Fiscal Responsibilities of Principal Investigators

A. Purpose

This policy summarizes some of the obligations imposed on Principal Investigators by federal regulations and Northwestern policy.

B. Revision history

Originally issued: March 2000

C. Persons affected

All Northwestern Health Sciences University faculty engaged in research activities.

D. Related research policy documents

Cost Sharing

E. Policy

At Northwestern Health Sciences University, the Principal Investigator (PI) has overall responsibility for the technical and fiscal management of a sponsored project. This includes the management of the project within funding limitations, and assurance that the sponsor will be notified when significant conditions related to project status change. This document addresses specific responsibilities concerned with the financial management of sponsored projects.

While responsibility for the day-to-day management of project finances may be delegated to administrative or other staff, accountability for compliance with Northwestern's policy and sponsor requirements ultimately rests with the PI.

This policy is divided into three parts:

  • Preparation and submission of proposed budgets
  • Management of project expenditures
  • Special requirements related to sponsor notifications

Preparation and submission of proposed budgets

In proposing budgets for sponsored projects, the PI assures Northwestern Health Sciences University and the potential sponsor that project finances are represented as accurately as possible. In addition, specific requirements, including cost principles as defined by the federal government in Office of Management Budget (OMB) Circular A­21, and consistency requirements as imposed by the federal Cost Accounting Standards (CAS) Board, must be adhered to at the proposal stage, as well as when funds are expended.

Allowability

Proposals should not include expenses which the federal government (in OMB A-21 or other regulations) or the sponsor has identified as unallowable. Similarly, expenses which are to be considered as indirect expenses, e.g., certain types of office supplies and clerical salaries, may not be proposed and budgeted as direct expenses, unless they meet the criteria defined in Charging for Administrative and Technical Expenses.

Cost Sharing

Proposed budgets should delineate the complete committed cost of the project, identifying the amount requested from the sponsor, and other costs that Northwestern Health Sciences University commits to pay for. A commitment to use Northwestern Health Sciences University resources to pay any portion of project costs that would otherwise be borne by the sponsor must be identified and tracked as cost sharing. (See Cost Sharing ). At the time such awards are finalized, PIs must assure that department funds are identified and separately budgeted for those expenses.

Commitment of Effort

Proposals should accurately represent the amount of time that key personnel are committing to the project. In preparing proposals, PIs must be careful not to overcommit themselves or others. PIs may submit proposals on the assumption that not all will be awarded, but, at the time of award, an accurate representation of time to be devoted to the project, whether that effort will be paid for by the sponsor or by Northwestern Health Sciences University, is necessary. Subsequent changes in levels of effort may also require advance notification to and approval by sponsors.

Estimating Methods

When estimating dollars to be budgeted for project expenses, estimating methods must be consistent with Northwestern Health Sciences University's accounting practices and must allow expenditures to be accumulated and reported to at least the same level of detail as the estimate.

Management of project expenditures

Authorization of Direct Charges

To authorize the expenditure of funds to be charged directly to sponsored projects, the originating department must assure that:

  • the estimated charge is reasonable;
  • the expenditure is allowable by the funding source and, if a charge to a federally-funded project, by OMB Circular A-21;
  • the expenditure is necessary and allocable to the project;
  • the justification for the expenditure is documented;
  • the charge is coded to the correct General Ledger code and function;
  • the charge is correctly coded as allowable for inclusion in the calculation of colleges indirect cost;
  • the method of allocation of costs is appropriate and documented; and
  • the charge has been processed appropriately through the Business Office

Certification of Direct Charges

Monthly Expenditure Statements are the official record of project expenses and the basis for cost reimbursements to Northwestern Health Sciences University. All Monthly Expenditure Statements for sponsored project and cost sharing accounts contain the following certification statement:

These salary and wage charges have been reviewed and, to the best of my knowledge, are reasonably accurate approximations of work performed on this project, taking into consideration the period of performance for the project. Other direct costs charged to this project have been reviewed and are, to the best of my knowledge, reasonable.

Where required, differences will be corrected through the accounting system.

Signing this certification is the responsibility of the project Principal Investigator (or Co-PI). A PI may delegate the preliminary review of statements for accuracy, but may not delegate certification of the appropriateness of the charges. It is good practice for departmental administrators or other staff members who have reviewed the expenses to co-sign or initial this certification.

In addition, commitments to share in paying for a project, i.e., committed cost sharing, must also be documented by means of a PI certification. Monthly Expenditure Statements for cost sharing accounts contain the same certification statement for the PI's signature. Any erroneous transactions must be corrected in a timely manner by an appropriate transfer.

Whenever expenses are moved to or between sponsored accounts, the PI must assure that the project that ultimately pays for the expense is the project which benefited from that expense, and that there is adequate documentation to support the appropriateness of the transaction. Certification of Monthly Expenditure Statements provides this assurance.

PIs are responsible for ensuring that any expenses posted to a sponsored project are for salaries or items which were purchased and used prior to the end date as specified by the award. It is the PI's responsibility to seek a No-Cost Extension of the award if that is necessary. Adequate explanation and documentation for these charges should be collected and maintained for three years after the award has been formally closed out.

Where documentation cannot be provided as to the allowability of what appears to be out-of-period costs, the sponsor may deny them. In this case, the department will be expected to cover the expense from unrestricted sources. Each department must maintain a mechanism to retain and track Monthly Expenditure Statements, assuring that they are certified within 75 days of the end of the Fiscal Quarter for which the Expenditure Statements are issued. Departments may consolidate Expenditure Statements for certification, as long as every expenditure can be linked to a certification. Difficulties in this regard should be discussed with the Vice President of Academic Affairs and Research.

Charging Salary to Projects

Salary being charged to sponsored projects must be supported by documentation of a corresponding appropriate level of effort. Effort Report or Time Card entries must be recorded accurately.

Charging Proposal Expenses to Ongoing Projects

The cost of proposal preparation activities in support of new directions in research may not be charged to sponsored projects. Department heads must ensure that non-sponsored project funds are available to cover the effort spent preparing proposals in support of new directions in research. The cost of proposal preparation for continuing research (continuation or extension proposals) is appropriately charged to current projects.

Clearing of Overdrafts

PIs are responsible for the ongoing fiscal management of awarded projects, including regular monitoring against project period budgets. If an account is in overdraft upon expiration of the term of the sponsored project agreement as a result of unanticipated project expenses, and additional funds are not available from the sponsor, the PI must identify an appropriate source of funds (e.g., gift, endowment, or operating budget) to cover the expense.

Since charges to clear overdrafts reflect direct project costs, they must not be incorporated into cost pools which lead to indirect cost recovery. These dollars represent project costs being borne by Northwestern Health Sciences University, and therefore must be accounted for in the same manner as cost sharing.

The department must identify the source of funds to the Business Office which will create a cost sharing account. The department may then initiate the necessary expense transfer, including documentation of the nature of the expenses, noting they were legitimate project expenses but the funding was inadequate, and other reasons for the transfer. The department is responsible for affecting the timely clearance of any such unfunded expenditures from within its resources.

Project Close-out

PIs are responsible for overseeing the proper close-out of sponsored projects, including the timely submission of all required reports. If final technical reports are to be completed after the project end date, and funds from the project are available to pay these expenses, a No-Cost Extension should be obtained from the sponsor to cover the expense of producing and distributing those reports. If funds are not available from the project, then the PI, department or school must identify unrestricted funds to pay final report costs.

Special requirements related to sponsor notifications

The PI must assure that ongoing fiscal management is accomplished in accordance with sponsor requirements, including the handling of:

  • rebudgeting requests;
  • no-cost extensions; and
  • requests to modify the scope of the project

In the case of federal cost-type contracts (as opposed to grants), Principal Investigators must assure compliance with the Limitation of Funds and/or Limitation of Cost clauses which include the requirements that:

  • the Contractor notify the sponsoring agency in writing at any time that there is reason to believe the total cost to the Government for the performance of the project will be greater or substantially less than the estimated cost; and further
  • the Contractor notify the sponsoring agency if, at any time, there is reason to believe that the costs which are expected to be incurred in the next succeeding 60 days, when added to all costs previously incurred, will exceed 75% of the specified estimated cost.

Failure to provide such notice may preclude Northwestern Health Sciences University from receiving additional funding on that contract. In the case of grants, similar restrictions often apply and appear in the grant award itself or in the accompanying agency policy manual or administrative guide. Such notifications must be made on a timely basis, in order to allow sufficient time to arrange for and process additional funds, or for the reduction in spending and effort in order to phase out the program in an orderly fashion if additional funds are not available.

The Principal Investigator's department head should also be informed, in advance, of potential funding problems. In addition, PIs must also inform sponsors of other significant changes affecting the project. OMB Circular A-110 lists a number of these, including:

  • change in the scope or the objective of the project or program (even if there is no associated budget revision);
  • change in a key person specified in the application or award document;
  • absence for more than three months, or a 25-percent reduction in time devoted to the project, by the principal investigator;
  • need for additional federal funding; and
  • transfer of funds allotted for training allowances (direct payment to trainees) to other categories of expense.
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