Printed on: 02/25/2018. Please go to http://policy.umn.edu for the most current version of the Policy or related document.

ADMINISTRATIVE POLICY

Charging Sponsored Costs Outside the Award Period

Responsible University Officer(s):

  • Vice President for Research

Policy Owner(s):

  • Associate Vice President for Research Administration

Policy contact(s):

Date Revised:

February 2014

Effective Date:

March 1999

POLICY STATEMENT

Principal investigators (PIs) who want to obtain an account (a sponsored project chart string)  before the start date of a new or renewal sponsored project, or before the award has been accepted/processed by the University must establish an advance or preaward account.   It is recommended that PIs and their department request a pre-award or advance account at any time that spending needs to occur prior to the time a new or renewal award is processed; this permits allowable costs to be direct charged to that award without the necessity for a historical salary adjustment or other cost transfers.  Costs charged to pre-award or advance accounts should be limited to the minimum amount needed for the pressing programmatic needs of the project (as determined by the PI and their department) because the University cannot bill for such costs until the official award is made by the sponsor, and the University has not yet formally received or accepted the award.

Education and Compliance Requirements

Principal Investigators must be current on their required investigator training (Responsible Conduct of Research) and all key personnel must have an approved, current REPA (Report of External Professional Activities) and any related conflict of management plan before an account string can be established. 

Charging Costs to a Sponsored Pre-award or Advance Account

All costs incurred on an advance or preaward account must meet the same criteria as costs incurred after the award arrives. This can at times be difficult to determine since the University may not yet have received the official terms governing the award.  PIs and Departments assume such risks and must pay any costs not ultimately paid by the sponsor.   Subawards will not be issued on pre-award or advance accounts.

Exemption for Certain Continuation Awards

Federal awards subject to the Federal Research Terms and Conditions, and many non-federal awards typically allow costs to be moved between budget periods in the same competitive segment without agency approval. These types of awards do not require pre-award account forms to be filed, but the department remains responsible if a continuation or supplemental award is not issued  or does not cover the costs,  Pre-award or advance accounts are, however, required for new or renewal awards, since receipt of these types of awards pose a higher risk.  PIs and department administrators must review their agency’s terms and conditions carefully to determine if agency prior approval is needed.   Sponsored Projects Administration staff (grant administrators) are available to assist with questions.

Advance Account:

Advance accounts are used when the University has received award paperwork and the project’s start date as listed in the pending award documents is on or after the current date, but award negotiations have not yet been completed.

To avoid delaying the start of the research, the principal investigator can request an advance account to begin the project on or after the start date listed in the draft agreement. The charges on this advance account will be allowable because once the agreement is signed, the start date on the award will coincide with the effective date of the advance account.   While typically used for contracts, advance accounts may also be used for grants and cooperative agreements if the need arises.

Preaward Account:

Some sponsors allow charges to be incurred prior to the start date listed in the agreement. Federal grant sponsors often permit charges up to 90 days before the start date and many businesses funding clinical trials allow start-up costs on their awards. In these cases, the principal investigator can request a preaward account.

Even though the charges are incurred outside the dates of the final award they are allowable because sponsor policy permits them.  Establishing a pre-award account is the institutional preferred method for charging such costs.  However, In lieu of obtaining a preaward or advance account, it is allowable to charge the expenses to a departmental account and transfer them to the sponsored project account after it has been finalized. However, if the latter method is used, the expenses must be moved within the cost transfer deadlines.   

Pre-award accounts are typically initiated for a period of time not to exceed 90 days.   Continued spending beyond that time is appropriate only if there remains a reasonable expectation that an award will be forthcoming.  

REASON FOR POLICY

Principal investigators have legitimate business reasons for needing preaward or advance accounts and for incurring costs planned for future budget periods. These accounts are established by the University to reduce audit risk and to allocate costs immediately to their benefitting activity, but they also put the University at risk because sponsors may decide not to issue an award to the University, may decline to cover the time period authorized for pre-award spending, or may be unwilling to negotiate acceptable award terms with the University.

This policy balances that risk with legitimate business needs and ensures that University funds are “advanced” to cover only those costs that are necessary to initiate or sustain important sponsored project activity.  This policy outlines internal controls and procedures that ensure accountability over the funds, meet required sponsor regulations, and provide documentation for audits.

PROCEDURES

FORMS/INSTRUCTIONS

APPENDICES

FREQUENTLY ASKED QUESTIONS

CONTACTS

Subject
Contact
Phone
Fax/Email
Primary Contact(s)
612-624-1648

DEFINITIONS

Account
For the purposes of this policy, account means an “EFS chart string” that is used to segregate costs associated with a single sponsored project.  It does NOT have the more specialized meaning that EFS uses to designate a given type of expense in the financial system (e.g. “object code.”)
Advance Account
Advance accounts are used when the University has received award paperwork and the project’s start date as listed in the pending award documents is on or after the current date, but award negotiations have not yet been completed.
Advance Account Costs
Costs incurred on an advance account.
Continuation Award
Funding obligated for a given budget period within the specified competitive segment (“project period”) designated in the original award.  The level of funding is typically specified in the original award, with the understanding that funding is based on availability of funds and satisfactory progress, but without competitive proposal review.
Pre-award Account
Pre-award accounts are used to establish a sponsored project account to allow work to begin and charges to be incurred before the project start date arrives.   In most cases, the University has not yet received award paperwork from the sponsor, but someone (most often the PI) has received verbal or written indication from the sponsor that an award will be forthcoming.
Pre-award Costs
Costs incurred on a pre-award account.
Renewal Award
The award of a new competitive segment (project period) for an award previously funded, usually accompanied with funding for the first budget period of that new competitive segment.  These awards are typically awarded as the result of a competitive review process following submission of a competing proposal by the University.
Sponsored Project
An externally funded activity that is governed by specific terms and conditions. Sponsored projects must be separately budgeted and accounted for subject to terms of the sponsoring organization. Sponsored projects may include grants, contracts (including fixed price agreements), and cooperative agreements for research, training, and other public service activities.
Start-Up Costs
Costs that are necessary to start an industry-sponsored clinical trial, such as salary expenses for developing the IRB application, protocol development costs, and recruitment costs.
Supplement Award
The award of additional funding within an existing competitive segment to augment work or cover unexpected costs performed during one or more existing budget periods.   This funding is most frequently awarded by the sponsor on a non-competitive basis.

RESPONSIBILITIES

Principal Investigator
  • Initiates the process of obtaining a preaward or advance project after determining that there is a business need to incur costs before the award is accepted by the University.
  • Decides what expenses need to be charged to a pre-award or advance account
  • Provides resolution to aged preaward or advance project, if appropriate.
  • Initiates the process for documenting and charging accelerated costs.
Unit Administrators
  • Processes the documents and monitors preaward expenses.
  • Monitors age of these projects; works closely with the principal investigator to verify that an award is still forthcoming; notifies SPA if it appears that an award will not be issued or if the award effective date will likely change such that special agency approvals for pre-award spending will be needed (e.g., pre-award spending greater than 90 days in advance of the start date.)Removes unallowable charges
  • Assists the principal investigator in reviewing aged preaward and advance projects.
  • Reconciles the pre-award/advance account to the final award; notifies SPA if any special actionsare needed (e.g., request for agency approval.)
Unit Head
  • Approves the request after discussing the costs that need to be charged with the PI, as needed.
  • Supplies a nonsponsored program number to which expenditures will be charged if charges are unallowable. Provides resolution to aged preaward and advance projects, if appropriate.
Dean
  • Provides general oversight over number and age of preaward and advance projects in their area. Provides resolution to aged preaward and advance projects, if appropriate.
Collegiate Staff
  • Monitors expenses on preaward and advance projects.
  • Monitor age of these projects.
Sponsored Projects Administration (SPA)
  • Reviews advance and preaward project requests.
  • Verifies that principal investigator has met the PI education and compliance requirements.
  • Provides guidance to PIs and departments about the appropriate use of pre-award and advance accounts
  • Sets up the preaward or advance project.
  • Monitor age of preaward and advance projects.
  • After conferring with the PI and/or department, initiates closeout process if it appears that an award will not be forthcoming. 
  • Upon receipt of an award, verifies that the time period authorized by pre-award spending met the agency’s pre-award spending rules; works with PI or department to obtain a request for non-standard pre-award spending period if needed.    Reports issues to Research Compliance Office for resolution.
Sponsored Financial Reporting
  • Terminates unfunded preaward and advance projects upon notification from SPA.
  • Transfers expenses for preaward and advance accounts that do not result in awards to departmental non-sponsored funds, if the department does not move the expense as required in the procedure entitled “Establishing and Charging Preaward or Advance Accounts”.

RELATED INFORMATION

HISTORY

Amended:
February 2014 – Comprehensive review. Minor revision. Re-wrote policy for clarity. Added definitions. Added verbage about responsibilities in the event that an award is not likely to be forthcoming and the need to reconcile pre-award or advance account expenses once the final award has been accepted. Clarified that pre-award account forms need not be filed between continuation budget periods or on supplements. Clarified that subawards will not be issued on pre-award or advance accounts.
Amended:
July 2008 - Policy updated to reflect rollout of Enterprise Financial System (EFS) and CUFS retirement. Procedures for this policy consolidated into one procedure.
Amended:
July 2004 - Added sponsor grant/award number and the dates of the budget period affected by accelerated work to the accelerated work form.
Amended:
October 2003 - Clarified definitions, permitted use of preaward account for start-up costs on industry-sponsored clinical trials, clarified oversight responsibilities, clarified effective date of preaward and advance accounts.
Amended:
July 2001 - Retitled policy to clarify scope of policy. Reorganized policy statement to differentiate between charging costs for new projects and continuing projects.
Effective:
March 1999
Supercedes:
Guidelines for Establishing Accounts for Pending Awards, July 1996.
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