1. Sponsored Programs at Penn
Rules governing the conduct of sponsored projects UG part 2: Direct and Indirect Costs

2. Direct Costs
Recall that direct costs are costs that can be clearly identified with and which benefit a sponsored project. Direct costs:
Should generally be charged as proposed
Should be documented with supporting financial information and documentation of how the charges benefit the project
Often, it is permissible to rebudget allowable direct costs. This information is available in the notice of award.

3. UG Allowable direct costs include:
Salaries of technical staff (subject to agency caps)
Equipment costing more than $5000
Materials and Supplies
Including computing devices costing less than $5000 so long as the device is essential and allocable to the project. Incidental other use is permissible. Specific sponsor guidance may prohibit charging to the award.
Clerical and Administrative Salaries
If the support is integral to the project, the individual can be specifically identified with the project, AND the cost was explicitly budgeted in the proposal or prior sponsor approval has been obtained. If these salaries are directly charged to a sponsored projects, the cost may NOT also be recovered as an F & A cost.
Value added tax (if no exemption is available)
Temporary dependent care (if consistent with entity travel policy)

4. Facilities and Administration (F & A) Costs
Costs that cannot be specifically allocated to an award are treated as F & A (also referred to as indirect) costs. Examples of costs that are generally not directly charged to sponsored projects include:
Office supplies
Administrative and clerical salaries
Telephone and technology support charges

5. Determination of the F & A rate
The federal F&A rate is negotiated with a cognizant agency (The Department of Health and Human Services for Penn). It is based on a comprehensive assessment of costs to the institution. Under the UG, a federal sponsor should permit the reimbursement of F&A at the negotiated rate on federal awards. Agencies may post exceptions, which should be listed in the funding opportunity announcement. Entities that do not have a federally negotiated F&A rate may instead use a 10% de minimus rate.

6. Calculation of F & A charges to an award
F&A Rates are applied to the “Base” of the approved award.
For federal awards, this base is generally Modified Total Direct Costs (MTDC)
MTDC excludes the following from the award costs:
Equipment
Tuition Costs
Subcontract amounts > than $25,000
Patient Care Costs
Rental Costs

7. Consistent Treatment of Costs
This is an illustrative rather than comprehensive list. When exceptions are made, especially for administrative and clerical salaries, documentation of sponsor approval should be maintained.

8. Non-federal sponsors
Penn budgets the following as Direct costs for Non-federal sponsors only:
Dependent tuition
Space used by the project
University services
Administrative costs
Of these costs, only dependent tuition and administrative costs are subject to F & A