University Business Policies and Procedures Manual

2485
OVEREXPENDITURES, LOSSES, AND GAINS ON CONTRACTS AND GRANTS
Effective Date: August 1, 1997
Revised: 07/01/04
Subject to Change Without Notice

1. General

Gains on fixed-price contracts or grants are treated as University revenue. Losses on fixed-price contracts or grants and overexpenditures on other contracts or grants are treated as University expenses. Such gains, losses, and overexpenditures are transferred to the responsible college or unit's unrestricted accounts.

1.1. Facility and Administrative (F & A) Costs

F & A costs on completed fixed-price contracts are adjusted to the actual amount or the budgeted amount, whichever is greater. When the actual amount exceeds the budgeted amount, the college does not receive any portion of the excess F & A costs. This happens when there are losses on fixed price contracts and overexpenditures on other contracts and grants. F & A costs are calculated using the applicable F & A cost rate in effect for that contract or grant at the time it ended.

2. Account Codes

Account codes are used to identify and segregate losses, gains, overexpenditures, and indirect costs on overexpenditures.

2.1. Account Code 0810

Account code 0810 is used to transfer gains, losses, and overexpenditures to unrestricted accounts. This account code is used for both sides of such entries. The description "Gain/Loss Cont/Grnt" is assigned.

2.2. Account Code 8600

Account code 8600 is used to transfer losses and overexpenditures to unrestricted accounts. This account code is used for both sides of such entries. The description "Cost Share/Loss Cont/Grnt" is assigned.

3. Gains and Losses on Fixed-Price Contracts or Grants

A fixed-price contract is considered completed when the funding agency has accepted the results of the contracted work and has paid in full. Occasionally, at the point of completion, there are funds remaining in the account (i.e., the budget was not fully spent). Such gains are treated as University revenue. In other occasional cases, expenses incurred on a fixed-price contract exceed the budget. Such losses are treated as University expenses. Policies and procedures for accounting for losses and gains on fixed-price contracts and grants are outlined below.

3.1. Accounting for Gains on Fixed-Price Contracts or Grants

Upon contract completion, indirect costs for the contract or grant are adjusted to the budgeted or actual amount, whichever is greater. Adjustments to indirect costs are credited to the F & A Cost Recovery account. The resulting gain is credited to the college or unit's unrestricted research or public service account, whichever is applicable. The account credited is at the college level, unless the college has authorized the entry to be credited directly to departments. The Contract and Grant Accounting offices make the appropriate accounting entries.

3.2. Accounting for Losses on Fixed-Price Contracts or Grants

Upon contract completion, F & A costs for the contract or grant are adjusted to the budgeted or actual amount, whichever is greater. The loss on both direct and F & A costs are charged to the college or unit's unrestricted research or public service account. Actual F & A costs are calculated and charged to the contract or grant account.

• The actual amount of F & A costs is charged to account code 89Z0
• F & A Recovery is credited.

The total loss on the contract or grant is expensed, charging the college or unit's unrestricted research or public service account. The account charged is at the college level, unless the college has authorized the losses to be charged directly to departments. The Contract and Grant Accounting offices make the appropriate accounting entries.

4. Overexpenditures on Contracts or Grants

Overexpenditures on non-fixed-price contracts and grants are recorded as University expenses when the account has expired and the final financial report is prepared by the Contract and Grant Accounting offices. Actual F & A costs are calculated and charged to the contract or grant account.

• F & A costs are calculated on actual direct costs and charged to account code 0820, up to the budgeted amount.
• F & A Recovery is credited.

The total amount that an account has been overspent, including both direct and F & A costs, is charged to the college or unit's unrestricted research or public service account. The account charged is at the college level, unless the college has authorized the overexpenditures to be charged directly to departments. The Contract and Grant Accounting offices make the appropriate accounting entries.

5. Notification and Documentation

The Overexpenditure or Gain Form is completed by the Contract & Grant Accounting offices to document journal entries transferring gains, losses, or overexpenditures to unrestricted accounts and to notify colleges or unit's that such transfers have been made. Copies are routed as follows:

• Principal Investigator
• Chair or Dean
• Contract file

Comments may be sent to UBPPM@UNM.edu
http://www.unm.edu/~ubppm