Printed on: 05/20/2018. Please go to http://policy.umn.edu for the most current version of the Policy or related document.

ADMINISTRATIVE PROCEDURE

Establishing and Charging Preaward or Advance Accounts

Evaluate the risk involved in establishing an advance account or requesting pre-award authorization.

Pre-award and advance accounts are advantageous and reduce audit risk because they allow costs to be correctly charged to their benefitting activity without the need to perform historical salary adjustments or cost transfers.   However, because disallowed pre-award or advance account charges may result in significant expenditures being transferred to departmental accounts, it is important to consider carefully the risk factors involved with establishing one of these accounts.  Sponsored Projects Administration (SPA) staff are available if you have questions about the level of risk likely to be incurred for your specific situation.  Listed below are some risk factors to consider:

  • All sponsors: the sponsor may not allow these accounts or may refuse to pay for costs incurred before the start date of the award.  In addition, if the University has not yet received the award, it may not yet be clear what costs are and are not allowable; the department must cover costs not allowed by the sponsor.
  • Business, associations, foundations:
    • the sponsor may have a policy that the start date of the project is the date of final signature (thus spending cannot begin until the award is fully signed). The sponsor's policy supercedes the University's policy.
    • the principal investigator may assume the start date will be the same as the date listed on the proposal or may have an informal agreement to begin on a certain date. The sponsor, however, may not process the award on a timely basis. If the award arrives at the University with a start date that is later than the proposed or assumed start date and the sponsor will not backdate the award, any advance account charges are unallowable unless specifically approved by the sponsor.
  • State of Minnesota agencies: the date of final state signature on the award usually determines the effective date. Advance expenditure authorization is occasionally granted. Consult your SPA grant administrator before proceeding with the pre-award or advance account request.

It is very important to be careful with advance or pre-award accounts for incoming subawards (the University is a subrecipient to another organization that holds a prime grant or contract with the sponsor.) All of the above issues apply for approval by both the sponsoring organization and the prime sponsor.

Ensure that criteria for establishing the account are met:

Advance Account (an account established before all parties have signed the award):

  • All regulatory requirements must be satisfied before activity related to those issues can begin
    • Example:  Conflict of Interest requirements must be satisfied prior to any expenditure of funds
    • Example:  No work with human subjects or animal subjects can begin until the corresponding compliance approval is on file.
  • The principal investigator must comply with PI Eligibility education requirements
  • The project must have a Proposal Routing Form fully processed through Sponsored Projects Administration [See below for special provisions for Industry-Sponsored Clinical Trial pre-award accounts.]
  • The department must accept the financial risk in the event that the award is not made or the costs are not allowable within the period of the award

Pre-award Account (an account established before the project start date)  For example,, a federal award that starts on June 1 but the principal investigator needs to begin project setup on April 1)

  • The award is a new or a renewal award (continuation awards or supplements do not require filing of a pre-award account form, though departments remain responsible for all costs not covered by the sponsor.)   Consult your SPA grant administrator if you are uncertain whether a form is required. 
  • All regulatory requirements must be satisfied before activity related to those issues can begin
  • the principal investigator must comply with PI Eligibility education requirements
  • the project must have a Proposal Routing Form fully processed through Sponsored Projects Administration
  • the department must accept the financial risk in the event that the award is not made or the start date is changed
  • the pre-award account start date must be within the pre-award period allowed by the sponsor

Industry-Sponsored Clinical Trial Pre-award Account:

  • all regulatory requirements must be satisfied before activity related to those issues can begin
  • the principal investigator must comply with PI Eligibility education requirements
  • the department must accept the financial risk in the event that the award is not made
  • An expedited Proposal Routing Form must be received by SPA.
  • see related information on processing an expedited Proposal Routing Form

Extension requests (costs incurred to the sponsored account when a no-cost extension has been submitted to the sponsor but no response has been received at the University)

Institutional approval is NOT necessary because if in the event the request is denied, these costs will be removed from the sponsored account in accordance with Administrative Policy: Managing Billings to and Receivables from External Customers.

Request an Account

Prepare the Pre-award or Advance Account Request Form. Forward the form for approval.

  • Department Head or Designee (required)
  • Dean (if required)

This form supplies approvers with the information they need to review the request, thus saving time required to request additional information from principal investigators. It also provides the approvers with an explanation for why the costs are necessary for conduct of the project and an assurance that the costs are allowable under the award.

After the form is approved, send it to the appropriate grant administrator in Sponsored Projects Administration for account setup.

Receive notification of account setup

The grant administrator will review the request to make sure that it includes the necessary information.

The grant administrator will establish an account number and notify the principal investigator, unit administrator, Sponsored Financial Reporting and other appropriate University departments. The effective date of a pre-award account will be the date of final signature on the pre-award account request form (department head, or, if required, dean). The effective date of an advance account will be the anticipated start date of the project.

Typically, SPA will be able to establish a pre-award or advance account within 5 business days after it has been received by SPA.  Additional time may be needed if sponsor approvals or consultations are needed or if the request is submitted simultaneously with heavy proposal deadlines.

Charge the expenses.

Facilities and administrative costs will be charged. All costs incurred on an advance and pre-award project must meet the same criteria as costs incurred after the award arrived. If you are unsure whether the cost would be allowed, please consult with the SPA grant administrator to see if prior approval is necessary.

  • Pre-award costs on federal projects must be incurred within the timeframe allowed by the sponsor. For example, most federal agencies allow institutions to approve pre-award costs within 90 days of the award's effective date. Costs incurred before this 90 day period require specific agency approval.
  • Clinical trial pre-award accounts: on charging documents, include in the justification that the charge is a start-up cost as defined in this policy.

Monitor pre-award / advance account.

Expenditures:
  • Effort must be certified at the time it occurs. Thus effort must be certified for work conducted on the project that has the pre-award or advance account.
  • Departmental and collegiate staff must review financial reports to ensure that pre-award expenditures meet the criteria outlined above.
  • Departmental staff must review financial reports to monitor spending levels. If spending appears to be excessive, staff should stop processing documents and refer the matter to the department head and Sponsored Projects Administration.
Age (the number of days since an account has been active)
  • If the account has been established for more than 90 days, department staff must check the status of the award. Departmental and collegiate staff must use financial reports to monitor the age of the account. If the account has been established for an excessive period of time (e.g., more than 90 days), they must follow up with the sponsor or the principal investigator to ensure that the awarded funds will be forthcoming.
  • Grant administrators in Sponsored Projects Administration periodically monitor the age of pre-award and advance accounts and request explanations or facilitate closing of unawarded projects.

Upon award start date or finalization, reconcile the pre-award / advance account to the award.

  • If no award is issued: the department is responsible for transferring the charges from the pre-award / advance account onto the non-sponsored account listed on the pre-award / advance account request form. Sponsored Financial Reporting (SFR) will terminate the pre-award / advance account upon notification from SPA. If the department does not transfer the charges in 30 days from the request, SFR will process the charge transfer and charge a fee in accordance with Administrative Policy: Selling Goods and Services to University Departments.
  • If some or all pre-award or advance account charges are not allowed by the sponsor: If the sponsor disallows certain charges and includes that information in its award documents, SPA makes a note on the Notice of Grant Award (NOGA) for the new award.  Upon receipt of the award documents, the department is responsible for reviewing the award terms and verifying that all pre-award or advance costs are allowable or ensuring that a special request to the sponsor for approval is initiated.  For unallowable costs, the department is responsible for transferring them onto the non-sponsored account listed on the pre-award / advance account request form using the deadlines specified in the Cost Transfer Approval Matrix. SFR handles these unallowable charges in accordance with Administrative Policy: Managing Billings to and Receivables from External Customers.
  • If award information changes: Occasionally the award will be issued by a different sponsor than that listed on the proposal, or the type of funding used will come from another source. In these cases, the account number may be changed upon award receipt. The department will be responsible for transferring charges from the advance account to the revised chart-string.

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