Title: Section 442.25 - Hospital research and education costs

442.25 Hospital research and education costs. (1630) All direct costs incurred in conducting hospital research and formal educational activities (as opposed to in-service education) must be recorded in Unrestricted Fund cost center accounts 8010-8199 (Research Expenses) or 8220-8299 (Education Expenses).

(b) Grant accountability. (1631) When separate accounting is required by law, grant contract, or donations restricted for research and educational activities, separate cost centers must be maintained. Transfers from restricted funds to match the expenditures for these activities must also be segregated into separate accounts in the series 5020-5199 (Research) or 5280-5300 (Education). Thus, accountability is maintained for all restricted research and educational activities.

(c) Overhead allocation. (1632) (1) No allocation of indirect overhead is to be made on the books prior to cost reporting unless such allocation is required by grant contract. When a grant contract calls for the payment of direct costs plus an overhead factor, the overhead factor should be included in billing, but no allocation should be made in the hospital's accounting records.

(2) The following example illustrates the accounting treatment of restricted grant activity:

(i) Assume that a hospital received a specific research grant on December 1, which called for payment of direct costs incurred, plus an overhead allocation of 10 percent of such costs. At December 31 (the hospital's year-end), $150 of direct costs had been incurred. The following entries would be made in the hospital's accounting records at December 31:

(ii) Unrestricted Fund.

Account Dr. Cr.

Research 8010 $150

Cash 1010 $150

Due from Specific Purpose Fund 1074 $165

Transfer from restricted funds for research expenses 5020 $165

To record specific research direct costs and to set up receivable and

other operating revenue from restricted fund for direct costs, plus overhead allocation.

(iii) Specific Purpose Fund.

Fund balance - Transfers to Operating Fund for Operating

Purposes 2797 $165

Due to Operating Fund 2781 $165

To record liability to Unrestricted Fund for direct research costs and overhead allocation.

(3) If direct overhead must, by grant contract, be recorded in the Unrestricted Fund cost centers used for the recording of the direct costs of the grant activity, the natural expense classification .89 (other expenses) must be used. A separate cost center entitled "Overhead Applied" should be established in the Unrestricted Fund and credited with the amount of such overhead allocation. For reporting purposes the balance in the "Overhead Applied" cost center must be offset against the grant activity cost center, so costs remaining in the grant activity cost center are direct costs only.

(d) Affiliated school contracts. (1633) Education costs incurred relative to affiliated school contracts must be reflected in the Education series of accounts (8220-8299) in the Unrestricted Fund. Salaries, wages and stipends paid to students on approved programs (including interns and residents) must be reflected in this series of accounts. Salaries, wages and stipends paid to interns and residents must be reflected in the appropriate natural classification of the Postgraduate Medical Education cost centers (Approved account 8240 and Non-Approved - account 8250). Fees paid to physicians involved primarily in approved education programs must also be recorded in the Education series of accounts, in the appropriate cost center.