Expense Allocation Made Easy
How to manage expenses when
you’re not an accountant….or even if
you are
Agenda








Introduction and Agenda Review
What is a grant purpose code and what is not
What is Cost Allocation and why do we care
Why is proper allocation the first time important
What you need to manage grant expenditures
Allocation Procedures
Cost Categories
Common Cost Allocation Challenges, what’s allowable and what’s not
 Conclusion
Learning Objectives
 To understand the importance of accurate, well‐ supported
invoices and documentation
 To define and demonstrate a comprehensive allocation
process
 To ensure that each grant bears its fair share, and only its
fair share, of the total cost of each expense
 To have the tools you need to do it right the first time
 How to communicate with faculty without fear
Breaking the Code of Purpose Codes
 Grant purpose codes versus non-grant purpose codes
 Grant Codes
Department Acronym
31 = National Science Foundation
32 = National Institutes of Health
33 = Department of Defense
34 = Office of Education
35 = United States Department of Agriculture
37 = Other Federal Agency
42 = State of Delaware
43 = Other, Subawards from other institutions, County or City, industry, foundations (not
gifts)
 45 = Gifts









Breaking the Code of Purpose Codes,
cont.
 After the Department Acronym, the sponsor type,
then what?
 Placeholder
 Begins with 21, 22, 23, 24, etc.
 Skip 29 except in Delegated Authority!
Who uses Project Codes?
 The Research Office is the only department that
uses Project Codes
 What is a Project Code?
 An extra long Purpose Code
 What it means
 Purpose Code, then fiscal year, then 3 zeros as placeholders
 Why Use a Project Code
 It is a quick identifier of an association with a grant
Expense Allocation and Why it Matters
Basic Cost Accounting Standards
(CAS)
Basis in OMB Circular A21, Cost Principles for
Educational Institutions
CAS 9905.
→
501
• Consistency in
estimating,
accumulating and
reporting costs
502
• Consistency in
allocating costs
incurred for the
same purpose
505
• Accounting for
unallowable costs
506
• Consistency in
using the same
cost accounting
period
Why do we need to comply
with the CAS?






Disallowed costs = expenses moved to department
Time wasted doing 90 Day JVs
More audit scrutiny = time spent pulling & explaining files
Prevents audit findings and other adverse publicity
Compliance = successful research administration
No stress and worries at closeout
UD’s CAS Guidelines
 Clarifies the federal regulations
 Provides specific examples
 Includes a flow chart and definitions
CAS Misconceptions
Budgeted = ALLOWABLE
(false!)
Approved once =
approved ALWAYS (false!)
Unlike circumstance
approved, therefore
allocable
Program officer
approved, therefore
allowed
(still must justify)
(audit may disagree)
Basic Principles
1.
2.
3.
4.
5.
6.
Allowable
Allocable
Reasonable
Consistent
Direct Costs
Indirect Costs
TRIFECTA
Basic Principles
Allowable
Allocable
Allowable
Reasonable
Allowable
 Definition – “Costs are allowable if they
conform to any limitations or exclusions set
forth in these principles or in the sponsored
agreement as to types or amounts of cost
items”. (OMB Circular A-21, Sec. C.2.d.)
Allocable
Is the Cost Allowable?
Proposed / Budgeted / Approved
Not disallowed by T&C’s
Reasonable
Allowable
Definition - “A cost may be considered
reasonable if the nature of the goods or
services acquired or applied, and the amount
involved therefore, reflect the action that a
prudent person would have taken under the
circumstances prevailing at the time the
decision to incur the cost was made.” (OMB
Circular A-21, Sec. C.3.)
Allocable
Is the Cost Reasonable?
Prudent person test
Necessary for performance of the project
Consistent with established
institution practices
Allocable
Reasonable
Allowable
Allocable
Definition - “A cost is allocable to a
particular cost objective if the goods or services
involved are chargeable or assignable to such cost
objective in accordance with relative benefits
received or other equitable relationship.”
(OMB Circular A-21, Sec. C.4.)
Is the Cost Allocable?
Benefits the project
Cost of one project may not be
shifted to another
Proportional to the relative benefit
received by project
Consistency
Definition – “practices used in estimating costs in
pricing a proposal shall be consistent with the
educational institutions cost accounting practices
used in accumulating and reporting costs…All costs
incurred for the same purpose, in like
circumstances, are either direct costs only or F&A
costs only.”
(OMB Circular A-21, Sec. C.10 & C.11)
Consistency
 Treat federal funds like
all others
 Must apply the
principles consistently
across grants and
contracts
Direct Costs
 Costs that can be identified specifically with a particular
sponsored project, instructional activity…or that can be
directly assigned to such activities relatively easily with a
high degree of accuracy.
 Where an institution treats a particular type of cost as a
direct cost of sponsored agreements, all costs incurred for
the same purpose in like circumstances shall be treated as
direct costs of all activities of the institution.
(OMB Circular A-21 Sec. D1)
Direct Costs
Indirect Costs
 Costs that are incurred for common and joint objectives
and therefore cannot be identified readily and specifically
with a particular sponsored activity, instructional activity,
or other institutional activity.
(OMB Circular A-21 Sec. E1)
Indirect Costs
How can I do this right the first time?
 Must have the right tools







Need the COA
Need Budget Justification
Need the Notice of Award
Need the RFP
Need view access to the purpose code
Need to track expenditures through UDataGlance
Access to your purpose code when it’s a
multi-department award
What to look for






The COA will give you:
the purpose and project codes
the start and end date
the award PI and the project PI
the budget, including cost share
special terms and conditions
What is an RFP and why do I need it?
 The solicitation (RFP, RFA) often times has
requirements for managing the grant if the
proposal is awarded
 Don’t assume that the PI has read this
information and know what is included in the
regulations
What is the Notice of Award
 This is the actual award document that tells
UD that a grant has been awarded
 Who’s money is it??
 The award comes to UD but the PI is responsible
for the research and the management (financial
and programmatic) of the award
 This has ALL of the guidelines/rules for
managing the grant
Communication
 Talking with your PI and others
 Knowing when and what questions to ask
 Who to ask for help
Working with Faculty Members




They can be intimidating
YOU know MORE than they do!
Ask lots of questions
Who to ask for help
Case Study
PI forwards a invoice for the purchase of two new
computers, one laptop and one desktop, they
include a note to please allocate the expense to a
specific grant….what do you do?
Per UD’s cost accounting standards, “computers are
normally classified as general office supplies as the
computers are a tool used for a variety of functions
often having generic administrative uses. In order to
meet the criteria of an ‘unlike circumstance’ and be
directly charged to a sponsored award, predominant
usage of a computer must be tied to the technical
objectives of the award.” The justification should be
specific and address the percentage of use on the
computer as related to the award.
What do you do?
Converse with the PI, ask questions and remind him/her
of UD’s cost accounting standards.
What do I ask?
A few suggestions to start the dialogue.
 Did you request and receive permission to purchase computers?
 What was budgeted? Advise the PI that at closeout, this is one of the first
things that an SRA looks for, to see if computer expenses were included in
the original budget.
 Will the item(s) be used specifically for one sponsored research project or
multiple projects? If the item is used on multiple projects, the percentage of
usage must be prorated accordingly and included in the justification for
closeout.
 For audit purposes, the justification must be specific and address the
percentage of use on the computer(s) as related to the award. The PI’s
justification must address the questions below.
 What percentage (100%?) were the items used for the project?
 Were the items necessary to complete the scope of work?
 How were the items used on the project?
 Who used the items on the project?
Gotchas! Or possible unallowables
CANG43212311000
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
CANG432123
04/05/2012
April 2012 RO Conference
Sample of Unallowable Costs









Alcoholic Beverages
Entertainment Costs
Lobbying
Goods/Services for Personal Use
Losses on Other Sponsored Agreements
Fines and Penalties
Memberships in Civic/Social Clubs
Costs with insufficient documentation
Non-travel related Meals and Refreshments (generally not allowable direct
costs) http://www.udel.edu/research/pdf/Allowability-of-meals.pdf
Example Unallocable Costs
 Travel to conference by PI (not related to current
sponsored activities) is not allocable as a direct cost
 Salary of administrative staff to schedule meetings is
not allocable as a direct cost to a specific sponsored
project
 Purchase of general use supplies for entire lab group
with no clear allocation method is not allocable to
individual sponsored projects
 Equipment purchased at end of sponsored project
Before you allocate that expense
 Check with your department administrator.
 Remember the “Cost Principles.”
 Do not charge common items to a grant.
 Supporting the expense with proper invoicing and receipts are
critical to the audit process.
Foreign Travel…always a challenge!
 The Fly America Act requires that all federally funded travel be on a US
flag carrier or US flag carrier service provided under a code-share
agreement. This applies to all aspects of the travel.
Http://www.udel.edu/research/pdf/fly-america-act.pdf
Fly America Waiver Checklist
 If an exception to the restrictions of the Act is requested, the individual
must complete the Fly America Waiver Checklist, preferably before the
flight is booked. For audit purposes, the individual will need to complete
the checklist and attach any required supporting documentation for each
trip for which he/she used a foreign air carrier.
http://www.udel.edu/research/pdf/fly-america-waiver-checklist.pdf
Foreign Travel – cont.





Not considered an exception
Cost factor – Foreign ticket is less than U.S. flag air carrier
May not be used solely based on the cost of ticket
Convenience – agency/traveler
Must use U.S. flag air carrier service, unless traveler meets one of the
exceptions or a matter of necessity
 Required Documentation
 Documentation must include: traveler’s name, dates traveled; origin and
destination of travel (boarding passes).
 Detailed itinerary should include traveler’s name, the name of the air
carrier and flight number for each leg of the trip.
 A statement explaining why you met one of the exceptions.
Foreign Travel – cont.
Liability
 No reimbursement for “any” transportation cost for which an traveler
improperly use of foreign flag carrier service
NOTE:
 UD recognizes travel to Canada as foreign and must comply with the Fly
America Act.
qqQQQqu
Katherine M. Lyons
kmlyons@udel.edu
302-831-8626
Cindy Panchisin
clp@udel.edu
302-831-8001
Victor Raphael Peguero
vpeguero@udel.edu
302-831-1464
UNIVERSITY OF DELAWARE
COST ACCOUNTING STANDARDS GUIDELINES
>
UNIVERSITY OF DELAWARE: COST ACCOUNTING STANDARDS GUIDELINES
I. FEDERAL CIRCULAR A-21: COST PRINCIPLES FOR EDUCATIONAL INSTITUTIONS
• CAS APPLICABILITY
. CAS AND F&A
• CAS RELATED DEFINITIONS
• DETERMINING ALLOWABILTTY, REASONABLENESS, AND ALLOCABIUTY OF COSTS
•
ALLOCATION METHODOLOGY
II. EXAMPLES & CLARIFICATIONS
• ADMINISTRATIVE AND CLERICAL SALARIES/WAGES/FRINGE BENEFITS
• GENERAL OFFICE SUPPLIES
• COMPUTERS
• POSTAGE
.
TELEPHONE AND VARIOUS OTHER COMMUNICATIONS
• MEMBERSHIPS ANDSUBSCRIPTIONS
.
PRINTING, BINDING, PUBLICATION AND COPYING
• EQUIPMENT
. SERVICE CENTERS
• COST SHARING
• FUNDING DELAYS
APPENDIX A: REPRESENTATIVE LIST, DIRECT & INDIRECT COSTS
APPENDIX B: EXPLICITLY UNALLOWABLE COSTS ON FEDERAL AGREEMENTS
APPENDIX C: FLOW CHART OF ADMINISTRATIVE & TECHNICAL EXPENSES
APPENDIX D: CAS DEFINITIONS
I.
FEDERAL CIRCULAR A-21: COST PRINCIPLES FOR EDUCATIONAL INSTITUTIONS
When a sponsor awards funds to the University in support of specific programs and projects, it requires the University
to manage those funds prudently to ensure that any costs incurred directly benefit the project accounts being
charged.
The Federal Government is the largest sponsor of externally funded activity at the University. The cost principles
relating to expenditures on federal awards are contained in the Office of Management and Budget's (OMB) Circular A2-LThe Cost Principles for Institutions of Higher Education. These cost principles require that any expense charged to
a federally sponsored project be reasonable and necessary, allocable, consistently treated, and conform to any limits
or exclusions set forth in A-21 or the terms and conditions of the award.
Anyone approving or processing the expenditure of federal funds must have a clear understanding of Cost Accounting
Standards (CAS) and apply consistent application of these fundamental cost principles. In addition, individual awards
may include special terms and conditions which must be considered when incurring costs. Terms and Conditions in an
award which specifically address costs override all related comments in this document. Consult with the appropriate
Contract and Grant Administrator in the Research Office for more details.
In simplest terms, the Cost Accounting Standards are a series of federal regulations that provide guidance on costing
practices for educational institutions in the administration of financial management of sponsored awards. The Office
of Naval Research (ONR) is the cognizant federal agency overseeing the administration of sponsored programs at the
University of Delaware.
CAS APPLICABILITY
Sponsored projects will be subject to CAS if anv ONE of the following criteria is applicable:
• federal awards
• awards that contain any federal flow-through funds. This is likely determined by the presence of terms and
conditions that reference federal guidance from Circular A-21 or have been assigned a Catalog of Federal
Domestic Assistance (CFDA) number. If after the award period has started it is discovered that the project is
Final version 11/12/08; posted to www.uctel.edu/research 12/08.
funded with federal flow-through dollars, any unallowable direct charges will need to be removed from the
project.
Awards where terms and conditions of the proposal or award documents reference Circular A-21 or Cost
Accounting Standards
Funds being used as cost sharing on a CAS covered project. Only the individual cost(s) being claimed as cost
sharing would be subject to CAS.
CAS AND F&A
The University is reimbursed for a portion of those costs categorized as Facilities & Administrative Costs (F&A). To
directly charge those items included in UD's F&A Cost Rate Proposal would constitute double charging the
government for the same cost. This is one of the situations that the government and Circular A-21 seek to avoid. In
summary, the application of CAS addresses the following:
Don't charge the federal sponsor for the same cost twice,
AND
Don't charge the federal sponsor for unallowable costs
All awards, including those not covered under CAS are still subject to the specific sponsor requirements listed in the
award and to University guidelines. Just because an award is not subject to CAS does not mean expenditures
unrelated to the award's purpose can be charged. All expenditures on an award must be reasonable, allocable, and
allowable.
Costs that would normally be considered as F&A costs, such as administrative and cferical salaries, may be charged
directly to non-federal awards if permitted by the sponsor's policies or otherwise approved by the sponsor.
Irrespective of CAS applicability, most awards include either audit clauses and/or financial reporting requirements.
These clauses allow for the review of supporting documentation for ail expenditures. The supporting documentation
should validate the relationship between the expenditure and the purpose of the award.
DETERMINING ALLOWABILITY, REASONABLENESS, AND ALLOCABILITY OF COSTS
Circular A-21, Section C. 2-4 requires that all costs charged to the government satisfy the following criteria:
Allowable - 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
• Allocable to sponsored agreements
• Given consistent treatment appropriate to the specific circumstances at hand
• In conformity to any limitations or exclusions set forth or in the sponsored agreement as to types or
amounts of cost items.
Typical costs charged directly to a sponsored project include:
• compensation of employees for performance of work under the sponsored agreement, including related
fringe benefit costs;
• costs of materials consumed or expended in the performance of the sponsored project;
• travel in accordance with the University's policy
• other allowable items of expense incurred for the sponsored project.
Costs of materials from stock/services rendered by specialized facilities or other institutional service operations may
be included as costs under federally sponsored agreements, provided such items are:
• consistently treated in similar circumstances as direct costs, rather than Facilities and Administrative
(indirect) costs; and
• charged under a recognized method of computing actual costs.
Allocable - The project that pays the expense must directly benefit from that expense. This important concept is
known as the "point of allocation". A cost is allocable to a particular cost objective (i.e., a specific function, project,
sponsored agreement, department, or the like) if the goods or services involved are chargeable or assignable to such
Final version 11/12/08; posted to www.u&af.edu/researdi 12/08.
cost objective in accordance with relative benefits received or other equitable relationship. Every incurred cost must
have a direct benefit to the sponsored project being charged. OMB Circular A-21 offers the following guidelines:
In general, a cost is allocable to a particular sponsored project if it fulfills one of the following conditions:
• 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; or
• it is necessary to the overall operation of the institution and, in light of the principles provided in OMB Circular A21, is deemed to be assignable in part to sponsored projects.
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.
Note: Reasonable methods of allocating common use scientific items and supplies may include proportional benefit,
specific anticipated use per award, full time equivalents (FTEs) on each award, lab square footage, high correlation to
another lab cost that is clearly allocated, and Modified Total Direct Cost (MTDC) proportions (i.e., relative size of nonsalary budget, excluding equipment, tuition, and any subcontracts).
In the rare instances in which a proper cost allocation cannot ultimately be determined using any reasonable
methods, the cost may be charged to a single sponsored project.
Where the purchase of equipment or other capital items is specifically authorized under a sponsored agreement, the
amounts thus authorized for such purchases are assignable to the sponsored agreement regardless of the use that
may subsequently be made of the equipment or other capital items involved.
Any costs allocable to a particular sponsored agreement under the standards provided in OMB Circular A-21 may not
be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund
considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of
convenience.
Any costs allocable to activities sponsored by industry, foreign governments, or other sponsors may not be
shifted to federally sponsored agreements.
Reasonable - The cost may be considered reasonable if the goods/services acquired and the cost involved reflects
the same action that a prudent person would have taken under the same circumstances in incurring the cost.
Circular A-21 notes that a cost may be considered reasonable if the cost:
•
•
•
Is necessary for the performance of the sponsored agreement
Has been determined reasonable by the individuals concerned acting with due diligence in the same
circumstances
Has been determined through costing policy, consistent with established institutional policies and
practices
Consistent - All costs incurred for the same purpose, in like circumstances, are either to be treated as direct costs or
as F&A costs. According to Circular A-21 and CAS 501, this includes consistency in estimating, accumulating and
reporting costs and consistency in allocating costs incurred for the same purpose.
Unlike Circumstance - A cost that is normally considered to be an F&A cost is considered an unlike circumstance if
it meets specific criteria. Unlike circumstances are costs which are allowed to be charged directly to a
particular sponsored award. These costs must:
• Satisfy the definition of a direct cost (specifically identifiable with the objectives of the research,
identification made with relative ease and a high degree of accuracy),
• Be extensive or unique in nature (in comparison with other research activity at UD),
• Where appropriate, be included in the proposal budget and adequately justified on Proposal, and
approved by the sponsor.
•
Be adequately documented at the time of allocation to satisfy the relevance as a direct cost
Final version 11/12/08; posted to www.udehedu/research 12/08.
Some questions to consider in determining the presence of a unique or 'unlike circumstance' in which normal F&A
costs might be charged directly should include;
1, Does the cost provide a direct benefit to the purpose or technical objectives of the award as opposed to a
cost that is "needed" to complete the project but is incidental to the purpose?
2. Can the cost meet the definition of a direct cost? Can the cost be specifically identified with a particular award
with relative ease and a high degree of accuracy? Is the cost allowable in accordance with all applicable
regulations, terms and conditions, policies and procedures?
3. For clerical and administrative salaries, do the facts and circumstances of the award meet the criteria to
qualify the cost as an exception ('unlike circumstance') as guided by Circular A-21?
4, For other costs that are normally classified as F&A costs (e.g., office supplies, postage, local telephone,
memberships, etc); do the facts and circumstances of the award meet the criteria to qualify these costs as a
unique situation/exception ("unlike circumstance')? Do these costs directly contribute to the specified goals of
the award?
CAS requires consistent treatment of costs in 'like circumstances' throughout the institution, Consequently 'unlike
circumstances' must be demonstrated/justified if a cost that is normally considered as an F&A cost is to be budgeted,
charged, and reported as a direct cost The following arguments are not valid in the demonstration of'unlike
circumstances':
a) Sponsor approval of the budget allocation of a particular cost without proper review by the
institution (i.e. items 1-3 above)
b) Insufficient F&A recovery to support the costs incurred
c) Sponsor limits or will not reimburse F&A costs to the University
d) Sponsor is willing to pay for the cost as a direct charge (See NOTE below)
Circular A-21 also generally defines those costs, which may be charged directly, and those for which we are
reimbursed through the F&A cost rate. When developing a sponsored project proposal, the Principal Investigator (PI)
builds a budget which reflects the project's direct costs (e.g., researchers salaries, equipment) — the costs which are
relatively easy to associate directly with the objectives of the project, and then applies the proper negotiated F&A
rate to add the cost of space, utilities, office supplies, and other essential infrastructure "overhead-type" expenses to
the budget. Circular A-21, D.2. also goes on to state that "identification with the sponsored work rather than
the nature of the goods and services involved is the determining factor in distinguishing direct from
F&A costs of sponsored agreements."
ALLOCATION METHODOLOGIES
The proper classification (direct versus F&A) of any charge should be determined based on a logical thought process.
This process can be described in three (3) steps as follows:
1.
Review - All applicable regulations, terms and conditions, policies, procedures applicable to the award. This
includes University of Delaware regulations, policies and procedures.
2. Judgment - Proper allocation of costs should be based upon the specific purpose of the award and the
technical goals expected rather than the need of certain items,
3. Justification - Appropriate, adequate written justification of'unlike circumstances' should be disclosed in the
proposal (or a justification is prepared when the need arises during the life of the project that could not have
been anticipated in the proposal process).
NOTE: Agency Approval of a budget based on written justification of'unlike circumstances' in the proposal
relies on the institutional obligation to make an informed decision based on the particular facts and
circumstances of the specific award.
The Office of Management and Budget Circular A-21 provides two methods for allocating an allowable direct cost to
two or more grants, they are defined as follows:
Final version 11/12/08; posted to \gw>y,udei.^»/res;fi.grch 12/08.
Proportional Benefit
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.
Example: A PI has two awards which require the purchase of mice to conduct experiments. The Specific Aims
for one award indicates 150 mice are needed to conduct the research and the Specific Aims of the second
award requires 50 mice to conduct the research. The PI orders 200 mice and allocates the cost of the mice
75%/25% between the awards.
Interrelationship
If a cost benefits two or more projects or activities in proportions that cannot be easily determined due to the
interrelationship of the work involved, then the cost may be allocated to the benefiting projects on any
reasonable basis.
Example: Acetone purchased for use in a laboratory is needed for the technicians working concurrently on
three research projects. A reasonable method of allocating the cost of the Acetone could be based on the
number of FTEs.
Regardless of the method used, A-21 states that the: "University is responsible for ensuring that costs charged to a
sponsored agreement are allowable, allocable, and reasonable under these cost principles; and University's financial
management system shall ensure that no one person has complete control over all aspects of a financial transaction."
Unallowable Costs
Costs considered "unallowable" in accordance with various authoritative documents and the individual Sponsors must
be identified and accounted for separately (CAS 505). These costs must be excluded from federally sponsored awards
and may not be budgeted, charged or reported to a sponsor. Unallowable costs are described in Circular A-21,
Section J. Some examples include:
General Advertising Costs/Public Relations
Alcoholic Beverages
Entertainment Costs
Goods/Services for Personal Use
Lobbying
Memberships in Civic/Social Clubs
II. EXAMPLES & CLARIFICATIONS
The following statements should serve as the basis for administering all CAS covered sponsored awards. The lack of
available F&A cost recovery funds to assist in the payment of costs normally classified as F&A costs is not a valid
argument for charging such costs directly to the sponsor when developing a budget or in the decision making process
regarding direct cost recovery.
IT IS THE PRIMARY RESPONSIBILITY OF THE PRINCIPAL INVESTIGATOR, WITH SUPPORT OF THE RESPECTIVE
DEPARTMENTAL RESEARCH ADMINISTRATOR AND THE DEPARTMENT CHAIR, TO REVIEW THESE BUDGETS AND DETERMINE
IF ALL COSTS ARE ALLOWABLE AND ALLOCATED CORRECTLY BETWEEN DIRECT AND F&A COST CATEGORIES.
Listed below are additional clarifications for several specific cost issues on federal awards.
ADMINISTRATIVE AND CLERICAL SALARIES/WAGES/FRINGE BENEFITS
While administrative and clerical salaries and wages are normally classified as F&A costs, direct budgeting and
charging of such costs may be considered where a major project or activity explicitly budgets for administrative or
clerical salaries and the individuals involved can be specifically identified with the technical goals of the project or
activity.
The nature of the work or actual functions performed under a particular project should require an extensive amount
of administrative or clerical support that is significantly greater than the routine level of such services provided by
academic departments.
Final version 11/12/08; posted to w ww .udel.eelu/research 12/08.
The following are specific examples (taken from OMB Circular A-21, Exhibit C) of when direct charging of
administrative and clerical salaries/wages and fringe benefits may be allowable (with adequate written justification
in the proposal narrative and upon approval by the sponsor);
•
Large, complex programs such as General Clinical Research Centers, Primate Centers, Program Projects,
environmental research centers, engineering research centers, and other grants and contracts that entail
assembling and managing teams of investigators from a number of institutions.
•
Projects that involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging,
searching literature, and reporting (such as epidemiological studies, clinical trials, and retrospective
clinical records studies).
•
Projects that require making travel and meeting arrangements for large numbers of participants, such as
conferences and seminars.
•
Projects whose principal focus is the preparation and production of manuals and large reports, books and
monographs (excluding routine progress and technical reports).
•
Projects geographically inaccessible to normal departmental administrative services, such as research
vessels, radio astronomy projects, and other research fields' sites that are remote from campus.
•
Individual projects requiring project-specific database management; individualized graphics or manuscript
preparation; human or animal protocols; and multiple project-related investigator coordination and
communications.
All of these circumstances display, with relative ease and a high degree of accuracy, extensive amounts of
administrative/clerical effort on a particular project (or in the case of a remote location, inaccessibility to normal
departmental services). If the cost does meet the test of an extensive amount of administrative and clerical effort,
but cannot meet the direct charge criteria stated above the cost must be recovered as an F&A cost. However, these
examples do not constitute an exhaustive list, nor do they imply that direct charging of administrative
or clerical salaries would always be appropriate for the situations illustrated in the examples.
Routine account monitoring, proposal processing, typing of general correspondence, manuscripts or
technical reports, ordering of supplies, and meeting/travel arrangements are not considered Hinlike
circumstances' and such costs are recovered through the University's F&A cost rate. Additionally,
projects cannot be grouped together to meet the requirement that there be an extensive amount of
support.
GENERAL OFFICE SUPPLIES
Costs include those incurred in support of routine activities associated with instruction, public service, research and
other institutional activities (i.e., paper, pencils, pens, ink, toner cartridges, etc.). Exceptions consist of instances
where the purchase of the supplies is extensive in nature, specifically identified to the purpose of the project, and
meets the definition of a direct charge.
COMPUTERS
Computers are normally classified as general office supplies as the computers are a tool used for a variety of
functions often having generic administrative uses.
In order to meet the criteria of an 'unlike circumstance' and be directly charged to a sponsored award, predominant
usage of a computer must be tied to the technical objectives of the award. Examples may include a
computer used to create a publication on a grant where publication is a specified deliverable, a computer that is
dedicated to controlling a scientific instrument - e.g., a mass spectrometer, a computer used to gather and analyze
data or perform numerical analysis, image manipulation, or other technical activities directly related to the objectives
of the science.
Examples of justification on a research proposal:
Final version 11/12/08; posted to wwwAKgei.edu/rese.3rcfi 12/08.
Laboratory Based Research Project:
A desktop computer (Dell, Optiplex 5200 GXMT) is requested to support the extensive cloning experiments and
plasmid constructions described in this proposal. This cost is normally treated as indirect at the University of
Delaware. However, due to the requirements of this project, this cost is requested and justified as a direct cost. This
computer is essential to fulfill the Specific Objectives of the proposal, including the construction of the human/rabbit
chimeras, the construction of the multicistronic plasmids, and the design of oligonucleotide primers for polymerase
chain amplification. The computer will be in heavy use for these purposes, and be used almost exclusively (80%) for
the scientific aims of this proposal, with the remainder of the use for other scientific purposes. The software needed
to design the plasmids, chimeric proteins, and oligonucleotide Primers (Lasergene, DNAStar, Inc.) will also be
purchased on this grant.
Laptop Computer for Research Project with Off-site Data Collection:
$3,000 is requested for a laptop computer. This cost is normally treated as indirect at the University of Delaware;
however, due to the requirements of this project, this cost is requested and justified as a direct cost item. The
computer will be almost exclusively dedicated to the accomplishment of the specific aims of this project as described
in the research plan (>80%); Specific aims 1 and 2 involve collection of data from children at three off-campus sites.
The laptop will enable the researchers to enter the data as it is received and review the entered data while still at the
site. The data can then be transferred from the sites directly to the university for analysis. On-site computer entry
facilitates quality control and removes the possibility of human error which could occur while transferring data from a
hand written record to a computerized data base.
POSTAGE
Postage costs incurred in support of routine communication activities associated with instruction, public service,
research, and other institutional activities should not be charged directly to sponsored accounts. Exceptions include
cases where extensive postage is required in support of the technical goals and objectives of the sponsored award.
For example, if the purpose of the project were to survey 1,000 high school students to determine their attitudes on
violence in the school system, postage for the survey may be an allowable direct charge.
Mailing technical reports and other project deliverables are considered part of normal, routine business expenses and
are therefore are considered F&A costs. Postage costs include US Mail, Federal Express, UPS, etc. The difference
between postage (F&A) and freight/shipping (direct) is driven by the item(s) being sent, not the means
by which they are sent.
TELEPHONE AND VARIOUS OTHER COMMUNICATIONS
Communication costs incurred in support of routine activities associated with instruction, public service, research and
other institutional activities should not be charged directly against sponsored projects. For example, installation
charges, recurring monthly use charges, local access calls, pagers, cell phones, etc., are normally considered F&A
costs. Some exceptions may include: long distance calls, and fax long distance charges that are specific to a project
and incurred for the sole direct benefit of the technical goals of the project.
MEMBERSHIPS and SUBSCRIPTIONS
Individual memberships in civic or social organizations are expressly unallowable in accordance with Circular A-21.
Individual memberships or subscriptions to professional groups or periodicals are normally considered unallowable as
direct costs but in rare situations may be allowed as direct charges only if the following can be demonstrated:
• An institutional membership is not available or will not satisfy the purpose of the project, and
•
The cost has been adequately justified (i.e., provides a direct benefit to the purpose of the project) in the
proposal.
PRINTING. BINDING. PUBLICATION AND COPYING
These costs are normally direct charges to sponsored awards given that the definition of a direct charge can be met.
The copying costs and the costs of disseminating research results through publication costs or page charges are
allowed as direct charges to sponsored awards from which the research was obtained,
With respect to copying costs, if using an external copy service, the invoice should be retained as documentation to
support the charge. If using a departmental copier, charges must be a per copy charge and must be based on a cost
study. In other words, you cannot charge the associated expenses of the copy machine such as toner cartridge,
Final version 11/12/08; posted to www.udel.edu / research 12/08.
paper, etc. directly to a contract or grant due to allocation problems among the many uses of the machine (i.e.,
contradicts "relative ease and a high degree of accuracy"). The per copy cost must be based on total utilization of all
activities (research, instruction, public service and other), not just research usage. In addition you must maintain
documentation of the use through a log. Copying of proposals or general correspondence not related to a
specific project should not be charged as direct costs.
EQUIPMENT
UD has defined equipment (versus supplies) for sponsored awards as follows:
Capitalized Equipment - nonexpendable, tangible, personal property having a useful life of two years or
greater and an acquisition cost of $5,000 or greater per individual item.
Non-capitalized Equipment (supplies) - nonexpendable, tangible, personal property having a useful life of less
than one year AND an acquisition cost of less than $5,000 per individual item.
Equipment Fabrication - occurs when multiple items that could be classified as supplies (some items may
have acquisition costs of $5,000 or less) are purchased to create/fabricate an integrated unit of equipment
having a total value of $5,000 or more. In these instances, the individual purchases should be budgeted and
accounted for as capitalized equipment.
SERVICE CENTERS
Costs identified to a particular sponsored project for the use of University-owned labs and other service centers
should be budgeted, charged, and reported as direct costs. These charges must be based on actual utilization
supported by adequate documentation. These charges must also be based on a usage rate approved by the VP
Finance Office. The rate must be approved before the charge is incurred by the sponsored projects.
COST SHARING
A cost used to meet the cost sharing commitments of a sponsored project will be allowed only to the extent that the
charge would meet the criteria as a direct charge. In addition to the specific criteria discussed above, the charge
must be allowable under the particular facts and circumstances of the award. If the cost would be classified as an
F&A charge, it will not be allowed to meet the cost sharing commitments of that particular project.
FUNDING DELAYS
Direct or F&A costs should only be charged to a particular project if they relate to the project. Delays in receipt of
future funding are not justification for charging costs to an unrelated project. If charges are necessary before the
receipt of the funding, a request for a pre-award should be made through established procedures.
Final version 11/12/08; posted to wvj/vv'.^tK>j.t>(1y/fi>seailcli 12/08.
APPENDIX A
Representative List of Acceptable Direct and Indirect Costs
DIRECT COSTS
SALARIES, WAGES, FRINGE BENEFITS
Examples:
Principal Investigator, Faculty
Research Assistant, Scientist
Technician
Post Docs, Graduate Students
INDIRECT COSTS
ADMINISTRATIVE and CLERICAL SALARIES,
WAGES, FRINGE BENEFITS:
Examples:
Fiscal Officer, Accountant
Secretary, Staff Assistant
Department Administrator
ANIMAL and ANIMAL CARE
COMPUTER SOFTWARE *
AUTO RENTAL
COMPUTER HARDWARE *
CONSULTANTS
DUES & MEMBERSHIPS
EQUIPMENT (Technical & Scientific)
EQUIPMENT (General Purpose)
MAINTENANCE/REPAIR/SCIENTIFIC EQUIPMENT
MAINTENANCE/REPAIR GENERAL PURPOSE EQ
FREIGHT/OTHER TRANSPORT
UPS, FedEx
MEALS & REFRESHMENTS *
PAGE CHARGES/REPRINTS/REFERENCE MATERIALS
PRINTING
PATIENT CARE COSTS
POSTAGE
RENTAL OF SPACE OR EQUIPMENT
(non University owned)
SERVICE/RECHARGE CENTER EXPENDITURES
SUBSCRIPTIONS
SUBCONTRACTS/SUBAWARDS
SUPPLIES & MATERIALS
Chemical & Laboratory
Gases
radioisotopes
OFFICE SUPPLIES
pens, pencils
paper, staples
files, folders, binders
TELEPHONE CHARGES - LONG DISTANCE
TELEPHONE CHARGES - BASIC
Basic Line Charges
Local Calls, Pagers, Cell Phones
TRAINEE COSTS (Training Grants Only)
Stipends, Tuition & Fees, Travel
TRAVEL
If there are unusual circumstances those costs normally considered indirect costs may be charged as direct costs.
These would typically be listed in your budget and a justification provided for unlike circumstance.
*May be charged as direct costs if 'predominant usage is tied to the specified objectives of the award'.
Final version 11/12/08; posted to www.udei.edu/nesearch 12/08.
APPENDIX B
Explicitly Unallowable Costs on Federal Agreements
UNALLOWABLE COSTS DESCRIPTION
ADVERTISING & PUBLIC RELATIONS COSTS
Purchase of promotional items. Production &
distribution of magazines, newsletters, direct
mail unless directly related to the performance
of a sponsored project. Expenses for employee
and subject recruitment allowable.
ALCOHOLIC BEVERAGES
Alcohol beverages are unallowable
ALUMNI/AE ACTIVITIES
Costs incurred for, or in support of, alumni/ae
activities and similar services are unallowable
BAD DEBTS
Any losses, whether actual or estimated, arising
from uncollectible accounts and other claims,
related collections costs, and related legal
costs, are unallowable
Contributions to a contingency reserve or any
similar provision made for events, the
occurrence of which cannot be foretold with
certainty as to time, intensity, or with an
assurance of their happening, are unallowable.
Costs that are directly associated with the
unallowable costs are also unallowable. A
directly associated costs is defined in federal
regulations as any cost which is generated
solely as a result of the incidence of another
cost, and which would not have been incurred
had the other cost not been incurred. An
example of a cost that is directly associated
with an unallowable cost is the cost of airfare
to go to another city for the purpose of
entertaining business associates, or
fundraising. Since entertainment and
fundraising costs are expressly unallowable
under OMB circular A-21, and the airfare would
not have been incurred had the unallowable
costs not been incurred, the airfare is an
unallowable directly associated cost.
Costs of entertainment, including amusement,
diversion, and social activities and any costs
directly associated with such costs (such as
tickets to shows or sports events, meals,
lodging, rentals, transportation, and gratuities)
are unallowable.
Costs resulting from violations or, or failure of
the institution to comply with, Federal, State,
and local or foreign laws and regulations are
unallowable, except when incurred as a result
of compliance with specific provisions of the
COMMENCEMENT AND CONVOCATION COSTS
DIRECTLY ASSOCIATED UNALLOWABLE COSTS
ENTERTAINMENT
FINES AND PENALTIES
Final version 11/12/08; posted to www.Mclel.edju/.reseaf'ch 12/08.
sponsored agreement, or instructions in writing
from the authorized official of the sponsoring
agency authorizing in advance such payments.
FUND RAISING
GOODS OR SERVICES FOR PERSONAL USE
LOBBYING
LOSSES ON OTHER SPONSORED AGREEMENTS OR
CONTRACTS {COST OVERRUNS)
MEDICAL LIABILITY INSURANCE
MEMBERSHIPS
SELLING AND MARKETING
STUDENT ACTIVITY COSTS
PRE-AGREEMENT COSTS
Costs of organized fund raising, including
financial campaigns, endowment drives,
solicitation of gifts and bequests, and similar
expenses incurred solely to raise capital or
obtain contributions, are unallowable.
Costs of goods or services for personal use of
the institution's employees are unallowable
regardless of whether the cost is reported as
taxable income to the employees.
Attempts to influence the outcomes of any
Federal, State, or local election, referendum,
initiative, legislation, or similar procedure,
through in kind or cash contributions,
endorsements, publicity or similar activity.
Any excess of costs over income under any
other sponsored agreement or contract of any
nature is unallowable. This includes, but is not
limited to, the institution's contributed portion
by reason of cost-sharing agreements or any
under-recoveries through negotiation of flat
amounts for F&A costs.
Only allowable on research programs to the
extent that the research involves human
subjects.
Membership in any civic or community
organization or country club or social or dining
club or organization are unallowable. As is
membership in business, technical, and
professional organizations.
Costs of selling and marketing any products or
services of the institution are unallowable.
Costs incurred for intramural activities, student
publications, student clubs, and other student
activities, are unallowable, unless specifically
provided for in the sponsored agreements.
Costs incurred prior to the effective date of the
sponsored project, whether or not they would
have been allowable there under if incurred
after such date, are unallowable unless
specifically set forth and identified in the
sponsored agreement, or approved through
prior approval procedures.
Final version 11/12/08; posted to www.udeit.edu/research 12/08.
Appendix C
CHARGING ADMINISTRATIVE AND TECHNICAL EXPENSES
YES
Is the expense specifically disapproved
by the sponsor?
NO
Is the expense reasonable and
allowable?
NO
NO
I
YES
Does the expense directly support the
project objectives? With relative ease
and a high degree of accuracy?
1
YES
Is the expense incurred for a technical /
programmatic purpose?
T
T
YES
NO
Is the project and/or activity
administratively intensive?
NO
Expense may be
directly charged
to sponsored
award, but must
be adequately
justified.
YES
NO
Is the expense budgeted and justified
according to UD guidelines?
YES
Expense must be
charged to
department or
school.
Finai ¥ersion 11/12/08; posted to
arch 12/08.
APPENDIX D
CAS RELATED DEFINITIONS
Direct Costs - costs that can be identified specifically with a particular sponsored project, instructional activity, or
other institutional activity, or can be directly assigned to such activities with relative ease and high degree of accuracy
are treated as direct costs. These costs must also meet criteria established in Circular A-21, Section C.2-4, which
details factors affecting allowability, reasonableness, and allocability of costs.
The issue of identification made "with relative ease and a high degree of accuracy" relates to the ability to track and
monitor direct cost expenditures consistently, clearly and exhaustively, and that the process is not overly
burdensome.
Additionally, costs that provide direct benefit to a sponsored project's scientific or technical scope of work are
considered direct costs. A few examples of technical expenses are the salaries, wages, and fringe benefits of the PI(s)
and technical or research employees, laboratory supplies, travel, subcontractor costs, patient/animal care costs, etc.
Facility and Administrative Costs (F&A or indirect costs) - costs that are incurred for and benefit common or joint
objectives, and therefore cannot be identified specifically with a particular sponsored project, an instructional activity
or any other institutional activity are considered F&A costs. Based upon the specific items included in UD's F&A Cost
Rate Proposal, the University negotiates with the government (through ONR) to determine the percentage (rate) at
which F&A costs will be reimbursed. Some typical F&A costs include salaries and related benefits of those employees
who perform non-technical support activities, office supplies, postage, local telephone costs,
memberships/subscriptions, and other expenses used to provide clerical or administrative project support. These
costs may not normally be charged directly to CAS covered projects. However, given the presence of certain 'unlike
circumstances', these costs may on occasion be charged directly to a CAS covered project.
Consistent Treatment of Costs - costs incurred for the same purpose, in like circumstances, are treated uniformly
either as direct costs or as F&A costs. Consistent treatment of costs is a basic cost accounting principle and is
specifically required by OMB Circular A-21 to assure that the same types of costs are not charged to federally
sponsored awards both as direct costs and again as F&A costs recovered through a negotiated rate. This concept is
further reinforced and emphasized in a Cost Accounting Standard (referred to as CAS 502) that universities are
required to follow.
Cost Sharing - that portion of total project costs contributed to a sponsored award not borne by sponsor but rather
by the University or third parties. Committed cost sharing is the amount of project costs that UD agrees to contribute
as part of the performance of the sponsored agreement. This commitment is most often made in the proposal or
stipulated in the award documentation.
Maior project or activity - as defined in A-21, is a project or activity that requires an extensive amount of
administrative or clerical support, which is significantly greater than the routine level of such services provided by
academic departments. Major projects/activities are those that are administratively intensive and are not necessarily
defined by the amount of funding.
Non-maior project or activity - is a project or activity that is not administratively intensive and only requires the
level of administrative or clerical support that is routinely provided by academic departments. An aspect of the nonmajor concept is the limited ability to measure or quantify administrative effort provided to a specific project/activity
technical goals and objectives.
Final version 11/12/08; posted to www f udel .edu/research 12/08.
Representative List of Acceptable Direct and Indirect Costs
Direct Costs
Salaries, Wages, Fringe Benefits
Examples:
Principal Investigator, Faculty
Research Assistant, Scientist
Technician, Scheduling Coordinator
Post Docs, Graduate Students
Animals and Animal Care
Auto Rental
Subcontracts/Consultants
Equipment meeting federal threshold
Freight/Other Transportation
Page charges/Reprints/Reference
materials
Lab Supplies & Materials
Computer Software
Chemicals
Radioisotopes
Test Tubes
1 elephone Charges for collaborative work
on the project
Indirect Costs
Non Programmatic Administrative and
Clerical Salaries, Wages, and Fringe
Benefits, Examples:
Fiscal officer, Accountant
Secretary, Staff Assistant
Department Administrator
Computer Hardware *
Dues & Memberships
Meals & Refreshments/Alcohol*
Printing*
UPS, FedEx, USPS*
Subscriptions
Office Supplies*
Pens, Pencils
Paper, Staples
File folders, Binders
Telephone Charges*
Basic monthly line charge fee
Local/Long distance calls
Cell Phones
Service/Recharge centers
Rental of space or equipment
Trainee Costs for Training Grants Only
Stipends, Tuition, Tiavel
Travel
Transportation
Meals/Lodging
Foreign Travel (sponsor approval may be required first}
Patient Care Costs
Explicitly Unallowable Costs on Federally Sponsored Projects:
Goods or Services for Personal Use, Memberships, Public Relations Costs, Alumni
Activities, Bad Debt, Commencement Costs, Entertainment, Fines and Penalties,
Fundraising, Lobbying, Losses on other sponsored agreements, Marketing, Student
Activity Costs
*Costs may be considered direct if they qualify for an unlike circumstance.
These costs must be clearly identified in the budget justification.