MODIFIED TOTAL DIRECT COST
CALCULATIONS
Direct vs. Indirect Costs vs. Unallowable Costs
Direct costs are those that can be identified specifically with a particular project, an instructional activity, or any other
institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.
Direct Costs generally include:
1. Program salaries/wages including vacations, holiday, sick leave and other excused absences of employees working
specifically on objectives of a grant or contract
2. Other fringe benefits allocable on direct labor program employees
3. Consultant services including any sub-contracts or sub-grants usually greater than $25, 000 contracted to
accomplish specific grant/contract objectives
4. Travel of direct labor program employees
5. Materials, supplies and equipment purchased directly for use on a specific grant or contract
6. Communication costs such as long distance telephone calls identifiable with a specific award or activity
Indirect costs are costs that are incurred for common or shared objectives, and therefore cannot be easily and specifically
identified with a particular project or activity. It is expected that the cost accounting practices (as defined at 48 CFR
9903.302-1) for classifying costs either as direct or indirect will be consistently applied to all costs incurred by the reporting
unit.
Indirect costs generally include:
1. Salaries of administrative staff and clerical staff providing normal supporting activity
2. Office supplies including postage
3. Local telephone calls
4. Facilities, utilities, operations and maintenance
Unallowable costs are a particular item or type of cost which, under the express provisions of an applicable
law, regulation, or sponsored agreement, is specifically named and stated to be unallowable.
Unallowable Costs generally include:
1. Advertising (non-employment), selling and marketing expense
2. Alcohol for consumption (unless specifically identified)
3. Legal expenses & settlements, fines and penalties
Defining Modified Total Direct Cost (MTDC)
Modified total direct costs (MTDC) are total direct costs excluding:
1. The portion of each individual consultant’s sub-grant and subcontract in excess of $25,000. Please
note that an individual grant or contract may include several consultant’s sub-grants or contracts.
2. Equipment with an estimated life of one or more years and
a. An acquisition cost of $5,000 or more including components for fabrication of equipment
b. Lease purchase agreements for equipment costing $5,000 or more
3. Arrangements under which federal financing is in the forms of loans, scholarships, fellowships,
traineeships or other fixed amounts based on such items as education allowances, published tuition
rates and fees.
4. Patient care charges
5. Capital expenditures
6. Tuition remission included as a direct cost
7. Rental costs
MODIFIED TOTAL DIRECT COST
CALCULATIONS
Calculating Modified Total Direct Cost (MDTC) base
When using an F&A (Facilities & Administrative) indirect cost rate, the rate is applied to a Modified Total
Direct Cost (MDTC) base. The F&A rate for SPC is 33% beginning 7/01/2012 through 6/30/2016.
Generally, the full F&A rate is applied to the MTDC based, unless specific sponsor guidelines state otherwise.
Always review the program guidelines as many sponsors indicate what cost, including F&A is and is not allowable.
Example: Indirect costs based on Modified Total Direct Costs:
Budget #1: Budget contains no items requiring cost modification.
Budget
Salary
Fringe Benefits
Equipment
Materials and Supplies
Travel
Publication Costs
Consultant/Subcontract 1
Tuition Remission
Total Direct Costs
Year 1
24,596
5,942
0
3,462
3,000
0
0
0
37,000
Year 2
25,334
6,374
0
4,202
3,090
1,000
0
0
40,000
Year 3
26,094
6,826
0
4,867
3,183
1,030
0
0
42,000
To find Modified Total Direct Costs (MTDC):
Total Directs
Less:
Equipment
Tuition Remission
Consultant/Subcontract
> $25k
MTDC
Year 1
37,000
Year 2
40,000
Year 3
42,000
0
0
0
0
0
0
0
37,000
0
40,000
42,000
**Note that MTDC = Total direct costs because no dollars are requested for equipment,
tuition remission, or consultant/subcontracts exceeding $25,000
To find indirect costs, multiply the MTDC amount by the indirect cost rate:
MTDC
Indirect Costs
33.0%
Year 1
37,000
12,210
Year 2
40,000
13,200
Year 3
42,000
13,860
MODIFIED TOTAL DIRECT COST
CALCULATIONS
Example Budget #2: Budget contains items requiring cost modification.
Budget
Salary
Fringe Benefits
Equipment
Materials and Supplies
Travel
Publication Costs
Consultant/Subcontract 1
Tuition Remission
Total Direct Costs
Year 1
24,596
5,942
9,000
3,462
3,000
0
10,000
8,000
64,000
Year 2
25,334
6,374
0
4,202
3,090
1,000
11,000
8,000
59,000
Year 3
26,094
6,826
0
4,867
3,183
1,030
9,000
8,000
59,000
Modified Total Direct Cost (MTDC) Calculation:
*Note that funding is now requested for our excluded categories, Equipment,
Consultant/Subcontracts, and Tuition Remission.
Total Directs
Less:
Equipment
Tuition Remission
Consultant/Subcontract
> $25k
MTDC
Year 1
64,000
Year 2
59,000
Year 3
59,000
9,000
8,000
0
8,000
0
8,000
0
47,000
0
51,000
5,000
46,000
Consultants/Subcontract detail:
Year 1 - $10,000 requested is less than $25,000
Year 2 – Running total is $10k + $11k = $21,000. Still less than $25,000
Year 3 – Total is $10k + $11k + $9k = $30,000. We’re now $5,000 over the
$25,000 threshold, so that $5,000 is subtracted to get the MTDC total.
Now we multiply MTDC by the indirect cost rate:
MTDC
Indirect Costs
33.0%
Year 1
47,000
Year 2
51,000
Year 3
46,000
15,510
16,890
15,180