Fixed Price Agreements at Closeout

When a fixed price award terminates and all the terms and conditions of the award have been satisfied, any residual funds remaining in the account do not need to be returned to the sponsor. (However, the residual funds should not be significant, as this might indicate weakness in the estimating process.)

Residual funds are subject to F&A, and any amount remaining should be applied to overruns on the PI’s other sponsored projects. 

Residual Funds Distribution Procedure

  1. VPF Sponsored Accounting will determine all funds have been received from sponsor. DLCI/PI will confirm all contractual requirements have been met.   
  2. VPF will review the residual funds in the award account and will confirm with the DLCI that all funds expended for the project are reflected in the account.  
  3. Once the final balance is determined, VPF will calculate the F&A (indirect) costs component on the remaining balance and charge that amount against the project.

  • For reference purposes, the F&A on residual funds balance is calculated as follows: 

    Remaining Balance divided by 1.nnn (where “nnn” = the current F&A rate, or see note) = remaining Direct Costs 

    The Remaining Balance minus the remaining Direct Costs (as calculated above) equals the remaining F & A (indirect) balance. 

    Example:

    $250,000 (Remaining Balance) divided by 1.62 (example only – use current F&A rate, or see note ) = $154,321 as the remaining Direct Costs 

    $250,000 - $154,321 = $95,679 as the remaining F&A (indirect) balance.

    $95,679 would be charged against the project. 

    $154,321 would be subject to Step 5 below. 

    Note: if RAS accepted a different rate other than full overhead, the rate applicable to the award will be applied instead of the current F&A rate during closeout. As an example, other activity subject to fund fee will have fund fee applied, if we accepted 10% TDC; that rate would apply, etc.

  1. If overruns exist on the PI’s other sponsored projects, the DLCI should apply residual funds against those projects through the Recorded Project Overrun (RPO) process using G/L account 420314.  
  2. After steps 1-4:
    1.  If the resulting balance is $100,000 or less: the funds remaining in the project account will be transferred to an internal order under the direction of the PI.  
    2. Balances over $100,000 should be reviewed by VPR Research Finance (ras-finance@mit.edu).  

Cost reimbursement awards which specifically permit MIT to retain residual funds will follow the same steps with regard to distribution of any residual funds.