PRACTICE EXERCISES    

Multiple Choice Exercises
True or False Exercises
Multiple Choice Answer Key
True or False Answer Key

1. The principal investigator has an annual international meeting in Paris to present a paper on the research he has performed on his NIH grant. The grant proposal and scope of work support the trip as an allowable expenditure. How should he travel?

2. The sofa in the waiting room of the office needs to be reupholstered, so that the patients serving on this grant as part of the nonclinical sponsored research will not be stuck by the spring sticking out. To which expense account and function should I charge the expense?

3. The principal investigator on this grant needs a new briefcase because the handle broke off and can not be repaired. To which expense account and function should the expense be charged?

4. A department has hired a new research assistant, in the laboratory, to perform on a specific research grant. We need to purchase a lab coat with the assistant's name on it. To what account and function should we charge this expense?

5. The Department has overspent the approved budget on the grant. What should be done to correct the negative balance?

6. The department has sent patients to the hospital and now the hospital has contacted the department for an account to charge patient care cost. Review the names of the patients involved in the patient care cost to determine in which research project they are participants and that the patient care cost has been approved by the grantor. To which account and function should the patient care cost then be charged?

7. A new employee in the department needs a computer. To which expense account and function should I charge this expense?

8. The department has run out of copier paper. To which expense account and function should I charge the expense?

9. The department has an administrative assistant performing various functions on various grants, and the department needs to charge the salary. Which expense account and function is the best choice?

10. As the PI and business manager are reviewing the line item budget for the sponsored program project on their PI report / Summary Statement, they recognize that they have more money in personnel than they will be able to spend in the fiscal period for the project because they were not able to hire personnel timely enough. They also recognize that the expenditures for the scientific supplies are higher than they expected and they will not have enough money in their scientific supplies line item budget. Another factor has occurred and the project will require the purchase of a high-powered microscope to ensure valid conclusions; however, no equipment was awarded in the grant. What should the PI and Business Manager do?

1. C is the correct answer. There are several points in this question.

• Answer A is incorrect because international travel should always be on US flag air carriers, even though the Concord offers the cheapest flight.
• Answer B is incorrect because grantees are strongly encouraged to take advantage of discount fares where travel schedules can be planned in advance.
• Answer D is incorrect because first class tickets are considered unallowable by OMB Circular A-21 as well as State regulations. ( Please note that if the first class ticket was the only ticket available, then it could possibly be a justifiable expense.)

2. B is the correct answer. Reupholster is a normal alteration of furniture, and this type of expense is classified as an indirect cost under OMB Circular A-21. The upholstering of the sofa will probably benefit that office beyond the grant period and will also be used by other patients not associated with the grant. Therefore, its use has a common objective and meets the criteria of an indirect cost. That is why function 42, general academic support is appropriate. Function, 42 should be used to accumulate all indirect costs, costs not specifically identified to a grant. The repairs account, 50204, would be appropriate so the type of expense is identified.

• Answers A, C, and D are incorrect for the same reason, they illustrate a direct cost. As stated, an indirect cost is that cost incurred by an organization for common or joint objectives and cannot be identified specifically with a particular project or program.

3. D is the correct answer. Answers A, B, and C are incorrect because this expenditure is considered a personal item and should not be incurred by MUSC.

4. B is the correct answer. The lab cost is an allowable type expense under MUSC policy and the grant. The monongramming of the department's name is also an allowable expense. However, the monogramming of the individual's name is not allowable. Therefore, the individual should be asked if they want to pay for the monogramming of their name. If yes, then the income received should be applied to the grant. If no, then the individuals name should not be monogrammed on the lab coat.

• Answer A is not correct because the expense must be charged to the research function the research assistant was hired for and not to the departmental research function.

5. C is the correct answer. This type of activity is considered to be a cost transfer. Cost transfers need to have a full explanation and can only be transferred to unrestricted funds that have the same reporting function, unless the expense was incorrectly coded to the wrong grant. "Reporting function" is a term that means the expenditure was used to support a type of activity such as research, instruction, or public service. In SmartStream the UDAK has a section called Reporting Source and the last 2 digits report the function. Therefore, the center / project receiving the cost transfer should have the same digit in the first field of this section.

• Answer A could be an option but only if the expenditure was inappropriately charged to the wrong cost center / project. In this case the procedure for performing a cost transfer would be followed.
• Answer B is incorrect because all negative balances must be resolved.
• Answer D could be correct if the grantor is awarding additional funds to the project.

6. B is the correct answer. As the expense is incurred due to patient care services performed by the hospital, the expense is appropriately charged to expense account hospital patient services, 50287. The function should reflect the research project to which the patient is a participant and the patient care costs have been approved by the grantor. These costs must be tracked and supported with back-up documentation, such as the patient name, dates of treatment or hospital stay, and the allowable rate / amount.

• Answer A is incorrect because it says to charge it to the grant with an available balance. It should be charged to the research project that the patient is a participant in.
• Answer C is incorrect because patient care costs are research related and should be charged to the appropriate research function.
• Answer D is incorrect because the expense account should be hospital patient services.

7. A is the correct answer. Eequipment is frequently viewed as an institutuinal expense and this type of expense is classified as an indirect cost under OMB Circular A-21. Therefore, it should be charged to thge general academic support function.

• Answer B would be correct if the computer was requested and approved in the nonclinical sponsored research proposal.
• Answer C is incorrect because an expense should never be charged to the facilities and administrative account, 57997, as this account is only used to capture the indirect expenses allocated to the project.

8. C is the correct answer. The copier paper should be viewed from the aspect of the actual use of the paper. Generally, the expense would be administrative in nature and classified as an indirect cost under OMB Circular A-21. Therefore, it should be charged to an institutional or general academic support function.

• Answer A is incorrect because no one sponsored program should bear the department's administrative expenses.
• Answer B is incorrect because an expense should never be charged to the facilities and administrative account, 57997, as this account is only used to capture the indirect expenses allocated to the project.

9. D is the correct answer. Administrative support should be charged to the general academic support function, as this is the practice of MUSC, and the service is administrative in nature. Also, in this case the administrative assistant's duties cannot be readily identifiable to a particular project.

• Answer A is incorrect because it would be difficult for the administrative assistant to identify what percent of time was spent on a particular grant fund.
• Answer B is incorrect because the assistant is performing various functions for various grants, not just one grant.
• Answer D is incorrect because an expense should never be charged to the facilities and administrative account, 57997, as this does not identify the type of expense incurred.

10 . D is the correct answer. Most granting agencies will allow a budget revision to the grant award. The Office of Research and Sponsored Programs is the contracting arm of MUSC and should be the contact to arrange for the budget revision. In some cases, the Office of Research and Sponsored Programs can grant the budget revision.

• Answer A is not correct because the efforts of personnel must reflect the charges of the personnel. Charging the microscope to another grant that would not use the microscope would be considered an unallowable charge and would require that the funds be paid back out of the department's unrestricted funds. If the line budget is overspent for the scientific supplies and the grantor is strict on this line item budget, the over-charge in scientific supplies would have to be moved off the grant fund and moved to the unrestricted account set up to collect sponsored programs' over-run expenditures.
• Answer B is incorrect because The Office of Grants & Contracts Accounting is not the authorizing division for budget revision. This office is the implementing arm of the revision.
• Answer C is not correct because the department should be pro-active in managing the grant money in the most efficient way for the project. If the budget revision is not submitted in a timely fashion, some grantors will not approve the revision which could result in the grant amount being reduced.

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Last Modified: 12/22/97