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2.2 Residual Funds

Purpose

This guideline describes the treatment of residual funds pertaining to fixed-price awards from externally funded sponsored programs at the University of Houston. The Principal Investigator (PI), Department Business Administrator (DBA) and the Division of Research (DOR) must ensure that residual funds are used to advance the mission of the university and do not create a possible conflict of interest for the PI.

Residual funds

Residual funds are unobligated, unspent cash balances remaining in a privately funded fixed-price sponsored project cost center at the conclusion of an award. As long as deliverables have been met and accepted by the private sponsor, funds remaining at the end of the project period belong to the university. The university earns a predetermined fixed amount, regardless of the actual costs, for services performed. Residuals occur only when the revenue is greater than the expense incurred. Revenue is recognized when payment is received.

Fixed-Price Awards

A fixed price award is provided to the University of Houston by an external funding agency when a fair price for the anticipated work is determined at the proposal stage. Costs are pre-determined based on a fixed fee per unit of service or product. The total award is not subject to any upward or downward adjustment of funds based on actual costs. There is no stipulation or expectation that excess funds be returned to the funding agency.

Guidelines

  1. Following the expiration of a fixed-price award, any unspent balance may be transferred to a residual fund’s cost center for use by the Principal Investigator, subject to the following provisions:
    • The sponsor has formally accepted the planned deliverables
    • No other sponsored funds were used for the project
    • Nothing in the agreement's terms and conditions explicitly says otherwise
  2. Only the portion of funds that would have been available to pay for direct costs at the current indirect costs rate may be transferred to the residual fund’s cost center. The portion of the remaining balance, that is attributable to indirect costs, will be transferred to a DOR cost center and maintained for the VC/VP for Research and Technology Transfer.
  3. The funds transferred to the residual cost center are no longer subject to the terms and conditions of the original award(s). The MAPP policies that apply to the use of local funds also govern the use of residual funds.
  4. Residual fund’s cost centers will be extended as long as a balance remains available in the cost center.
  5. In the event the PI leaves the university, the remaining balance reverts to the institution and not the department or college. 
  6. When the total balance remaining on the fixed-price project is less than $200, that balance will be transferred to the institution and not to the PI’s cost center.
  7. If the PI has cost overruns in an existing sponsored project’s cost center, residual transfers will not be approved until the deficit balance is cleared.
  8. If the PI has a cash deficit on another project that he/she is responsible for a residual transfer will be held pending a resolution on the project with the non-payment.

Requesting Residual Transfer

The PI, DBA, Research Administrator (RA) or delegate can initiate the request to transfer residual funds. The PI must confirm that the statements below are accurate:

  • The work under the agreement was completed and all deliverables have been made and accepted by the sponsor. 
  • The work was completed without using any other sponsored project agency funds. 
  • The funds in the residual will be used to further research efforts at the University.

If the remaining cash balance is more than 25% of the total award amount, a more detailed written justification is needed for the following:

  • Reason for having more than 25% of the initial award left over after the award performance period.
  • May describe any cost saving mechanism or efficient management of the project that resulted in the overage.

Process

Requestors should allow 3-5 business days for residual transfers based on the steps below.

Note: When there is a request for awards with outstanding payments, the Office of Contracts and Grants (OCG) will work with the PI to recover full payment but will move only the amount that represents the cash overage at the time of request. If no cash overage exists the request will be returned pending the payment.

Steps Responsible Person Timeline
Submit request via email to request residual transfer PI, DBA, RA or PI’s delegate
Review the request for compliance and approval OCG Post award RA 1 day
Add budget, equivalent to the cash overage, to the residual cost center and send a notice of the modification to the PI and DBA OCG Post award RA 1 - 2 working days if a new residual cost center is required
Approval for transfers over 25% of the award amount per the above VPR or the OCG Director 1 additional day
In the event of sponsor non-payment, at least three (3) collection attempts/notice will be sent prior to returning the request OCG Financial Director and PI Up to 3 weeks

Revised: August 29, 2018