Reconciling financial activities on sponsored projects is an important element to maintaining compliance with institutional and sponsor regulations, and ensuring all financial transactions meet Allowable, Allocable, and Reasonable (AAR) standards. This page will guide you to the process and resources for validating the ledger of transactions on a sponsored project. Information on other activities that some departments consider reconciliation, such as projections, may be found on other pages in the Manage Award and Finances stage of myRESEARHpath.
Depending on the department and the sponsor, the threshold of risk for reconciliation of transactions utilizing sponsored funds will vary. GAP 200.012, Reconciliation of Financial Transactions, provides more information about the general procedures, process, and responsibilities involved with reconciliation.
Allowable, Allocable, Reasonable (AAR)
All costs charged to a sponsored project must meet all conditions for being Allowable, Allocable, and Reasonable:
- Allowable: In compliance with sponsor, state, institutional, and other applicable regulations
- Allocable: Specifically identified with a sponsored project in a documentable manner
- Reasonable: Necessary for the scope of work with no unnecessary add-ons, and the price is realistic and sensible
If a cost is non-compliant with AAR conditions, the ledger will need to be adjusted to remove this charge from the sponsored account. This is most often done via a JV or cost transfer. Federally sponsored projects should follow the procedures in GAP 200.150, Cost Transfers on Federally Sponsored Projects.
Talk to your business manager or lead research administrator to determine if the transaction should be moved to a discretionary code or other code. It is also important to communicate with the research team about any unallowable charges and create a plan to mitigate further unallowable spending. In some instances adjustments may need to be made to the budget. Access the Awarded budgets and rebudgets/CAS page for more information.
Monthly financial reconciliation
On a monthly basis, transactions for sponsored funds should be reconciled to ensure they meet AAR standards. This usually happens via workflow in your Universal Worklist, and depending on your department, review of the expenses may occur before they post to a specific account. Transactions must be necessary and reasonable for the performance of the Federal award:
- Allocable to the Federal award in proportions that may be approximated using reasonable and documented methods
- Reasonable in nature and amount
- Consistent with policies and procedures and consistent treatment of cost
Refer to the Uniform Guidance Code of Federal Regulations Part 200 Subpart E Cost Principles for additional guidance.
Based on your management center, department, and sponsor requirements, the expectations for monthly financial reconciliation vary. Some departments will reconcile 100% of transactions on sponsored codes (full reconciliation), while others reconcile select codes according to Financial Assessment & Management (FAM) risk thresholds (most SOM/SON departments).
Documentation for transactions must support the transaction and demonstrate AAR standards are met. Examples of documentation may be detailed text and/or attachments for journal entries, purchase order, invoice, receipts, or an accounts payable check request. Documentation should reflect why the transaction is necessary and support that the costs benefit the award and represent items received.
Refer to GAP 200.012, Reconciliation of Financial Transactions and talk to your business manager or lead research administrator to better understand the process and requirements for your department. The “Related Resources” on this page provide additional training and reference guides for reconciliation and FAM.
Burn rates and spending analyses
Monitoring burn rates and conducted spending analyses is important to ensure project spending aligns with proposed activities and timelines, and that the project is progressing on schedule and budget. This is also important in determining that spending meets AAR compliance.
Some departments have developed their own process and tools for determining burn rates and analyzing spending. Talk with your department business manager or lead research administrator for information specific to your unit. If your unit uses the projection and reporting tool in SAP, explore the "Related Resources" on this page for guidance and training on utilizing this tool.