Vanderbilt University

Guidelines for Budgeting and Charging Direct Costs on Sponsored Projects (11/15/96)

Account Coding

What is an account?

At Vanderbilt, budget line items and individual expense transactions are identified by a five-digit account number. This account classifies the transaction as salaries, fringes, supplies, travel, etc. To select the correct account for sponsored project budget line items or expense transactions, the principal investigator and/or grant administrator should be familiar with Vanderbilt's account structure.

A complete listing of Vanderbilt accounts is maintained by the Office of Contract and Grant Accounting and Medical Center Financial Management. Each grant administrator should be familiar with the accounts available for use on sponsored projects and other centers. Please contact the appropriate individuals in Appendix C to obtain copies.

Why the emphasis on proper account coding?

One of the elements most critical to successful financial administration of sponsored projects is the assignment of appropriate accounts to budget line items and expense transactions, for the following reasons.

(1) Miscoded expenses can result in incorrect indirect cost charges. The account determines whether or not the cost will be included in "modified total direct cost" and therefore subject to indirect cost.

(2) Failure to identify capital equipment purchases can result in noncompliance with internal and external property management regulations. Federal regulations require that all capital equipment purchases be added to the central inventory system. The account used on the capital equipment requisition is one method used by central equipment inventory offices to identify capital equipment purchases to be added to central inventories.

(3) Errors in account coding can result in inappropriate conclusions by the principal investigator and/or sponsor regarding financial status.

(4) Improperly coded expenses can result in inappropriate conclusions by auditors and can adversely impact Vanderbilt's ability to effectively monitor for compliance with federal regulations regarding allowability. In an internal or external review or audit, the account determines the type of review or audit procedure to which the expense is subjected, and whether the expense is viewed initially as allowable or unallowable.

(5) The account distinguishes between costs funded by the agency and those cost-shared by Vanderbilt. Failure to use a cost sharing account on cost-shared expenditures will understate Vanderbilt's contribution to the project.

Do all proposal budgets need to be detailed at the account level?

No, not all proposal budgets need to be prepared at the account level. However, funded proposals must have budgets at the account level per the May 8, 1996 revision to Office of Management and Budget Circular A-21, Section C.10.:

Section C. 10. Consistency in estimating, accumulating and reporting costs.

a. An educational institution's practices used in estimating costs in pricing a proposal shall be consistent with the educational institution's cost accounting practices used in accumulating and reporting costs.

b. An educational institution's cost accounting practices used in accumulating and reporting actual costs for a sponsored agreement shall be consistent with the educational institution's practices used in estimating costs in pricing the related proposal or application.

c. The grouping of homogeneous costs in estimates prepared for proposal purposes shall not per se be deemed an inconsistent application of cost accounting practices under subsection a when such costs are accumulated and reported in greater detail on an actual cost basis during performance of the sponsored agreement.

What are some of the special circumstances related to account coding?

In many situations, there are several accounts that could appropriately be used, and it is up to the grant administrator, based on guidance from the appropriate Dean, Director, or Department Head, to choose the account that best describes the good or service being acquired. Following are general comments on selected expense areas.

Personnel Costs: 50000-59999

Salaries and wages and related fringe benefit accounts, 50000 - 59999, are used for individuals hired and paid through the Vanderbilt payroll system (Human Resource System - HRS), and the accounts used are determined by the job code assigned to the position. Payments for services outside the Vanderbilt payroll system should be charged to the appropriate account in the Professional Services (63xxx) range. The Classification and Compensation department of Human Resource Services will assist you in determining the appropriate job code for new positions or in reclassifying existing positions.

Supplies: 60000-60999

For allowability reasons discussed later, proper distinction between office supplies and lab/research supplies is critical, particularly on government-funded projects. Accounts 61440 "Spec Res Unrestricted", 61450 "Special Prog/Project", 61900 "Misc Expense", 61910 "Other Expenses", and 61920 "Unassigned Expenses" are not appropriate for use, as they do not specifically identify the type of cost being charged.

Travel: 62000-62999

Foreign travel should be charged to account 62660 "Travel, Foreign". Any alcoholic beverages or entertainment costs to be reimbursed to a traveler must be charged to the appropriate entertainment account, 6211x.

Subject Participation: 63400

All subject payments should be charged to account 63400 "Subject Participation".

Subcontracts: 63900/63910

The first $25,000 in payments to a subcontractor on a sponsored project should be charged to 63900 "Sub-Cont Under $25K". Payments in excess of $25,000 should be charged to 63910 "Sub-Cont over $25K".

Capital Equipment: 74010-74090 and 74300

Capital equipment funded by the sponsor should be charged to accounts in the range 74010 through 74090. Cost-shared capital equipment should be charged to 74300 "Equipment Cost Share". Effective July 1, 1996, capital equipment is defined as "an article of nonexpendable tangible personal property having a useful life of more than one year, and an acquisition cost of $3,000* or more per unit." [Colleges and Universities Rate Agreement, Section I: "Indirect Cost Rates" dated May 3, 1996].

*The $3,000 capitalization threshold currently does not apply to Vanderbilt entities subject to Medicare regulations such as Vanderbilt University Hospital, The Vanderbilt Clinic and certain entities under the umbrella of Vanderbilt Health Services such as HomeCare and Vanderbilt Health Plan. For these entities, the capitalization threshold is $500.