ELearning tutorial on Timing of Expenditures and Benefit to Award 

 

In adherence with the Cost Principles, all expenditures must be reasonable, allocable, allowable, and consistently treated.  In addition, there are several factors to consider in regards to the timing of expenditures. 

Definitions

  • Award or Total Budget Period is the start and end date of the Sponsored Award.  This is also referred to as a “Competing Segment” as the Award is obtained through a competitive process.
  • Budget Period is the start and end date for a designated period of time within an Award, if applicable. Budget Periods are designated by the sponsor in the Award documentation. For example:  a sponsor issues an Award with a Total Award Period of January 2010- December 2013.  The sponsor provides funding for the first year so the Budget Period would be January 1, 2010 – December 31, 2010.  This is also referred to as a “Non-Competing Segment” as the subsequent year's funding is not based on a competitive proposal.
  • Current Budget Period is the term used in MyFD for Budget Period.
  • Carry Forward is the balance of unused funds at the end of a Budget Period transferred (“carried forward”) to the next Budget Period.  Funds cannot be carried forward to a Competing Segment.
  • Automatic Carry Forward is when unused funds can be carried forward to the next Budget Period without sponsor approval.
  • Project vs. Award: A project (or program) is the overall research topic (e.g., curing breast cancer). An Award is a specific amount of funding to be utilized in a specific amount of time, on that research topic. Most projects are funding by multiple Awards. For more information on Project vs. Award view this video.
  • Benefit is the how the expense (item or service) is necessary to the achievement of the Award objectives.
  • Date when the expense was incurred:  the date that the expense (item or service) was purchased or ordered.
  • Date when the expense was posted:  the date that the expenditure transaction posted in the UW financial system. An expense can be posted after the end date of the Total or Budget period, but must be posted before the Final Action Date (FAD) to ensure that the expense is included in the final invoice/financial report.
  • Date received: the date that the expense (item or service) was received by the department.

Expenditure Timing/Benefit

Sponsors require that expenditures are incurred, received, and provide necessary benefit between the start and end date of the applicable Total or Budget Period. Application of this compliance concept depends on the Award type.

I. Award does NOT have designated Budget Periods.

If the Award does not have designated Budget Periods then the expenditures must be incurred, received, and provide a necessary benefit between the start and end date of the Total Period.

The following scenario illustrates the application of this concept.

Scenario:  An Award has a Total Period start/end date of January 1, 2012 – December 31, 2013.  

Allowable Expense: Lab supplies were incurred, received, in June 2012 and used (provided benefit) between the end date of December 31, 2013.

Unallowable Expense:  Lab supplies were ordered (incurred) in December 2013 but they did not provide benefit during the Total Period.

Unallowable Expense:  An airline ticket is purchased (incurred and received) in November 2013 for travel to a conference in February 2014.  The benefit (conference) is not received during the Total Period. 

Unallowable Expense.  A laptop was purchased (incurred)  December 2013 and received January 2014.  The laptop was recieved after the end date of the Total Period. The laptop could not provide benefit to the Award under which it was purchased. 

II. Award does have designated Budget Periods and automatic carry forward.

If the Award period has designated Budget Periods and Automatic Carry Forward, then expenditures must be incurred, received, and provide a necessary benefit between the start and end date of the Total Period.

Scenario:  An Award has a Total Period start/end date of January 1, 2010 – December 31, 2013. The Budget Period is January 1, – December 31, 2010. 

Allowable Expense:  Lab supplies are incurred and received in late December 2010 and will be used (provide benefit) during the Current Budget Period and the subsequent Budget Period (January 1, 2011 – December 31, 2011).

Allowable Expense:  A laptop is purchased (incurred) and received in December 2010.  It will be used (provide benefit) in the current and subsequent Budget Periods.

Allowable Expense:  Registration for a conference, held (received, benefit provided) in March 2011, is paid (incurred) in December 2010. 

Scenario:  An Award has an Award/Total Period start/end date of January 1, 2010 – December 31, 2013. The Current Budget Period is January 1, – December 31, 2013, the last Budget Period of the Award. 

Unallowable Expense:  A laptop is purchased (incurred) and received in late December 2013 so a majority of its use (benefit) will not be received during the Award or Current Budget Period.

III. Award has designated Budget Periods and the Sponsor does NOT allow for Automatic Carry Forward between Budget Periods.

If the Award has Budget Periods and the sponsor does NOT allow for Automatic Carry Forward, then the expenditures must be incurred, received, and provide a majority benefit between the start and end date of the Budget Period.

Scenario:  An Award has an Award/Total Period start/end date of January 1, 2010 – December 31, 2013.  The Budget Period is January 1, – December  31, 2010.

Allowable Expense:  An airline ticket is purchased (incurred and received) in March 2010 for a conference in June 2010. 

Unallowable Expense: An airline ticket is purchased (incurred and received) in November 2010 for a conference (benefit provided) in March 2011.   

Unallowable Expense:  A piece of equipment was purchased in December 2010 but received in January 2011.

 

Expenses Moved via Cost Transfer

If an expenditure is being moved onto an Award via Cost Transfer, ensure that the date the expense was originally incurred is between the start/end dates of the benefitting (where the expense was moved onto) Award or Budget Period, as applicable.  

Scenario: The Current Budget Period for an award is January 1, 2010 – December 31, 2010.

Allowable Expense:  An expense is incurred in January 2010 and posted to a department budget.  The expense is transferred in February 2010 to the current Budget. 

Unallowable Expense:  An expense is incurred in September 2009 and posted to a department budget.  The expense is transferred in February 2010 to the current Award Budget.  The expense was incurred prior to the start date (and more than 90 days, see below) of the budget that it is being transferred to.

Pre-Award Expenditures

Some sponsors allow for expenses to be incurred prior to the Start date of the Award or Budget Period.   These are referred to as “pre-Award expenditures.”  Prior to incurring pre-Award expenditures:

  1. Review the Award to determine if the Sponsor allows for pre-Award expenditures
  2. If the Award is silent on the issue, review the Sponsor regulations to determine if they allow for pre-Award expenditures (some federal sponsors allow up to 90 days prior).
  3. If pre-Award expenditures are allowed, determine if there are any requirements (e.g., prior written sponsor approval).
  4. Request an Advance Budget from Office of Sponsored Programs (OSP).

Scenario:  The start date of the Award is January 1, 2010.   The sponsor allows for pre-Award expenditures of up to 90 days without approval.

Allowable Expense:  Lab supplies are purchased in late December 2009 and charged to a department budget.  The expense is moved onto the Award in February 2010.

Unallowable Expense:  Lab supplies are purchased in December 2009 and charged (incurred) to an Advance Budget.  The Award was delayed and did not have a start date until June 1, 2011.  The expense was incurred more than 90 days prior to the start date of the Award.

End of Award Expenditures

Purchases near the end of a Total or Budget Period, as appropriate are subject to review, as it can be difficult to show how the expenditure benefitted the Award in a limited amount of time.  All purchases incurred within the last 90 days of a Total or Budget Period should be reviewed to:

  • Ensure the item/service was received during the Total or Budget Period.
  • Determine how the item/service provided benefit in the Total or Budget Period, given that it was purchased close to the applicable end date. Providing benefit means having a reasonable amount of use during the Total or Budget Period. 

In addition to the above, it is recommended that end of the Total or Budget Period equipment expenditures should be reviewed to determine:

  • If the equipment was included in the original budget proposal.  If so include documentation (copy of the budget and/or budget notes) showing that the equipment was identified as part of the proposal.  Include this information with the purchase documentation.   If the equipment was identified but not purchased until the end of the Award, document how the equipment benefitted the Award given the limited amount of time left on the Award.
  • If the equipment was not included in the original budget proposal, determine and document how it benefitted the Award, given the limited time remaining.
  • If Sponsor approval, as required, has it been obtained for the purchase of the equipment.
  • If the equipment will be used exclusively on this Award. If not, provide the basis for how the cost was allocated to other funding sources.
  • Why this purchase was required, when the proposal indicated that the project had access to all the necessary equipment and/or facilities (if applicable).
  • If the equipment was purchased to replace existing equipment, provide disponsition (location, status, and/or current use) of the equipment being replaced.

Examples:

Scenario:  The Award start/end dates are January 1, 2010 – December 31, 2013.  The current Budget Period is January 1, – December 31, 2010 and the Sponsor does NOT allow for Carry Forward.

Allowable Expense:  Lab supplies are purchased (incurred) and received in early December 2010 and used (provided benefit) before the end of December 2010.

Unallowable Expense:  Lab supplies are purchased (incurred) and received in early December 2010 but are not used (benefit provided) until January 2011.