FI0205 – Sponsored Projects

Effective: December 26, 2014
Revision No: 11
General Policies Charging Salaries To Grant And Contract Wbs Elements
Accounting Classifications Charging Salaries On An After-Performance Basis
General Obligations And Requirements Faculty Salaries Chargeable To Federal And Federal Flow-Through Grants And Contracts
Grant Proposals And Applications Payments To Hourly Clerical And Supporting Personnel
Contract Proposals And Execution Procedures
Subawards Forms
Budgeting Contacts
  Related Policies

To provide policies and procedures for administering grants and contracts, including budgets, proposals and applications, cost sharing, subcontracts, and salary allocation.


General Policies[top]

  1. The term "grant" designates funds the university receives from outside sources for the purpose of accomplishing instruction, research, public service, or other designated functions in a specific area of mutual interest to the university and the grantor. The governing documents furnished by the grantor at the time of such grant awards usually designate the funds as grants and specify the degree of accounting and reporting obligations for such funds. Grants may be exchange or non-exchange transactions. See the definition of exchange and non-exchange transaction below.

    The term "contract" designates funds received by the university for specific services provided to agencies, corporations, or others under negotiated contracts. Contracts, including clinical trials, are always considered to be an exchange transaction.

  2. Grants are classified as exchange or non-exchange transactions. This designation determines the method that the university uses to recognize revenue.

    1. An exchange transaction is a reciprocal transfer in which each party receives and sacrifices something of approximately equal value. Revenue is deferred until it is earned.

    2. A non-exchange transaction occurs when the grantor does not receive financial benefit equal to the amount granted. There is either no deliverable or the deliverable is of less value than the amount granted. Revenue is recognized in the accounting period in which all eligibility requirements are met.

  3. The following policies apply to grants received and contracts entered into by the university. Because the volume of grant and contract transactions and funds varies widely and the administrative organization differs among the various university campuses and institutes, each campus and institute is responsible for providing additional written procedures necessary for maintaining adequate control of such funds within the framework of these policies.

  4. Campus or institute procedures must provide for sufficient prior review of proposals, applications, and agreements to ensure that all personnel responsible for committing university resources (personnel, facilities, and equipment) and for administering the proposed agreements are fully aware of their obligations. In addition, the procedures should provide for coordination with the Controller's Office in activating WBS element numbers for grants and contracts.

  5. The contracting process should allow sufficient time to have fully executed contracts prior to the starting date of the contract.

Accounting Classifications[top]

  1. For accounting purposes, grants and contracts are grouped into two major classifications.

    1. Restricted Grants and Contracts. Practically all of the grant and contract funds received by the university are accounted for as Restricted Current Funds, which require that a separate WBS element be established for each grant or contract to document and account for the receipt and expenditure of such funds. Restricted grants and contracts processed through the university will have "R" WBS elements.

    2. Unrestricted Grants and Contracts. General program support grants to university campuses and institutes, which do not require separate accounting for the expenditure of funds should be accounted for as General Current Funds/Unrestricted Revenue of the appropriate campus or institute when received. Documents indicating the source and nature of such funds must be sent to the Controller's Office when the request is made to establish an appropriate revenue cost center. Normally, the university receives relatively few "unrestricted" grants. An example is an Institutional Educational Allowance received to support graduate student instruction.

General Obligations and Requirements[top]

  1. The university is responsible for complying with the regulations, guidelines, technical and fiscal reporting and billing requirements, and management procedures as prescribed by the sponsoring agency. The majority of grant and contract awards received by the university are not more restrictive in accounting, reporting, and billing requirements than will be provided through the university's normal fiscal procedures.

  2. The principal investigator is primarily responsible for administering the grant or contract. The following areas require the principal investigator's special attention.

    1. Administrative Responsibilities. The general administrative responsibilities for grants and contracts are as follows.

      1. Performance Regulations. The campus or institute research office is responsible for being fully aware of applicable regulations (particularly for federally sponsored projects) that must be followed in conducting such projects. This office is responsible for maintaining current information on such regulations; reviewing proposals, applications, and agreements to comply with current regulations; and disseminating information on such regulations to appropriate campus or institute staff.

      2. University Obligations. The department head and principal investigator of the grant or contract project must be thoroughly familiar with all obligations assumed by the university on grants and contracts under their administration and see that requirements are met, charges are processed promptly, and required technical reports are submitted on schedule (or that time extensions are obtained when necessary or appropriate). These personnel should also obtain advance approval for significant revisions to budget or program plans. In addition, the department head and principal investigator must ensure that project costs are reasonable, allocable to the grant or contract within the stated time period, allowable, and consistently charged. See item 10 below for more information on project costs.

      3. Note: When developing contracts, employees should be aware of the university's policy on conflict of interests (see FISCAL POLICY FI0125).

      4. Fiscal Responsibility. The Controller's Office is responsible for maintaining the official accounting records pertaining to all grants and contracts. This is accomplished through the establishment of appropriate university WBS elements by the campus or institute business office in which all grant and contract expenditure and reimbursement transactions are recorded. The Controller's Office is also responsible for making available monthly accounting reports of the financial status of each grant and contract to principal investigators and other appropriate university officials to assist them in the financial management of these projects.

      5. Grant and Contract Funding Methods. The three methodologies for receiving monies from granting agencies to fund grant and contract expenditures are:

        1. Cost Reimbursement. For most grants or contracts, reimbursement for actual expenditures is requested from granting agencies through periodic invoices or financial reports. These invoices and financial reports are normally prepared by the campus or institute business office. Invoicing and financial report preparation by departments are permitted only in situations when the campus or institute business office cannot practically comply with the contract terms. In such cases, prior approval by the campus or institute business office is required.

        2. Cash Drawdowns. Agreements with certain federal agencies allow the university to obtain funds as needed to cover actual expenditures made prior to submitting detailed expenditure reports. After work on the project has begun and expenditures are incurred, the campus or institute business office may process a cash drawdown to cover the university's expenses to date. Cash drawdowns should not be processed in advance of actual expenditures, and the amount of the drawdown should not exceed the actual expenditures for the applicable grant or contract on the funds transfer date. Granting agencies have individual rules pertaining to excessive cash transfers, and personnel responsible for processing drawdowns should be familiar and comply with applicable regulations. Whenever excess cash transfers are made, the campus or institute business office will request the Controller's Office to remit the required interest due the Department of Health and Human Services.

        3. Cash Advances. Occasionally federal grants or contracts are awarded for which funds are received in advance of expenses incurred by the university. The campus or institute business office will request the Controller's Office to remit any interest payments to the appropriate federal granting agency as required by law. Private sponsored research funded in advance does not accrue interest earnings.

    2. Timeliness in Charges and Adjustments. So that required reporting and funding of sponsored projects are accomplished in a timely manner, all charges and adjustments to sponsored projects should be recorded on the official records as soon as possible. Department heads and project directors should promptly review the monthly Grant and Contract Budget and Expenditure Report. Departments may access this report online and print as needed. Sponsors and external auditors are extremely critical of late charges, late transfers, and late adjustments to WBS elements for sponsored projects. Charges or transfers delayed beyond the normal processing schedule must be accompanied by an explanation and justification. All charges should be processed against such accounts within 60 days after the project end date so that final financial reports can be submitted and the WBS elements closed on a timely basis. For complete information about cost transfer requirements, see FISCAL POLICY FI0220, COST TRANSFERS.

    3. Grant and Contract Budget and Expenditure Report. The Grant and Contract Budget and Expenditure Report, or the "R ledger sheet," is an official accounting document for a particular project. The R ledger sheet shows budget information for a particular project, direct expenditures and facilities and administrative (F&A) costs that have been charged to the project, and funding or invoicing activity. Auditors and others use this report to trace project charges to the original documents that support and contain detailed information about the recorded transactions. The report also serves as a management tool for the principal investigator. When the financial transactions are processed in a timely manner, the report will accurately indicate expenditures for project budget objectives and will be a helpful guide in planning and controlling further expenditures. Principal investigators should ensure that this report is reviewed monthly and appropriate action is taken. For example, expenditures should be reviewed for accuracy, applicability, and completeness. The budget should be updated if it does not match the contract or proposal, if there have been any changes to the award amount, or for any other planned spending changes as approved by the funding agency. Also, the principal investigator may want to initiate requests for project time extensions or additional funding based on R ledger information.

    4. Budget Monitoring. Expenditures require continuous internal monitoring by the department to prevent budget category overruns. Occasionally, line-item budget overruns require prior approval by the sponsor or are unallowable. Variances between actual and budgeted expenditures by category may result in additional F&A costs and may cause a WBS element to be overspent. Generally, invoicing and financial reporting cannot occur when a restricted WBS element is overspent. Principal investigators and/or department heads should ensure that over-expenditures are transferred quickly to an appropriate cost object since the department is ultimately responsible for these costs and for any lost funding caused by late invoicing on overspent WBS elements.

    5. Equipment Procured on Federally Sponsored Projects. All research equipment costing $5,000.00 or more and all general-purpose equipment (i.e., equipment that can be readily used other than for research) costing $5,000.00 or more should be itemized in detail in the proposal and in the approved grant or contract. Otherwise, written approval may be required from the sponsor before purchasing such equipment. In addition, for equipment costing $5,000.00 or more, an internal (within a campus or institute) and external (when applicable) search for available suitable equipment must be conducted. If suitable equipment is available, it must be used instead of purchasing additional equipment. All requisitions for the purchase of such equipment must contain a statement certifying that appropriate approvals and search for the requisitioned equipment have been completed. (Note: See FISCAL POLICY FI0605, 15b for a list of sensitive minor equipment costing $1,000-4,999, which must be accounted for on university equipment inventory records.)

    6. Other Federal Regulations Relating to Conflict of Interests, Protection of Human Subjects, Care of Animals, Inventions and Patents, Publications, Copyrights, etc. Contact the campus or institute research office for assistance.

    7. Unusual Requirements. A grant or contract proposal with unusual procedural, reporting, or billing requirements beyond the university's normal policies or practices should not be accepted or recommended for approval until both the campus or institute research office and the principal investigator of the project have cleared the requirements with appropriate university officials.

Grant Proposals and Applications[top]

  1. University policy permits (1) the preparation and submission of grant proposals through campus or institute procedures as approved by the chancellor or administrative head of each campus and institute and (2) the acceptance of such grants for purposes that are clearly within the stated mission of the campus or institute. The campus or institute chief business officer should approve any grant that contains cost-sharing or matching provisions. When any question exists as to whether the purpose of a prospective grant is outside the mission of the campus or institute, the appropriate vice president must approve the application before it is submitted. Some granting agencies require an official university acceptance of the award documents and, in such cases, the documents must be forwarded to the office delegated for review and signature. (See FISCAL POLICY FI0420, 25.)

Contract Proposals and Execution[top]

  1. Only authorized University officials are allowed to sign contracts on behalf of the University. University Bylaws, Article IV, Section I, and University Contracts Fiscal Policy (FI0420) specify the University officials who are authorized to sign contracts. A list of these officials is also available on the University of Tennessee System Administration's contract office's website. Review and approval procedures specified in Contracts Fiscal Policy shall be followed for all contracts. This policy allows the following to be executed at the campus or institute level:

    1. Proposals for contracts;

    2. Domestic sponsored grants and contracts that are receivable agreements;

    3. No-cost Material Transfer Agreements with domestic (U.S.) entities; and

    4. No-cost Confidentiality/Non-Disclosure Agreements with domestic entities.

  2. Although the above contracts do not have to follow the review and approval procedures detailed in University Contracts policy, only authorized officials may sign them. Further, University Research Offices are responsible for ensuring that all terms and conditions are acceptable under University Contracts policy and that no prohibited provisions remain in such contracts. The Research offices are also responsible for retaining these original agreements in accordance with the University’s Records Management policy FI0120.

  3. The contracting process should allow sufficient time to have fully executed contracts prior to the starting date of the contract.


  1. Subawards issued by the university under federal awards are subject to the direct costing rules described in 13. above. The funding and the regulations flow through the university to the subrecipient. The evaluation of subrecipient costs by principal investigators and academic departments should therefore include the same tests as described above for proper costing. Any subrecipient costs considered to be in violation of these rules should be disallowed from payment of the subrecipient's invoice. See FISCAL POLICY FI0230 for details on monitoring subawards.


  1. RESTRICTED BUDGET FORM (FORM T-1). This form must be completed for each grant or contract when the proposal is completed. Upon execution by the university, the original grant or contract documents should be forwarded to the campus or institute business office for the official files so that the required WBS elements can be established. A campus or institute receiving direct grants that do not require official acceptance by the chief financial officer (or designee) should immediately forward copies of all pertinent documents, accompanied by a completed FORM T-1, to the campus or institute business office so that the required WBS elements can be established and the documents filed. Restricted WBS element numbers for sponsored projects generally will not be assigned until the approved award and a copy of the FORM T-1 have been received in the appropriate campus or institute business office and entered into IRIS. Also, the budgeted amounts must be valid and reasonable by line item amount compared to the proposal and award budget line items before restricted WBS element for a sponsored project will be released for posting. However, provisions may be made for assigning an advance restricted WBS element by contacting the appropriate campus or institute business office. Refer to the REQUEST FOR ADVANCE WBS ELEMENT (ADVANCED ACCOUNT REQUEST) form,
  2. Supplemental Budget and Cost Information. Each campus or institute chief business office and research office should develop supplemental budget and cost information forms to use in reviewing grant and contract proposals. Such supplemental budget and cost information forms should (1) require that the total costs involved in the proposed project be given and (2) reflect any portion of both direct and facilities and administrative costs being borne by the department or the university as joint-effort cost sharing that is in addition to the mandatory direct or F&A cost sharing proposed for the project budget. See FISCAL POLICY FI0210 for more information on cost sharing.


Charging Salaries to Grant and Contract WBS Elements[top]

  1. Through its payroll system, the university maintains an appointment and position cost distribution system to properly document charges to sponsored project WBS elements for personal services of professorial and professional staff. The following guidelines apply to the allocation of salaries to grant and contract WBS elements through this system. For additional information, refer to FISCAL POLICY FI0215, EFFORT CERTIFICATION.

    1. Percentage of Salary. The planned percentage of salary allocated to the grant or contract account must reflect the planned percentage of effort to be devoted to the project.
    2. Allocation of Salaries Through the University's Accounting System (IRIS). The appropriate salary allocations must be made through IRIS for faculty and staff who perform services under grants and contracts and whose position cost distribution can be determined in advance. The department head and principal investigator are responsible for continuously reviewing such salary allocations and for initiating a revised PERSONNEL INFORMATION FORM (PIF) whenever the percentage of effort assigned to a grant or contract varies as much as five percentage points of total effort from the current allocation. This is accomplished by indicating the proper salary distribution on the PIF.
    3. After-the-fact Certification of Effort. This type of certification is required of all salaried personnel whenever a portion of their effort is devoted to a grant or contract. Certification is accomplished through the IRIS electronic effort certification system. The planned position cost distribution from the PIF is shown on the effort certification form and may be confirmed or changed by the employee, as appropriate, to accurately reflect the employee's actual expenditure of effort for the period. Any change to the position cost distribution on the effort certification form will result in an automated retroactive payroll adjustment to accurately reflect the confirmed distribution. Several exception codes are available to explain a distribution change so that no retroactive payroll adjustment is made. This may be appropriate, for example, to document effort devoted to a project that fulfills the university's cost sharing commitment where the actual salary charge should remain on another university cost object.

Charging Salaries on an After-Performance Basis[top]

  1. When faculty and staff perform services under grants and contracts occasionally (and under conditions that do not require using the planned position cost distribution system as described above such as for longevity or nine over twelve month adjustment), the transfer of such salary charges to grants and contracts may be accomplished after the fact with the SALARY TRANSFER VOUCHER FORM using the following guidelines.

    1. Internal Records. Department heads and principal investigators have the responsibility for (1) maintaining records on time and effort devoted by faculty and staff to grant and contract projects and (2) initiating Salary Transfer Voucher forms for appropriate salary allocation to be posted monthly in the correct fiscal year. Salary Transfer Vouchers must reach the Payroll Office by the 15th of the following month.
    2. Information Required. At a minimum, Salary Transfer Vouchers should contain the following information:

      • Names and Titles. The names and titles of the faculty or staff whose salaries are being transferred.
      • Time Period. The time period when services were performed.
      • Type of Pay. The type of payment to be transferred.
      • Amounts of Transfer. The amounts to be debited and credited to each cost center or WBS element.
      • Calculation of Amounts Transferred. The percentage of effort or the quantity of time (days or hours) devoted to work on the grant or contract should be used to explain the amounts to be transferred. If time is expressed in days or hours, the Salary Transfer Voucher must identify the time by dates or state that detailed time records are maintained in departmental files and will be available for audit purposes. The unit salary rate on which the transfers are based (monthly, academic term, or effective daily or hourly rate) should be determined in accordance with the guidelines below.
    3. Effective Daily or Hourly Salary Rate. If possible,grantsand contracts should have professional salaries distributed through the planned position cost payroll distribution system on a percentage-of-effort basis. However, properly computed daily or hourly rates may be used: (1) when short periods of service are required, (2) when sponsors specifically required this method, or (3) to calculate compensation for appropriately approved extra services on grants and contracts. The following guidelines apply for all campuses and institutes unless an alternate calculation procedure has been approved by the chief financial officer (or designee).

      • Faculty on Academic Year Appointments. The academic year is defined as 39 calendar weeks ending on the date of commencement for spring semester. When salary allocations are made on a daily-rate basis for faculty on an academic year appointment, the rate is the current academic year salary divided by 168 days. Allowance is made here for official university holidays as well as an allowance for days of administrative closing. When an hourly rate computation is necessary, eight hours are considered a duty day. Similarly, for such work performed in these categories during summer semester, the semester is defined as 56 duty days, and the applicable daily rate is also the current academic year salary divided by 168.
      • Faculty and Professional Staff on Twelve-month Appointments. To convert the salary of a faculty or professional staff member appointed on a twelve-month service basis to an effective daily rate, divide the current annual salary rate by 224 duty days. This figure reflects an allowance made for annual leave, official holidays, and days of administrative closing. To compute an hourly rate, eight hours are considered a duty day.
      • Salaried Non-exempt Staff Appointments. To convert the salary for non-exempt staff to an effective daily rate, 260 work days reduced by 7 holidays, 5 administrative closing days, and the individual employee's annual leave accrual rate determine the effective number of duty days. This number is then divided into the base annual salary to obtain the appropriate daily rate. To compute an hourly rate, a duty day consists of eight hours.

Faculty Salaries Chargeable to Federal and Federal Flow-through Grants and Contracts[top]

  1. All university faculty are expected to contribute to the research enterprise and, by definition, research is a primary, ongoing responsibility of all faculty. Generally, faculty salaries charged to the grant or contract result in release time for the faculty, and the released salary dollars are used to hire replacement services or support other departmental operations. Faculty, as defined in this policy, includes twelve-month and nine-month appointments, regular, term, full-time, or part-time faculty.

    1. Extra-service pay (i.e., additional pay) is compensation paid by the university beyond the established monthly base salary of the faculty member. Extra-service pay is for university activity that is not part of the individual's job responsibilities and is not otherwise defined under the individual's appointment and/or his or her 100 percent effort distribution. For part-time employees, this policy applies after the employee reaches 100 percent of his or her annualized compensation. It is the joint responsibility of the individual and his or her immediate supervisor to ensure that the individual is fulfilling primary job responsibilities, and the activities leading to extra-service pay shall in no way detract from the performance of his or her assigned responsibilities and 100 percent effort distribution. The ADDITIONAL PAYMENT E-FORM should be used for processing extra-service pay.
  2. During the summer months, nine-month faculty may earn extra-service pay on grants and contracts, provided that the total income earned, including pay for summer teaching and/or administration, does not exceed 33 1/3 percent of the individual's base salary.
  3. Faculty can receive extra-service pay as consultants for federal and federal flow-through projects in other departments under the following guidelines:

    1. Consulting must be allowed by and is subject to any conditions of the sponsoring agency.
    2. Consulting must be across departmental lines.
    3. The consulting fee cannot exceed the faculty member's rate of pay calculated on base salary.
    4. Consulting fees cannot be paid if the faculty member is a project investigator or named in the proposal and/or budget.
  4. For example, a contract to conduct a social science survey requires three hours of statistician work to fulfill the report requirements. A faculty member in the Statistics department may receive extra-service pay from the grant or contract assuming the abovementioned requirements are met and the consulting time does not interfere with the statistician's primary job responsibilities.

    Questions related to faculty salaries chargeable to federal or federal flow-through projects should be directed to the campus or institute research office.

Payments to Hourly Clerical and Supporting Personnel[top]

  1. These biweekly employees are paid after the fact on reported hours worked. Their time is charged to the individual cost object as reported; therefore, no effort reporting is required for them.

Health Science Center:
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Ron Maples  (865) 974-2493