When we receive an award, the University and the PI become stewards of the funds provided. Proper allocation of funds is an important part of grants management, and of ethical conduct of research. Mistakes in this realm can have serious consequences. ORSP helps by monitoring expenditures to ensure that they are reasonable, allocable, and allowable, and advising PIs and financial managers on budgeting and spending.
As PI, you have responsibilities to the sponsor, the public, the University, and colleagues to steward the funding responsibly, in accord with the sponsor’s rules and the commitments you’ve made. All research expenditures must meet all three of these criteria:
- Allowable: of a kind or category that the sponsor permits
- Allocable: unambiguously, assigned specifically in support of the project
- Reasonable: in no way excessive considering prevailing costs of what is being purchased, the time, effort, and expertise needed for a given effort, etc.
Each sponsor, and in some cases each program, has rules concerning what is allowable, what must be budgeted in advance, and what requires sponsor approval prior to commitment or expenditure of funds.
As a PI, it is essential that you understand your role and responsibilities in funds management, as well as those of research team members for whose work you’re also responsible. For a multi-Investigator project, the PI is responsible for management of the whole, while individual Investigators remain responsible for all resources allocated to their parts of the project.
Sponsors’ allowability rules and processes can be complex and include requirements such as reporting that are your responsibility. Be certain that you understand each program’s rules before committing funds. If you are uncertain about requirements, or have questions, seek help from your ORSP Contract and Grant Specialist.
As a steward of federal grant funds, the University is obligated to use funds prudently and only for their intended purposes. Sponsors’ rules and procedures regarding using and accounting for funds have grown ever more complex. The text of 2 CFR 200, the Federal regulations on administrative requirements, cost principles, and audit requirements, manifests that complexity. PIs, investigators, and others at the University have responsibilities under these regulations. We strive to make discharge of those responsibilities as straightforward as possible.
All costs must be allowable under federal regulations, sponsor terms and conditions including program-specific requirements, and University policy. Consistent assignment of charges to specific expense types enables the University to guard against charging unallowable costs.
In support of the public interest, federal agencies’ Offices of the Inspector General provide oversight of sponsored programs. If lapses occur, scrutiny is intensified. Non-federal sponsors are also applying more stringent requirements and performing an increasing number of audits.
Misuse of federal funds can give rise to serious repercussions. For example, violations of the Federal False Claims Act carry the risk of substantial financial penalties and criminal charges with penalties that can include imprisonment. Peer institutions have paid large fines in addition to having to repay the government for funds determined to have been used for unsupportable, unreasonable and unallowable expenses for costs charged to a sponsored award such as travel, equipment purchases near the end of the award, administrative salaries, or cell phones. Misuse of research funds may also result in investigation and discipline pursuant to the Policy on Ethical Conduct in Academic Research, Scholarship, and Creative Activities.
If you are uncertain whether or not a cost is allowable or if you need prior sponsor approval, work with your department administrator or your Contract and Grant Specialist. For federal awards, the expense must be allowable, allocable, and reasonable. To determine whether a particular cost is allowable, allocable, and reasonable, apply the “prudent person” test. If the answer to any of the following questions is “no” then the cost must not be charged to the project without first consulting with ORSP:
- Is the cost generally accepted as necessary for the performance of the project or similar projects?
- Is there an “arm’s-length” relationship between the investigator and commercial entities (sponsors, vendors, etc.) or subcontractors? For example, goods and services should not be purchased from a friend or relative.
- Would you be comfortable explaining to someone outside the University why you charged this item to your project?
- Is charging this cost consistent with Lehigh’s policies, procedures, and practices?
Monitor your expenditures regularly. Review the account balances and transactions charged to each project on a regular, preferably monthly, basis. Work with your departmental business manager/coordinator to ensure that the expenses are charged and documented correctly; accurately assign personnel effort to research aims; plan/forecast ahead; and make timely reallocations if needed.