Financial Management Issues

9.10 Other Financial Management Issues
Most awards are made on a “cost-reimbursable” basis, where the University is reimbursed for actual expenses incurred—usually on a monthly basis—by billing the sponsor or by drawing against a sponsor’s LOC account. Some awards, usually from private sponsors, are funded by a payment schedule which typically includes some advance payment. Should the PI/PD receive a sponsor check, he/she should take it to his/her business office, which will forward it immediately to PAFO along with identifying information for deposit to the project account.

9.10.1 Strategic Sourcing and Procurement
PI/PDs should first consult with their departmental administrators for assistance with purchasing and ordering procedures. Procedures vary depending upon what is ordered. BU has contracts with some vendors to ensure the best prices, and most large items require bids or unique source justification. Consulting with the appropriate person in the Sourcing and Procurement Department can greatly simplify and facilitate the process. PI/PDs should note that special procedures apply to the purchase of hazardous and other restricted items.
For Additional Information see: Sourcing and Procurement

9.10.2 Equipment
The University must properly classify, safeguard, and depreciate its equipment and abide by federal guidelines as stated in OMB Circular A-110 and the terms of sponsored awards with respect to the purchase, use, and disposition of equipment. PI/PDs planning to purchase equipment using sponsored project funds should refer to the specific terms of the agreement and contact OSP for any necessary advance approvals.

Each department of the University should maintain an accurate inventory of its equipment. In addition, federal regulations require that a complete equipment inventory survey be taken every two years by Property Management.
For Additional Information see: Property Management

9.10.3 Animal Charges
Boston University investigators conducting protocols involving animals will incur animal-related charges, including purchases and husbandry costs. As stated in the Animal Care and Use section in Chapter 3, PI/PDs are responsible for assuring that there is an approved protocol on file with the IACUC Office for any work involving the use of animals, and in the case of externally funded research, that the approved protocol is linked with a specific proposal or sponsored project. Charges for the purchase or caring for animals should not be charged to a sponsored award prior to receiving such approval.

9.10.4 Travel
In addition to meeting all other policy requirements, travel costs charged to grants and contracts are subject to specific limitations and restrictions, in accordance with the terms set by the sponsor. Travelers on University business trips that are funded by a federal grant or contract must abide by the OMB Circular A-21 rules on air travel.

  • Domestic Travel: Domestic Travel is defined as travel within and between any of the 50 United States, Puerto Rico, U.S. Virgin Islands; travel between the United States and Canada and within Canada. When traveling domestically, one should use the lowest available economy class airfare.
  • Foreign Travel: International travel on projects funded directly or indirectly by federal funds requires travelers to comply with the Fly America Act. For international air travel, Federal requirements state that American carriers must be used when a traveler is flying between the United States and another country or between other countries. Not using American flag carriers when only cost and convenience are factors is not permitted. Exceptions to use of American carriers can be found on page 20 of: Travel and Business Expense Guidelines.   Questions should be addressed to PAFO.

Prior Approvals: Grants from some federal agencies and most federal contracts require that all international travel—even if included in the award—be approved in advance (normally 45–90 days) by the sponsor’s grants or contracts officer.
For Additional Information see: Travel

9.10.5 Program Income
Program Income is gross income directly generated by a supported activity or earned by the institution as a result of an award during the period of the award. The treatment of program income on federal grants is stipulated by the administrative requirements of the awarding agency and depends, in part, on whether the funded project is for research or another approved activity. Similarly, non-federal sponsors may have terms and conditions that govern the treatment of program income.
There are three methods for treating Program Income:

  1. Additive: Program income funds are added to the project’s committed funds by the awarding agency and recipient, thus increasing the amount available to accomplish program objectives (increase in available budget).
  2. Matching: Program income is used to finance the non-federal share of the project (offset to cost-sharing or matching). Program income is used for costs during the project period unless the sponsor authorizes deferral to a later period.
  3. Deductive: Total funds available to the project remain the same and the funds generated through program income are deducted from the financial commitment of the sponsor (offset to sponsor’s funding).

In most cases, a separate account should be established to house program income. This allows accountants to submit reports on program income easily, auditors to review program income for compliance with regulations, and allows PI/PDs to utilize their program income funds (where allowable) to maximum advantage. Whether a separate account is created or not, the following are minimal expectation of PI/PDs and departmental administrators with respect to program income:

PI/PDs are responsible for the following:

  • Identifying sources of actual and potential program income at the proposal stage.
  • Completing required program income sections in the grant proposal as necessary.
  • Developing a plan for using program income.
  • Discussing anticipated program income with the departmental administrator.
  • Verifying program income on reports.
  • Addressing account balance issues at final project termination.

Departmental administrators are responsible for the following:

  • Assisting PI/PD in calculating prices.
  • Billing for products or services which produce program income.
  • Reconciling revenue invoiced or submitted against financial reports.
  • Monitoring levels of program income in the account and any limits that are set by the sponsor.
  • Properly depositing income received in accordance with the University’s revenue policy.
  • Monitoring expenditure levels.

PAFO is responsible for tracking and reporting program income to sponsors


9.10.6 Interest-Bearing Accounts
BU will accept grants which contain a provision requiring the accrual of interest on advance payments. Depending on the terms and conditions of the award, interest earned may need to be returned to the sponsor or used to further support the purposes of the sponsored project. For federal awards, interest on “excess cash” (cash in excess of current expenses) in excess of $250 annually must be returned to the federal government. If payments are made in advance and there is no formal requirement to make the interest available to the project, such interest is deposited in the institution’s general fund.

9.10.7 Service Centers
A Service Center is an organizational unit which provides specific types of goods and/or services to Boston University departments and is supported by interdepartmental charges to the user department’s operating accounts. The users typically determine the amount of goods or services they obtain. Such goods or services might be available from commercial sources, but for reasons of convenience, cost, or control are often provided more effectively and conveniently through a BU service center. Service center rates are calculated based on costs that will result in a “break-even” situation. Service centers must follow these standards:

  • • Provide goods and services primarily to other BU departments, sponsored programs, or activities.
  • •Operate as a discrete unit having control of revenues and expenses with ongoing activities.
  • •Charge all internal users equally for services at a rate calculated to recover their costs over a fixed period of time.
  • •Sales to external entities, if any, usually are incidental.

For additional information about service centers at Boston University, including programmatic and financial management policies, rate calculation templates, and a listing of BU service centers, please visit the Service Center Administration homepage.

9.10.8 Financial Monitoring
Overspending or under-spending projects can reflect poorly on the PI/PD, PAFO, and the University, indicating inadequate planning or poor internal financial management and controls. A major responsibility shared by the PI/PD, the departmental business office, and PAFO is to monitor the budget and ongoing charges. If a project ends with a deficit, the PI/PD’s department or administrative area is responsible for covering the remaining expenditures. Under-spent projects, though of less concern than overspent ones, can still be serious. Particularly severe under-spending (20% or more of a project’s total direct costs) can suggest that the goals of a project have not been met or that the Cost Accounting requirements related to budgeting were not utilized. In most cases funds not spent by the end of the project period must be returned to the sponsor.

To avoid either of these issues, careful planning, monitoring, ongoing communication with the sponsor, and revising the work plan as needed should be exercised throughout the life of the project. Reports are available from the University’s financial system to reflect sponsored project activity. This information should be used by the PI/PD and departmental administrator to monitor the financial health of a sponsored research project and reviewed to determine whether:

  • Charges are within agreement, budget, and agency guidelines.
  • Charges are reflected in the correct budget categories.
  • Funds are being expended in a timely manner.
  • Cost overruns or severe under-spending are developing in specific budget categories.

Additional information on financial management, including BU’s Overdraft Policy, can be found on the PAFO Resources page.

9.10.9 Subrecipient Administration and Monitoring

As a condition of its acceptance of funding from sponsors, the University is obligated in its role as primary recipient to undertake certain stewardship activities as well as to ensure that performance goals are achieved.

9.10.9.1 Pre-Award Administration:  Prior to award, OSP assesses a subrecipient organization’s financial status and internal controls.  In rare instances, BU may determine that the risk of entering into a subaward with the proposed entity is excessive and not move forward with executing the agreement.  In addition to those required by the sponsor, OSP will establish terms and conditions in the subrecipient agreement consistent with the level of perceived risk.

9.10.9.2 Post-Award Monitoring:  The subrecipient agreement indicates the address to which monthly invoices are sent. These invoices are reviewed by the PI to ensure that adequate technical progress has been made to support the charges and by PAFO for compliance with the terms and conditions of the subrecipient agreement.  The signature of the PI on the invoice or evidence of PI authorization through other means (such as email) is required. Alternate signatures (e.g. department administrator, graduate research assistant, postdoctoral fellow, etc.) are generally not considered adequate because these individuals generally do not possess full knowledge of the costs incurred in relation to the work performed on the subaward.  Cases of inadequate performance must be brought to the attention of the OSP administrator as soon as they are discovered since BU has the responsibility to notify the sponsor if any lack of performance on behalf of the subrecipient will have a significant (unanticipated) impact on the scope of the award.

9.10.9.3 Subaward Closeout:  Before a final invoice can be paid, the BU PI must certify that all technical reports and /or deliverables have been received and that the subrecipient has fulfilled its obligations. Final verification of technical completion by the subrecipient is indicated by the PI’s signature and date on the final invoice. In addition, final close out documents [residual property; inventions and discoveries (including a negative report); subrecipient’s release forms (where applicable), final risk assessment review; final audits (desk, assist when necessary)] are required.

9.10.9.4 Other Monitoring Activities:  Boston University employs a “risk‐based” approach to subrecipient monitoring. Factors that may affect the timing, nature, and extent of during‐the‐award monitoring include program complexity, percentage passed-through, amount of award, organization type and overall subrecipient risk.  BU uses several tools in its monitoring activities, including annual questionnaires, audit review and resolution, and desk reviews.

For additional information on Subrecipient Administration and Monitoring, please visit the “Subrecipient Agreements” section on the PAFO Post Award Policies page.

9.10.10 Project Reporting and Financial Closeout
Sponsors typically require periodic financial and technical reports. The schedule and format for completing reports is outlined in the sponsor’s notice of award or in the agency’s general terms and conditions. The PI/PD is responsible for submitting both the periodic and the final technical report to the sponsor within the timeframe specified. Failure to submit these reports in a timely manner could jeopardize future funding by the sponsor, not only for the PI/PD, but also for other BU investigators funded by the same sponsor.

A copy of a project’s final report or a copy of the transmittal letter must be submitted to OSP. PAFO submits financial reports to the sponsors for research and other scholarly activity that reflect the use of sponsored funds as recorded in the financial records of the University and are in compliance with the sponsor’s terms and conditions. Compliance with policies surrounding the use of a sponsor’s funds is a responsibility shared by PI/PDs and the departmental business office.

Interim Reports: The PI/PD’s business office must sign off on interim financial reports and return them to PAFO within the time period specified. Draft interim reports not returned within the specified period will be submitted to the sponsor based on the University’s financial records without departmental approval in order to ensure compliance with the sponsor’s reporting deadlines.

Final Reports: The department that is considered to be responsible for an award will review and verify draft final financial reports, communicate changes and additional information to PAFO, and return the draft report—signed by the department business office and/or the PI/PD—to PAFO no less than 30 days prior to sponsor’s reporting deadline. Draft final reports not returned within the specified period will be submitted to the sponsor based on the University’s financial records without departmental approval in order to ensure compliance with sponsor reporting deadlines. At the time of closeout, PAFO is responsible for changing the award status in the University financial system to “AR [Accounts Receivable] Status” to prevent further charging to the account.
Sponsored Projects Financial Reporting and Financial Closeout
For Additional Information see:
Provost and VP Over-expenditure Memo, August 2008: Provost Overdraft Memo & Overdraft Policy

9.10.11 Fixed Price Awards
Boston University, as a not-for-profit educational institution, conducts sponsored programs on a cost reimbursement basis. However, BU’s OSP will consider a fixed-price relationship only in exceptional cases when there is no alternative. In such cases, deliverables on fixed price awards should be limited to status and/or final technical reports.
All cost proposals for fixed price relationships should be estimated on a cost basis consistent with standard cost accounting policies. A detailed budget should be prepared for BU/OSP review, even if not required by or submitted to the sponsor. Fixed price relationships should never be utilized where there is any uncertainty related to anticipated costs. Expenses should be budgeted and justified based on anticipated reasonable cost. Budgets should not anticipate revenue in excess of expense or funding to recover expenses incurred prior to the beginning of the project.
All proposals, including the statement of work, description of deliverables, delivery due dates, and budget should be routed in accordance with BU standard procedures. The PI/PD, the unit head, and the dean of the school must review and sign the BU Proposal Summary Form, accepting the risks inherent in a fixed price agreement.