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Costs charged to sponsored projects that will not be collected from the sponsor for reasons of unallowability, unallocability, dispute with or bankruptcy by the sponsor, or other reasons, must be paid for with University funds. This will be done by moving uncollectible costs to a nonsponsored program at the department level promptly after a determination is made by Sponsored Financial Reporting, Sponsored Projects Administration, or the responsible department that the costs are deemed uncollectible. If the uncollectible costs (or portion thereof) are subsequently collected from the sponsor (bankruptcy settlement, legal settlement, repayment plan, etc.), the collected amount will be applied proportionately to direct and facilities and administrative (F&A) costs.

Implementation of this policy will improve oversight and accountability for uncollectible costs by ensuring that all costs incurred in connection with the conduct of a sponsored project are managed by the responsible units. Timely movement of uncollectible costs to a nonsponsored program will result in proper classification of expenses, which will lead to more accurate and complete financial information, and increased compliance with sponsor regulations regarding costs and cash management.

• Establishing Nonsponsored Accounts for Uncollectible Costs on Sponsored Projects
• Moving Uncollectible Costs to Nonsponsored Accounts

• Historical Salary Adjustment (HSA)
• Journal Entry (JE)

Subject	Contact	Phone	Fax/Email
Primary Contacts	Denise Seck Sue Paulson	612-624-2513 612-624-5007	seckx001@umn.edu spaul@umn.edu
Allowable Costs on Sponsored Projects	Grant Administrators (SPA)	612-624-5599
Establishing Default Accounts	Sponsored Financial Reporting	612-624-6026
Identifying Departmental Non-Sponsored Accounts	Sponsored Financial Reporting	612-624-6026
Moving Unallowable Costs	Sponsored Financial Reporting	612-624-6026

Budget Overruns

Direct costs that are incurred and charged to a sponsored project, but are in excess of the awarded amount.

Sponsored Financial Reporting (SFR)

The unit within the Controller's Organization that is responsible for financial aspects of post-award administration. Includes, but is not limited to, financial reporting, invoicing, collecting on sponsored accounts, and coordination of external audits of sponsored projects.

Sponsored Project Administration (SPA)

The unit within the Office of the Vice President for Research that is responsible for pre-award and some post-award administration on sponsored projects.

Unallocable Costs

Costs that are allowable but are not assignable to a sponsored project because they do not provide relative benefit to the project, or were otherwise not allocable under sponsor guidelines or the specific sponsor agreement. Example - late charges (charges for goods or services that are allowable but incurred after the project end date).

Unallowable Costs

Costs that cannot be charged to a project per sponsor guidelines or any other costs incurred by the University that Office of Management and Budget (OMB) Circular A-21 specifies cannot be included in the development of the indirect cost rate charged, nor as a direct cost to a Federally sponsored project, nor included in ISO/department recharge rates.

Uncollectible Accounts Receivable

Any costs charged to a sponsored project that have been billed to the sponsor, but subsequent to the billing are determined to be uncollectible from the sponsor.

Uncollectible Costs

Any costs charged to a sponsored project that will not be reimbursed by the sponsor. They include:

• Budget overruns;
• Unallowable costs;
• Unallocable costs; and
• Other uncollectible costs that do not meet any of the above criteria, but that the sponsor is otherwise unwilling or unable to pay, (e.g., amounts that are disputed by the sponsor, or amounts deemed uncollectible due to sponsor bankruptcy).

Unit

Any organizational entity within the University that has budgetary authority. Includes, but is not limited to colleges, departments, centers, institutes, etc.

Principal Investigator

• As the individual responsible for sponsored projects, ensure that risks of incurring uncollectible costs are managed appropriately by complying with all sponsor terms and conditions.
• Identify agreements concerning responsibility for uncollectible costs incurred on cross-college sponsored projects.
• If uncollectible costs are charged:
  • work with Unit Head to ensure availability of non-sponsored funds against which those costs can be applied.
  • ensure that processes are followed to provide timely resolution and prevent future recurrence.

Unit Administrative Staff

• Advise and work with Principal Investigators so that uncollectible costs are not charged to sponsored projects.
• Move uncollectible costs to the appropriate nonsponsored account within 30 days of notification of their uncollectibility, or within 30 days of submission of the final report and/or invoice to the sponsor.
• Advise and work with Principal Investigator and Unit Head to identify non-sponsored funds against which uncollectible costs can be applied.

Unit Head

• Ensure the availability and authorize the use of non-sponsored funds to cover uncollectible costs.
• Work with Principal Investigators to establish agreements concerning responsibility for uncollectible costs incurred on cross-college sponsored projects.
• Provide oversight and ensure that mechanisms are in place and utilized to ensure timely resolution of uncollectible costs.

Dean's Office

• Work with Unit Head to resolve open issues on agreements concerning responsibility for uncollectible costs incurred on cross-college sponsored projects.
• Provide oversight and take corrective action as needed to resolve issues concerning uncollectible costs.

Associate Vice President - Finance & Controller

• Establish policies and procedures governing removing uncollectible costs.
• Determine responsibility for covering costs in cases where uncollectibility occurs and there is a dispute as to the unit responsible.

Controller's Organization - Sponsored Financial Reporting

• Initiate late payment procedures and ensure that, as appropriate, Principal Investigators, Collegiate Deans, Unit Heads and Unit Administrators are notified of potential collection problems.
• Assist units in identifying any uncollectible costs (for example, overdrafts or late charges) that they must remove from sponsored projects.
• If unit administrative staff do not remove uncollectible costs in accordance with their responsibilities, Sponsored Financial Reporting will remove those costs to the department's default write-off account and provide proper documentation, and charge the department a fee to process the removal if applicable.

Controller's Organization - Other

• Set up initial write-off accounts using the appropriate function codes of non-sponsored research, non-sponsored instruction, and non-sponsored public service.
• Generate management reports on uncollectible accounts receivable, write-off patterns, etc. Communicate unusual trends or patterns to the Controller, Financial Management Group, Office of the Vice President for Research, Office of Oversight, Analysis & Reporting, Sponsored Project Administration, affected principal investigators, the Office of Internal Audits, and Sponsored Financial Reporting.
• Identify departments requiring additional education or training, notify them of appropriate resources (Training Services, OVPR, etc.), and monitor performance for improvement.

Sponsored Project Administration

• Ensure that contracts are negotiated to minimize the risk of non-payment of receivables by sponsoring organizations.
• Notify Principal Investigator, Unit Administrator, Unit Head, and Sponsored Financial Reporting about pre-award accounts/costs and no-cost extension approvals.
• Provide guidance to Principal Investigators, Unit Heads and Administrators, and others as appropriate on issues that could result in uncollectible costs being charged (e.g., possible OMB Circular A-21 violations, budget deviations, re-budgeting issues, etc.).

Training Services

• Ensure policies and procedures related to uncollectible costs are included in sponsored projects training classes.
• Work with Controller's Organization to provide additional education and training to those units not meeting expected standards.

Office of Budget and Finance

• Monitor the elimination of deficits in the default write-off accounts.

• Administrative Policy: Charging of Direct and Indirect Costs
• Administrative Policy: Processing Internal Accounting Transactions
• Administrative Policy: Budget Oversight for Nonsponsored Funds
• Administrative Policy: Hospitality and Special Expenses
• Federal Office of Management and Budget (OMB) Circular A-21, "Cost Principles for Educational Institutions"
• Federal OMB Circular A-110, "Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations"
U.S. Department of Health & Human Services, Public Health Service, "Grants Policy Statement" 48 Code of Federal Regulations Part 9905, "Cost Accounting Standards for Educational Institutions"

Amended:

July 2008 - Policy and related procedures updated to reflect Enterprise Financial System rollout.

Amended:

Septemer 2004 - Updated information regarding fees charged by SFR to remove uncollectible costs. Clarified process for reimbursing accounts when uncollectible costs are subsequently paid.

Amended:

December 2000 - Updated to reflect the use of the "Historical Salary Adjustment" rather than the discontinued "Type 38 Payroll Journal Voucher".

Effective:

September 1999

To obtain a copy of a historical policy, e-mail the U Policy Librarian at policy@umn.edu or call 612-624-4372.