I. Purpose
To establish a policy that will outline the circumstances and other administrative matters when Principal Investigator / Project Director (PI/PD) needs to incur expenditures prior to receiving the official award notice.
II. Scope
This policy applies to all PI/PD seeking to spend grant funds prior to receipt of a sponsors award notification.
III. Policy
The University will, at its own risk, incur obligations and expenditures to cover cost prior to the receipt of an official award notice and the beginning date of the actual award. The following criteria must be met:
- the costs incurred are necessary for the conduct of the project;
- the costs are allowable under the potential award; and
- the sponsor’s written prior approval is obtained when required.
IV. Definitions
Award – A provision of funds based on an approved application and budget, to an organizational entity or an individual to carry out an activity or project. This includes both direct and indirect costs unless otherwise indicated.
Principal Investigator/Project Director – The individual designated by a sponsoring agency who is responsible and accountable for the proper conduct and direction of the project or activity.
V. Procedure
A. Authorities
The Office of Management and Budget “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Final Rule” (2 CFR Chapter I, Chapter II, Part 200.621, C-37) allows for pre-award costs incurred prior to the award date. Principal Investigators / Project Directors (PI/PD) may begin spending on a proposed grant/contract award 90 calendar days from award date. By engaging in pre-award expenditures, the PI/PD understands that:
- sponsor’s guidelines must confirm pre-award spending is allowable;
- costs incurred only for items budgeted in the proposal;
- pre-award costs incurred at the recipient’s risk.
- the sponsor is under no obligation to reimburse costs if the recipient does not receive an award or if the award is less than anticipated and inadequate to cover costs.
- expenditures not covered by the agency become the responsibility of the department and/or unit.
Under Federal Demonstration Partnership (FDP) programs, most federal agencies permit allowable grant expenditures up to 90 days prior to the effective date of an award without the sponsoring agency’s prior approval. FDP programs may apply to Department of Health and Human Services (DHHS), National Science Foundation (NSF), National Aeronautics and Space Administration (NASA), Department of Education (ED), and the Department of Defense (DOD), among others.
For awards which are given under the FDP guidelines, authority to incur pre-award expenditures up to 90 days prior to the start date of the award may be granted internally. Requests for these pre-award expenditures must be submitted through an Internal Prior Approval Request (IPAR) form.
B. Procedure to Request an Account
In order to establish a pre-award spending account, the following procedures must be followed:
- Complete the IPAR form. The PI/PD must put a default account number in the explanation and justification block. This number is necessary to recover costs in case the sponsor deems pre-award costs as unallowable or chooses to not fund the project in whole or part.
- Once the form has all the administrative approvals, the PI/PD should retain a copy of the form and forward the original to the Special Funds Accountant.
C. Receipt of Award
Upon receipt of the fully negotiated award, the Special Funds Accountant will issue a formal notice of award and attach a copy of the award document. Should the terms of the award, especially the approved award project period, make any of the project costs already incurred unallowable; such costs will be transferred automatically to the departmental fund and cost center designated on the IPAR form.
D. Non-Receipt of Award
If an award is not made, the Special Funds Accountant will notify the PI/PD that the pre-award account will be closed. All costs incurred will then be transferred automatically to the departmental fund and cost center designated on the IPAR form.