August 26, 2008

Emerging Contract and Grant Issues: Federal Focus Areas

Associate Vice Chancellor John Ellis and Assistant Vice Chancellor Marcia Smith sent the following information and guidance to campus administrative staff on August 26, 2008.

This is to bring to your attention three areas that are currently the focus of federal agencies and their audit divisions in their review of colleges and universities.

1. Advancing funds to subrecipients

The federal government only allows for advance funding in rare circumstances when a subrecipient lacks sufficient working capital to perform the work (see Circular A-110, subpart C, 22(f) at

In the rare event that you make an advance to a subrecipient, please ensure the advances are made in accordance with University and federal regulations prior to advancing funds. You should only advance the amount of money needed to cover the short term working capital needs of the subrecipient organization. For example if the subaward is $100k for research work to be performed over a 12 month period, you should not advance the full amount of the subaward. If the subrecipient cannot finance their working capital needs on a month-to-month basis, you might advance $5k or the equivalent of one month’s payroll needs.

If an advance has been made, care needs to be exercised to ensure the work is performed in accordance with the terms of the subaward and documentation is provided by the subrecipient demonstrating the work has been completed. If the subrecipient has not provided documented support for the work performed, you should not advance further funds on this subaward until you are satisfied the subrecipient is performing the agreed upon research and you could prove to the federal government or other parties that the subrecipient has completed the work.

See for further guidance on monitoring subrecipients. Please note that most subrecipients can meet their short term working capital needs and can do business on a cost reimbursable basis rather than requiring an advance.

2. Cost transfers

Due to the high incidence rate of late or inadequately documented costs transfers, audit divisions of the federal government are paying special attention to cost transfers across the UC system. To minimize your exposure to disallowance, please ensure you are meeting the requirements of the campus cost transfer policy available at

In previous years, cost transfers that were late or inadequately documented have been disallowed by federal agencies on UC contracts and grants.

3. Sponsors enforcing contractual reporting deadlines

Some federal sponsors have recently refused to pay invoices because reports were not submitted by established deadlines. This applies to all reports including technical, progress, and financial reports. Although past practice has allowed for payment regardless of whether a report was submitted late, some agencies are now strictly enforcing their policy of non-payment for proper charges when we fail to comply with terms and conditions including federal reporting requirements.

**Departments will absorb disallowed or unpaid costs**

In the event that costs are disallowed or not paid by federal funding agencies in any of the areas described above, the administering department or unit will be required to cover these disallowed costs from unrestricted funds. UC Berkeley campus departments have in the past had to cover disallowed costs in these areas.

Please work with your Principal Investigators to ensure that your awards follow proper procedures to minimize your department’s exposure to disallowed expenses. Contact your Extramural Funds Accounting Analyst or Sponsored Project Office Analyst if you have further questions on these topics.

John Ellis
Associate Vice Chancellor-Finance, and Controller

Marcia L. Smith
Assistant Vice Chancellor, Research Administration and Compliance

August 22, 2008

NIH Publishes Web-based Tutorial on Financial Conflict of Interest Requirements

The National Institutes of Health has announced a web-based tutorial developed to help improve and enhance compliance with federal financial conflict of interest regulations. NIH designed the tutorial for use by “institutional officials responsible for managing NIH-funded grants, cooperative agreements and/or contracts and for individuals who are responsible for the design, conduct or reporting of NIH-supported research.”

The tutorial is available in both Flash and PDF format on the NIH Office of Extramural Research Conflict of Interest web page: