Direct Costs Costs that can be identified specifically with a particular sponsored activity and with a high degree of accuracy Indirect Costs Costs incurred for common or joint objectives that cannot be identified readily and specifically with a particular sponsored project Total Costs Direct and Indirect Costs
What is the F & A rate? F & A rate = Indirect Costs Direct Costs + Cost Sharing e.g., departmental admin salaries; IT infrastructure; ORA and SPA salaries e.g., materials & supplies; research personnel; faculty summer salary e.g., academic year faculty effort commitments
Direct and indirect costs allocable to sponsored agreements are comprised of many different kinds of costs Fringe Benefits Salaries Secretary Salary Travel Office Supplies Office Computer Dept. Chair Time Library Custodial Services Animals Scientific Journals Office Phone DIRECT COSTS Equipment Building
Federal Policies, such as the Office of Management and Budget Circulars A-21 and A-110, form the process and financial framework for research administration PolicyPurposeSubject Matter OMB Circular A-21 Defines the financial framework for administering federally-sponsored research Describes the basis for calculating facilities and administrative (indirect) costs Provides a reference section for determining how to charge specific, common costs Direct Costs Facilities and Administrative Costs (i.e., indirect costs) Identification and Assignment of F&A Costs General Provision for Selected Items of Cost “Effort Reporting” as described under Compensation for personal services Cost Accounting Standards Provides guidance and parameters for Higher Educational institutions when accounting for costs associated with sponsored projects 501 — Estimating, accumulating and reporting costs 502 — Allocating costs incurred for the same purpose 505 — Accounting for unallowable costs 506 — Cost accounting period OMB Circular A-110 Establishes uniform administrative requirements for federal grants and agreements to universities, hospitals and other non-profits Pre-award requirements — e.g., forms for application, special award conditions, etc. Post-award requirements — e.g., financial management, cost sharing, allowable costs, period of availability of funds, etc. Property Standards — e.g., federally-owned property, equipment, etc. OMB Circular A-133 Establishes the standards for obtaining consistency and uniformity among Federal agencies for the audit of non-profit organizations expending Federal awards Audit parameters Auditor and Auditee responsibilities Federal Agency responsibilities
Regulatory Pyramid Individual Contract or Grant Terms Award-specific NIH or NSF Grant/ Contract Terms Institution Policies and Procedures Institution Policies Sponsor Specific Policy NIH GPS/ NSF GPM & FDP Federal Policies A-21 and A-110
Allowable Costs All costs must be allowable under federal regulations and sponsor terms and conditions, including program-specific requirements and University policy. To be allowable, costs must: be reasonable and necessary; be allocable to sponsored projects be given consistent treatment; and conform to any limitations or exclusions set forth in the relevant federal regulations, the sponsored agreement and the Institutional policy
Allowable Costs Allocable it is incurred solely to advance the work under the sponsored agreement; or it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods Reasonable A cost that a prudent person would have incurred under the circumstances prevailing when the purchase was made. Consistent costs incurred for the same purpose, in like circumstances, must be treated consistently as either a direct or indirect (F&A) costs
A-21 Exemptions Costs charged to federally sponsored projects which result in inconsistent treatment of direct cost practices will be documented with written justifications supporting OMB A ‐ 21 exceptions of “major project” or “unlike circumstances.“ Major Project: Large complex programs that entail assembling and managing teams of investigators from a number of institutions are typical major projects. Projects that require an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments, may qualify as a major project. Unlike Circumstances: When a cost is incurred for a purpose outside of the normal practices or activities for that type of cost.
The Interrelationship Rule If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefited projects on any reasonable basis. Allowable Costs
Federal vs Non-Federal The OMB Circulars apply to federal sponsored agreements and federal flow- through sponsored agreements, and costs normally charged as F&A costs MAY be charged directly to non-federal agreements if not prohibited by sponsor policy.
YES NO DIRECT Direct or F&A? (consistency) F&A Charge a non-sponsored account Charge the cost to the award Decision Process for Direct Charging an Award Allowable? Allocable? Reasonable?