Understanding Basic Terms and Concepts

Revenue Recognition

When grants are set up to be billed for cost reimbursement when funds are expensed on a grant (5 ledger) fund, revenue is recognized in equal amounts up to the Award Amount in object code 4600 Grant Revenue because we are entitled to be reimbursed for those expenditures from the sponsor.  If the grant fund is overspent, revenue will not be recognized and an overdraft will result.

When grants are set up to be billed based on milestones/patients seen (clinical trial billing), revenue is recognized as the project is billed.  Depts should email copies of the invoices to GCINVOICING-L@lists.upenn.edu per the Sponsored Project Invoicing instructions posted at the ORS website.

PBIL - the Maximum Billable Award (Project BILlable)

A Special Budget Object Code entered by Research Services-Post Award and equals the Award Amount from the sponsor.  PBIL serves as a control and does not allow Revenue Recognition above the Award Amount. When a Grant Fund is reported to the sponsor and there is a fund balance remaining, PBIL gets reduced to ensure Revenue Recognition is limited to the Reported Amount.

PBUD - the Authorized Project Budget (Project BUDget)

It is a Special Object Code entered by Research Services.  PBUD is most often equal to PBIL except for Advance Accounts where PBIL is set equal to zero, but a budget has been authorized.  Another example is if the grant fund is accounting for cost sharing and certain expenditures are not to be reimbursed from the sponsor, but funded by the institution.  The department should enter an Operating Budget based on the PBUD value.

FSRD and FSRI

These are also Special Budget Object Codes Entered by Research services that indicate the Direct and Indirect Costs reported to the Sponsor.

Operating Budget

Gets entered by the grant administrator at the department level utilizing Ben Financials and should most often reflect the PBIL/PBUD value. At times a dept can budget at its own discretion to control spending (example: if a sponsor awards you 5 years of funding at once, the dept may want to enter budgets annually to control spending). View a sample budget.

Cash Position

A positive Cash Position means we have not collected enough cash to cover our expenses.  A negative Cash Position means we have collected more cash than we have spent. Cash position can be tracked and is composed of 3 separate object codes (1220,1221,2630) to assist with understanding potential billing issues or potential cash surpluses/residual balances.  1220 Billed Receivable is the amount currently billed and outstanding.  The amount increases as we bill the sponsor for reimbursable expenses/milestones and decreases as payments from the sponsor are applied.  1221 Unbilled Receivable represents reimbursable expenses which have yet to be billed to the sponsor.  The amount increases when reimbursable expenses increase and the amount decreases when we bill the sponsor.  2630 Advance Billed will be a negative amount and reflects as a potential liability when we've billed in excess of our expenditures (depending on the circumstances we may need to return cash balances or have sponsor approval to keep the residual View and read more information on Research Services Billing.

Adjustment Period

The period after the Account End Date of the grant where adjustments can be made prior to the grant freezing.  The period ends 30 days prior to the Financial Report Due Date (Note: The period is 15 days if the Financial Report is due 30 days after the Account End Date).  The administrator can find out funds freezing in the next 90 days by running the ORG Summary.rep or GrantMonitor reports within Business Objects/Web Intelligence.

Modified Total Direct Cost Base

The base used to calculate Indirect Costs on Federal Awards.

Allowability of Costs

OMB Uniform Guidance governs.  On Federal Awards, revenue is not recognized on object code 5214 Entertainment because it is an unallowable cost.  Some costs are allowable, but should not be directly charged to grant funds because they are recovered through the Facilities and Administrative (F&A) previously known as Indirect) Cost Rate.    Items such as office supplies, postage, local telephone costs, and memberships shall normally be charged as F&A costs.” Directly charging costs normally treated as an F&A cost is unallowable because the cost would be reimbursed twice.

• Generally part of F&A costs.

  Administrative or clerical staff are generally part of F&A costs.   In order to be direct charged to a federal award the charge must be integral to a project and must be budgeted and justified or have prior written sponsor approval. Under the Uniform Guidance, a project no longer needs to be identified as “major” to include administrative salary, but in general such expenses should be treated as indirect (F&A) costs unless the following conditions apply:

  To be integral to the project, the administrative activity should be:

• essential or vital to the project, and described accordingly in the justification;
• budgeted at a percentage of a person-month that reflects that essential nature (a minimum of 10% FTE)
• performed by individuals specifically identified with the project or activity
• costs that are not also recovered as indirect costs

• Applicable Uniform Guidance section: 200.413

  For non-federally sponsored projects, administrative or clerical staff may be direct charged provided they benefit the project and follow those sponsors’ requirements for the award.

Encumbrances/Unliquidated Obligations

• Commitments of the budget period not yet paid.
• If reported at the end of a budget period, funding gets reserved in the next budget period so encumbrances can be paid and recorded as an outlay of the next budget period.
• Must liquidate within 90 days (Uniform Guidance)
• Cannot be reported in the final period.

Unobligated Balance

• Represents unspent and uncommitted funds at the end of a budget year or project.
• The University may be able to carryover the unobligated balance to the next budget year(per the terms and conditions of award):
  • automatically (example: NIH grants under SNAP) 
  • or with the approval of the sponsor. When the carryover of the unobligated balance to the next budget period requires sponsor approval, the PI writes the request to carryover and must have it co-signed by an Institutional Official. For NIH grants, the approval of carryover is only official upon the receipt of a revised Notice of Award (NOA).