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Residual Funds Policy

Purpose

To manage residual funds remaining in externally-funded speedtypes upon completion of a fixed-price award.

Definitions

Fixed-Price Award

An award or contract in which an agreed-upon, set price is determined for the project to be accomplished. If the cost of the project exceeds the awarded amount, the department housing the project or Principal Investigator absorbs the additional costs required to perform the work. Fixed-price sponsored awards or contracts can be between Case Western Reserve University and any type of sponsor (federal and non-federal sponsors, including industry, foundations, and other non-profits).  Proposal budgets created for fixed-price awards are expected to estimate costs as close to actual as possible.  

Residual Funds

Residual funds occur if total funding received from the sponsor exceeds total expenditures at the project ending date and all deliverables have been met.  This occurs when a sponsor makes fixed-price payments that are not dependent upon our actual spending, and our spending is less than the income actually received.  Generally, these speedtypes are set up with Billing Code 4 (BC04; fixed-price) but can sometimes be set up with Billing Code 3 (BC03; automatic payment) or Billing Code 7 (BC07; Department Billings).

Discretionary Speedtype

A speedtype with the prefix “OSA” (other sponsored activity).  This type of speedtype has no restriction or reporting requirement.

Review

As a non-profit institution, the University’s mission is not to seek profit from its research activities; therefore, significant residual balances on fixed-price sponsored awards may call into question the validity of the proposed budget and potentially affect the University’s tax-exempt status.

A residual fund balance can only be moved to a discretionary speedtype during the financial close-out process, and if all of the following conditions are met:

  1. The award mechanism is fixed-price.
  2. The PI provides documentation that the full scope of work has been completed, all deliverables and reports have been provided and accepted, and the sponsor considers the project complete.
  3. The agency and specific award terms allow for the University to retain the residual funds (unspent income).  This is determined by reviewing the sponsor’s policies and specific award mechanism (award notice, terms and conditions, contract).
  4. The project did not involve providing cost-share.  If it did involve cost-share (voluntary or involuntary, including salary cap limitations), the residual balance will first be used to cover that Mandel School expense.  This will be verified by reviewing the cost-share side (for example, CSR123456) and any other related speedtypes for expenses.
  5. The School did not waive or reduce indirect for the project.  If indirect was waived or reduced, an adjustment will first be posted to recover the waived overhead as possible.  The direct cost basis for this calculation will include funds spent and unspent (full direct budget).  The indirect to charge will be the based on the differential between the indirect actually recovered and what the indirect percentage could have been as documented in the project’s indirect cost waiver approval (as filed at the time of proposal submission).
  6. The effort charged is in line with the work performed.
  7. All final salary and non-salary expenses, and adjustments of any kind (journals) have posted to the PeopleSoft statement.  Likewise, all final invoices due from sponsor have been paid and posted to the correct project speedtype.

Procedure

  1. The Mandel School Finance and Administration Office will review the project following the list above as part of the standard grant financial close-out process.
  2. A final grant recap from the Office of Research and Technology Management (Post-Award Services) must be completed and signed by the PI and Mandel School.  The recap will note the following, as applicable:
    1. Journal of residual income to cover cost-share (if necessary).  This will be done before charging indirect on the residual balance.
    2. Manual overhead adjustment (if necessary, in cases of waived or reduced indirect) on posted project expenses.
    3. Journal of direct residual income to OSA.  The overhead that would have been charged (had the full budget been spent as planned) will be journaled to the School’s overhead recovery income line.  See example below.
  3. The transactions noted in Section 2a-c above require approval from the Office of Research and Technology Management; please note that office has final authority to approve or deny any transaction.

Example

Speedtype:  RES123456
*Funds Received:  $400,000
*Final Expenditures:  $388,000
*Residual Balance:  $12,000
F&A Rate:  30%
PI Retains (to OSA): $9,231 ($12,000 ÷ 1.3)
Mandel School Indirect: $2,769 ($12,000 – $9,231) OR ($9,231 × 30%)

* Includes both direct and indirect amounts.  Indirect is only charged as direct expenses are posted.