Research Policy Handbook

Fiscal Responsibilities of Principal Investigators (RPH 3.1)

Current version: May 2, 2011

Summary:

Summarizes some of the obligations imposed on Principal Investigators by law and by Stanford policy. This document incorporates and supersedes the documents entitled "Responsibilities of Principal Investigators" and "Salaries Charged to Sponsored Projects," both published in the 1989 Research Policy Handbook. The process for review and certification of project expenditures was modified in October 1999. Requirements related to commitment of PI effort for research projects were established in March 2001 and revised in May 2011. Clarifications related to expenditure management were added in June 2001 and to vacation accrual in October 2003. Closeout requirements were added in February 2006.

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At Stanford, the Principal Investigator (PI) has overall responsibility for the technical and fiscal management of a sponsored project. This includes the management of the project within funding limitations, adherence to reporting requirements and assurance that the sponsor will be notified when significant conditions related to project status change. This document addresses specific responsibilities concerned with the financial management of sponsored projects. While responsibility for the day-to-day management of project finances may be delegated to administrative or other staff, accountability for compliance with Stanford policy and sponsor requirements ultimately rests with the PI.

Stanford University requires all Principal Investigators to review their obligations for stewardship of sponsor funds and compliance with applicable regulations. For that purpose, specialized briefings are conducted. Individuals may also certify their review of this material on a web site (https://dor.stanford.edu/PIship/).

This policy is divided into three parts:

1. Preparation and submission of proposed budgets, including consideration of allowability, cost sharing, commitment of effort, and estimating methods
2. Management of project expenditures, including review and certification of direct charges and cost-shared expenditures, charging of salary and vacation, monitoring of funds within the sponsor's funding limitations, and project closeout
3. Special requirements related to sponsor notifications and prior approvals.

1. PREPARATION AND SUBMISSION OF PROPOSED BUDGETS

In proposing budgets for sponsored projects, the PI assures Stanford and the potential sponsor that project finances are represented as accurately as possible. In addition, specific requirements, including cost principles as defined by the federal government in Office of Management Budget (OMB) Circular A-21, and consistency requirements as imposed by the federal Cost Accounting Standards (CAS) Board, must be adhered to at the proposal stage, as well as when funds are expended.

1. ALLOWABILITY
   

   Proposals should not include expenses which the federal government (in OMB Circular A-21 or other regulations) or the sponsor has identified as unallowable. Similarly, expenses which are to be considered as indirect expenses, e.g., certain types of office supplies and clerical salaries, may not be proposed and budgeted as direct expenses, unless they meet the criteria defined in Charging for Administrative and Technical Expenses, document 3.6 in the Research Policy Handbook.

2. COST SHARING
   

   Proposed budgets should delineate the complete committed cost of the project, identifying the amount requested from the sponsor, and other costs that Stanford commits to pay. A commitment to use Stanford resources to pay any portion of project costs that would otherwise be borne by the sponsor must be identified and tracked as cost sharing. At the time such awards are finalized, PIs must assure that department funds are identified and separately budgeted for those expenses. Voluntary effort above and beyond what was committed does not have to be treated as cost sharing. (See Cost Sharing Policy, document 3.5 in the Research Policy Handbook).

3. COMMITMENT OF EFFORT
   

   Stanford University requires a commitment of effort on the part of the Principal Investigator during the period in which the work is being performed. This effort may be expended during the academic year, summer quarter only, or both. Committed effort shall be direct charged or cost shared.

   The requirement of PI effort does NOT extend to:

   • Equipment grants
   • Seed grants for students/postdocs where the faculty mentor is named as PI, dissertation support, training grants or other awards intended as "student augmentation"
   • Limited-purpose awards characterized by Stanford as Other Sponsored Activities, including travel grants, conference support, etc. (see Categories of Sponsored Projects, Research Policy Handbook 3.4, for definition and further examples of Other Sponsored Activities.)

   In preparing proposals, PIs must be careful not to overcommit themselves or others. Distribution of effort must take into account the time required for teaching and campus citizenship.

   Note: Individual Schools may have their own thresholds for how much FTE faculty members must reserve for non-research activities. Research-only faculty on 12-month appointments may typically charge up to 95% to sponsored projects year round. See below for requirements for summer salary.

   PIs may submit proposals on the assumption that not all will be awarded, but, at the time of award, a reasonable representation of time to be devoted to the project, whether that effort will be paid for by the sponsor or by Stanford, is necessary. Subsequent changes in levels of effort may also require advance notification to and approval by sponsors (see section 3 of this policy on such notification and approval requirements).

   C.1    NSF Guidelines on Cost Sharing
   For proposals submitted, or due, on or after January 15, 2011, inclusion of voluntary committed cost sharing is prohibited. Cost sharing will only be allowed when explicitly authorized by the NSF Director and included in specific program announcements.

   C.2    Summer Salary
   A faculty member who is on a nine-month appointment may be paid from federal and/or non-federal sponsored projects for no more than 90% during any of the summer months. Salary charged to sponsored projects during the summer months must be consistent with effort expended during the same period.

   See also Frequently Asked Questions on Faculty Effort on Sponsored Research.

4. ESTIMATING METHODS
   

   When estimating dollars to be budgeted for project expenses, estimating methods must be consistent with Stanford accounting practices and must allow expenditures to be accumulated and reported to at least the same level of detail as the estimate.

5. BUDGET JUSTIFICATIONS
   

   Stanford is obligated to treat types of expenses consistently as either direct or indirect costs. If a proposed budget includes the direct expenditure of project funds for costs that would normally be charged indirectly, e.g., clerical and administrative expenses, general-purpose equipment, or operations and maintenance, then those items must be supported in the proposal by an explicit budget justification. In addition, when administrative and clerical costs are being proposed to a federal sponsor, the proposal must include an explanation of the activities which allow the project to be classified as "major" (see Research Policy Handbook 3.6, Charging for Administrative and Technical Expenses).

   Note: This section is not intended to override sponsor requirements related to proposals.

2. MANAGEMENT OF PROJECT EXPENDITURES

1. AUTHORIZATION OF DIRECT CHARGES
   

   To authorize the expenditure of funds to be charged directly to sponsored projects, the originating department must assure that:

   • the estimated charge is reasonable and necessary
   • the expenditure is allowable by the funding source and, if a charge to a federally-funded project, by OMB Circular A-21
   • the expenditure is allocable to the project, i.e., provides benefit to the project
   • the funds are available within the authorized award amount and funding limitations
   • the justification for the expenditure is documented
   • the method of allocation of costs is appropriate and documented
   • the charge is coded with the correct Expenditure Type and charged to the correct Project-Task-Award (PTA)
   • the charge has been processed through the appropriate University system.

   See also Administrative Guide Memo 36, Authorizing Expenditures [pdf file].

2. REVIEW OF PROJECT EXPENDITURES
   

   Monthly Expenditure Statements, prepared and issued by the Controller's Office, are the official record of project expenses and the basis for cost reimbursements to Stanford.

   Expenditure Statements for sponsored project and cost sharing accounts must be reviewed each month by a knowledgeable individual, i.e., the Principal Investigator or designee, so that adjustments can be made in a timely manner, and that rates of expenditures can be monitored to assure availability of funds. (See Sec. 3. A.) This review is documented by means of a signature on the Expenditure Statement. To be considered timely, monthly expenditures must be reviewed within two months of the end of the month being reviewed. A resource for the review of project expenditures is available at https://ora.stanford.edu/expenditure/default.asp.

   Any questionable charges must be brought promptly to the PI's attention, and, if needed, corrected by an appropriate transfer. Transfers should be initiated as soon as possible after a need has been identified. Whenever expenses are moved to or between sponsored accounts, the PI must assure that the project which ultimately pays the expense is the project which benefited from that expense, and that there is adequate documentation to support the appropriateness of the transaction. Procedures governing transfers of expense are defined in RPH 3.13, Cost Transfer Policy for Sponsored Projects.

3. CERTIFICATION OF PROJECT EXPENDITURES
   

   In addition to monthly review, expenditures for sponsored project and cost sharing accounts must be certified by the Principal Investigator at least quarterly. The following certification statement appears on Expenditure Statements for every sponsored project and cost sharing account:

   To the best of my knowledge, salary and wages charged to this project are appropriate in relation to work performed on this project. All other costs charged to this project are, to the best of my knowledge, appropriate. Where required, corrections have been or will be made through the accounting system.

   Project expenditures must be certified no less frequently than every academic quarter, recorded by signature on the last expenditure statement of the quarter (or the last statement for a project which ends mid-quarter). This certification is the responsibility of the project Principal Investigator (or Co-PI). A PI may delegate the monthly review of statements for accuracy, but may not delegate certification of the appropriateness of the charges.

   The PI's certification assures that all expenses charged to the account are allowable, allocable to the project, and reasonable. The certification of salary expenditures assures that salaries charged to the account are supported by a corresponding expenditure of effort during the time period being certified. The certification also assures that other expenditures are for items or services purchased and used during the project period as specified by the award. It is the PI's responsibility to seek a No-Cost Extension of the award if that is necessary in order to complete the project.

   To be considered timely, the certification must be signed within two months of the end of the academic quarter being certified. A quarterly calendar detailing timeliness for both monthly reviews and quarterly certifications of expenditures is available at https://ora.stanford.edu/expenditure/cert_calendar_fall.asp.

   Adequate explanation and documentation for all project charges must be maintained for three years after the sponsor closes out the award. Where documentation cannot be provided as to the allowability, allocability and reasonableness of any project expense, including but not limited to expenses incurred late in the project period, the sponsor may deny them. In this case, the PI, department or school will be expected to cover the expense from unrestricted sources.

   Each school and independent laboratory must maintain a mechanism to retain reviewed and certified Expenditure Statements. Difficulties regarding the timely certification of expenditures should be discussed with the Department Chair, School Dean, and/or Vice Provost and Dean of Research. Schools and Departments may consolidate Expenditure Statements for certification, as long as every expenditure can be linked to a certification.

4. CHARGING SALARIES TO PROJECTS
   

   Salary being charged to sponsored projects must be supported by documentation of a corresponding appropriate level of effort. Labor Distribution schedules must be completed accurately and salary charges certified as described in section 2.C, above.

5. CHARGING OF VACATION TO PROJECTS
   

   Staff at Stanford University, including Academic Staff-Research (non-faculty), accrue vacation as specified by University policy (see Administrative Guide memo 22.5, Vacations [pdf file]). Vacation charges to sponsored projects are appropriate only when such vacation is earned on the respective project. When staff members leave the University, they must be paid for accrued vacation. Such vacation shall not be charged to any project(s) on which it was not earned.

   Note: Stanford University implemented new accounting systems in the Fall of 2003. At the same time, Stanford and the Office of Naval Research (ONR) agreed on August 29, 2003 to establish provisional Vacation Accrual/Disability Sick Leave rates for exempt and nonexempt/bargaining unit staff. These accrual rates, reviewed and negotiated annually , enable Stanford to charge the appropriate funding source for vacation earned by benefits-eligible staff as they are working. An Excel template, calculating the value of "unfunded" beginning (9/1/03) vacation balance that can be charged to a particular "account" (Project-Task-Award combination), can be downloaded at
   https://fingate.stanford.edu/docs/vacation_accrual.xls

6. CHARGING PROPOSAL EXPENSES TO ONGOING PROJECTS
   

   Proposal preparation costs may not be charged to sponsored projects unless the proposal is being prepared for submission to a current sponsor for non-competing extension or continuation of its ongoing project. In those circumstances, it is appropriate to charge those proposal development costs directly to current projects. Costs for development of proposals for submission to other sponsors, or for work that does not relate to ongoing projects, is not allocable to current projects and may not be charged to those projects.

7. MONITORING OF FUNDS WITHIN SPONSOR FUNDING LIMITATIONS
   

   PIs are responsible for the ongoing fiscal management of awarded projects, including regular monitoring against project period budgets. Federal grants policy (OMB Circular A-110) establishes the approved project budget as the financial expression of the project, and sponsors may evaluate the project against the budget at any time. Although sponsors allow certain flexibilities with respect to rebudgeting, unobligated balances, and preaward costs, Stanford University and sponsors expect expenditures to be reasonably consistent with the approved project and budget. Sponsors may question or restrict expenditures that appear inconsistent with the project plan and budget. PIs are obligated to request prior approval when budget and program plan revisions indicate a significant change in scope. Indicators of a change in scope can include, for example, significant expenditures beyond the amount authorized on the award, or requests for additional funding (See Section 3 of this policy.)

   It is Stanford's expectation that projects will be managed within their established budgets. If, as a result of unusual circumstances or unanticipated project expenses, an account is in overdraft upon expiration of the term of the sponsored project, and if additional funds have not been received from the sponsor, the PI must identify an appropriate source of funds (e.g., gift, endowment, or operating budget) to cover the expense. The overdraft must be transferred in sufficient time to permit Stanford to comply with the financial reporting requirements of the original award (See Project Closeout, below).

   Since charges to clear overdrafts reflect direct project costs, they must not be incorporated into cost pools which lead to indirect cost recovery. These dollars represent project costs being borne by Stanford, and therefore must be accounted for in the same manner as cost sharing.

   The department must identify the source of funds to the Office of Sponsored Research (OSR) or designated School office which will create a cost sharing account. The department will then initiate the necessary expense transfer, including documentation of the nature of the expenses, noting they were legitimate project expenses but the funding was inadequate, and other reasons for the transfer. Such transfers must occur in sufficient time to permit Stanford to comply with the financial reporting requirements of the award (See Project Closeout, below.)

   The school is responsible for the timely clearance of any such unfunded expenditures from within its resources.

8. NO-COST TIME EXTENSIONS
   

   If additional time is needed to complete a project and there is an unexpended balance in the award, PIs may request that the period of performance of an award be extended. In some cases, Stanford officials are authorized to approve no-cost time extensions; in other cases, agency prior approval is required. Requests for extensions should be initiated by a PI and processed in accordance with the terms of the sponsored award; in most cases, the countersignature of an authorized institutional office is required. To ensure compliance with the reporting requirements of awards, PIs are urged to submit no-cost time extension requests as soon as the need becomes apparent. Requests for a no-cost extension should be submitted no later than the end date of the award (unless an earlier date is required by the agency.) Award closeouts cannot be delayed to accommodate pending requests submitted after the award end date.

   If final technical reports are to be completed after the project end date, and funds from the project are available to pay these expenses, a no-cost extension should be obtained from the sponsor to cover the expense of producing and distributing those reports. If funds are not available from the project, then the PI, department or school must identify unrestricted funds to pay final report costs. (See "Monitoring of Funds within Sponsor Funding Limitations" above).

9. PROJECT CLOSEOUT
   

   PIs are responsible for overseeing the proper closeout of sponsored projects, including the timely submission of all required reports (including final technical reports). While central offices prepare and submit final administrative reports, including financial and property reports, they do so on the basis of documentation created in the department. PIs must assure that such documentation is adequate and readily available. In addition, PIs are responsible for ensuring that any necessary final financial adjustments and documentation (e.g., final invoices from vendors or subrecipients) are received promptly after the end of the award.

   If an approval to close an award has not already been provided by the PI, the Office of Sponsored Research (OSR) will prepare and submit financial reports based on the information reflected in the financial system as of two weeks prior to the due date for the final report. In addition, some financial reports may require the PI's signature.

3. SPECIAL REQUIREMENTS RELATED TO SPONSOR NOTIFICATIONS AND PRIOR APPROVALS

The PI must assure that ongoing fiscal management is accomplished in accordance with sponsor requirements, including necessary notifications to the sponsor about project status.

Remaining in communication with sponsors and with Stanford administrative offices is an important part of project management. To keep all involved parties aware of project status, it is good practice to maintain communications with each of the following:

• the sponsor's technical officer (the project or program director),
• the sponsor's grant or contract officer (the administrative officer), and
• the institutional representative for Stanford University (the Office of Sponsored Research, or school office with delegated authority).

In all cases, required notifications or requests for prior approval of contract or grant status, including those described in the sections below, should be made in writing to both the administrative and technical officials in the sponsoring agency. Such notifications must be coordinated through the Office of Sponsored Research.

1. COMMUNICATION RELATED TO PROJECT AND FUNDING STATUS
   

   Separate regulatory requirements exist for notification to the sponsor in the case of federal contracts and in the case of federal grants. In all cases, such notifications must be made on a timely basis, in coordination with the Office of Sponsored Research, in order to allow sufficient time to arrange for and process additional funds, or for the reduction in spending and effort in order to phase out the program in an orderly fashion if additional funds are not available. The Principal Investigator's Department Chair and School Dean should also be informed, in advance, of potential funding problems.

   1. Financial status of federal cost-type contracts

      In the case of federal cost-type contracts (as opposed to grants), Principal Investigators must assure compliance with the Limitation of Funds and/or Limitation of Cost clauses which include the requirements that:

      1. the Contractor notify the sponsoring agency in writing at any time that there is reason to believe the total cost to the Government for the performance of the project will be greater or substantially less than the estimated cost, and further,
      2. the Contractor notify the sponsoring agency if, at any time, there is reason to believe that the costs which are expected to be incurred in the next succeeding 60 days, when added to all costs previously incurred, will exceed 75% of the specified estimated cost.

      Failure to provide such notice may preclude Stanford from receiving additional funding on that contract.

   2. Project and financial status of federal grants

      OMB Circular A-110 lists administrative requirements for federal grants, and establishes that prior written approval by the sponsor is necessary in the following circumstances:

      • change in the scope or the objective of the project or program (even if there is no associated budget revision)
      • change in a key person specified in the application or award document (see discussion of changes in PI status below)
      • need for additional federal funding
      • transfer of funds allotted for training allowances (direct payment to trainees) to other categories of expense.

      Prior approval must be requested of granting agencies when either a significantly accelerated rate of project expenditures, or expenditures that are significantly behind budget projections, indicates that the scope of the project has been changed.

      In addition, the specific award notice or the agency's policy manual or administrative guide may also establish requirements for communication with the sponsor during the course of the project.

2. CHANGES IN PRINCIPAL INVESTIGATOR STATUS
   

   In addition, sponsors often have requirements regarding notification or prior approval of changes in availability of the Principal Investigator.

   For FEDERAL CONTRACTS AND NON-FEDERAL PROJECTS, the terms and conditions of the particular agreement will govern.

   For FEDERAL GRANTS, OMB Circular A-110 requires prior written approval from the awarding agency for either of the following circumstances involving the Principal Investigator or approved Project Director.

   1. A reduction in time devoted to the project of 25% or more from the proposed and awarded level
   2. An absence from the project for more than three months.

   For any additional requirements, review the grant award and grant policy of the specific agency.

   The Principal Investigator, Department Chair, or department administrator should contact the Office of Sponsored Research to coordinate securing required approvals in either of the circumstances above. If, in the original award, Stanford had committed to fund some of the Principal Investigator's effort as cost sharing and the PI reduces the overall committed level on the project, OSR will also negotiate reductions in levels of the cost-shared component of effort, as appropriate.

   In addition, when a Principal Investigator's faculty appointment will terminate prior to or during a project's period of performance, the sponsor is so informed by the Office of Sponsored Research.

Questions about these sponsor notifications should be directed to the Office of Sponsored Research.

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