National Council of University Research Administrators
Cost Principles:
It Depends!
KEYS TO SUCCESS
NCURA Region IV
Spring Meeting
April 27 – 30, 2014
© 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Charlie Giese, Research Program Manager
University of Wisconsin-Madison
giese@biostat.wisc.edu
608.263.7848
Diane Hillebrand, CRA, Grant & Contract Officer
University of North Dakota-School of Medicine & Health Sciences
diane.hillebrand@med.und.edu
701.777.2808
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
OMB Circular A-21
Cost Principles
Allowable vs Unallowable
Omni Circular
Questions
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
OMB Circular A-21
Principles for determining costs applicable to
grants, contracts, and other agreements
with educational institutions
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Brief History
 Originally issued in 1958
 Significant changes made in 1996:
 Raised threshold for capitalizing equipment to $5,000
 Established use of Facilities & Administration (F&A) rate(s) in
effect at start of sponsored agreement over life of agreement
 Incorporated four Cost Accounting Standards (CAS)
 Required educational institutions to submit a Disclosure
Statement (DS-2) regarding cost accounting practices
 Omni Circular to take effect 12/26/2014
 Streamline eight Federal regulations into single policy guide
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Objective
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Establishes principles for determining costs applicable
to grants, contracts, and other agreements with
educational institutions.
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Principles deal with the subject of cost determination.
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Principles were designed to ensure that the Federal
Government pay for its fair share of total costs,
determined in accordance with generally accepted
accounting principles, except where restricted or
prohibited by law.
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Direct Costs
 Can be identified specifically with a particular
sponsored project, an instructional activity, or any
other institutional activity, or 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 direct cost of sponsored agreements, all costs
incurred for same purpose in like circumstances
must be treated as direct costs of all institutional
activities
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Indirect Costs
Costs incurred for common or joint
objectives and, therefore, cannot be
identified readily and specifically with a
particular sponsored project, instructional
activity, or any other institutional activity
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
OMB Circular A-21
Cost Principles
Allowable vs Unallowable
Omni Circular
Questions
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Cost Principles
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Costs are reimbursed by the Federal Government if the meet
the follow criteria
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Allowable
Allocable
Reasonable
Permissible
Necessary
Consistent
Cost that can not meet these requirements are considered
unallowable no matter the expense
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Allowable
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Allowability of costs is defined specifically in OMB
Circular A-21 Section J “General Provisions of the Cost
Principles”
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Must be reasonable
Cost must be Allocable to project
Consistently treated in like circumstances
Conforms to limitations or exclusions set forth by A-21
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Allocable
• Cost is incurred solely to advance the work of
the project
• Application of cost is in proportions that can be
approximated through reasonable methods.
• Cost is necessary to the objectives of the
institution and deemed assignable to the
project.
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Reasonable
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If the cost is generally recognized as necessary for the
operation of the project
Whether there are restraints imposed by factors such as
the terms of the agreement or applicable law
If individuals act prudently in similar circumstances in
acquisition of costs
The extent to which costs are constant with established
institutional policies and practices
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Permissible
• Costs must be permissible under the
applicable law(state, federal, etc.)
• Costs must be permissible under
terms/conditions set forth in the award or
referenced thereof
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Necessary
• For a cost to be necessary it must be
essential to achieve or complete a certain
result or results.
• Costs applied to the project MUST be
necessary to accomplish the scope of
work.
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Consistent
• Cost that are similar must be treated the
same in like circumstances and must be
done consistently
• Costs should be treated as either direct or
indirect, not both
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
OMB Circular A-21
Cost Principles
Allowable vs Unallowable
Omni Circular
Questions
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Allowable vs Unallowable
• OMB Circular A-21 Section J defines 54
specific categories of costs and assigns
them to the categories of allowable and
unallowable.
• Section J instructs grantees on the
acceptable treatment of allowable costs
as either direct costs or F&A costs.
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Allowable Costs
Section J instructs that an allowable cost may be:
– normally treated as a direct cost;
– normally treated as an F&A cost; or
– normally treated as an F&A cost, except in
“unlike” circumstances under which it may be
treated as a direct cost.
• Note that such “unlike” circumstances must
be documented during the institutional CAS
review and approval process.
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Unallowable Costs
Section J instructs that an institution is required to
separately track and account for all unallowable
costs to ensure that they are not charged to Federal
awards either as direct costs or as part of the
institution’s F&A cost rate calculations.
– Examples: Alcoholic Beverages, Alumni Activity,
Commencement Costs, Bad Debts, etc.
Costs that are named in Section J as
unallowable are unallowable in any
circumstance.
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Typically Treated as Indirect Costs
• Administrative and Clerical Salaries
• Telecommunications -- Local Telephone Service
• Including phone equipment such as telephones, cell phones,
pagers, fax machines, and line charges
• Postage
• Including U.S. Postal Service, Federal Express, UPS
• Dues and Memberships
• Office Supplies
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Typically Treated as Indirect Costs continued
• Subscriptions, Books, and Periodicals
• General Purpose Equipment
• Non-research equipment which may be used for general office
purposes such as desktop computers, laptop computers,
printers, fax machines, copy machines, and office furniture.
• General computer services, networking costs, or other IT services
• Staff recruitment and relocation
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
OMB Circular A-21
Cost Principles
Allowable vs Unallowable
Omni Circular
Questions
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Omni Circular
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Also known as the Super Circular, Omni Guidance, or Uniformed
Administrative Requirements, Cost Principles, and Audit Requirements
for Federal Awards
Implementation set for December 26, 2014
Replaces A-21 and seven other OMB Circulars
Organized into the following Subparts:
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Subpart A — Acronyms and Definitions
Subpart B — General Provisions
Subpart C — Pre-Federal Award Requirements and
Federal Awards
Subpart D — Post Federal Award Requirements
Subpart E — Cost Principles
Subpart F — Audit Requirements
@ 2014 National Council of University Research Administrators
Contents of
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Section E
Differences between this section and the A-21 will
include the following:
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Direct cost allocation
Indirect Cost Rate Requirement
Compensation
Idle Facilities
Cost Accounting Standards and Disclosure Statement
Materials and Supplies
Utility Cost Adjustment
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Omni Circular Differences
• Direct Cost Allocation
– Administrative cost may be charged directly when specifically allocated
to one award
• Indirect Costs Rates
– Federal agencies will be required to accept a negotiated indirect cost
rate
– de minimis Rate for non federal entities
• Compensation
– Provides alternative accounting methods for salaries
• Idle Facilities
– Allows for these costs when necessary
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Omni Circular Differences continued
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Cost accounting Standards and Disclosure Statement
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Materials and Supplies
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New threshold at $50 million
Computers can now be allowable
Utility Cost Adjustment
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Recovery of utility costs associated with research
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Review Goals and Objectives
Questions
@ 2014 National Council of University Research Administrators
NCURA Region IV Spring Meeting
April 27 – 30, 2014
Charlie Giese, Research Program Manager
University of Wisconsin-Madison
giese@biostat.wisc.edu
608.263.7848
Diane Hillebrand, CRA, Grant & Contract Officer
University of North Dakota-School of Medicine & Health Sciences
diane.hillebrand@med.und.edu
701.777.2808
@ 2014 National Council of University Research Administrators