University Organization for Research Administration

Administrative Policy Considerations

Roles and Responsibilities

Preparation of Proposals

Types of Agreements and Instruments

Initiating the Project Award

Award Administration

Project Changes

Effort Reports

Guidelines for Cost Transfers

Project Reporting


Accounting Procedures for Non-Federal Sponsors and the F&A Costs of Sponsored Projects

Establishing a University Purchase Order for Subrecipients

Detailed Efffort Reporting Procedures

Service Centers and Recharge Centers

Financial Reporting

The Closeout and Final Reporting Process

OMB Circular A21

Additional Reference Materials





















8         Award Administration

8.1      Sponsor-University Relationship

Awards for sponsored projects are made to The Trustees of the University of Pennsylvania, which is identified as the grantee or contractor in the document. It is the primary responsibility of ORS, as designated institutional representative, to serve as the intermediary between the sponsor and the principal investigator for the purposes of negotiating changes in the project budget, modifications (reallocations, increase or decrease of funds), date extensions, and other items of an administrative nature.

ORS is responsible for submitting required financial reports and obtaining payment for sponsored projects. ORS, in cooperation with the principal investigator and the business administrator, is responsible for ensuring compliance with sponsor regulations and guidelines.

The principal investigator is directly responsible for performing the project within any administrative constraints imposed by the sponsor and the University. The principal investigator directs the technical aspects of the project effort within the scope authorized by the sponsor and authorizes any and all expenditures of project funds subject to approval, where necessary, by ORS or the sponsor. The principal criterion for assuring that costs charged to a sponsored project are appropriate is that they benefit the project. The principal investigator should meet with his/her business administrator at the initiation of a project and monthly during its course to assure proper fiscal management. The principal investigator is responsible for the timely submission of all required technical or programmatic reports (See Sponsored Projects Policies Nos. 2106 and 2127.)

8.2      Relevant Sponsored Projects Policies

The following Sponsored Projects Policies are of direct relevance to the administration of sponsored projects:


2101 Administration of Sponsored Projects

2103 Administration of Clinical Trials

2104 Negotiation of Awards

2105 Acceptance of Awards

2106 Financial Responsibility

2107 Accounting Authority & Responsibility

2108 Cost Accounting Standards (CAS)

2109 Budgets

2110 Federal Direct Cost Expenditures

2111 Unallowable Costs

2112 Procurement of Goods & Services

2116 Facilities and Administrative (F&A) Costs

2119 Cost Sharing/Matching Requirements

2220 Accounting for Matching Gifts

2121 Accounting for Program Income

2122 Sponsored Project Payments

2123 Funding under Letter of Credit Agreements

2124 Direct Billing

2125 Delinquent Payment/Nonpayment of Project Costs by Sponsors

2126 Interim & Final Financial Reports

2129 Write-off of Overdrafts and Disallowances

2131 Compliance with Subrecipient Standards of OMB Circular A-133

2132 Record Retention

2133 Advances of Cash from External Sponsors

2135 Monitoring Subrecipients Not Subject to OMB Circular A-133

2138 Direct Cost Expenditures for Non-Federal Organizations

2140 Expense Approval Requirements


8.3      General Administration

8.3.1      Expenditure of Funds

Once an account has been established and budgeted (see Initiating the Project Award ), project expenditures can be made. The department's business office will assist the principal investigator in administering an award and will provide monthly reports on the project's financial status. The principal investigator should assure that the charges made to the project account each month are accurate, reasonable and allowable under the terms of the award.

8.3.2      Allowable Costs

Allowable costs are defined by sponsors in their award documentation. In general, expenditures that are in conformance with the sponsor approved budget are allowable. Unapproved deviations from the budget may result in a disallowance by the sponsor requiring transfer of the disallowed expenditure to department/school University accounts. See Sponsored Projects Policies Nos. 2110 and 2138. Certain other costs normally unallowable on federal awards, such as cell phones and local telephone charges may be allowable on non-federal awards.

8.3.3      Unallowable Costs

Certain costs may be unallowable either as direct or F&A cost, regardless of sponsor. For example, parking fines while on University business are unallowable (Procurement/Disbursement Policy No. 2329 and Sponsored Projects Policy No. 2111).

8.3.4      Specific Expenditure Categories

Many specific expenditure categories have special requirements and considerations. Administration of the major categories is summarized in the sections below.       Personnel

Appointments of all personnel to sponsored projects are subject to the Human Resources Policies of the University. Payment of all personnel is effected through the University's Personnel/Payroll System and is administered in the departmental business office.

7         Faculty and Staff Salaries

A research project should be charged with a portion of each employee's salary equal to the portion of time or effort devoted directly to the project. For a faculty member with a nine-month appointment, one month of effort is one-ninth of his academic year salary. Salary increases can be charged proportionally to the project if they can be accommodated within the project budget.

7         Summer Salaries

Most sponsors will provide for compensation of faculty members with nine-month salary bases during summer months at their regular University salary rates when included as part of the project proposal. Submission by the University of a proposal that provides for summer salary does not imply a University commitment to pay such salaries in the event that the sponsor does not provide for summer salaries in the project award nor does it imply that the University will pay the capped portion of a salary if the sponsor imposes such a cap.

7         Additional Compensation

Project funds may not be used to increase the regular compensation of the principal investigator or other University staff members.

7         Graduate Research Assistants

Graduate research assistants should be separately budgeted for their salary/stipend and for their tuition remission as stated in Graduate Research Assistants . Stipends are specifically unallowable on NIH research awards (the R, S, U, N, and P series) and graduate research assistants should be paid using Object Code 5041. Graduate students paid stipends from NIH or other training grants should be paid using Object Code 5045. For further information please consult the Penn Tax Guide to Graduate Student and Post-Doctoral Appointments.


7         Postdoctoral Researchers


Unless specifically permitted by the terms of the award Postdoctoral researchers must be paid as employees of the University using Object Code 5047. Stipends are specifically unallowable on NIH research awards (the R, S, U, N, and P series). For further information on the appropriate object codes to be used for post-doctoral appointments please consult the Penn Tax Guide to Graduate Student and Post-Doctoral Appointments       Human Subjects and Animal Care Costs

These costs are allowed only if project has received prior IRB and/or IACUC approval.       Travel

Travel requests and reimbursements for sponsored projects are processed in accordance with University travel procedures and guidelines, as defined in the Financial Policy Manual. Dependent travel or personal side-trips cannot be charged to a sponsored project account. Each travel request should clearly state the relationship of the trip to sponsored project effort. The Travel and Entertainment Expenditure Justification for Sponsored Projects form can be used for this purpose. The form is required to be completed and submitted with all reimbursement requests for foreign travel on federal awards.

7         Domestic Travel

Domestic travel in support of sponsored projects is generally allowable, although some awards such as federal contracts may place limits on the amounts to be used for travel or may require adherence to federal travel regulations.

7         Foreign Travel

Foreign travel is generally defined as any travel outside the United States and Canada, although some contracts may stipulate differently.

Some sponsors require that foreign travel be approved in writing and in advance, even when the award includes funds for foreign travel.

Federal awards require that all foreign travel utilize US-flag air carriers wherever possible without regard to cost or convenience. This requirement applies to any non-federal funds used for cost sharing on federal awards. See Travel and Entertainment Policy #2354: International Travel for further information.       Equipment   Definition of Non Expendable Equipment

Items with a unit cost of $5,000 or more and a useful life of one year or more.   Types of Non Expendable Equipment


Special Purpose Equipment: used only for research, medical, scientific or other technical activities.

Examples: laboratory instrumentation.


General Purpose Equipment: not limited only to research, medical, scientific or other technical activities.

Examples: office furniture, computers, air conditioners.   Approval to Purchase


Many sponsors permit the acquisition of non-expendable equipment with grant or contract funds provided it is required for the performance of the project. Some sponsors require that prior written approval be obtained before equipment is purchased while others give the University the authority to make such decisions. The principal investigator should ascertain the specific requirements of the award from which equipment is to be purchased prior to ordering it. Consult the department or school business office or ORS.   Equipment Acquisition


As for most purchases, generally, the business office orders equipment through BEN Buys although some laboratories are approved to order certain items directly. For further information, go to the Purchasing Services web site.   Equipment Records


The business office in the department should keep project equipment records on each item acquired, showing at least the following:


7         Name of Item

7         Manufacturer

7         Model No.

7         Serial No.

7         Acquisition Document Reference (P.O. No., Date and Acct. No.)

7         Unit Cost Approval Document Reference (when required)

7         Sponsor Grant/Contract Number

7         Location  

7         Equipment Inventory and Disposition Requirements


On all federal contracts, and in some other special cases, annual and final equipment inventories to the sponsor are required. ORS will initiate requests for inventories, as necessary. Most sponsors include provisions for transfer of title to the University for authorized equipment acquisitions. The transfer of title may take place at the time of initial acquisition or at the completion of the project. If an item of equipment was bought with sponsored project funds or was provided by the sponsor, and is to be sold, traded in for new equipment, or scrapped, provide ORS with the project number, original cost and acquisition date of the item. ORS will advise as to appropriate action. In all cases equipment owned by the sponsor must be returned to the sponsor or a request for title must be made.       Non-Employee Personal Services to Sponsored Projects

Frequently, the services of individuals who are not University employees are necessary in the performance of sponsored projects. Such services may include consulting, preparation of working papers or reports, presentation of lectures or seminars and other such activities which are essential to the successful completion of the project. However, it is important that payments for such services be classified and documented properly in the accounting system to avoid audit exceptions. The following guidelines are in effect.   Honoraria

Honoraria are not allowable as a charge against most federally sponsored projects. They are considered a payment or reward where the primary intent is to confer distinction on, or to symbolize respect, esteem or admiration for, the recipient. Services chargeable to a federal sponsored project should be classified as to type of service, i.e., consulting fees, lecture fees, etc. Non-government sponsored projects may be charged for honoraria where appropriate and with the specific approval of ORS.   Lecture Fees

Such fees may be charged to training projects provided they are allowable within the terms of the specific grant or contract. Lecture fees are not an appropriate charge to research projects.   Other Non-University Employee Services

For personal services not covered by the above categories, a description of the services rendered must accompany the payment request (Request for Payment Form C-368). Such services are normally allowable provided the services are essential to the project, the charges are reasonable and a selection process has been employed to secure the most qualified individual available.   Payment of Non-University Employee Travel

If a non-University employee bills for travel in connection with the above services and provides original receipts to support travel expenses, then the travel expenses are paid on a C-1 Form. This reimbursement is not reported to the IRS. If original travel receipts are unavailable, the travel expenses should be included in the total reimbursement under the appropriate object code on the C-368 Form. See Travel and Entertainment Policy - (#2361) Expense Reimbursement for further information.

8.4      Subrecipients (Subawards)

8.4.1      Overview

When the University is awarded a sponsored project agreement in which a substantial portion of the work will be accomplished by another institution or organization, the policies and procedures set forth in this Section apply.

Note: In general, these instruments should not be used to contract for services of a consulting firm or organization even though subawards and goods and services agreements are formally encumbered in the University accounting system through the use of purchase order agreements.

Subawards can not be used for routine purchases of equipment or support services.

8.4.2      The Subaward

Usually, subrecipients must honor the same terms and conditions the sponsor imposes on the University. The purpose of the subaward document is to establish those requirements contractually.

Upon receipt of the award from the sponsor, a representative of Research Services, will contact the BA and the PI to the subaward requirements. After confirming the cost, time period, scope of work, billing requirements, reporting requirements, appropriate subaward instrument, and special needs of the project, ORS will write and mail the subaward. The accompanying letter advises that a Purchase Order will follow. If the subrecipient is new to the University, a Vendor Questionnaire will be sent asking the subrecipient to specify its vendor name, address, and then sign and return the agreement to Research Services.

For a more detailed explanation of the process for subawards see the Section on Establishing a University Purchase Order for Subrecipients .

8.4.3      The Purchase Order

Research Services sends the responsible BA a copy of the signed agreement with instructions for creating the official University purchase order. The following are issues to consider:

1.      If the vendor and site data are not in the Purchasing system, the BA must submit a request to the Purchasing System Administrator to add the vendor into the system. (See Supplier Update Form).

2.      For each subaward, the account distribution should link Object Code #5332 to the first $25,000 of subaward expenditures, and Object Code #5333 thereafter. This step ensures F&A costs are properly charged. When non-standard F&A cost rates are applied to the subaward, the account distribution linkage should be adjusted accordingly. For non-federal funds Object Code #5332 should be used for the entire amount of the subaward (see Sponsored Projects Policy No. 2138 and the section on Accounting Procedures for Non-Federal Sponsors and the F&A Costs of Sponsored Projects ).

3.      The Notes to the Vendor field should establish a clear link to the subaward by reading:

"Subaward service, in accordance with the terms and conditions of Subaward #________, dated ________, with an effective date of ________. In case of any conflict between the conditions of the purchase order and the subaward, the terms of the subaward shall take precedence."

4.      If the subaward purchase order is greater than $5,000, the following statement must be entered in the Notes to Approver field:

"Subaward, Competitive bids are not required"

The purchase order is then approved in accordance with the School/center purchase order approval hierarchy.

8.4.4      Invoices

The subrecipient is instructed to mail invoices directly to the responsible BA for forwarding to Accounts Payable. The subaward describes the required invoice format. The PI must approve payments before Accounts Payable will pay (see Sponsored Projects Policy Nos. 2110, 2131, and 2135).

8.4.5      Additional Increments and Subaward Modifications

When an increment is necessary, Research Services will send a signed modification to the subrecipient, advising that the subaward is being increased and extended, and a new purchase order number will be issued. Research Services will then send a copy of the modification to the department, with instructions to create a new purchase order as follows:

1.      The BA links the new purchase order to the original BEN Buys subaward.

2.      The Notes to Vendor field should indicate that this is an extension of subaward services for subaward # ______, modification # _____________, dated ____________.

3.      If the original agreement was for less than $25,000, the difference between the original award and $25,000 will be charged to Object Code #5332. The balance will be charged to Object Code #5333. For non-federal funds Object Code #5332 should be used for the entire amount of the subaward (see Sponsored Projects Policy No. 2138 and the section on Accounting Procedures for Non-Federal Sponsors and the F&A Costs of Sponsored Projects ).

4.      If the subaward purchase order is greater than $5,000, the following statement must be entered in the Notes to Approver field:

"Revision to Subaward PO#_________, Competitive bids are not required."

The purchase order is then approved in accordance with the school/center purchase order approval hierarchy.

For a more detailed explanation of the Purchase Order process for subawards see the Section on Establishing a University Purchase Order for Subrecipients .

8.4.6      Subaward Close-out


The University generally requires subrecipients to provide final invoices within 45 days of project conclusion, or, half the number of days available to the University to submit a financial report, whichever is less. It is the BA's responsibility to request and maintain a record of the subrecipient's expenses. Research Services is responsible for requesting final invention reports and providing them to sponsors. The PI is responsible for coordinating preparation and submission of any required final technical reports (See Sponsored Projects Policies Nos. 2131 and 2135.)

8.5      Consultants

8.5.1      Payment of Consulting Fees and Documentation


A consulting agreement is recommended in most cases and is always required by federal sponsors. A copy of a recommended agreement appears in the Forms and Agreements section of the Research Services web site. The consulting agreement must be completed prior to the start of work.

Note: To be considered a legally binding agreement between the University and the consultant, all such agreements must be signed by an authorized institution official in Research Services.


Fees for consultants may be charged to sponsored projects in accordance with the terms of the specific grant or contract and the University's policy. Payments should be made only for work already completed and must be supported by a Consulting Agreement form and by an invoice signed by the consultant for the work performed. Reminder: NSF sets limits on the daily consultant reimbursement rate (NSF Daily Rate).       For All Consultants

Consultants should be paid only for work that is already completed and supported by a consulting agreement and an invoice signed by the consultant. The invoice must specifically include the following:

    • Name of consultant
    • Nature of services rendered
    • Rate of pay
    • Period of service
    • Total amount of the fee and other expenses

Consulting should only be performed and charged to an award while the award is in active status. Work performed outside the award period is the responsibility of the department. Please refer to the Corporate Tax Office website for detailed information regarding the engagement and payment of individual consultants (http://www.finance.upenn.edu/comptroller/tax/index.shtml).

University personnel engaged as consultants under the University's policy on Extra Compensation for University Employees must follow the procedures outlined below.       For External Consultants

Payments to external consultants should be processed in accordance with University of Pennsylvania Financial Policy #2319 entitled "Payment to Individuals for Honoraria, Consulting Fees, Lecture Fees, Human Subject Fees, and Other Services," in the Financial Policy Manual and the Independent Contractors & Consultants Guide. The following conditions also apply to external consultants:       For Federal Employees


Fees paid to federal employees are generally not allowable as charges to federal grants and contracts. Before committing to pay federal employees for any consulting, lecture, travel fees, or meals, contact Research Services to determine allowability.       For University of Pennsylvania Employees


Payments to internal consultants should be processed in accordance with Financial Policy #2320 entitled "Extra Compensation for University Employees" in the Financial Policy Manual. Charges representing extra compensation for consulting or lecture work (i.e., compensation above the salary base paid to a salaried University employee) are allowable only in unusual cases and only when all of the following conditions exist:

    • The consultation is specifically provided for in the award document or approved in writing by the sponsor.
    • The consultation is across departmental lines or involves a separate or remote location.
    • The work performed is outside the scope of the individual's regular departmental workload.
    • The payment is considered extra compensation and is processed through the payroll system using an additional pay form.

8.6      Program and Interest Income


Program income or interest revenue must be budgeted and accounted for within the fund in a manner consistent with the specific terms and conditions of the award or by reference to general provisions of federal regulation.

8.6.1      Program Income


Program income is income generated as a result of program activity or by the sale of assets previously purchased under a sponsored program (see Sponsored Projects Policy No. 2121). Other types of program income are, but not limited to:


7        Fees earned from grant supported services

7        Rental or usage fees

7        Third party patient reimbursement

7        Sale of tissue cultures, educational materials or research animals


Note: Although income earned from license fees and royalties on patents and copyrighted material is considered program income for federal awards, most agency regulations exempt this income from reporting requirements. Refer to the terms and conditions of non-federal awards for their requirements related to patent and copyright income.

The terms of the award must be reviewed carefully to ascertain sponsor requirements regarding the reporting and disposition of program income. Generally, federal sponsors will require that program income be reported on the Financial Status Report (FSR).


Program income may be used as additional (additive) support when specifically allowed by the sponsor. When supplemental support is permitted, funds must be properly budgeted and accounted for. ORS will establish a separate fund to account for program income when the additive method is required to be used, unless the amount of program income is nominal, i.e., less than $5,000. The fund will have the same F&A rate as the sponsored project fund.


In certain cases program income will be used to reduce or deduct from the sponsor's share of funding. This is more likely to occur if program income exceeds $25,000 per year.


Program income can be considered for cost sharing or matching gift requirements as long as the associated expenditures are also allowable.

8.6.2      Interest Bearing Funds and Excess Cash


The University will accept grants which contain a provision requiring the accrual of interest on advance payments. A new award with these provisions will be sent to the Office of the Treasurer for participation in the Temporary Investment Fund (TIF) (see Sponsored Projects Policy No. 2133).


ORS will issue an AIS indicating in the remarks section that the fund is to participate in TIF. However, depending on the terms and conditions of the award, interest earned may need to be returned to the sponsor or used to further support the purposes of the sponsored project.


For federal awards, interest on excess cash (cash in excess of current expenses) in excess of $250 annually must be returned to the federal government.

8.7      Rebudgeting of Funds

During the conduct of the project, the principal investigator may determine that budget changes are necessary. Many sponsors allow flexibility in how project funds are expended and permit budget changes needed to meet project requirements. Principal investigators need to be aware of the specific requirements for their awards and to request prior approval for budget changes when necessary. Re-budgeting to include animal care costs or human subject costs is not permitted without prior IRB and or IACUC approval.

When budget revisions are made in direct cost categories, there may also be an impact on the F&A costs to be charged to the project. As an example, if funds budgeted for equipment, that were not included in the MTDC base for calculating the F&A cost, are expended for materials and supplies, then F&A costs will be assessed against those expenditures.

Principal investigators should seek guidance from their business administrator or ORS (see Sponsored Projects Policy No. 2106 and Project Changes ) on specific re-budgeting questions.

8.8      Project Extensions

The principal investigator must plan and direct the project work so that it will be completed within the time and funds authorized. It is often necessary and appropriate to initiate a request for additional time with or without additional funds. Requests for such changes should be initiated by the principal investigator, countersigned by ORS, and forwarded to the sponsor well in advance (at least 60 days) of the project expiration date.

8.8.1      Federal Sponsors

Most federal sponsors allow the University to grant a one time extension of a grant without additional funds up to one year. See Project Changes and Sponsored Projects Policies Nos. 2106 and 2113 for additional information. Any further extensions of time require the prior approval of the sponsor.

8.8.2      Non-Federal Sponsors

Non-Federal sponsors may require the formal execution of an amendment to the contract to effectuate changes or extensions of the terms and conditions of an award.


In those instances where the fund number is to be used for a future budget period or the current budget period has been extended beyond the original termination date, the University's financial accounting system records will be updated to reflect the new Budget End Date upon issuance of the Account Information Sheet (AIS). The AIS is issued when verifiable documentation authorizing an extension of the project or budget period is made available. Documentation must be in the form of a letter (or official e-mail) from an authorized official of the sponsor approving the extension, or by way of a notice of award and such information must be made available to Research Services - Pre Award.

8.9      Retroactive Cost Transfers

Once a cost has been incurred and charged to a particular project account, it cannot be arbitrarily transferred to another project account. Cost transfers indicate a lack of controls in the project and are a cause for concern. For information see the Section on Guidelines for Cost Transfers and Sponsored Projects Policies 2106 and 2113.

8.10 Billing and Financial Reporting

As required by the terms of a sponsored project, periodic billing, financial reporting and withdrawals against letters of credit are initiated by ORS, based on the official University accounting system records. The PI's primary responsibility in this area is to ensure that expenses charged to the project account are accurately reflected in the accounting system in a timely manner. The PI should review the project fund monthly. The PI is also responsible for working with his/her business administrator to assure that a project is ready for close-out and final expenditures are reflected on the fund within 60 days after the stated termination date. If the final reporting date is less than 90 days after the termination date, the project must be ready for close-out reporting at least 30 days prior to the final reporting date. Should there be any questions, contact ORS.

A specific research accountant is assigned to the PI's account and handles all project financial reports. See the ORS web site for a listing of department and school assignments.

See the section on The Close-out and Final Reporting Process for close-out requirements.

8.11 Overexpenditures and Collections

If a deficit or disallowance to the project account occurs, the principal investigator, in consultation with the chair and dean, will advise ORS as to the desired disposition. In the absence of such advice, ORS will transfer the over expenditure into an unrestricted account of the appropriate school and refer the matter to the responsibility center senior business officer (see Sponsored Projects Policy No. 2129). The University does not budget funds to cover grant or contract deficits.

Occasionally, a sponsor fails to reimburse the University for legitimate expenditures made for a project. While it is the responsibility of ORS to submit invoices or financial reports as required in the award document, the principal investigator, his/her department and school play an important role in resolving situations where a sponsor will not or cannot reimburse the University. In such cases refer to Sponsored Projects Policy No. 2125.

Revised 9/16/04


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