Comments from Southern Region Business Officers on NIFA’s Treatment of Capacity Funds Becoming More like Grant Funds
November 2017
Institution 1
Additional Administrative Burden on Institutions:
Hatch:
Our Hatch, Hatch Multistate, McIntire-Stennis, and AHD projects have a federal fund number that is entered into REEport during the proposal process. Most of these projects run for 5 years (Vet Med has limited the AHD projects to 1 or 2 years) so how do we continue to link these projects from our Banner system to REEport if they have to change on an annual basis? In addition, we have 2 linked state match funds for each project so this would require establishing 3 new funds for each project each federal year.
We have well over 140 active projects at the current time so establishing new funds would not be an easy or sustainable endeavor…we are looking at potentially over 400 new funds on an annual basis.
First in, first out should be more than sufficient for accounting for the different fiscal year allocations with the one aside related to the requirement that we draw down funding from the current fiscal year even if we have enough funding from prior years to cover the current year’s expenditures.
Smith Lever:
Since Smith Lever isn’t currently (and hopefully never will be) project based, we simply have a federal Smith Lever fund and a state offset fund for each department. However, this still amounts to over 125 federal funds across the departments in CALS, CNRE, and Vet Med, so again, having to establish new fund numbers for each federal year would be a huge undertaking.
Tracking would also become more complex as we would need to go down to the fund level to verify when we have used up one year’s worth of funding so we can move onto the new year’s funding using the new funds. It’s hard enough tracking at the global level to make sure we aren’t overspending and even then we run into some problems due to the fact that we have to work with and rely on other colleges to enter the necessary personnel actions.
Furthermore, the opportunities for departments to modify funding incorrectly would skyrocket due to the added complexity without the sort of documentation that accompanies the establishment of an OSP grant. As such, there would be a considerable uptick in labor redistributions to not only correct inadvertent department errors but also to clear up the overages/shortfalls as we get towards the end of a federal year’s funding.
Time and Effort Reporting:
I think, in general, we are comfortable with time and effort reporting at our institution. We do this based on payroll allocations. We provide twice a year effort reporting to our faculty and monthly effort reporting to our staff. However, our sense from talking with other institutions is that the effort reporting we do at the university may not be sufficient for the NIFA/USDA staff who appear to be imposing stronger guidelines on these funds than other institutions through Uniform Guidance. It would be hard for me to explain why the Office of Naval Research could be sitting in our Office of Sponsored Programs indicating that our effort reporting standards for ALL of our grants are effective but NIFA would say they are not based on stronger standards.
I honestly think we are okay here, but given what other institutions are going through, I am concerned.
Budgets:
There is some discussion of NIFA/USDA requiring budgets for these funds. If that is at a high level (e.g. Salary, operating) then it should be fine. If that is required at a program level or worse a project level, that will be an extreme burden. Also, to what end? Isn’t the budget for Smith Lever at each land grant institution predicated on the formula? Isn’t there some checkpoint on how we spend that money based on our SF 425s and reviews? Isn’t there an annual report that shows how we spent that money, how much was integrated, multi-state, and what our impacts were? What would happen if I budgeted something too high or too low? Would it change my allocation? Would we be subject to additional scrutiny which would hold up resources defined by the act?
Institution 2
I decided to add a few concrete comparisons following a project from cradle to grave. As outlined below, we propose the same, report the same, and apparently are being audited the same for both capacity and competitive grants. I do not believe this is appropriate, and I believe it has been stealthily morphing over time. I believe there are some cases where competitive grants are actually given much more leeway than capacity funds as noted below.
The NIFA Policy Guide of 2014 https://nifa.usda.gov/policy-guide which covered NIFA’s implementation of 2 CFR part 200 Uniform Administrative Requirements seemed to change not only the name of capacity funds to grants but also superseded all the capacity manuals (page 2) and changed the nature of the funds from appropriated allocations to grant funds.
Similarities between Competitive and Capacity
Since around 2010, maybe even earlier, we propose for capacity funds the exact same way as competitive through Grants.gov through a stripped down competitive package; and beginning in federal year 2020, we will provide budgets for capacity similar to competitive. We already are required to include a statement about matching funds. McIntire Stennis is already requiring a budget in proposals.
The Terms and Conditions on the Capacity Award Face Sheet changed beginning with the 2015 award to include the General Provisions 2 CFR Part 400, Uniform Administrative Requirements, Cost Principles, and Audit Requirements adopts 2 CFR Part 200 which is used for competitive. Beginning in 2017, the Award Face Sheet added a new NIFA Capacity Award Terms and Conditions which includes Prior Approval Requirements and many other Articles identical to competitive awards. Prior approval of equipment is stated in these terms and conditions https://nifa.usda.gov/resource/capacity-award-terms-and-conditions-november-2016. We are required to initiate a project in REEport for both competitive and capacity projects. Grants.gov feeds information into REEport for competitive. Administrator enters information in REEport for capacity.
USDA auditors’ have requested separate account numbers, distinct for each year of funding. This is a huge burden, but is the exact same account set up that would be used for a competitive grant. The funds for each competitive grant are segregated in a restricted account. We use the same income and expense accounts for capacity funds from year to year.
Annual progress reports and final progress reports are submitted by faculty into REEport for both competitive and capacity.
We draw down funds through the ASAP system for both competitive and capacity projects.
Financial reporting is done with SF425 for both competitive and capacity.
Effort certification is required the same as competitive.
Close out is now 90 days for both competitive and capacity. In the past, capacity was due February 1 after the Funds and Manpower deadline.
Differences between Competitive and Capacity
Even though the administrative requirements for capacity are equal to or more than competitive, no indirect cost is provided. Think about Funds and Manpower reports, ARERRA, etc. Unrecovered indirect cost is not even allowed to be used as part of our 1:1 match requirement on capacity funds, and it is allowed on most competitive.
An Authorized Organizational Representative has the authority on competitive funds through expanded authorities to extend the end date of a competitive grant for a first request without NIFA approval. There is no option to extend the end date on capacity. Of course, this is because capacity funds are really federal appropriations, not grants. Even if NIFA is choosing to call them grants, they know the spending authority does not allow the same time frame for the funds to be expended.
An institution’s Authorized Organizational Representative is authorized through Expanded authorities to allow budget changes without NIFA prior approval on competitive grants, including the purchase of equipment. So NFIA has waived prior approval requirement for competitive but included it for capacity. Here is the actions that an AOR can do on a competitive grant without prior approval from NIFA. See the link which shows all waived prior approval actions that an AOR can do for any institution with research funds – https://www.nsf.gov/bfa/dias/policy/fedrtc/appendix_a.pdf
Institution 3
We should fall back on the Acts themselves to make our case:
Hatch Act intent is clear that states should receive “equitable” allowances or allotments; it is well outside the intent and the letter of the Act to make these funds competitive in nature. The basis of the majority of the fund allotments is population, specifically rural population. Unless the Experiment Station directors believe that population shifts over time merit review, we should stay with the distribution process the Act contains. Also, a significant part of Hatch Act funds exists to allow states to plan research activities – making that competitive again violates the spirit of the Act. Even unspent funds are supposed to follow the same formula for redistribution to other states.
For the Smith-Lever Act, the basis of distribution essentially mirrors the Hatch Act, and that is not by coincidence. Congress had no intent of making these funds competitive either.
I wonder if NIFA realizes that they have no authority to make the funds competitive, unless they work to change the Act itself.
Institution 4
Capacity funds allow preparedness for real-time threats to food safety and animal health. It’s too late to apply for a competitive grant after an outbreak has occurred. Also, capacity funds are often viewed as leverage to obtain funding from other sources.
We agree with the other statements about the time & effort reporting concerns. We have recently implemented a new quarterly effort certification program (“e-crt”) that was developed in consultation with Huron Consulting. Our OSPA (Office of Sponsored Projects Administration) and Research Financial Services (RFS) offices believe this is sufficient to be in compliance.
We feel that NIFA’s interpretations of Uniform Guidance are an issue. We thought the implementation of UG would lead to more flexibility and less administrative burden. NIFA requirements seem to be more restrictive than what is required in Uniform Guidance. A conference call and email exchange last July with Mary Britt (Policy & Oversight Division, OGFM, NIFA) confirmed this was the case, particularly with time and effort reporting.
Our accounting system (SAP) already separates each Federal fiscal year by the use of a Fund number. So we are able to segregate each year’s appropriation by reporting on those Fund numbers.
However, we do not currently utilize project level budgeting in our system. If required, this would create significant administrative burden with 160+ active research projects and not even sure how it would work in Extension. This creates a huge issue with flexibility and makes it harder to adjust plans readily and respond to emerging issues. Currently, the Director has the ability to re-direct the funds internally.
Institution 5
I’m in agreement with the information that the others have offered regarding the regulations and the changes. I would like to offer an illustration of the problem for us. In the world of competitive grants, it is accepted that the expenses incurred for clerical staff are not allowable as a direct charge to a grant. This was further clarified in 2 CFR 200.413(c) when it was released.
For an organization like Extension in this state, we have at least one office associate in every county, and as I read the language the salary & fringe expenses for these employees would not be allowable as a charge to Smith-Lever or the Smith-Lever match funds.
For this institution, that would be over $3,000,000 of salaries & fringes that would not be allowable as either direct or match expense.
Considerations for Capacity Funds Management
State support for NIFA’s streamlining of reporting is possible when it does not interfere with the intent of the funding.
We recognize that the “old” Hatch manual is now replaced, statements in that manual reflect the spirit of Hatch funding management, and are included as examples of the intended management of said funds.
Hatch funding has always carried exceptions to standard federal provisions and regulations. Quoting (with emphasis added) “Except as otherwise provided herein, funds allotted under the Hatch Act are subject to the provisions of 7 CFR Part 3015 … and OMB Circular A-21…”
Hatch Program:
Budgeting and Expenditure authority
Overhead/Administrative costs:
Competitive projects include overhead costs in their budgets, albeit capped UDSDA/NIFA. Hatch allocations do not recover such costs. We are allowed to create administrative projects which, as defined in the Hatch manual, “means a component of the eligible Institution’s Research Program specifically authorizing expenditure of Hatch funds for research planning and other activities directly associated with the effective administration and direction of the Hatch program.”
Conversion of Hatch funds to competitive funds OR interpreting 2 CFR 200 guidance such that administrative projects (and by extension, administrative costs) are no longer allowed does not follow with the spirit of Hatch funding evidenced in the statement in the Hatch manual.
Director’s Authority
Experiment Station Directors are authorized by NIFA (formerly CSRS) to have the responsibility of “Determining the research to be conducted by the station using Hatch funds subject to the approval of CSRS [now NIFA] and matching State funds.” NIFA has suggested verbally that it will begin to require budgets for capacity funds. Details are not yet known, but if competitive-style budgets are expected and funds managed as competitive-style budgets, Directors will lose the authority to shift funds between projects without NIFA or NPL approval. The loss of Director’s authority is contrary to Hatch fund management philosophy as seen in the following language excerpted from the Hatch manual:
“In view of the continuing nature of the Hatch Act and its Research Program, funds are allocated on a program basis and individual project budgets are not required to be submitted for CSRS approval. Accordingly, requirements of the 7 CFR 3015.110…regarding revision of financial plans are not applicable to the Hatch Research Program.” and
“Hatch formula funds may be assigned or reassigned to approved Hatch projects at the discretion of the Director.”
Period of Performance
Currently, Hatch projects may be submitted at any time of year. If budgets must be managed at the NIFA level, and within a defined federal fiscal year, and controlled at that level by the state, funds will have to be taken from existing projects mid-year to fund new ones. To the contrary, if a project terminates with budget remaining, it could be required to revert to NIFA rather than remaining with the Director/Station for internal reallocation. The current model allows the Director discretion to rebudget, an extremely efficient process for mid-cycle adjustments.
Matching
Federal Register Notice “Matching Funds Requirements for Agricultural Research and Extension Capacity Funds at 1890 Land-Grant Institutions and 1862 Land-Grant Institutions in Insular Areas”
Proposed legislation 3419.4 states that “The president of the eligible institution must submit any request for a waiver for matching requirements.” Sounds simple, except that the Director has been eliminated from the process. While this specific legislation does not specifically include SAES, the Director must have the authority to request waivers. (Example of existing form with Director authority: “Request for Waiver from Target Percentage Multistate Extension Activities and Integrated Activities” [Form NIFA-Waiver])
Paperwork
This college currently has 218 active projects. The additional paperwork to manage 218 separate projects as opposed to one Hatch funding source is significant. Think about it this way: each one will have an individual budget, these budgets are spread across 40ish budget managers (each of whom will be impacted), must be consolidated for 425 reporting, mid-year terminations and initiations of each project (rather than a single begin/end for a single Hatch fund), etc. The more paper, the more human error.
Effort Certification
Based on recent discussions, NIFA is attempting to require paperwork that will allow them to re-calculate effort %’s. Because legislation states that “(x) It is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting. When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected.”, there is an inherent recognition that reasonable distribution of effort is appropriate. Exact, by-the-hour effort tracking is not expected and should not be required. Reasonable distribution of effort as assessed by the responsible official (PD or department head or director’s or their designee) should be recognized by NIFA as sufficient.
In my opinion, we need specific language in or superseding 2 CFR 200 (similar to language found in the old Hatch manual) that gives NIFA a reason for capacity fund management to be different. This takes care of both NIFA and the states in case of audits.
Comments previously submitted are supported, with one point in particular being strongly backed:
Formula-driven funds are distributed without budgets, and to require budgets for NIFA to pre-approve and manage rather than leaving that task to the Director is adding a level of oversight that has not been previously needed nor is it reflective of the spirit of the funding legislation.
Institution 6
Entry of Estimated FTEs – At this point NIFA cannot describe why this is needed. Actual FTEs are a much better indicator. Seems like an unneeded entry of data.
Information about Students – Some are requesting we enter information about undergraduate, graduate, post doc students for every program we have in the system. There is no indication as to why this is important.
Planned program classification schemes have gone to the extreme – They are now requesting 4 different classification schemes. In past there has been one. These include: Knowledge areas (currently used), SOI (subject of investigation), Field of Science, and Science Emphasis Area. Again, no reason for collecting. Looks a lot like a research project, but doesn’t fit Extension.
We now have to enter a progress report for each planned program. Then we have to go back in and attach project reports to an annual report. Seems like an extra step that is not needed.
They are still using a two year cycle from the plan to the report. The panel suggested it be a rolling plan from one year to the next. Too much changes on an annual basis for a two year plan to report timeline.