Allocating Costs To Federal Research Grant Awards

Female Science Professor has two interesting posts up yesterday and today concerning allocating investigator effort and other costs to Federal research grants. Her basic gripe is that university and granting agency officials are forcing her to lie and/or pretend that she can accurately measure actual percent effort on a specific Federally funded project and can promise that software licenses (or equipment) charged 100% to a particular award can never be used for any purpose other than the direct furtherance of the specific aims of that award.
In relation to allocation of effort, she relates a discussion with a university grant management official about her percent effort on a particular project as follows:

And so on. We did not reach a number. I pleaded with her to tell me what number would seem like a good number and she refused because we might be audited and it would be bad if I worked more than what was listed and it would be bad if I worked less than what was listed. Every time I suggested a number, she rejected it because it was either somehow not an acceptable number (too low, too high) for mysterious accounting reasons or she wasn't convinced it was accurate. I said that if she told me a good number, I would promise to work that amount, although I was of course lying because I'm going to work whatever amount is best for the project in the time I have available, and also I still don't get the concept of time and effort being different but the same. She refused.

In relation to allocation of the cost of a specific software license to be used to analyze experimental data, she complains:

As regular FSP readers surely know by now, some of these rules and regulations make me crazy.
Example: I found myself promising recently that I would never ever ever use a software site license that I purchased with one grant for any activity not related to that specific grant.

The university and/or governmental officials who are putting FSP in the position of thinking she needs to lie and/or pretend about allocation of effort and other costs to Federally funded research grant awards are ignorant of the Government's interpretation of the relevant statutes and regulations that governs allocation of costs. The relevant guidance is provided by Office of Management and Budget Circular A-21, which provides in pertinent part:

If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding subsection b, the costs may be allocated or transferred to benefited projects on any reasonable basis, consistent with subsections d.(1) and (2).

This provision explicitly treats the situation where investigator effort or other cost benefits more than one project, but where the relative proportion of the benefit of the cost to the multiple projects cannot be explicitly determined. In this situation, the effort or cost may be allocated on any reasonable basis.
In the case of effort allocation, it would thus be perfectly acceptable for a PI to allocate her effort equally among her multiple grant awards, or to allocate her effort in proportion to the size of each of those grant awards, or in proportion to the number of other personnel being suppported by each of those grant awards. It would even be reasonable for the PI to simply make an estimate on no explicit basis of the effort devoted to each grant.
As a practical matter, the only way a PI's allocation of effort is going to cause a problem in an audit is when the allocation is absurd on its face. For example, obviously you cannot devote more than 100% effort total to all of your professional activities. And if you are a teaching faculty, you also cannot allocate 100% of your effort to sponsored research.
More subtle cases would be like a Provost allocating 90% of her effort to sponsored grants. It is is simply not feasible that it only takes 10% effort to be a Provost.
In the case of other cost allocation, if you purchased a software license (or piece of equipment) with the purpose at the time of purchase to use that license for pursuing the aims of the grant that the license was charged to, and that you later figure out that the software can be used for some other purpose in your lab related to other projects or activities, that is absolutely fine, so long as the allocation of 100% of the cost of the license to that grant was "reasonable" at the time it was charged. If you purchased the license to perform necessary analysis of data relating to the charged grant, and you then performed all of that analysis, then it was totally reasonable to charge 100% of that license to that grant, regardless of what you do with the software above and beyond that analysis.
University or Federal agency officials who demand an explicit quantitative basis for allocation of effort and/or costs in situations where the interrelated nature of scientific research projects in a laboratory make such an explicit computation impossible are failing to follow the guidance of OMB Circular A-21.

13 responses so far

  • microfool says:

    The wonkitude dial on this blog goes all the way to 21!

  • DrugMonkey says:

    mebbe so microfool but as the Doyenne of all that is ProfBlogging details, local functionaries make PIs lives absolute hell over their misinterpretations or ignorance of policy. Policy geekery is a self-protection mechanism.

  • Policy geekery is a self-protection mechanism.

    And it's fucking fun! There's nothing like a nice cold Schewitini (shaken, not stirred) and a freshly printed warm laser copy of Circular A-21!

  • Arlenna says:

    This is handy for me to hear right now--because we have just been working on an incredibly detailed budget update/re-justification/cost allocation razor-slicing for a Federal grant that asks for more information and justification than I have ever seen. On one level, I understand they need to keep track for the taxpayer. On the other hand, I end up feeling like I just have to be somewhat dishonest about some of it because we just can't KNOW exactly how many tubes of antibody we will end up using over the course of the project...

  • D says:

    The funny thing is that if you talk to grant management specialists at NIH they don't care about these details for grants. And, as long as they are not buying Cristal and a new car with grant money the NIH is unlikely to ever audit someone's R01. If someone's R01 is or has been audited please tell us.
    What NIH does care about(and will audit you for) is how Universities spend the indirect cost dollars that they get from grants. And whether the indirect cost rate is justified. In fact, as I understand it circular A21 deals with indirect costs rates and what universities can charge to indirect costs. It has nothing to say about direct costs. NIH policy clearer states that a PI can rebudget up to 25% of direct costs without getting any permission. So, I think someone at the school is a little confused about the difference between direct and indirect cost reimbursements.

  • Jeezus fucking christ! So much wrongity wrong motherfucking wrongitude in one comment!

    The funny thing is that if you talk to grant management specialists at NIH they don't care about these details for grants.

    It's not funny at all, since NIH grant management specialists have nothing whatsoever to do with auditing how NIH grant money is actually spent by awardees. Their only responsibility is to prepare grant awards based on the budgets approved by study section/council and any administrative adjustments, and to close out awards when grants terminate.

    And, as long as they are not buying Cristal and a new car with grant money the NIH is unlikely to ever audit someone's R01.

    The NIH isn't just unlikely to audit someone's R01. They are incapable of doing so, as they do not have any staff legally or administratively charged with auditing extramural grants. It is only the Office of the Inspector General of the Department of Health and Human Services that has the power and capability to audit NIH grants.

    If someone's R01 is or has been audited please tell us.

    You've gotta be motherfucking kidding me! Google is your friend, dumbshit.

    What NIH does care about(and will audit you for) is how Universities spend the indirect cost dollars that they get from grants. And whether the indirect cost rate is justified.

    NIH will *never* audit the expenditure of indirect costs (for the same reason that they *never* audit direct cost expenditures), and NIH does not concern itself with indirect cost rates or negotiate them with non-profit and educational grant recipients. It is the Office of the Inspector General of the Department of Health and Human Services that would audit indirect cost expenditures. It is the Division of Cost Allocation of the Department of Health and Human Services that negotiates indirect cost rates with non-profits and universities.

    In fact, as I understand it circular A21 deals with indirect costs rates and what universities can charge to indirect costs. It has nothing to say about direct costs.

    Dude, what the fucking fuck is wrong with you!?!?!?!? How about you read the motherfucking circular before you just spout off completely 100% infinity wrong bullshit?? I even gave you the motherfucking link!

    NIH policy clearer states that a PI can rebudget up to 25% of direct costs without getting any permission.

    This expanded rebudgeting authority allows the awardee to rebudget funds between different categories of expenditures--e.g., personnel, supplies, equipment, services--on allocable costs in relation to a particular grant award. This hasn't the slightest fucking thing to do with what we are talking about, which is the *allocability* of a cost to a particular grant award.

    So, I think someone at the school is a little confused about the difference between direct and indirect cost reimbursements.

    Dude, *you* are unbelievably confused about EVERYTHING you are spouting off about. The stupid BURNS LIKE A MOTHERFUCKER!

  • In response to CPP. Let me help you understand this a bit better. You seem a bit naive on how the system works. (Yes, that is a specific mild jab to set CPP off).
    First, I will admit that I was a bit lazy in referring to NIH when I meant HHS but hey, they are "One HHS".
    The original complaint from FSP was pretty clear. She was getting asked by her grants people to precisely allocate her grant spending to different grants.
    The bottom line fact is that NIH (and HHS) doesn't really care about how PIs spend their NIH grant dollars as long as they roughly match up with the proposed budget (within 25%). So why should the schools care? I don't know.
    The only thing that NIH/HHS cares about is when schools try to cheat on indirect cost reimbursements or when they try to have faculty charge administrative (e.g., being a course director) or teaching time as direct costs to a grant. This is in line with the the major purpose of A21
    "The principles are designed to provide that the Federal Government bear its fair share of total costs".
    Since Direct costs are budgeted in the grant that leaves only the indirect costs portion for HHS or the schools to really worry about.
    From this I conclude that someone at that school is confused. They do not need to be asking for this info from FSP. Because NIH doesn't care about how PIs spend (or allocate) their direct grant dollars. This is especially true for how PIs allocate their time between different Federal grants.
    As for Circular A21. Yes, I have read it. Even before your supplied link. But perhaps you are a bit of a naive mother fucker. Just because a circular is written doesn't mean that it is interpreted or even implemented the same by all parts of the Federal Govt. HHS and its parts realize that they can't and do not want to police PIs. They do use the circular to police the F&A costs charged by schools. That is how it is.
    Finally, I know of no NIH or HHS policy (and yes I goggled and even binged it) that disallows a PI from using software purchased with money from 1 grant to NOT be used for another. That is stupid. Even with its bureaucratic faults NIH would still allow that. That is a stupid interpretation by FSP's grants folks.
    There is no reason for FSP's grants folks to be harassing her to justify her time allocations to specific grants.
    PS. In fact NIH grants management people (actually I am referring to the grants folks at the individual ICs but again "One HHS") can (and sometimes do) oversee how PIs spend their grant dollars. This is especially true if the Notice of Award specifically excludes them for spending money on certain items. The HHS/OIG only goes after the big fish like Standford or UCSD.

  • Policy Wonk says:

    There are some truths to what PhysioProf and pretty much what D said is really off. The role of a GMS as described above is somewhat simplistic, they don't audit but they do refer grants for audits. In other words they do the preliminary work, if something looks questionable then it's passed on. With non-modulars, the finances are monitored by the GMS on a yearly basis.
    What they do care about is consistency in direct costs. The charges must be allowable and allocable. Let's say you charge service contracts for a piece of equipment. Usually this is part of an indirect cost recovery. So if it's direct cost, it's best to say why it's not included in the F&A, otherwise it's double dipping, and also if the equipment is used for several grant projects then an explanation of how the maintenance charges are split among the grants using the equipment. They want to make sure this policy is applied consistently throughout the university/research institute.
    Although it's tough to track how much you devote to one grant vs. another, or how much you'll use a software program on one grant vs. another, it is expected that PIs make a genuine good faith effort to track effort and direct cost allocations, the university takes the responsibility for monitoring this which is why FSP is being asked those questions. Although burdensome, it's a requirement of federal funding.

  • Policy Wonk says:

    D-
    I'm not quite sure where you're getting your information from but NIH cares about direct charges, all they see in regards the F&A is the rate agreement, which simply has the percentages and some limited language on exclusions. The Division of Cost Allocation cares about the F&A.
    It does matter if a PI uses software on another grant ex post facto, because it's available and paid for and part of the resources. It's the time of purchase and method of payment that matters.
    And in regards to "There is no reason for FSP's grants folks to be harassing her to justify her time allocations to specific grants." That's a MAJOR requirement of OMB A-21 and the biggest red flag for audits. Institutions must assure federal and other sponsors that the assignment of effort and associated salary and fringe benefit costs to projects they sponsor is fair, consistent, and timely. Award of a grant or contract is based on commitments made by the principal investigator (PI), co-investigators, and associates to spend specific amounts of time on the project. The sponsor (government or other) considers this commitment a legal obligation. Failure to abide by this commitment or document the committed effort could be viewed as a failure to perform under the terms and conditions of the agreement with the granting agency.

  • D (now MOTHERFUCKER D) says:

    Policy wonk,
    You are correct, especially about consistency.
    What I am trying to say is what NIH/HHS believes is reasonable to expect of the PI and the insitution.
    To Quote NIH Policy (http://grants.nih.gov/grants/policy/nihgps_2003/NIHGPS_Part5.htm#_Toc54600121)
    "Allocation of Costs and Closely Related Work
    When salaries or other activities are supported by two or more sources, issues arise as to how the direct costs should be allocated among the sources of support. In general, a cost that benefits two or more projects or activities in proportions that can be determined without undue effort or cost should be allocated to the projects on the basis of the proportional benefit. A cost that benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved may be allocated or transferred to the benefiting projects on any reasonable basis as long as the costs charged are allowable, allocable, and reasonable under the applicable cost principles and the grantee’s financial management system includes adequate internal controls (for example, no one person has complete control over all aspects of a financial transaction). As a result, a grantee may allocate costs normally assignable to multiple projects to one of those projects."
    They make it pretty easy. If it "can be determined without undue effort" then allocate it to different grants.
    Or if it is too much of a pain in the ass then
    "a grantee may allocate costs normally assignable to multiple projects to one of those projects."
    This is NIH's interpretation of A21. It sounds like FSP is being asked to allocate effort and costs in an unreasonable manner to me. Which is not supported by NIH policy.

  • Anonymous says:

    D-
    I get what you're saying. I think what the grants accountant stated was misconstrued by FSP. What really should have been said is "out of all your time spent on research what woud you say is a close estimate of percent effort spent on this project?". It's not related to the 40hour work week, but rather what percent of that 10 hours she devotes to research grants for example, would she say is devoted to that project?
    As someone who was a research administrator in the past, what we are asking is what as close to true actual effort should we put down on paper so we can legally pay you. You have no idea how hard it is to extract this information from PIs,who see this as a hindrance and as a way to place limits on research (they are very much like free thinking artists in a way) and we are also trying to match the effort stated on their progress reports and applications (as an average over the course of a year).
    It's just like being a lawyer, you divvy up your billable hours.

  • cargo cult says:

    I think this thread explains why so many universities encourage older professors to seek administrative positions at federal funding agencies - to smooth out any such "audits of allocations" as well as to smooth out the overall peer review of federal grant proposals.
    As far as this quote in the original post:
    "As a practical matter, the only way a PI's allocation of effort is going to cause a problem in an audit is when the allocation is absurd on its face."
    In the so-called real world, there are several other reasons why problems might arise:
    1) Someone might want to see your grant proposal denied on the basis of sloppy allocation of funds from previous grants, and would use your lack of concern to torpedo your proposal. They could rationalize their malicious behavior by claiming that there was a better use for the money, anyway.
    2) Politically or economically sensitive research results tend to lead to close scrutiny of all aspects of said research, including how grants were spent. Independent research agencies & peer review of grant proposals were supposed to prevent that, but that's been undermined recently.
    Your only defense, in such cases, is to be sure that every detail is ironclad, all i's dotted, etc. - able to withstand aggressive attack by a legion of legal gnomes. Best have that ol' lab notebook in order as well, with a daily record of said allocated activities.
    There's no doubt that the federal funding agencies (especially HHS and other Cabinet departments) are under political pressure these days, and are also not nearly as independent as the Vannevar Bush-originated structures, like NSF, NIH, etc. For example, the current HHS head, Sebelius is a political appointee with a prior interest in bringing the Agro-Bio-Defense BSL-4 facility to Kansas, largely because of the fiscal rewards it would bring (and she was governor of Kansas).
    This is not independent peer review of grant proposals, but rather a process driven by political patronage for economic reasons.
    Get in the way of that process, or upset the private contractors and pharmaceutical companies involved in the billion-dollar handouts, and you will be much more likely to be audited over grant allocations, and anything else they can think of. Making noise about politics being more important than good science in the allocation of HHS funding is a sure way to bring about increased scrutiny, that's for sure.
    In today's academic world, being able to do science is a matter of politics and bureaucracy - and the fact is, some bureaucratic rules are only there to be used as needed, to quell the unruly and the obstinate - which includes some of the above posters, I think. 😉

  • HagalePues says:

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