Some Sponsors don’t recognize that educational institutions are fundamentally different from commercial businesses.
Commercial Sponsors and some Governmental Sponsors attempt to issue the University a “Labor Hours” type contract as opposed to a “Cost Reimbursement” type contract. When a Sponsor requests that our budget be expressed in terms of labor categories, labor rates and labor hours, we need to ensure that the Sponsor recognizes that we have a different cost accounting system than a commercial business and cannot account for effort or salary/fringe benefits in terms of labor rates and hours. An explanation essentially like the following must be submitted as part of a proposal or in an exception letter prepared by SPARCS, stating that any reference to labor rates or hours are only estimates.
University maintains an effort reporting system as prescribed in OMB Circular A-21, “Cost Principles for Educational Institutions” Section J.10.b. This effort reporting system is unique to educational institutions and totally different from the typical job-cost-accounting system used by a commercial enterprise. All of the Faculty Investigators, and graduate research assistants assigned to any sponsored research project are employees of the University and are paid a monthly salary. The allocable portion of any participant’s monthly salary chargeable to any given sponsored project is computed using the percentage of the investigator’s total available time that the individual certifies that he or she spent working on a given project.
There are no time sheets or hourly records on any of these salaried individuals. The University cannot certify to any quantity of labor hours on an invoice because there are no records to substantiate such a certification. In accordance with FAR Part 30 Cost Accounting Standards (CAS # 501), practices used for estimating costs in pricing proposals shall be consistent with cost accounting practices used in accumulating and reporting costs. Our proposal budgets must be prepared using the same methods that we are required to use in our cost accounting system. Our normal proposal budget shows the amount of effort associated with the salary proposed for each investigator. It may be expressed as a percentage or as a number of months of salary. Investigators’ effort may range from 1% to 100% or ½ month to 12 months. All references to hours of work that may be stated in the proposal budget narrative are calculated estimates using the individuals’ certified percentage of effort, multiplied by the standard 2,080 hours per work year. Likewise any references to hourly wages are a calculated estimate using the individual’s salary, plus benefits, and indirect costs divided by 2,080 hours per standard work year. These estimates are not part of the University’s official cost accounting system and therefore are not covered by the certification of accuracy that appears on each invoice.
Additionally, the University will request that the contract includes language explaining that the Sponsor will accept the University’s standard accounting system and invoices, substantially like the following:
“The contractor/subcontractor may submit invoices based on their standard cost accounting system. Salary, fringe benefits and indirect costs will be calculated using the percentage of individuals’ time applied to this project as prescribed in OMB Circular A-21 Section J.10.b. The contractor/subcontractor is not required to keep hourly time records to support invoices.”
For specific guidance on this matter call SPARCS at 515.2444 or email email@example.com.