Overview
The University may enter fixed price, fee for service agreements, and clinical trials agreements. Principal investigators (PIs) must make reasonable efforts to price these agreements appropriately. Their pricing must ensure that all University costs are covered. Departments are responsible for any resulting deficit. After verification that all costs were accurately charged to the MFK and all deliverables were accepted by the sponsor, there may be a residual balance retained by the institution.
"Performance-based" fixed price agreements are often financed differently from other types of sponsored research agreements. The level of funding the sponsor provides for the work depends on industry norms rather than actual costs of doing the research. In addition, in a fee for service agreement the PI agrees to perform the work regardless of the actual cost of conducting the research. If the PI underestimates the cost of the research, the department must provide other University funding to complete the work.
Similar to other sponsored agreements, the actual costs incurred by the University to provide the goods/services/milestones must be charged to the related MFK. Upon the completion of the project, the Principal Investigator (PI) and/or his/her designee must review the MFK and compare the payments received under the agreement to actual expenditures incurred.
Definitions
Fee-for-Service/Fixed Price Agreement is a sponsored agreement or contract in which the sponsor agrees to pay an upfront, predetermined price, for agreed upon services or individual tasks to be performed. Fee for service awards include, but are not limited to fixed fee contracts, deliverable-based agreements, and other awards where there is not a requirement that any remaining funds be returned to the sponsor.
Residual Balance is the balance of funds when the agreement permits the University to retain the funds after the work is completed. If the funding provided by the sponsor is not fully expended after all appropriate expenses have been accounted for, a residual balance will exist. Residual balances can occur on a grant or contract (including clinical trial and service agreements).
Financial Activity
The University will treat financial activity as follows:
- Expenses incurred exceed the total payments received:
This negative residual balance must be absorbed by departmental resources. - Expenses incurred equal the total payments received:
A zero balance at the end of the award deems the project as complete. - Total Payment received exceed the expenses incurred:
This positive balance may be retained by the institution. In certain instances, the balance may need to be refunded to the sponsoring agency.
Residual balances are considered institutional funds. These balances must be utilized to support the research mission of the university and follow institutional policies/procedures. The funds shall not be used for personal or private (i.e., not related to University business) expenses.
Close-out
The procedures noted below should be followed based upon the type of the balance.
- Negative Balance (expenditures exceed payments)
Grant Accounting (GAO) will contact the PI and their department for an MFK to transfer the expenditures equal the negative balance off the award. - Zero Balance (expenditures equal payments)
Grant Accounting (GAO) will contact the PI and their department to close the award. - Positive Balance (payments exceed expenditures)
The PI and their department should initiate a Residual Balance Transfer Request (Request) and obtain the required approval (see below). This Request should not be processed until the department satisfies the following general conditions:- The award period has ended.
- Final payment from the sponsor has been received.
- Encumbrances on the award are zero.
- All outstanding transactions have been posted to the award.
Residual Balance Transfer Request:
Requirements, Approvals and Routing
If the residual balance (direct and F&A) amount is greater than 20% of the approved budget or more than $25,000 a residual balance transfer form must be completed. This form will require approval from the DEO and College/Unit Business Officer. The completed form should be emailed to your grant accountant for review and GAO approval.
Residual Balance Transfer Request Form
Last updated 03/26/2024