Financial Disposition of Residual Funds for Fixed and Prepaid Awards Policy

Purpose

This policy is required to define a consistent process for the disposition of residual balances for Fixed and Prepaid awards after successful completion of the projects.

Overview

Fixed price agreements are discouraged because of the risk involved. A fixed price contract requires that UTEP performs the scope of work for the sponsoring agency regardless of the actual cost of doing the work. The university must budget carefully to ensure that actual costs for fulfilling the work, and the funds paid by the agency match. All costs for a fixed price project must be expended directly to the sponsored project. The accurate pricing and charging of costs should not result in either a deficit or a substantial surplus at project completion and submission of required deliverables to the sponsoring agency.

Policy Statement

Residual balances occur when expenses at project completion are less than cash received from the sponsor. Following completion of a fixed price or pre-paid award (sponsored project), residual funds will first be used to reimburse the University for unrecovered indirect costs (F&A) on the original unexpended balance using the awarded F&A rate. 

 Residual funds remaining after indirect costs have been deducted, and up to a maximum of 25% of the total funds received, can be transferred to a designated project under series 2267000, as assigned by Grant Management Accounting. Any residual balance exceeding 25% of the funds received will be transferred to VPR Residual Funds Project. Residual projects will be set up for a 12-month period of performance after the award end date of the original project. All unspent residual funds after 12 months will be transferred into the VPR Residual Funds Project. No extensions will be granted beyond the original 12-month period.

The process of transferring residual balances will occur after the sponsoring agency confirms acceptance of deliverables and releases UTEP from further contract obligations (where applicable).

 Any request for an exception to the above policy must be submitted in writing to the VPR or designee for consideration and approval.

Process for Residual Fund Management

The Office of Sponsor Projects in coordination with Grants Management Accounting will review the terms and conditions of fixed-price awards to determine whether an award qualifies for a residual account at the conclusion of the project period. If an award is eligible, OSP will request a budget plan outlining the budget categories and anticipated use of funds for the residual project. All expenditures must comply with applicable University policies and procedures. The budget plan must include appropriate justification and align with the objectives and priorities of the project, department, or college. The performance period for a residual project may not exceed 12 months.

 Should any funds remain in the residual project after the approved project performance period expires, the balance will be transferred to VPR Residual Funds project.

Definitions

• Fixed Price Contract (Award): Contracts characterized by payment of a predetermined amount by a sponsor to support a project. The payments are not on an expense reimbursement basis but on a predetermined lump-sum or based on a schedule determined by sponsor.
• Prepaid Contract (Award): Contracts characterized by payment made in whole at the beginning of the award period.
• Residual Balance: The difference between the funded amount and actual project costs at the end of project, provided successful completion of all project deliverables according to the project proposal.

Roles and Responsibilities

All employees must comply with this policy. Responsibility for resolution of issues that arise regarding this policy rests with Research & Innovation.

Principal Investigator (PI)

• Confirm all direct charges necessary for completion of the project have been expended and properly accounted for, including any required cost sharing commitments.
• Confirm that all required reports and deliverables have been provided to the sponsor (successful completion of the project).

  Office of Sponsored Projects

• Identify in the internal Notice of Award (NOA) if residuals are to be returned to the sponsoring agency or can be transferred to a residual project upon completion of the project.
• Facilitate the set up of residual accounts via the GART (Grant Action Request Tracking) system for processing by GMA.

  Grants Management Accounting

• Follow standard closeout procedures, verifying all transactions have posted, all encumbrances are liquidated, award has no deficits, cost share commitment is complete, and identifying any unexpended funds on fixed price awards.
• Verify all payments have been received from the sponsor according to the terms of the contract.
• Balance and evaluate the indirect cost (F&A) amount according to the awarded budget and the awarded F&A rate.
• Setup a residual project for the Project Investigator (PI) using project series 2267000, Fund 5300, Function same as original award, 0% Indirect) after notification from OSP.
• Process transfers of unexpended funds and communicate new Project ID to OSP via GART.