SUBJECT:

Federal Cost Accounting Standards (CAS) Implementation

The Federal Government has imposed four Cost Accounting Standards
(CAS) on universities. THIS WILL HAVE A MAJOR IMPACT ON OUR COST
REIMBURSEMENT PRACTICES. Briefly, these Standards require that:

1. Practices used in estimating costs for Federal contract and grant
proposals are consistent with cost accounting practices used in
accumulating and reporting costs on awards;

2. All costs incurred on Federal contracts and grants for the same
purpose, in like circumstances, are direct costs only or indirect
costs only;

3. Unallowable costs shall be identified and excluded from any Federal
billing, claim, application, or proposal; and

4. The same cost accounting period shall be used for Federal sponsored
agreement cost estimating, accumulating, and reporting.

While the initial imposition applied only to Federal contract awards,
the University Costing Principles (A-21) were revised in May, 1996, to
impose the same requirements for all Federal awards (grants,
cooperative agreements, etc.). These standards apply to all
universities which have an annual Federal volume of $25 million or
more. Because of its large Federal volume, UCSD is required to comply
with these standards, and was required to complete and submit a cost
accounting disclosure statement (DS-2) to the Federal Government by
June 30, 1996, in order to continue receiving Federal awards. The same
deadline applied to the Berkeley, Los Angeles, and San Francisco
campuses. Most of the other UC campuses have submittal deadlines of
December 31, 1996, or June 30, 1997.

In order to comply with the CAS requirements while retaining as much
flexibility as possible, UCSD retained Coopers and Lybrand, an
accounting firm with experience and expertise on cost accounting
standards, to assist with the development of the DS-2. In addition,
two campus workgroups were established.

The CAS Implementation Team is composed of staff representatives from
each of the academic areas (Academic Affairs, School of Medicine,
Scripps Institution of Oceanography), certain administrative areas
(Accounting, Contract and Grant Administration, Internal Audit), and
the members of the campus Recharge Review Committee. This group has
been responsible for reviewing campus costing practices and proposing
changes where necessary to attain compliance. The Steering Committee,
composed of three vice chancellors and three faculty, have considered
the proposed changes and their impact, and provided direction for the
campus effort. The members of these two groups are listed on the
attachment.

As a result, and in spite of the short timetable, the campus DS-2 has
been completed, reviewed by the Office of the President, and submitted
to the Federal Government. We thank the members of the CAS
Implementation Team and the faculty who participated on the Steering
Committee for their time and efforts on this project. The campus DS-2
has been installed on the Business and Financial Services website; the
URL is: http://www-bfs.ucsd.edu/emf/cas/casbds2\dsindex.htm.

However, the CAS compliance process is not finished. In order to
support the positions taken in the campus DS-2 and to ensure that
flexibility in campus costing practices does not result in audit
disallowances, the campus needs to develop, revise and clarify
policies and procedures to ensure that campus costing practices are in
compliance with CAS. The campus then needs to develop training and
reference materials, and provide orientation and training for all
affected personnel. In order to accomplish this and to enable input
from the campus on these developments, the CAS Implementation Team and
Steering Committee are being reactivated. We have scheduled four
meetings of the Implementation Team, and two meetings of the Steering
Committee, as follows:

CAS Implementation Team CAS Steering Committee
August 15, 1:30-3:30 pm, September 20, 10:30-noon
September 5, 1:30-3:30 pm October 30, 9-10:30 am
September 27, 9-11 am,
October 17, 1-3 pm

While the Federal requirements which have been imposed on us are not
subject to negotiation, the methods employed by the campus to comply
with the requirements, and the level of flexibility and workload
resulting from those methods, are important aspects of determination.
We encourage all faculty and staff to offer suggestions and
alternatives, and offer two ways that your input can be included:

1. CAS Orientation Forums for all interested faculty and staff are
scheduled as listed below. You are invited to attend one of these
forums, and you are strongly encouraged to bring your key faculty
members and staff with you.

October 1, 1996 noon-2 pm SIO Sumner Auditorium
October 1, 1996 4-6 pm SOM Garren Auditorium
October 9, 1996 10 am-noon Price Center Ballroom A

2. You may channel your suggestions through the CAS Implementation
Team members who represent your area, or through members of the other
working groups. Please consult the attached listing.

We will continue to seek input on CAS compliance and policy/procedure
revisions from all affected campus personnel, through their
representatives on the CAS Implementation Team, the campus sponsored
projects process reengineering group (SPEAR Team), the Research
Administration Council, and through the CAS Orientation Forums. Some
of the key CAS compliance issues are summarized below.

COST SHARING
One of the Cost Accounting Standards (CAS 501) requires that any cost
sharing which is described and quantified in a proposal must be
accounted for in campus records as part of project costs/value, and
must be subsequently included in the calculation of overhead rates for
sponsored activities. A number of steps are underway to enable the
campus to comply with these requirements.

1. The Request for Extramural Support (RES) form, which is used to
route proposals for campus approvals, has been redesigned. It
identifies three categories of cost sharing: Equipment Funding,
Expenditure, and Non-Expenditure. Each has a yes/no indicator and
will require certain information and approval. The revised RES form
and an instruction memo for the revised form has been distributed to
departments. It is also available on the OCGA website and at the UCSD
Storehouse.

2. The Cost Sharing team has designed two alternative mechanisms for
tracking cost sharing in compliance with CAS, and is developing cost
estimates for these alternatives. The members of this team are listed
in the attachment. A decision on the preferred mechanism should be
made by the end of August. The team is also drafting the implementing
procedures for Extramural Funds Accounting and departments.

3. When this process has been completed, PPM 150-45, Cost Sharing in
Federal Contracts and Grants will be revised to reflect these changes,
to redefine cost sharing under CAS, and to describe strategies to
minimize the requirements for formal cost sharing.

NETWORK COSTING
As information was collected for the DS-2, the charging of network
costs to Federal awards was found to vary by department, building, and
academic area, as well as by cost type. To meet the disclosure
deadline, the DS-2 summarily disclosed that Computer and Networking
Services are charged direct, and Computing Network Infrastructure costs
are treated as indirect costs. Prior to the anticipated fall Federal
site visit, the campus must now define what is meant by these two
categories (what is included in each), and decide where variations are
allowable due to unlike circumstances.

A group of campus personnel has been asked to develop the definitions
needed, and to arrive at a consensus on which variations in costing
are defensible. In addition, this group will make some
recommendations on how the campus should handle the increasing cost of
networking, and whether the current campus standards for
telecommunications/networking specifications in new buildings need to
be revised. The first meeting took place on August 16, at 1 pm. The
members of this group, called the Network Costing Group, are listed in
the attachment.

OTHER POLICY CHANGES
New policy will need to be developed to attain CAS compliance
regarding Cost Accounting Standards Criteria for Costing on Federal
Awards (Direct versus Indirect, Basis for Proposing/Estimating versus
Reporting/Invoicing ). We are expecting a status letter from Coopers
& Lybrand with suggestions on other policies we may want to establish
to support our DS-2.

Besides our Cost Sharing Policy (PPM 150-45), the following campus
policies will also need to be revised to attain CAS compliance or to
incorporate other changes:

PPM 130-3 Machine shops - Recharge Operations
PPM 150-14 Indirect Cost Rates Applicable to Research, Instruction,
and other Sponsored Projects
PPM 150-35 Classification, Acceptance, and Administration of Awards
PPM 300-40 Recharge and Other Income Producing Activities

The CAS Implementation Team will also review other existing campus
policies, make inquiries to their respective departments/units, and
consult with Administrative Records, to identify any other campus
policies which will be affected by CAS. Where policy revisions are
required, interim guidelines will be issued as a first step, to attain
campus CAS compliance during the formal policy development process.

TRAINING
One of the tasks for the CAS Implementation Team/Steering Committee is
to develop a CAS training strategy. This is anticipated to involve
the following components:

Initial Orientations/Open Forums
Development of Training and Reference Materials
Initiation of a variety of training mediums such as Campus
Notifications, Staff Development Programs, Academic Area Meetings,
Middle Management Briefings, Website information, and Consultation
Access

In conjunction with and as a result of the CAS implementation efforts,
the campus will develop and schedule training/orientation for campus
staff, and produce reference materials to guide and assist units in
their efforts to comply with the standards. As much as possible,
these materials and updated information will be added to the website
listed earlier, which currently houses the campus DS-2.

Currently, the UCSD Medical Center, Managed Care Services, and Medical
Practice and Ambulatory Care Services are excluded from the campus
disclosure process, for two reasons:

1. The costing practices of these units are substantially different
from those of the campus, and this would require a separate
disclosure.

2. At the time the campus DS-2 was developed, these units had not
received any Federal CAS-covered awards, and therefore could be
excluded from the process.

However, these units have submitted at least two funding proposals
which, if awarded, would require the development and submittal of a
second DS-2.

It is clear that the Federal imposition of Cost Accounting Standards
on universities is resulting in major changes for us, and will require
a significant effort to ensure compliance. We hope that all at UCSD
will take the time to learn and understand the changes, and will
cooperate to ensure that costing practices at UCSD comply with the CAS
requirements. Please feel free to contact Bill Brophy, CAS Project
Director, at x46517, or by email at bbrophy@ucsd.edu if you have any
questions or comments on these efforts.

Sincerely, David D. Sworder Acting Vice Chancellor for Research Steven W. Relyea Vice Chancellor Business Affairs John A. Woods Vice Chancellor Resource Management and Planning

Attachment

CAS STEERING COMMITTEE
Dr. Richard Attiyeh, Interim Senior Vice Chancellor, Academic Affairs
X43130
rattiyeh@ucsd.edu
Dr. William Chang, Professor/Chair Emrts, ECE
X42737
wchang@ucsd.edu
Dr. Michael Criqui, Professor, Family/Prevent. Medicine
X43723
mcriqui@ucsd.edu
Dr. Bernard Minster, Chair/Professor, IGPP
X45650
jbminster@ucsd.edu
Steve Relyea, Vice Chancellor, Business Affairs
X43390
relyeas@ucsd.edu
Dr. Nicholas Spitzer, Professor, Biology
X42456
nspitzer@ucsd.edu
Dr. David Sworder, Acting Vice Chancellor for Research
X46654
Sworderd@ucsd.edu
John Woods, Vice Chancellor, Resource Management and Planning
X46280
jwoods@ucsd.edu

CAS IMPLEMENTATION TEAM
Dennis Beeson, Accountant, Accounting
X44502
dbeeson@ucsd.edu
Bill Brophy, Director of Financial Analysis, Resource Management
X46517
bbrophy@ucsd.edu
Bill Cherom, Financial Officer, Academic Affairs
X41289
bcherom@ucsd.edu
Paul Croft, Asst Dean, Engineering
X46207
pcroft@ucsd.edu
Tom Collins, Deputy Director, SIO
X42832
Someone’s email here
Linda Dale, Director, Contracts and Grants
X43333
ldale@ucsd.edu
Clayton Egan, Accountant, Accounting
X44673
cegan@ucsd.edu
Thyra Fleming, Administrative Analyst, SIO
X47238
tfleming@ucsd.edu
Bob Hogan, Director of Corporate Finan. Svc., UCSDMC
X32173
rhogan@ucsd.edu
Teresa Hsiao, Financial Analyst, School of Medicine
X47885
thsiao@ucsd.edu
Nick Johnston, General Accounting Manager, Accounting
X44736
njohnston@ucsd.edu
Pat Jordan, Management Services Officer, MPL
X41802
pjordan@ucsd.edu
Lyle Kafader, Dir./Adm. Computer Analysis, Sch. Engineering
X46087
Lkafader@ucsd.edu
Don Larson, Assistant Vice Chancellor, Business and Financial Svcs.
X40386
dlarson@ucsd.edu
Joanna Mancusi, Administrative Analyst, CSE
X43712
jmancusi@ucsd.edu
Charlena McElveen, Admin Analyst, Extramural Funds Accounting
X45945
cmcelveen@ucsd.edu
Debbie McGraw, Assistant Dean/Fiscal Affairs, School of Medicine
X43705
dmcgraw@ucsd.edu
Agnes Nishikawa, Director of Budget/Finance, Auxiliary/Plant Svcs.
X40306
anishikawa@ucsd.edu
Stephanie Peterson, Director, Internal Audit
X43617
svpeterson@ucsd.edu
Stephanie Rea, Admin Analyst, School of Engineering
X46797
srea@ucsd.edu
Gail Robotta, Manager, Resc. Ops., University Relations
X48159
grobotta@ucsd.edu
RB Smith, Executive Officer, CASS
X43933
rb@ucsd.edu
Leon Snoberger, Director, Resc. Analysis, Student Affairs
X42390
lsnoberger@ucsd.edu
Jan Specht, Senior Administrative Analyst, Chemistry/Biochemistry
X44616
jspecht@ucsd.edu
Steve Ste. Marie, Accountant, Accounting
X44562
sstemarie@ucsd.edu

COST SHARING TEAM
Bill Brophy, Director of Financial Analysis, Resource Management
X45617

Barbara Connolly, Programmer, ACT/Systems
X49777
bconnolly@ucsd.edu
Thyra Fleming, Administrative Analyst, SIO
X47238
tfleming@ucsd.edu
Marianne Generales, Sr. Admin Analyst, OGSR
X46636
mgenerales@ucsd.edu
Gene Hasegawa, Assistant Director, Contracts/Grants, Sch. Medicine
X43203 ghasegawa@ucsd.edu
Nick Johnston, General Accounting Manager, Accounting
X44736
njohnston@ucsd.edu
Pat Jordan, Management Services Officer, MPL
X41802
pjordan@ucsd.edu
Lyle Kafader, Dir./Adm. Computer Analysis, Sch. Engineering
X46087
lkafader@ucsd.edu
Charlena McElveen, Admin Analyst, Extramural Funds Accounting
X45945
cmcelveen@ucsd.edu
Emma Reyes, Manager, Extramural Funds Accounting
X41110
ereyes@ucsd.edu
Carol Ring, Administrative Analyst, Medicine
622-2121
cring@ucsd.edu
RB Smith, Executive Officer, CASS
X43933
rb@ucsd.edu
Jan Specht, Senior Administrative Analyst, Chemistry/Biochemistry
X44616
jspecht@ucsd.edu

NETWORK COSTING GROUP
Dennis Beeson, Accountant, Accounting
X44502
dbeeson@ucsd.edu
Bill Brophy, Director of Financial Analysis, Resource Management
X45617
bbrophy@ucsd.edu
Edward Dinkins, Programmer/Analyst, BFS
X43089
edinkins@ucsd.edu
Ron Espiritu, Principal Administrative Analyst, School of Medicine
X41512
respiritu@ucsd.edu
Ann Hanson, Assistant Director, Customer Services, ACT
X47447
ahanson@ucsd.edu
Lyle Kafader, Dir./Adm. Computer Analysis, Sch. Engineering
X46087
lkafader@ucsd.edu
Mick Laver, Programmer Analyst, SIO
X42040
mlaver@ucsd.edu
Tony Wood, Director, ACS
X44050
twood@ucsd.edu