Financially Closing Out Fixed Price Agreements
Purpose: To describe the disposition of residual balances
currently on fixed price agreements, fee for service agreements or any other
related fixed fee agreements.
Source: Policy Statement dated May 1990
and University Policy
Background: Fixed price agreements are generally
discouraged because of risk involved. A fixed price contract requires that
NAU perform work to the sponsor's specifications regardless of the actual cost
of doing the work. Therefore, the university must budget carefully to
ensure that actual cost and the price paid by the sponsor will match.
All costs for a fixed price project must be expensed directly to
the project ID. Facilities and administrative costs are predicted at
the outset of the award and included in the approved budget. Direct costs are
identified by the project director and charged as they occur. All
project-related costs must be charged to the project ID.
Thus with accurate budgeting and charging costs, there should be
neither a deficit nor a substantial surplus of funds at project completion.
Policy: Upon Fixed Price project completion, both deficit and
surplus balances on fixed price agreements must be transferred to a
non-sponsored account. Note for cost reimbursement type of funding the
residual funds will be returned to the sponsoring agency.
If Costs Exceed the Sponsor's Funding at Project Completion
If costs exceed the sponsor's funding at project completion, Post Award Accounting Services and Fiscal Compliance (PAASFC) will take one or more of the following steps
until all project costs are covered:
- notify the Principal Investigator and department administrator with a memo requesting an alternative unrestricted fund source to absorb the overrun.
- ask the department chair, dean, or
other qualified contact at the college for an unrestricted account to absorb
the cost overrun expenses
- cover the cost overrun of the college,
department, or centers with facilities and administrative cost recovery funds.
Note: This procedure applies to cost overruns on cost
reimbursement awards as well.
If the Sponsor's Funding Exceeds Costs at Project Completion
If the sponsor's funding exceeds project costs, PAASFC will:
- book facilities and administrative costs
(based on project budget) that had been waived up to the federally negotiated
rate, if applicable.
- Residual funds on fixed price fee for
services and other related fixed fee contracts in the
amount of 5% of the total
award, up to $5,000, can be retained by the
department. Residual funds in
excess of $5,000 are to be transferred to the Office
of the Vice President for Research account to be used to support
research and development. Only the Office of the Vice President for
Research can authorize the generating department's use of the excess
funds over the 5% or $5,000. The request to use the
excess funds must be
made in writing and approved by the Office of the Vice
President for Research.