DIRECT AND INDIRECT COSTS OF SPONSORED AGREEMENTS
Federal regulations (OMB Circular A-21 and the Federal Cost Accounting Standards) require that the same type of costs be treated consistently as direct or indirect costs.
This policy applies to all Federal and non-federal sponsored agreements (grants, contracts, and other agreements). However, costs normally treated as indirect, such as administrative/clerical salaries, may be charged directly to non-federal sponsored agreements if permitted by the sponsor.
III. Effective Date
This policy is effective on June 1, 2000. The policy applies to all costs incurred on or after that date.
OMB Circular A-21 provides the following definitions of Direct and Indirect Costs (Facilities and Administrative Costs)
V. Consistent Treatment of 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 type of costs are not charged to Federally sponsored agreements both as direct costs and as indirect costs. This concept is reinforced and emphasized in a Cost Accounting Standard (referred to as "CAS 502") that educational institutions are required to follow.
Consistency, in this context, means that costs incurred for the same purpose, in like circumstances, must be treated uniformly as either directs costs or as indirect costs. Thus, since certain types of costs, such as the salaries of administrative/ clerical staff, office supplies, and postage are normally treated as indirect costs, the same types of costs cannot be charged directly to sponsored agreements, unless the circumstances related to a particular project are clearly different from the normal operations of the institution. For example, although postage is normally treated as an indirect cost, a particular project may have a special need for postage because of the mailing of hundreds of survey questionnaires. In this case, it would be appropriate to charge the project directly for the postage to mail the questionnaires, since this would constitute "unlike circumstances" compared to routine postage requirements.
VI. Direct Costs
The following types of costs should be directly charged to sponsored agreements where they can be specifically identified to the work performed under the agreements.
VII. Normal Indirect Costs
ADMINISTRATIVE/CLERICAL SALARIES AND FRINGE BENEFITS
2. Direct charging of administrative/clerical salaries may be appropriate where a major project explicitly budgets for administrative/clerical services and the individuals involved can be specifically identified to the project. Circular A-21 defines "major project" as a project that requires an extensive amount of administrative/clerical support which is significantly greater than the routine level of such services provided by academic departments.
3. Examples of "major project" where direct charging of administrative/clerical staff salaries may be appropriate are given in Exhibit C of OMB Circular A-21, as listed below. These examples are not exhaustive nor are they intended to imply that direct charging of administrative costs would always be appropriate for the situations illustrated in the examples.
4. "Major projects" do not have carte blanche approval for charging administrative costs. Administrative/clerical salaries may be charged directly to the agreement only if they meet all of the following conditions:
5. If an administrative/clerical salary meets the first two (2) conditions as listed in item 4 above but was not included in the approved budget of the sponsored agreement, the salary may be charged directly to the agreement only when a written rebudgeting request was submitted and approved by the sponsoring agency. The rebudgeting request must justify the unlike circumstance that requires the direct charge of administrative support and must explain why the salary was not in the original budget. The agency approval must also be in writing.
6. Address these questions in the written request for rebudgeting administrative/clerical salaries:
1. The following costs are normally indirect. They may be charged directly only under special circumstances:
2. These costs may be directly charged only where they meet all of the following requirements.
3. If the cost meets the first two (2) conditions listed in item 2 above but was not included in the approved budget of the sponsored agreement, it may be charged directly to the agreement only when a written justification is approved by the designated official of the academic unit and by Sponsored Projects Services. The justification must explain the unlike circumstance that requires the direct charge of administrative cost and why the cost was not in the original budget.
4. Examples of "unlike circumstances" where the costs may be directly charged to the agreement are:
5. Address these questions when justifying direct charge of other administrative costs:
VIII. Quality Control Assurance Program
Sponsored Projects Services will periodically review all administrative/clerical salaries charged to Federal agreements. Charges will be transferred to departmental funds if not supported by an approved budget and adequate budget justification. In cases where the administrative/clerical salaries are not included in the approved budget, charges will be transferred to departmental funds if not subsequently supported by an adequate justification and approval by the sponsoring agency.
Sponsored Projects Services will periodically select a judgment sample of transactions charged to Federal agreements for postage, memberships, local telephone, and office supplies, etc.. Charges will be transferred to departmental funds if not supported by an approved budget and adequate budget justification. In cases where the other normal indirect costs are not included in the approved budget, charges will be transferred to departmental funds if not subsequently supported by an adequate justification and approval by the designated official of the academic unit.
Sponsored Projects Services is a unit of the
Office of the Senior Vice President for Research
Express Mail Address:
Phone: (520) 626-6000
The University of Arizona