Michael, I haven't dealt with auditors on this.  However, these
pointers  may help.  They are from experience with educational
institutions; I do not know if they apply to you, but...

The limitation on F&A is regulatory.  Therefore you know going into the
matter that this is not a recoverable cost.  Hence your decision to accept
this kind of award includes the decision to fund any difference between the
statutory limit from institutional resources.  Therefore the cost is not
something that could be billed and not recovered; it cannot be billed.  It
is this decision to fund from institutional resources that they appear to
be trying to allocate appropriately.  IF the auditors, studying the
indirect cost agreement with NIH do find that your indirect costs on this
type of activity should properly be some other indirect rate than that
limited by statute, that is the difference that they are trying to
allocate.  However, they may be making an improper assumption that some
negotiated indirect rate other than the statutorily limited one does, in
fact, represent the appropriate full indirect cost for that
project.  Determining this really gets back to how your indirect is negotiated.

Hope this gives some help.

Chuck

At 10:11 AM 3/10/2004, you wrote:
>Some time ago I posted a question to the group concerning handling of the
>under-recovery of indirect costs associated with training grants.    Our
>auditors have maintained that the under-recovery has to be recognized on
>the accounting statements as a financial loss, i.e. made up from our
>financial reserves.    I received some information that suggested there may
>be some disagreement on this point.
>
>If you have familiarity or experience with this issue I would very much
>like to hear from you.   I also would like to know where to look for a
>definitive answer if there is one.
>
>Thanks everyone--
>
>Michael Pelletier
>Associate Director, Office of Sponsored Programs
>Education Development Center, Inc.
>(617)618-2227
>
>
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Virginia Commonwealth University
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e-mail xxxxxx@vcu.edu

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