Post-award Sponsored Program Administration.

After your DLC has received its award, it will probably need equipment and services to pursue its project effectively. The Basics of Post-award Sponsored Program Administration addresses the question of what types of direct costs are allowable to sponsored projects. COEUS data identifies types of purchases that need specific sponsor approval. The compliance standards that govern questions of allowability and sponsor approval include:

For more information about these compliance standards, see the Sponsored Programs Post Award Process Project Administration and Reporting course.

To ensure that expenses are being accurately charged to projects, each DLC performs a monthly financial review. This review is in accordance with Financial Review and Control (FRC), a collection of policies and procedures for performing these regular reviews. For detailed information on FRC, see Financial Review and Control.

FRC reviews should be completed monthly because each DLC at the Institute is subject to both internal and external audits. Auditors examine whether your DLC is charging expenses in accordance with the standards set forth in the OMB Circulars.

Allocation Cost Objects and Rates

For the purposes of financial support, MIT treats its departments differently from its labs and centers. Departments generally receive the bulk of their funding from the Institute itself, whereas labs and centers receive the bulk of their funding from sponsors outside MIT. However, these labs and centers still use Institute resources, such as staff and facilities.

Allocation is the process by which MIT provides (or "allocates") administration and project support, then recoups the cost of providing these resources from the sponsor. An allocation rate is calculated for each laboratory and the rate is applied to all projects in the lab so that sponsors pay their share of the cost of laboratory administration and support.

Faculty members, as distinct from their researchers or administrative staff, are appointed in at least one academic department. The Institute financially supports the salary and support staff of all faculty through their home department, even if faculty are working at a lab or center. The portion of support provided is normally 20 to 25% in the SoE and is related to the faculty member's instructional activities. However, except for the costs of the Laboratory Directors' offices, the Institute generally does not financially support the labs' or centers' administrative needs, such as personnel, financial management, and facilities management. Therefore labs and centers assess an allocation rate to the grants and contracts performed in the lab to recoup the cost of administrative services.

Labs and centers can recover these allocation costs - with the approval of the Office of Naval Research (ONR) - again, through allocation. These costs can be allocated to research grants and contracts via a rate approved by ONR.

You can download OSP's General Rules for Laboratory and Center Allocations from OSP Allocation Costs. Included in this document is an example of how the allocation budget for the lab or center is prepared to set the allocation rates. There is also an example of how the allocation rates are applied to project costs.

For more discussion of allocation, rates, and the differences between departments, labs, and centers, see the chapter on Financial Management.

Reviews and Reporting

Allocation Account Review. Laboratories with allocation rates must participate in the allocation account review process every year. During this process, you submit a formal budget for your lab or center allocation to OSP, which then forwards it to the Defense Contract Audit Agency (DCAA) for review. For more detailed information, see Allocation Costs and also General Rules for Laboratory Allocation.

Expenses Posted to Labs

Rules govern the types of expenses that can be posted to the allocation cost object. These expenses are routinely audited, so you must understand them and be able to determine which qualify as allowable expenses. For example, travel, equipment, meetings, and lunches are unallowable expenses. For more information, see Laboratory Allocations.

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Project End and Closeout

Project end and closeout is the process by which all the sponsor requirements and internal procedures necessary to terminate a sponsored project are completed.

Perhaps the most important of these procedures is the management of any remaining funds. Ideally, when a grant ends, all of the sponsor's funds have been appropriately spent and expenses have not exceed the awarded amount. Proper planning ensures that all funds are spent in a timely manner in accordance with the project's budget, thus precluding the need to return unused funds to the sponsor.

For more information, see the section on Project Completion and Closeout in Basics of Post-award Sponsored Program Administration.

Final Progress and Financial Reports

Most sponsors require a final progress report and a final financial report on awards that are terminating. Refer to COEUS award data for your DLC's specific reporting requirements.

Non-competing awards (those no longer requiring competition with other proposals for funding) may require the regular submission of progress reports or proposals prior to the receipt of any continued funding.

If a DLC's project has not been completed, the PI may request a no-cost extension.

Application for a No-Cost Extension

A No-Cost Extension allows a principal investigator extra time to finish the project beyond its proposed expiration date. To receive a no-cost extension, a PI generally must write a request letter which includes technical justification, new completion date, uncommitted balance, and budget. OSP must then endorse the letter before forwarding it to the sponsor. Check your sponsor's guidelines to determine how to apply for a no-cost extension. You can find a list of report forms available to review expiring project WBS elements at the MIT Data Warehouse.

Several sponsors now offer electronic no-cost extension processes. However, in general you still must complete the MIT process for requesting no-cost extensions as described above. Contact your OSP representative if you have questions. and/or see General MIT Requirements for Requesting No-cost Extensions. COEUS award data also includes no-cost extension approval requirements

Final Financial Audit

As part of your project's closeout process, the Controller's Accounting Office (CAO) at MIT will send you a Notice of Closeout Action Required form (page 14 of PDF) for review of any open commitments. Respond to the form so that sponsored accounting staff can complete the final audit. In addition, submit any final technical, property, intellectual property, and/or financial reports that the sponsor requires. Provide copies or evidence of submission to OSP.

Project overruns can and should be avoided through proper planning and administration. However, in the unlikely event that you do face an overrun, you may not cover it with other sponsored funds. You can cover it only through faculty or DLC discretionary funds. The overrun will be funded in the award close-out process. For more information, see Account Closeout Procedures (PDF).

Record Retention

Each awarding agency may have specific guidelines for record retention. For more information, see Record Retention Requirements.

Subaward Closeout

All subawards must be processed for closeout and formally closed on a timely basis. As you begin the closeout process, consider the requirements of the prime award (under which a subaward is issued) to determine appropriate timeliness. MIT will not close out a prime award until all its subawards have been closed out.

For more information on subaward closeouts, see the OSP Policy and Procedure Manual.

Non-Competing Renewals

A non-competing renewal is funding for a continuing project, that is, a project that need not compete with other proposals for funding. If your DLC project will be continued as a non-competing renewal, you may be required to submit a progress report or proposal before the project receives any continuation funding.

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Acronyms and Terms

For a comprehensive list of acronyms used at the Institute, see Acronyms and Abbreviations Used at MIT. For a comprehensive list of terms used with SAP (the Institute's financial system), see SAP Glossary.

A21 — A circular from the Executive Office of the President of the United States, Office of Management and Budget, entitled "Cost Principles for Educational Institutions." It defines the costs allowable as charges to contracts and grants.

AAALAC — American Association for the Accreditation of Lab Animal Care.

Accrual accounting — The process of recording an expense when it occurs, rather than when it is paid.

AFOSR — Air Force Office of Scientific Research, an office in the Department of Defense.

Allocable Costs — Those allowable costs that actually benefit the grant or contract to which they are being charged. For example, allocable costs include those costs for the effort of employees applied to the project supported by the award.

Allowable Costs — Those categories of costs that can be charged to an award, such as salaries and equipment. Certain types of costs, such as the cost of alcoholic beverages, are not allowable.

AMA — American Medical Association.

Audit — A formal examination of the accounts of an organization, an individual, or a financial situation. An audit may also include an examination into compliance with applicable terms, laws, and regulations.

Authorized Total — The total amount that a sponsored project is authorized to spend in a given period. For example, suppose the budget for a particular proposal is $3,000,000, the period of performance is three years, and the proposal is fully funded. Does this mean that you have $3,000,000 available TO spend? That depends on the Authorized Total that the sponsor has stipulated. If the sponsor has set $1,000,000 for the first year of the award as the authorized total, then you can spend up to $1,000,000 during that first year. The sponsor will also authorize a given amount that you can spend for each subsequent year.

Awards, Funds that have been obligated by a funding agency for a particular project.

Budget,The detailed statement outlining estimated project costs to support work under a grant or contract. (See also Rebudget.)

Budget Period,The interval of time, usually twelve months, into which the project period is divided for budgetary and funding purposes.

CAO — Controller's Accounting Office

CAS, Cost Accounting Standards. Federally mandated accounting standards intended to ensure uniformity in budgeting and spending funds.

CASB — Cost Accounting Standards Board.

CBD, Commerce Business Daily.

CDC, Centers for Disease Control and Prevention.

CFDA, Catalog of Federal Domestic Assistance.

CFR, Code of Federal Regulations.

Challenge Grant, A grant that provides monies in response to monies from other sources, usually according to a formula. For example, a challenge grant may offer two dollars for every one that is obtained from a fund drive. The grant usually has a fixed upper limit, and may have a challenge minimum below which no grant will be made. This form of grant is fairly common in the arts, humanities, and some other fields, but is less common in the sciences.

A challenge grant differs from a matching grant. The amount of money that the recipient organization realizes from a challenge grant may vary widely, depending upon how successful that organization is in meeting the challenge. Matching grants usually award a clearly defined amount and require that a specified sum be obtained before any award is made.

Change Order, Under Federal contracts containing a Changes clause, a written uni-lateral contract modification signed by the contracting officer, directing the contractor to make changes in project specifications. The Changes clause allows the contractor to submit a proposal for costs associated with the required changes.

Close Out, The process of completing all the internal procedures and sponsor requirements necessary to terminate or complete a project.

COGR, Council on Governmental Relations.

Competing Proposals, Proposals that are submitted for the first time, or unfunded proposals that are resubmitted. Both types must compete for funds via a review process established by the sponsor. Ongoing projects must compete again if the term of the original award has expired.

Consortium Agreement, An Agreement written for multi-sponsor support of a sponsored program. Each sponsoring organization executes the same Agreement, becoming a consortium member.

Continuation Project (Non-Competing):Applicable to grants and cooperative agreements only. A project approved for multiple-year funding, although funds are typically committed only one year at a time.

At the end of the initial budget period, progress on the project is assessed. If satisfactory, an award is made for the next budget period, subject to the availability of funds. Continuation projects do not compete with new project proposals, and are not subject to peer review beyond the initial project approval.

Contract, A mechanism for the procurement of a product or service with specific obligations for both sponsor and recipient. Typically, a research topic and the methods for conducting the research are specified in detail by the sponsor, although some sponsors award contracts in response to unsolicited proposals.

Contract Administrator, An OSP representative.

Cooperative Agreement, An award similar to a grant, but in which the sponsor's staff may be actively involved in proposal preparation. This award anticipates substantial sponsor involvement in research once the award has been made.

Co-PI, The co-principal investigator.

COS — Community of Science. An organization that shares information about scientific expertise, funded scientific research, and funding opportunities for research.

Cost Accounting Standards (CAS), Federally mandated accounting standards intended to ensure uniformity in budgeting and spending funds.

Cost Object, A collector of expenses and revenues for a specific project or purpose. Put simply, a cost object is an account related to a specific activity within a project (see also WBS Element).

Cost-Reimbursement Type, A contract or grant for which the sponsor pays the full costs incurred in the conduct of the work, up to an agreed amount.

Cost Sharing, A portion of a project or program cost not reimbursed by the sponsor. Cost sharing represents a commitment by the Institute.

Cost sharing may be required by the sponsor as a condition of the award (mandatory) or it may be offered by the Institute in excess of mandatory cost sharing requirements (voluntary). Whether cost sharing is required by the sponsor or is offered by the Institute or PI voluntarily, the commitments are mandatory once an award is made. In other words, they represent binding obligations on the Institute. The Federal regulations and the MIT policy governing cost sharing are summarized on the OSP web site. See Policy for Cost Sharing and Matching Funds on Sponsored Projects.

COUHES, MIT Committee on the Use of Human as Experimental Subjects.

CRADA, Cooperative Research and Development Agreement. A written agreement between a private company and a government agency to work together on a project. By entering into a CRADA, the Federal government and non-Federal partners can perform research by sharing the costs of this research.

CSR, Center for Scientific Review, an office in the National Institutes of Health

DAR, Department of Defense supplement to the Federal Acquisition Regulations (FAR). DoD contracts will include both FAR and DFAR clauses.

Deficit/Overrun, A financial condition in which expenditures exceed the funds available.

Direct Costs per OMB A-21, Costs that can be identified specifically with a particular sponsored project, or can be directly assigned with a high degree of accuracy.

EB Employee Benefits/Fringe Benefits, Employee benefits paid by the employer (for example, FICA, Worker's Compensation, Withholding Tax, Insurance, and so forth). For more information, see Employee Benefit Rates.

EEO/AA, Equal Employment Opportunity/Affirmative Action.

Effort Reporting, A procedure mandated by the federal government to verify that direct labor charges to federally sponsored agreements are reasonable, and reflect actual work performed. Effort reporting shows the distribution of the effort of individuals among the various activities in which they work. For more information, see effort reporting.

ERA (Electronic Research Administration), ERA broadly encompasses the application of computer systems to serve the needs of all phases of research administration, from identifying funding opportunities to post-award administration. COEUS supports ERA.

FAR, see Federal Acquisition Regulations (FAR).

FastLane, An interactive real-time system used to conduct official National Science Foundation business over the Internet. FastLane is the submission system for the NSF, providing electronic templates for proposals, annual reports, final reports, extension requests, etc. For more information, see Fastlane.

F&A, (Facilities and Administration) A rate that MIT charges to a sponsored project for the use of Institute facilities and administration (overhead). A percentage of every dollar that a sponsor awards to a project pays for the use of MIT offices, staff, etc. For more information, see indirect costs.

F&A Underrecovery, The difference between the F&A rate that MIT charges to a project, and the rate that the project's sponsor is willing to pay. For example, if MIT's F&A rate is 65%, and a sponsor agrees to pay only 50%, then the project's lab or center must find a way to pay for a 15% underrecovery. (See also F&A.)

FDA, Food and Drug Administration.

Federal Acquisition Regulations (FAR), The primary regulation used by all federal executive agencies in their acquisition of supplies and services with appropriated funds. FAR became effective in 1984.

Federal Contract, The appropriate agreement to use in a procurement relationship between the federal government and a contractor. A federal contract applies whenever the principal purpose is for the federal government to acquire property or services for its direct benefit and use.

Federal Grant, The appropriate agreement to use in a relationship between the federal government and a recipient whenever the principal purpose is the transfer of money to accomplish a public purpose. With a federal grant, there is no substantial involvement anticipated between the governmental agency and the recipient during the period of performance.

Fellowship, An award made directly to an individual in support of specific educational pursuits. The individual cannot be an employee of the granting organization. Traineeships differ from fellowships; check the award conditions on training grants for service and/or pay-back requirements.

Final Report, The final technical or financial report required by a sponsor to complete a research project.

Fiscal Year (FY), Any twelve-month period for which annual accounts are kept. The fiscal year at MIT is July 1 to June 30. The Federal fiscal year is October 1 through September 30.

Fixed-price Contract, A contract providing for a set lump sum payment upon satisfactory performance of the terms of the contract.

FOIA, Freedom of Information Act.

Fringe Benefits, Employee benefits paid by the employer (for example, FICA, Worker's Compensation, Pension, Insurance, and so forth).

FTE, Full-time equivalent. For example, two half-time employees represent one FTE.

Fund Accounting, The accounting system used by the federal government and some universities to identify revenues and expenses according to the source of funds. Separate records are kept for assets donated to an organization and restricted by donors to certain specific purposes or use.

Funding Cycle, The period during which a sponsor accepts proposals and awards funding. If a sponsor has standing proposal review committees (or boards) that meet at specified times during the year, application deadlines correspond with those meetings.

In the case of NSF, proposals that are received too late to be considered in the current funding cycle may be held over for the next cycle.

FY:Fiscal Year. Any twelve-month period for which annual accounts are kept. The fiscal year at MIT is July 1 to June 30.

Gift, An award that does not involve deliverables or elaborate reporting requirements (although informal reports or verbal communication do further good donor relations). A gift does not require separate accounting, nor does the donor receive detailed financial accounting. A gift may be provided for the stated area of research or activity. No intellectual property rights are provided. A gift does not require the return of unexpended funds, and it has no period of performance.

GPG, Grant Proposal Guide, the proposal guidelines for the National Science Foundation.

IACUC, Institutional Animal Care and Use Committee

In-kind Contribution, A service or item donated in lieu of dollars.

Indirect Costs, Those costs that are incurred for common or joint objectives, such as administrative costs. Indirect costs cannot be identified with a particular sponsored project, instructional activity, or other institutional activity. They come under Facilities and Administration (F&A) per OMB A-21. For more information, see OSP's web site on F&A costs.

Industrial Agreement, An award that funds basic research related to industrial research and development (R&D). An industrial agreement may involve interaction and collaboration with the sponsor, and it often requires extensive negotiations. MIT has a standard research agreement for industry, including provisions for dissemination of information and rights to intellectual property.

Investigator-Initiated Proposal, A proposal submitted to a sponsor that is not in response to an RFP, RFA, or a specific program announcement.

IRB, Institutional Review Board. A body, required under Federal regulation, that oversees research involving human subjects.

Key Personnel, The personnel considered to be of primary importance to the successful conduct of a project. The term usually applies to the Principal Investigator(s), but may extend to other senior members of the project staff.

Matching Funds — Financial contribution by the university required by a granting agency as a condition for receiving a contract, grant, or award. A form of cost sharing at a significant level, for example, two Federal -to-one non-Federal or one Federal to one non-Federal.

MTDC, Modified Total Direct Costs.

NACUBO, The National Association of College and University Business Officers. Here is the contact information:

One Dupont Circle, NW, Suite 500
Washington DC 20036
(202) 861-2500
http://www.nacubo.org

NASA, National Aeronautics and Space Administration.

NCI, National Cancer Institute, part of the National Institutes of Health (NIH).

NCRR, National Center for Research Resources, part of the National Institutes of Health (NIH).

NAS, National Academy of Sciences.

NCURA, The National Council of University Research Administrators. Here is the contact information:

One Dupont Circle, NW, Suite 220
Washington, DC 20036
(202) 466-3894
http://www.ncura.edu

New Award, An award not previously awarded, or a renewal or continuation award treated as a new award by the sponsor and given a new agency number.

New and Competing Proposals, Proposals submitted for the first time and thus competing for funding, or ongoing projects that must re-compete for funding prior to the expiration of the original award.

NIH, National Institutes of Health.

NOA, Notice of Award. The legally binding document that serves as a notification to the recipient and others that a grant or cooperative agreement has been made. The NOA references all terms of the award, and documents the obligation of funds.

No-cost Extension, An extension of the period of performance beyond the expiration date to allow the principal investigator to finish a project. Usually, no additional costs are provided.

Non-Competing Renewal, A renewal applied to a continuing project, i.e., one that need not compete with other projects for funding.

OED, Office for Organization and Employee Development.

OSP, Office of Sponsored Programs.

Peer Review, A system of technical evaluation of competitive proposals submitted for funding. A peer review uses reviewers who are the professional equals of the principal investigator or program director responsible for directing or conducting the proposed project. Peer review is a form of objective review. It is legislatively mandated in some programs, and administratively required in others.

PHS, Public Health Service.

PHS 2590, An application for the continuation of a PHS grant (National Institutes of Health).

PHS 398, An application form for a PHS grant (National Institutes of Health).

PI, The individual responsible for the conduct of research or other activity described in the proposal for an award. According to MIT policy (dated 9/20/93), the following academic and research appointees may be Principal Investigators for research programs:

For anyone else to gain Principal Investigator status, the candidate must receive the recommendation of the department Dean and the department head (or laboratory director), or have the approval of the Associate Provost, based on the recommendation of the laboratory director for whom the candidate would work.

Post-differential Allowance Expenses, Expenses authorized for employees based abroad to provide additional compensation for services as a recruitment and retention tool. When the allowance is authorized, the employee's base salary is increased accordingly.

PRDA, Program Research and Development Announcement.

Pre-award Costs Authorization, Authorization to incur allowable expense (sometimes up to a specified limit) on a project before the award is made by the sponsor.

Preliminary Proposal, see "Pre-proposal"

Pre-proposal, A brief description (usually 2-10 pages) of a research plan and estimated budget. The pre-proposal is sometimes submitted to determine the interest of a potential sponsor prior to submission of a formal proposal. A pre-proposal is also known as a preliminary proposal.

Prior Approval, The requirement for written permission before project funds can be used for purposes not in the approved budget. Prior approval is also required to significantly change aspects of the program from those originally planned and approved.

Priority Score, A score derived from the rating given to a research proposal by each member on a review committee. The score is used to help determine which approved proposals will be granted awards, based on funds available.

Program Announcement, A document describing a research opportunity from a funding agency. It may describe new or expanded interest in a particular extramural program, or it may be a reminder of a continuing interest in an extramural program.

Program/project Officer, An individual designated by a sponsor as responsible for the technical, scientific, and/or programmatic aspects of a particular award. A program/project officer serves as the sponsor's counterpart to the principal investigator or project director of the grantee and contractor organization. He or she deals with the grantee and contractor organization staff to assure programmatic progress. He or she is not authorized to change the terms of the award-these actions require an award modification executed by the Grant or Contract Officer.

Progress Report, Scheduled reports required by a sponsor summarizing progress to date. Technical, fiscal, and, invention reports may be required.

PP (Project Period), The total time for which support of a project has been programmatically approved. A project period may consist of one or more budget periods. (See also Budget Period.)

Proposal, An application for funding that contains all the information necessary to describe a project's plans, staff capabilities, and the funds requested. Formal proposals are officially approved and submitted by an organization in the name of a principal investigator.

Proposal summary form — This is an OSP proposal form. For more information, see Proposal Preparation.

Rebudget, The act of amending a budget by moving funds from one category or line item to another; also called Budget Adjustment.

RFP (Request for Proposals), A request by a sponsor for proposals for a given objective.

RFP (Request for Payment), RFP is also a request for payment handled through the MIT Controllers Accounting Office.

RFQ (Request for Quotations), A standard request for price quotations from competing procurement sources.

RSO (Research Subaward Office), The MIT office that oversees research subawards.

S&W (Salaries and Wages), Payments made to MIT employees for work performed.

SBA, Small Business Administration

SBIR (Small Business Innovation Research), The Small Business Innovation Research program promotes research and development by domestic small businesses.

Scope of Work, The description of the work to be performed on a project.

Senior Personnel, Professional personnel who are responsible for the scientific or technical direction of project.

Sponsor, The organization that funds a project via award of a contract, grant or cooperative agreement.

SRA, Society of Research Administrators. Here is the contact information:

1901 North Moore Street
Suite 1004
Arlington, VA 22209
(703) 741-0140
Info@srainternational.org

Stipend, A payment made to an individual under a fellowship or training grant in accordance with pre-established levels. A stipend provide for the individual's living expenses during the period of training.

STTR (Small Business Technology Transfer), The Small Business Technology Transfer program promotes research and development by domestic small businesses in cooperation with institutions of higher education.

STIS (Science and Technology Information System) , An on-line search system of the National Science Foundation.

Subcontract (also called subcontract or subgrant), A secondary award directed to cooperatively working with a third party to carry out the program for which a primary award has been granted. In other words, a subaward agreement allows an additional party to complete a portion of the work described in the proposal for a primary award.

Under a sponsored project a recipient also needs to acquire goods and services in order to carry out the project for which funds have been granted. This is a vendor relationship, and is not characterized by a cooperative effort to carry out the objectives of the project, but does require the acquisition of goods and services by the recipient. Using these definitions, for example, consulting contracts are vendor-type relationships and handled by the Procurement Office.

In most cases, distinctions between these two types of activities are relatively easy to make. For example, in a subaward agreement:

  1. The Subawardee has its performance measured against its portion of the scope of work of MIT's program;
  2. The Subawardee has responsibility for programmatic decision making;
  3. The Subawardee has responsibility for adherence to applicable program compliance requirements (i.e., OMB Circulars, regulations of Federal and Not-for-Profit Entities, etc);
  4. The Subawardee uses the funds to carry out a portion of the scope of work of MIT's program as compared to providing goods or services for MIT's program; and
  5. The Subawardee's principal investigator/project director may be a co-author on publications or may seek patent protection for inventions.

For more information on subawards, visit OSP's web site detailing policies and procedures for Research Subawards.

Subcontract, An agreement or secondary contract in which a third party agrees to perform some of the activities defined in the proposal for an award. A subcontract relationship is generally described at the time of proposal submission but not consummated until after the award has been made to the organization submitting the primary proposal.

Supplemental proposal, A request to the sponsor for additional funds for an ongoing project during the previously approved performance period. A supplemental proposal may result from increased costs, modifications in design, or a desire to add a closely related component to the ongoing project.

TDC (Total Direct Costs), The total of all direct costs of a project.

Terms of Award, All legal requirements imposed on an agreement by the sponsor, whether by statute, regulation, or terms in the award document. The terms of an agreement may include both standard and special provisions that are considered necessary to protect the recipient's and sponsor's interests.

Testbed, An experimental proof of concept, technology demonstration, or pre-prototype.

TLO (Technology Licensing Office), The Institute's TLO manages the patenting, licensing, trademarking, and copyrighting of the intellectual property developed at MIT, Lincoln Laboratory, and the Whitehead Institute. The TLO serves as an educational resource on intellectual property and licensing matters for the MIT community.

Total Project Costs, The total allowable direct and indirect costs incurred by an organization to carry out an approved project.

Underrecovery, see F&A Underrecovery.

Unsolicited Proposal, A proposal submitted to a sponsor that is not in response to an RFP, RFA, or program announcement. (See also Investigator-Initiated Proposal.)

Vacation Accrual — See Employee Benefit Rates.

WBS element — A WBS (Work Breakdown Structure) element is an cost object that collects expenses and revenues related to sponsored research. Many projects have several WBS elements associated with them, forming a WBS hierarchy.

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Contacts

Your primary contact at the Office of Sponsored Programs is your DLC's OSP representative. S/he will be able to answer most of your questions about the process of proposal preparation and project sponsorship. However, your representative may refer you to other OSP staff whose area of expertise more closely matches your question.

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Electronic Tools and Training

These electronic tools can make your sponsored program award acquisition easier.

More Training

The Office of Sponsored Programs has developed a full sponsored program curriculum. The following courses provide additional details about the subjects we have covered in this chapter:

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FAQs

Why are terms and conditions important?

Terms and conditions can vary from award to award, and it is critical that you read and understand the terms and conditions for each Award that funds your DLC.

What's a period of performance?

The period of performance is the time period during which the proposed work will be conducted.

If the PI has a verbal commitment from the sponsor, does that mean that the PI's proposal has been funded and that s/he can start spending the money?

No. The award money cannot be spent until the award has been executed and a cost object established.

Some awards include approval of an exception for pre-award costs. Pre-award cost objects are limited and must be set up through OSP. The PI, with the approval of the DLC head, must submit a written request to the OSP representative to establish a cost object to collect preaward expenses. You must also provide the OSP representative with a cost object for unrestricted funds that will be used in case the full award is not granted.

What other sources of funding can a DLC receive in addition to sponsored funds?

DLCs can also receive funding from gifts/endowments and from general Institute funds. Typically, however, Labs and Centers receive the bulk of their funding from sponsors, whereas Departments receive the bulk of their funding from general Institute funds.

If a project overruns, what are my options for covering the budget overrun? Can an overrun be covered by other sponsored funds?

Overruns can be avoided through proper planning and administration. However, in the unlikely event that you do face an overrun, you may not cover it with other sponsored funds. You can cover it only through faculty or DLC discretionary funds. The overrun will be covered in the award close-out process via making a Recorded Project Overrun entry on the overrun Project.

What charges can be moved off a sponsored project, and how much time do I have to make these transfers?

Costs may be transferred off a sponsored project to correct an error in the original assignment of the costs. Costs should be charged to sponsored project cost objects in proportion to the benefit provided or other equitable relationship. Costs may not be transferred to another sponsored project in order to reduce overruns. All transfers between sponsored project cost objects must be carefully explained to describe the error, how it occurred, how it was discovered, and why the costs are more appropriate to the cost object to which they are being transferred.

Errors must be corrected on a timely basis. Cost transfers should be performed during the fiscal period immediately following the period during which the error occurred. Transfers are not considered timely if they are correcting errors that are over 120 days old.

Training on journal voucher transfers is available through the Office of Employee Development.

Can budgeted funds be "rebudgeted" in categories other than those originally intended? For example, can funds budgeted to M&S expenses (Materials and Services) be used for Equipment or Salary expenses?

You may rebudget funds only within the terms of the sponsorship award. Very often, you must obtain prior approval from your sponsor before you may perform any significant rebudgeting.

In recent years, the federal government has reduced the administrative burden associated with securing prior approval for rebudgeting specific types of expenses on federal grants and cooperative agreements. However, some awards still include restrictions, and the requirement to secure prior approval before significantly rebudgeting is common.

OSP maintains information on limitations by specific award in COEUS. You should review the COEUS terms and comments before undertaking any significant rebudgeting. Specific questions not addressed in COEUS should be referred to your OSP representative.

What are "unallowable" costs?

Unallowable costs are those that a sponsor will not reimburse, such as costs for alcoholic beverages. Note that the terms "unallowable costs" and "unallowable expenses" are used interchangeably. For more information, see Classification of Unallowable vs. Allowable Costs (downloadable Word document).

For more FAQs, see Basics of Post-award Sponsored Program Administration.


Forms and References


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Expanded Table of Contents

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