Accounting Procedures for Grants and Contracts

1 Introduction
2 The Types of Accounts
2.1 Grant Fund
2.2 Contract for Service Account
2.3 Research and Development Account
2.4 Internal Faculty Grant
2.5 Gift, Endowed Account, Bequest
3 Disbursement Rules
3.1 General Information
3.2 Travel
3.3 Travel Outside the Contiguous United States
3.4 Educational Travel
3.5 Travel Advances
3.6 Per Diem
3.7 Extravagant Expenses
3.8 Cellular Phone Calls
3.9 Expenses for Spouses or Relatives
3.10 Equipment Purchases
3.11 Contracted Services/Employee Compensation
3.12 Finder Fees
3.13 Gifts, Flowers, Parking Fees
4 Grant Reports
5 Technology Transfer and Intellectual Property Accounting Policies
5.1 Record Keeping
5.2 Direct Expenses
5.3 Revenue
5.4 Revenue Distributions
6 How to Reach Us

University of Kansas Medical Center
Research Institute, Inc.

Accounting Policies for Grants and Contracts


The University of Kansas Medical Center Research Institute, Inc. (RI) is a 501(c)(3) not-for-profit corporation contracted by the University of Kansas Medical Center (Medical Center) to manage all privately-funded grants and contracts. The RI is responsible to a board of directors, consisting of six Medical Center administrators, five faculty members, and twelve community leaders. The mission of the RI is to promote and support the education and research mission of the Medical Center. There are three divisions within the RI created to administer the program:

  • Grant Administration
  • Clinical Trials
  • Technology Transfer and Intellectual Property

2—The Types of Accounts
The purpose of any fund established in the RI must be to carry out the medical research agenda of the University of Kansas. The RI has developed four types of accounts for faculty research funds:

  • Grant Fund
  • Contract for Service Account (included Clinical Trials)
  • Research and Development Account
  • Internal Faculty Grant
  • Tech Transfer Account

All Medical Center pre-award procedures must be completed and approved prior to establishing an account. The Research Administration office can assist with this process.

The RI will not accept checks unless accompanied by documentation, which provides direction for the use of those funds. Acceptable documentation includes a contract, a grant award or a letter of intention for the use of those funds. At minimum, funds deposited in any of the accounts for the RI must include a letter of transmittal from the authorized owner of those funds. The RI will not accept cash for deposit in accounts.

Generally, the only person eligible to access the money in the account is the faculty member who is the principal investigator of the grant. The faculty member may authorize other persons to have signature authority on expenditures by obtaining an authorization form from the RI or its web site and submitting the completed and signed form to the RI. The only time that a department chair, dean or other administrator at the Medical Center has access to the Grant Funds is in an emergency situation authorized by the Executive Vice Chancellor of the KUMC and the President of the Research Institute or in a situation where the faculty member provides permission. It is, however, the policy of the RI that any administrator in an administrative line relationship with the faculty member may have access to the information from that fund (i.e., a chair of a department, the dean of the school, the Executive Vice Chancellor of the Medical Center, the Chancellor of the University).

2.1—Grant Fund
The first and most basic account is a Grant Fund. The Grant Fund is set up to receive and expend monies for the traditional grant from an external funding source. Various funding sources have different requirements for grant management (i.e., expenditures and budget changes and authorizations). It is important that each grant/fund has a record of all of the original understandings between the faculty member and the funding source as it relates to budget. The RI then establishes a budget and a control number and provides those to the faculty member and to the Medical Center. All expenditures against that budget must include the control number and various authorizations. The entire account documentation includes the proposal, all approval signatures, and a copy of the budget with the requirements of the funding source as to the expenditures of the budgets.

2.2—Contract for Service Account
The second type of account is a Contract for Service. Generally, but not exclusively, these are clinical trials with private pharmaceutical companies as the major sponsor. Clinical trial contracts may be considered product testing or basic research. This account may also be used for basic research where the research service is purchased rather than contracted as a traditional grant. Generally the funding source does not require the return of the funds remaining at the conclusion of the research.

In a Contract for Service account, the faculty member prepares a budget for presentation to the company. When the company approves the budget and funds are received, the company does not necessarily require expenditures in the same format as the prepared budget line items. The company has contracted for services/research to be completed and has agreed on a specified amount to be paid. The company does not require a final financial report. Therefore, the Research Institute will honor flexibility in expenditures, as long as the expenditure is within the stated intention of the funding source.

There are, of course, IRS expenditure requirements for a Contract for Service account. The service and all the bills related thereto must be paid out of that fund. Therefore, the RI does not honor expenditures from a Contract for Service account that are not directly involved in the carrying out of the contract. There are a number of expenses which can not be paid from active Contract for Service accounts even though the funds for such contracts are quite flexible in their uses. The reason for non-payment is usually that the expenditure does not relate directly to the research of the contract. Items such as flowers, parties, gifts, meal expenses, appreciation banquets, non-related travel, remodeling, etc. are not acceptable payments from active Contract for Service accounts.

2.3—Research and Development Account
The third type of account is a Research and Development account (R&D). This account is meant to provide faculty members with discretionary research related funds. Faculty can transfer funds remaining after the completion, reconciliation, and closing of a Contract for Service account to an R&D account to be used for the faculty member's own research and for the development of new research. This is a highly flexible account, since the funds established in this account require no reporting back to a funding source. The rules for expenditure relate only to the Medical Center rules and the IRS regulations regarding conduct of business. A faculty member can establish budget line items for an R&D account which include personnel, travel, supplies, animal care or any of the other traditional research expenditures. Line items for consulting services for potential research, or for dues and memberships to organizations are appropriate expenditures for this account if the faculty member approves the expenditure and those dues and memberships relate to the research of the faculty member. The RI requires original receipts and will only authorize appropriate business expenses.

2.4—Internal Faculty Grant
The fourth type of account is an internal faculty grant. The RI has an annual program which provides funding to Medical Center faculty members who successfully compete for certain types of internal grants. The program is announced annually in August and offers a variety of bridging, pilot, and special initiative grant opportunities. When a faculty member receives such a grant, an RI account is established with a specific budget. The fund established for these grants is very similar to any other grant account, except the RI offers greater flexibility in budget transfers for these accounts. All university, IRS, and specific grant restrictions are applicable.

Typically, no faculty salary is allowed, although research assistants are permitted. Equipment should not exceed 10% of the total. Travel is not permitted unless it is clearly needed to collect data. The grant should not be used to cover normal department operating expenses.

2.5—Gift, Endowed Account, Bequest
The RI does not establish endowed funds, nor does it receive bequests or gifts from individuals. All such donations should be directed to the University of Kansas Endowment Association (KUEA) for their management. Funds, for which the donor wishes a tax contribution receipt, should be directed to the KUEA. Nonetheless, a gift from a private company received to conduct specific research should be placed with the RI and will be designated as a grant or contract for service.

3—Disbursement Rules

3.1—General Information
Requests for expenditure consist of the appropriate entry into the PeopleSoft Financial system, original receipts, and any supporting documentation.

Proper documentation of an expense includes:

  • Original invoice or receipt from place of purchase
  • Original credit card receipt
  • Description of the use or purpose of the purchase
  • List of individuals present at a meal
  • List of attendees at a meeting where a meal or refreshments are served
  • Printout of agenda from meeting where a meal or refreshments are served
  • Description of the purpose of the meeting
  • Program schedule from conference attended
  • Contract for Service form (used for speakers or one time services)

Generally, approval for payment from an RI account is made if the request:

  • Provides a direct benefit to the University of Kansas Medical Center within a Medical Center-sanctioned program
  • Has been established as a bona fide business purpose related to the grant
  • Has been properly substantiated
  • Can be properly reported for tax purposes as appropriate
  • Can be used in compliance within acceptable limitations of the donor
  • Has been accounted for in a timely basis (within 90 days of the expenditure)

It is important that every principal investigator, faculty member, or other authorized person for an account at the RI understands that their signature serves as certification that the requested expenditure (to the best of their knowledge and belief) is furthering the mission of the University of Kansas Medical Center.

Any payment to an individual requires the signature of the payee and the authorizing signature of the payee's supervisor, department chair, or other university administrator. Individuals may not sign/authorize their own reimbursement.

The RI adheres to the State of Kansas pre-approval requirement for State employees traveling Out of State or Internationally. This requirement is met by completing the Pre-Travel Modules in PeopleSoft prior to travel.

If travel is made by air and the airline does not provide tickets, some confirmation statement in writing noting the cost of the travel can be obtained from the carrier and is required for reimbursement. When extended personal car usage is requested, a log of those miles with the date, the time, the place and the business purpose must be included. Complete RI Travel Procedures may be found here.

3.3—Travel Outside the Contiguous United States
If a faculty member is using any RI-managed funds for travel outside the contiguous United States (lower 48 states), and wishes to add additional days of vacation to that trip, pre-approval relating to the parameters for reimbursement must be obtained from the RI Executive Director. The IRS guidelines will also act as a major guideline for determining approvals. Personal days within a business trip may be acceptable, but the proportion of business to personal days may affect the amount of reimbursement.

To ascertain the nature of a trip, each day must be classified as either business or personal. Days spent traveling to and from the destination where the Medical Center business will be conducted are business days. As a general rule, any non-travel day where at least four hours is spent on Medical Center business is considered a business day. All other days are considered personal.

If the overall cost of the trip would be less if the individual were to stay a day or two longer and travel on a cheaper flight (often the case in domestic travel with a Saturday night included) the RI can pay for the marginal days subsistence expenses (i.e., lodging, meals, rental car). The marginal day's reimbursement cannot exceed the savings on the airfare.

3.4—Educational Travel
Travel as a form of education will not be allowed for RI disbursement.

3.5—Travel Advances
Travel advances are not generally given. Employees shall provide themselves with sufficient funds for all anticipated expenses. Advances from the Research Institute may be given to cover anticipated expenses in hardship cases or exceptional circumstances. Travel advances from the Research Institute are recoverable from the employee by: (a) setoff against the accrued pay or other amount due the employee; (b) other methods provided by law.

3.6—Per Diem
The RI will reimburse Per Diem at the Federal rates (see RI Travel Rates document). The RI will honor either original receipts for meals for the entire day or the daily per diem, but not a mixture for the day. That is, the meal receipts for the day may total more than the per diem allowance and would be payable if not deemed "extravagant," but a request to pay a receipt which is more than the total allowable daily per diem and the individual per diem meal expenses for the other meals of the day would not be honored.

3.7—Extravagant Expenses
The RI will not reimburse extravagant or unusually large expenses for meals or other items related to any account because it is not a "reasonable business expense" in the interpretation of the IRS. The term "extravagant" is used by the IRS and is repeatedly noted by auditors as non-deductible. The RI, as a tax-exempt organization, will determine in its sole discretion either to pay or not to pay such apparent extravagant expenses. Generally, on a grant, the Kansas state rate for a hotel expense or travel expense will be honored. If it is an R&D account, some leeway may be provided, but not an extravagant amount.

On some occasions in grants, the funding source requests particular items to be approved which would be deemed extravagant or lavish because of the particular need of the funding source to assist the faculty member's research or development program in that manner. If it is clearly stated in the grant award, contract, or itemized budget that such expenditure is desired by the funding source, the RI will make payment. On occasion, the RI will require the faculty member to obtain written approval from the funding source if there is a question regarding such expenditures. If the funding source approves the payment and the expenditure meets the IRS requirement, the RI will make payment.

Original hotel receipts showing the detail of charges are required for payment of hotel bills. In no case will the RI authorize mini-bar expenses, in-room movies, personal phone calls or hotel entertainment items such as spa package, entertainment package, movies, etc. The faculty member needs to note those items and subtract them from the amount requested. Business entertainment expenses need to be very carefully documented. If, in fact, non-business individuals also are at the event and one bill is submitted, it is permissible to prorate the requested amount for those persons within the party who are legitimately part of the business experience. Again, the RI will not pay for lavish or extravagant business entertainment events, since, in fact, the IRS regularly deems them as personal gain to the faculty member and could result in personal fines and taxes needing to be paid on portions of those expenses.

3.8—Cellular Phone Calls
If a faculty member or staff person has a phone paid by an external source, care must be taken to ensure that all calls utilizing this phone are for business purposes (related to the funding) and are noted. Personal calls must also be highlighted and paid by the employee with an attached personal check. The check will be deposited and credited to the account as a reimbursement.

3.9—Expenses for Spouses or Relatives
The RI may reimburse meal or entertainment costs for a spouse, relative, partner, household member for an R&D account when there is clearly a business purpose for the person's attendance. The description and documentation of that business purpose must accompany the request. When any question arises regarding expenditure, a faculty member should use the basic Medical Center travel requirements as their initial guide. The RI will utilize State requirements as the guideline, including the State agreed-upon reimbursement amounts of travel, entertainment, meals, etc.

3.10—Equipment Purchases
All equipment purchased with grants, clinical trials or R&D accounts through the RI must benefit the Medical Center program and will become the property of the Medical Center when acquired. The RI transfers all such equipment to the Medical Center equipment registration office; all such equipment will be tagged and inventoried to the department and becomes the property of the State of Kansas. Equipment purchased with private funds will remain the property of the Medical Center.

3.11—Contracted Services/Employee Compensation
At no time will the RI issue a check for payment of services directly to an employee of the State of Kansas or the Medical Center's affiliate organizations such as KUPI, KU Hospital or any of the foundations. All payments for additional services charged to a grant must go through one of the payroll systems available to the faculty member. If the faculty member requires services utilizing Grant Funds and wishes to contract with outside agencies for those services (e.g. secretarial, data management, data analysis, etc.), the person or entity receiving the reimbursement must clearly be an independent contractor from the Medical Center and its affiliates. The most appropriate documentation for the IRS considering an independent contractor is, in fact, a corporate structure which receipts revenue and accounts for that revenue to the IRS on their own responsibility. The facts and circumstances of each request for contracted services will be considered on a case-by-case basis.

3.12—Finder Fees
Finder fees to pay for human subject candidates can not be approved. The KUMC Institutional Review Board and most other IRB committees in the nation consider this type of payment unethical. Federal auditors may also consider payment such as this "kickback."

3.13—Gifts, Flowers, Parking Fees
Gifts and flowers purchased from grant funds or contract for service funds can not be approved by the RI unless specifically itemized and approved by the funding source in the contract or budget. Special appreciation, recognition or bereavement gifts or flowers may be approved from an R&D account if clearly tied to research development. However, even gift items such as books, plaques, tickets, etc. over a value of $25.00 may be considered by the IRS as personal gain and thus subject to income tax. Gift certificates of any amount will be considered as cash by the IRS and thus will be taxable. Employee parking will not be paid from grant or R&D accounts.

Special Disclaimer Note: This information should be considered only as the best advice the RI can provide and is not IRS law. The IRS Code Section 1.132-6 De minimis fringe is not clear on many items of this nature. An individual IRS auditor has significant interpretation authority and will exercise that authority during the audit.

4—Grant Reports
The RI provides each principal investigator with a monthly record of the expenditures and revenues that have been posted during the preceding month to the grant account. There are two sections to that report. The top section is the amount of funds and the line items approved by the RI to be subcontracted to the Medical Center Grant Accounting Office. Generally these line items include salaries, interdepartmental costs or supplies ordered through the Medical Center.

The lower section of the page has the line items and the funds in the budget approval to be spent directly through the RI with the use of a Check Request Form. The faculty member does not have two accounts. Note that the numbers on both of these reports are the same. There is only one account, but the report provides two sets of encumbrances of the budgeted line items to be utilized. If a faculty member overspends one set of the funds (such as the Grant Accounting section—the upper portion of the budget), then requests must be made of the RI to transfer the authorization from Grant Accounting back to the RI or vice versa.

5 - Technology Transfer and Intellectual Property
The KUMC Research Institute (RI) manages all KUMC employee-created intellectual property (IP). Authorization to do this is through a contractual relationship between the KUMC and the RI. The RI primary responsibilities of IP management are that all IP must be protected and the IP is to be transferred to the public. Developing excess revenue is an important objective of the contractual relationship with the KUMC but is secondary to the two primary responsibilities.

Intellectual property is derived from all KUMC employees. It is protected through a series of procedures beginning at the point of employment when the employee contractually agrees to assign all IP to the University. The RI Division of Technology Transfer and Intellectual Property then has the responsibility to assist the KUMC and employees to protect and transfer IP to the public. This process is accomplished through educating employees in the process, developing legal protections which disclose the IP, identifying the inventors, assessing the value of the IP to the KUMC and public, choosing the pathway to protect and transfer the IP, and overseeing the process.

Confidential files are established for tracking the process of discovery, protection, and transfer. Those files are the responsibility of the RI Division of Technology Transfer and Intellectual Property. When external expenses and/or revenue related to the IP result, a confidential IP financial account is established in the RI Division of Grant Administration and Accounting. These files may be audited by an external audit firm at the time of the Research Institute annual audit.

5.2—Direct expenses
RI administrative and staff costs are not considered direct expenses against the TT revenue. Third party external direct expenses that are not a part of the RI day to day responsibilities are considered direct expenses and debited against an account established for each IP. External vendors such as attorney firms will be paid by the RI and posted as a liability on the account until IP derived revenue is available. All direct expenses from parties of interest within the University must be documented and forwarded to the RI for approval at the time that the technology disclosure is made. The approved expenses made by internal University parties will be submitted to the RI and will be reimbursed to the internal parties should there be adequate revenue to distribute. Any further direct expenses made on behalf of the technology, during development, must be approved by the RI and will also be added to the account.

Direct development expenses include:

  1. All external expenses for patenting or otherwise protecting and managing the IP.
  2. A documented expense from the University and/or Department that have been made in the early support of the IP.


Revenue is defined as cash received by the RI. Sources of revenue are:
Milestone event fees in the development of the technology,

  1. Sale of equity that has been received in the transfer process,
  2. Royalty that results from sales of any product of the IP, and
  3. Other fees received in the process.

Equity positions are not distributed until the equity can be traded publicly or until it is sold by the RI and becomes cash. All expenses must be paid before distribution to parties of interest can be made. In the case of IP, which has a long-term management expectancy, some revenue may remain in the account in anticipation of future direct expenses. However, the goal of the process is to distribute the excess revenue not establish a trust account.

All direct revenue from the IP is placed in the account and is used to pay for external direct expenses and/or distributed to the parties of interest. Distributions may be postponed when additional direct expenses are anticipated.

5.4—Revenue Distributions
Parties of interest include the inventors, the KUMC, University Departments and the RI. Specific percentages of interest are established and documented early in the IP development process.

Distributions are made in the following priority.

  1. External debt to all vendors;
  2. Documented University/Department direct expenses are paid from the remaining net balance;
  3. Inventors receive their percent of this net balance (at least 25% to all inventors according to the written agreement established at the time of disclosure).
  4. KUMC receives a percent of the net balance after inventors;
  5. RI receives the net balance for investment in other technology development activities.

6—How to Reach Us

  • Federal and Private funded Grants
    913-588-1251, SPA staff
  • Clinical Trials
    913-588-1249, CRA staff
  • Technology Transfer & Intellectual Property
  • Sponsored Programs Office
    913-588-1251, SPA staff

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