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Selected highlights from the many research resources online at the Smithsonian.

CHAPTER TEN

FINANCIAL ADMINISTRATION OF AWARD

After an award is accepted and established in the Enterprise Resource Planning System (ERP) (or PeopleSoft), OSP continues to support the Principal Investigator in the financial management of his or her grant or contract. An OSP Financial Analyst assists the Principal Investigator and the Principal Investigator's unit financial officer in employing appropriate management and accounting practices.

OSP acts as the official Smithsonian representative for the financial management of sponsored projects. In this capacity, the Director of OSP has the authority to sign and validate, on behalf of the Smithsonian, documents related to the financial administration of awards. Such documents include:

  • Financial reports
  • Invoices
  • Letters-of-credit
  • Releases

This chapter details the following financial administration topics:

  • Principal Investigator Financial Responsibility
  • Fund Accounting Fundamentals
  • Establishment of Budget and Expenditures
  • Prior Approvals
  • Designated Codes
  • Award Summary
  • Pre-award Expenses
  • Reports to Sponsor
  • Monthly Financial Reports
  • Receiving  Payment
  • Depositing  Cash and Checks for Sponsored Projects
  • Charging Expenses
  • Program Income
  • Accounting Classification Coding Structure

PRINCIPAL INVESTIGATOR FINANCIAL RESPONSIBILITY 

The primary responsibility for each sponsored project rests with the Principal Investigator.  He or she is ultimately responsible for how the funds are spent.  OSP assists with accounting procedures and provides financial management advice. Failure by a Principal Investigator to adhere to the terms and conditions of an award may result in transfer of financial liability to the Principal Investigator's unit.

FUND ACCOUNTING FUNDAMENTALS

Funds received by the Smithsonian can be restricted or unrestricted. Since all sponsored project funds may only be utilized in accordance with the purposes established by the proposal and the terms and conditions of the award, they are considered restricted funds.

Sponsored project award  accounts are maintained in accordance with the principles of fund accounting. Such principles require separate accounts for each award and classification in accordance with the source of the funding. Each sponsored project is assigned a unique designated code.  The type of designated code assigned is based on the type of award received, as discussed more in detail below under the section "Designated Codes."

ESTABLISHMENT OF BUDGET AND EXPENDITURES

Budgets for grants and contracts are outlined in the proposal and established at the time of award showing the total amount to be received over the life of the award. However, on incrementally-funded projects, only the amount funded to date by the sponsor will be established for the project budget. The budget summary OSP prepares provides details of the approved (budgeted) direct project costs, arranged by class code and sponsor.

Direct costs are charged against the designated code established for the project, and the appropriate amounts of indirect costs are charged against it as direct costs are incurred. Such indirect charges are included in grant and contract budgets and are reported to the sponsor in the same manner as expenditures for direct costs.

All expenditure items are assigned chartfield values that identify transactions by the following:

  • fund code
  • budget reference
  • designated code
  • department ID
  • account
  • class field
  • program code

Chartfield values may also contain a project ID and an activity ID.

PRIOR APPROVALS

Some sponsors require prior approval of certain expenditures, changes in the approved budget, scope of work, key personnel, or other activities. The Principal Investigator should contact OSP for assistance if changes in the project become necessary that would require obtaining prior approval. OSP Director assists the Principal Investigator in the preparation and countersigns the formal request submitted for sponsor approval. Some sponsors allow the responsibility for certain types of changes in the project to rest with an internal institutional official. The OSP is the authorizing Smithsonian official in such cases. ( Refer to Chapter 9 of this guide for details on other changes to a grant that may require sponsor approval.)

DESIGNATED CODES

This section describes the following aspects of designated codes:

  • Types
  • Assignment
  • Set-up

Types of Designated Codes

Each Sponsored project award is assigned a designated code.  Each designated code is grouped within a series of numbers, which provides additional information about the award.  These numerical series are:

500001 - 599999    Non-government grants and contracts
600001 - 699999    Government grants
700001 - 798999    Government contracts

Assignment of Designated

CodesOSP has responsibility for assigning designated codes to a project for non-government grants and contracts (fund code 802) and government grants and contracts (fund code 803). The designated code, which is determined by the source of funds and the type of award, is essential for establishing an account in the ERP System (PeopleSoft).

Set-up of Designated Codes

OSP establishes a designated code in the ERP System after a proposal has been funded, and the award document has been accepted by the Principal Investigator and OSP. A copy of the proposal that includes the budget and the original award documents must be received in OSP before a designated code can be assigned by an OSP Grant and Contract Administrator. No Smithsonian funds should be expended for the project until this designated code has been assigned.

Each award is fiscally accounted for by a separate restricted account. When the sponsor requires differentiation between various aspects of a single project, different project ID codes and activity ID codes should be used along with other required chartfield values.  Sometimes it may be necessary to create separate designated codes to isolate expenses that belong to the individual budget periods of a multi-year project.

AWARD SUMMARY

After assigning the project designated code, the OSP Grant and Contract Administrator prepares and distributes an Award Summary along with the award document and an authorized budget. The Award Summary briefly states the terms and conditions of the agreement, including those directly affecting the Principal Investigator. Each Award Summary indicates the name of the unit Fund Manager, in addition to the OSP Grant and Contract Administrator and the Financial Analyst assigned to assist the Principal Investigator on the project (see Sample Project Award Summary in Appendix T). The information on the Award Summary is used in OSP's automated Grant Management System (GMS) to generate reports and special studies.

PRE-AWARD EXPENSES

Normally, the Smithsonian will not incur costs for a project until official notification of an award has been received. Principal Investigators may be permitted to incur expenses before an award is finalized by requesting advance funds. Before making such a request, OSP must verify that the sponsor will allow the pre-award costs to be charged to the project. Information about applying for risk funds is detailed in the "Negotiation and Acceptance  of Award" chapter of this Guide (Chapter Eight) and in SD 308, Appendix S, "Advances and Investments in Trust Funded Programs".

REPORTS TO SPONSOR

Financial reports, management reports, reports of findings or progress, and invention disclosures are of primary interest to any sponsor. Most award agreements will specify the type, form, and frequency of reports. Some sponsors, for example, may require technical reports only when there is something of note to present; others may require informal reports on a periodic basis.

The Principal Investigator is responsible for meeting all technical and programmatic reporting requirements. A copy of all such reports prepared by the Principal Investigator must be sent to OSP for the official file. In some cases, submission of the reports by the Principal Investigator may need to be coordinated with OSP.  For instance, the submission of a financial report may need to be coordinated with an OSP Financial Analyst.  While OSP Financial Analysts are responsible for preparing all financial reports, the Principal Investigator and Fund Manager may need to work closely with the Financial Analyst to facilitate the timely submission of all financial reports.

The type and frequency of financial reporting varies according to the terms of the award agreement. Some sponsors require reports monthly, others quarterly, or semiannually; in some cases only final financial reports are necessary. It is the responsibility of OSP with the cooperation of the Principal Investigator to comply with the terms and conditions of the award agreement regarding financial reports.

MONTHLY FINANCIAL REPORTS

Monthly financial reports, which contain expenditure and obligation information, are generated by the Fund Manager, Administrative Officer, or delegated individual on behalf of the Principal Investigator.  These reports should be reviewed carefully to verify the accuracy of charges to the designated code. Discrepancies do occur, and they are more easily corrected when they first appear. If errors occur on a sponsored project account, Principal Investigators or their Fund Managers should complete, sign, and send a Service Request Form (SI-4059) to their Financial Analyst in OSP.  It is extremely important that all Fund Managers and Principal Investigator review PeopleSoft core financial reports monthly.  In addition, all grants and contracts should be reconciled monthly. The monthly financial reports will assist Principal Investigators in tracking costs and adhering to budgets. When charging expenses, Principal Investigators should remember to allow for indirect cost charges, if applicable.

Principal Investigators should contact the appropriate Financial Analyst in OSP with any questions regarding the monthly financial reports.

Samples of various PeopleSoft core financial reports are in Appendix U. Since these reports can be difficult to interpret, OSP staff will assist Principal Investigators in learning to use the information. The Office of the Comptroller offers training on SIERP (PeopleSoft) core financial reports. Principal Investigators may wish to contact the OC for more information.

RECEIVING PAYMENT

Government agencies, foundations, and corporations differ in their methods of paying the Smithsonian for sponsored projects. The major methods of payment are:

  • Cost-Reimbursable Invoices: OSP requests reimbursement of expenses already incurred. Sometimes these reports show the types of expenditures and the total amount spent to date. The sponsor then reimburses the Smithsonian for these costs;
  • Prepayment/Advance Payments: At the beginning of the project, the sponsor sends the full or partial amount of the award according to a payment schedule set forth in the award agreement. Sponsors usually require regular financial reports on the use of prepaid funds.

Since most payments are requested, received, and processed by OSP, Principal Investigators need not have detailed knowledge of the various payment mechanisms. An OSP Financial Analyst can answer any questions Principal Investigators have about payment mechanisms. Payments of sponsored projects should be directed to a lockbox maintained by OSP. Contact OSP for further information.

DEPOSITING CASH AND CHECKS FOR SPONSORED PROJECTS

If funds are sent by the sponsor directly to the unit, the Principal Investigator or unit Fund Manager should use the Revenue Input Voucher form to deposit the check through the Accounting Service Unit (ASU).  Since certain accounts and class fields are used for grants and contracts, to consult an OSP Financial Analyst as needed to verify the correct chartfield values prior to submitting the Revenue Input Voucher.   A copy of the check and Revenue Input Voucher should be submitted to OSP with any accompanying sponsor materials. Note that all original award documents for grants and contracts should be forwarded directly to OSP, since OSP maintains the official file of record for the Smithsonian. The efforts of both the Principal Investigator and the Fund Manager to expedite the deposit of payments and submissions of documents to OSP will facilitate the setting up of designated codes on a timely basis.

CHARGING EXPENSES

Once the designated code has been assigned, the Principal Investigator has primary responsibility for using the funds in a manner consistent with sponsor and Smithsonian regulations including special conditions incorporated into the agreement. All direct and indirect charges to sponsored projects must adhere to the principles of allowable costs. Expenses must be reasonable, related to the scope of work, and comply with the approved budget.

An allowable cost is one that complies with the principles regarding costs that are applied to sponsored projects funded by the federal government.  Accordingly, these guidelines are set forth in OMB Circular A-122, "Cost Principles for Non-Profit Organizations." For example, the federal government will not reimburse for entertainment costs (including alcoholic beverages); thus, such costs are not allowed. Another example of a cost that would be disallowed is the charging of an expense to a project before the inception date without prior sponsor approval or after the expiration of the project period.

When a funding period is specified, only allowable costs resulting from obligations incurred during the funding period may be charge to the grant.

Significant items, such as expensive pieces of equipment that are charged shortly before the completion date of an award, may be disallowed by federal auditors, especially if the project is unlikely to have benefited from the purchase. If a Principal Investigator wishes to make such a purchase, an OSP Grant and Contract Administrator should be consulted prior to the placing of an order. When uncertainty exists regarding a specific expenditure, Principal Investigators and unit Fund Managers should call OSP for assistance.

PROGRAM INCOME

Awards made to the Smithsonian are bound by the terms prescribed by the sponsor regarding income generated by the activities. Program income includes: such income as general program income as defined in OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations," and  individual sponsor guidelines; proceeds from the sale of assets acquired with the project fund; or royalties from copyrights on publications developed under an award. Generally, all program income earned during the period of project support is retained by the recipient and is treated in accordance with the sponsor's guidelines governing the use of these funds. The Principal Investigator is not authorized to choose how these funds will be used; rather, OSP should be contacted for review of the sponsor guidelines.

ACCOUNTING CLASSIFICATION CODING STRUCTURE

Appendix H contains an abbreviated list of accounting class fields used most frequently for sponsored project grants and contracts. OSP can assist Principal Investigators and unit Fund Managers with questions on the appropriate accounts and class fields for both revenue and expenses. When charging expenses, each expenditure and obligation must be identified with appropriate chartfield values. The number of chartfield values will vary depending not only on whether it is a posting to a revenue or expenses account, but on how much information the unit needs to capture for reporting.  The names of the chartfield values are listed by segment:

    1. Fund code:  identifies a major category with no fixed beginning or end date (use 802 from agreement contracts and grants and 803 fro government contracts and grants).
    2. Budget reference:  for fund codes 802 and 803, the budget reference is always 0000.
    3. Designated code:  used in conjunction with the fund code and does have a fixed beginning date and a fixed end date.  All costs must be incurred prior to the end date of a designated code.
    4. Department ID:  identifies the organization with the Smithsonian that is requesting or spending the money.
    5. Account code:  from the general ledger chart of accounts and is designed to classify institutional financial activities affecting assets, liabilities, equity, revenue and/or expense.
    6. Class field:  Revenue class fields identify a specific type of income. Expense class fields identify what was purchased.  All revenue, expenses, and capital assets require a valid class field.
    7. Program code:  describes broad areas of mission-related activity that continue from year to year across organizational lines.
    8. Project ID code:  normally unique to an individual unit and may extend over more than one fiscal year.
    9. Activity ID code:  used in conjunction with the project ID to provide information to the unit for reporting purposes.