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Budgetary Limits on Spending Research Funds

Category: Research
Number: RCH-030-010
Audience: Faculty Members and Research Administrators
Issued: August 16, 2004
Revised: July 10, 2019
Owner(s): AVP (Finance)
Approved by: VP (Research)
Contact: Associate Vice-President (Finance) - 306-585-4171; Director, Research Office - 306-337-2478

Introduction

This policy applies specifically to research funds. Policy for other funds can be found in GOV-090-035 Budgetary Limits on Spending.

It is the intent of this policy to provide support when it is essential to the continuance of a research project.

Definitions

Policy

Research funds should not go into a deficit position. Principal Investigators are responsible to budget their expenses in accordance with the schedule of revenue available to the University.

In order to maintain continuity in projects and to recognize the various methods and timing of project revenues from sponsors, the University may choose to assist researchers with the interim financing of projects subject to the approvals and conditions as described under Processes. The Principal Investigator must have a justification for requesting this assistance.

Principal Investogators are responsible for reviewing their research fund balances on a regular basis to ensure expenses are properly recorded, to understand the outstanding commitments to be paid and to be aware of the funding available to be spent. Financial Services monitors the balances of research funds on a regular basis. The Principal Investigator will be notified of any deficit or overspent fund balance and will have 14 days to respond. After 14 days, if the Principal Investigator has not replied, Financial Services will contact the Research Office and the Principal Investigator’s Dean or Director regarding the overspent fund. The Dean or Director will work with Financial Services and the Research Office in resolving the deficit.

Personal Liability of Principal Investigator

The Principal Investigator may be held personally liable for the final deficit in their fund if:

  • The deficit is not covered by departmental, faculty, external sponsor or other usable source of money.
  • Authorization for incurring the over-spending was not approved as outlined in this policy.
  • Expenses incurred are considered non-eligible by the sponsor or if the expenses were incurred outside the time lines specified by the sponsor.

Where prior approval was obtained for the deficit, the Faculty will be held liable for the deficit amount approved. Any remaining deficit must be covered personally by the Principal Investigator.

Consequences for Noncompliance

If a research fund goes into deficit without prior approval, or the deficit is greater than the amount approved, the Principal Investigator may be required to personally reimburse the University for the over-expenditure, and may be subject to disciplinary action per the Collective Agreement. In addition, without limiting the foregoing, the University may withhold support and approval of any future research grant applications or grants to the individual, or impose other administrative sanctions, as appropriate.

Processes

Deficits in Sponsored Research Grant Funds

Deficits are not typically allowed in research grant funds. The Principal Investigator is responsible for ensuring that the grant fund is not in a deficit during the grant period. The Principal Investigator should not contract for goods and services beyond the available money in the fund or money receivable from the sponsor for the current fiscal year. 

In the case of multi-year grants, the Principal Investigator may incur a deficit to a maximum of 10% of the grant receivable for the next fiscal year. A multi-year grant cannot be overspent in the last year of the grant, even if it is expected the grant will be renewed.

The University will consider allowing temporary deficits beyond the amounts above with the disclosure and approval of a plan to finance any amounts spent in excess of the amount available in a research grant fund. See the section below, “Authorization to Overspend a Fund” for directions on how to apply for permission to have a deficit in a research grant fund.

Deficits in Sponsored Research Contract Funds

Research contracts have specific terms and conditions, including a finite financial commitment from the sponsor and deliverables that must be completed by certain dates before invoices can be sent or payment is released. Because of the nature of contracts, expenses are incurred before any work can be completed in order to meet the terms of the research contract. As a result, it is necessary to overspend contract funds.

The allowed deficit is limited to the sum of the next two installments to be paid by the sponsor as specified in the research contract payment schedule. The total expenses in the contract fund should not exceed the total financial commitment of the sponsor.

The Principal Investigator is responsible for ensuring research contract deliverables are submitted on time and meet the standards expected by the sponsor. If the sponsor is withholding payment because of a disagreement over deliverables, the Principal Investigator is responsible for submitting or revising the deliverables and negotiating a revised reporting schedule.  The Principal Investigator should ask the Research Office for assistance with negotiating with the sponsor, and decisions regarding the disagreement should be documented and agreed to by both parties.

The University will consider allowing temporary deficits beyond the amounts above, with the disclosure and approval of a plan to finance any amounts spent in excess of the amount available under research contract. See the section below, "Authorization to Overspend a Fund" for directions on how to apply for permission to have a deficit in a research contract fund.

Deficits in Internal Research

Internal research funds should not be overspent. The University will not consider exceptions for internally funded projects.

Sponsor in Arrears

Where it has been determined that a sponsor is in arrears, Financial Services will notify the Principal Investigator, the Research Office and the Dean or Director. Parties will collectively determine how to deal with that sponsor.

If it is determined that the project should be terminated, the Faculty will cover the amount of the deficit to the point where notification was made.

Authorization to Overspend a Fund

The University will consider allowing temporary deficits for sponsored research funds. Principal Investigators are personally liable for deficits that are not approved as outlined in this policy. The University is not obligated to approve any request for overspending a research fund.

Applying for Authorization to Overspend a Fund:

  1. The Principal Investigator fills out the Request to Overspend Sponsored Research Fund (203 KB) File and includes an explanation of why the overspending is necessary and when the sponsor is expected to cover the deficit.
  2. The Dean or Director signs the request form indicating that the Faculty is willing to accept responsibility for the deficit if the sponsor does not cover the deficit.
  3. The Principal Investigator forwards the request form to Financial Services for final approval.
  4. Financial Services consults with the Research Office for all research related funds.
  5. Financial Services notifies both the Principal Investigator and the Dean or Director of their decision, with an explanation of why approval was granted or denied.

If the final deficit exceeds the maximum approved deficit, the Faculty is only responsible for the deficit amount approved. The Principal Investigator is personally liable for the amount exceeded.

There may be circumstances under which the Dean or Director is not willing to accept responsibility for the deficit if it is not covered by the sponsor, but the Principal Investigator believes that the project is important to the University and that the institution should accept the risk of the project incurring a deficit.  In such circumstances, the Principal Investigator may request the Vice-President, Research to sign the request form accepting the responsibility for any eventual deficit of the fund.  The Principal Investigator making the request must submit a plan for recovery or repayment of a possible deficit.  Where there was no such plan proposed, Vice-Presidential acceptance of the risk of deficit would be unlikely unless there are present strategic interests of the institution that would be best served by doing so.

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