Policy statement and procedures
Adopted August 2008
The University will follow the restrictions and requirements of U.S. Office of Management and Budget (OMB)’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, known as Uniform Guidance and applicable federal regulations with respect to charging direct and administrative costs (F&A or indirect) to federally sponsored projects. All unallowable charges must be removed from the sponsored account.
As a recipient of federal awards, the University is obligated to comply with rules and regulations concerning the consistent treatment of direct costs and administrative (F&A or indirect) costs. The consistent treatment of expenditures, as direct or indirect costs, ensures that sponsors do not pay twice for the same type of costs. The OMB has adopted regulations from the Cost Accounting Standards Board (CASB) and applied them to educational institutions for direct and indirect charges.
The University follows guidelines provided in the Uniform Guidance and CASB's Cost Accounting Standards for Educational Institutions to identify and account for costs, both allowable and unallowable as well as direct and indirect. Uniform Guidance provides general standards to identify allowable costs that can be charged to a sponsored agreement. (See Procedures for more detailed information.)
Uniform Guidance also requires the University to identify unallowable costs and exclude them from any application, proposal, billing or claim related to a federally sponsored agreement. Instead, they must be charged to specific expense accounts in the University's accounting system so they can be easily distinguished from allowable costs charged to the sponsored agreement. Appendix A lists University expense accounts that must be excluded from any transactions under any federally funded agreement, while Appendix B lists and describes unallowable costs, as defined in 2 CFR §200.420-.475.
Finally, Uniform Guidance mandates that administrative costs be treated as facilities and administrative (F&A, formerly "indirect") costs and generally should not be charged directly to awards funded by the federal government. Uniform Guidance provides guidance as to when it may be appropriate to charge administrative costs directly to federally sponsored agreements. Special care should be exercised so that costs incurred for the same purpose in like circumstances are treated consistently as either direct costs or F&A costs.
All direct costs must be charged in a timely manner and be:
Any expense that does not meet all of the above requirements cannot be charged to the sponsored account.
Indirect Cost Information
Definition and Examples of Direct Charging
According to Uniform Guidance, consistency means that costs incurred for the same purpose, in "like circumstances," must be treated uniformly as either direct costs or as F&A costs. Certain types of costs (e.g., salaries of administrative and clerical staff, office supplies, postage, local telephone charges) are normally treated as F&A costs (indirect or overhead costs) and cannot be charged directly to sponsored projects unless "unlike circumstances" can be justified.
In accordance with the guidelines of Uniform Guidance, F&A costs will be considered for direct charging under the following circumstances:
Uniform Guidance lists the following circumstances under which such expenses may be charged directly:
The direct charging of office supplies, postage and/or telecommunications costs, substantially beyond that normally provided by the responsible administrative unit, may be approved under the following circumstances:
Notwithstanding the above guidelines, if the sponsor, the Finance Office, or University auditors disapprove the expense for any reason, then the cost must be removed from the sponsored account.
F&A or Indirect Cost Rate
The Finance Office will prepare and negotiate the F&A rate in conformance with OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, known as Uniform Guidance standards. The submission will be reviewed by federal auditors and negotiated by the University with representatives of the University's cognizant federal agency, the Department of Health and Human Services (DHHS). The current maximum Indirect Cost Rate Agreement with DHHS outlines the rate that must be incorporated into all budgets.
The University's current maximum on-campus negotiated rate is 44% (22% off-campus) of modified total direct costs, consisting of all salaries and wages, fringe benefits, materials, supplies, services, travel and subawards up to the first $25,000 of each subaward (regardless of the period covered by the subaward). Modified total direct costs shall exclude equipment, capital expenditures, charges for patient care, student tuition remission, rental costs of off-site facilities, scholarships, and fellowships as well as the portion of each subaward in excess of $25,000. Additionally, the following cost categories are exempt from the application of the F&A rate: adaptation of equipment for accessibility, interpretation, CART, note taking, support for GU student workers, fellowship stipends, and subawards to other institutions of higher education, or other accessibility related costs. The purpose of this waiver on those cost categories is to ensure that Gallaudet is applying for federal funds on a level playing field with other institutions that are applying for those same competitively awarded funds. The agreement expires on September 30, 2023.
The Office of Sponsored Programs (OSP) is the liaison between the principal investigator (PI) and the federal sponsor. All proposals will be in compliance with Uniform Guidance.
|Terms||Definition and Examples|
|Allocate||Allocate means to assign an item of cost, or a group of items of cost, to one or more sponsored agreements, functions (such as "research"), organizational subdivisions (such as "college") or other work unit (adapted from CAS 9905.502).
"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 cost objective in accordance with relative benefits received or other equitable relationship" (2 CFR 200.405).
Example: An educational institution normally allocates the cost of equipment required to conduct a project directly to the sponsored agreement.
|Allowable costs||"Costs that are (a) reasonable; (b) allocable to sponsored agreements under the principles and methods outlined in Uniform Guidance - Subpart E; (c) given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances; and (d) conform to any limitations or exclusions set forth in 2 CFR §200.408 or in the sponsored agreement as to types or amounts of cost items" (2 CFR §200.420).
Example: A piece of equipment required to conduct the study is an allowable cost to the project, but entertainment costs are not.
|Authorized budget||Each project has a budget approved by the sponsor and the University. This is a target document indicating intended categories of fund expenditures. Depending on the sponsor’s award provisions, it may be modified, as required, in the course of project performance. Some sponsors have restrictions as to the kinds and amounts of modifications that may be made in the budget.|
|Direct costs||"Those costs that can be identified specifically with a particular sponsored 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" (2 CFR §200.413).
Example: Travel is normally charged as a direct cost to a project.
|F&A (or indirect) cost rate||A composite rate applied to sponsored projects as a percentage of the sponsored project’s direct costs for the purpose of charging the sponsored project its share of the University’s F&A/indirect costs. In business and industry, this is known as "overhead." The federally negotiated F&A/indirect cost rates for research and other sponsored activities are developed by the University in accordance with 2 CFR §200.414and negotiated with the Department of Health and Human Services (DHHS), the University’s federal cognizant agency. The University’s current maximum on-campus negotiated rate is 44% (22% off-campus) of modified total direct costs ends September 30, 2023.
Example: The University’s F&A/indirect cost rate for an on-campus research project is 44% of salaries and wages, if allowable.
|Facilities and administration costs (F&A)||"Costs that are incurred for common or joint objectives and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity" (2 CFR §200.56).
In its 1996 revision of OMB A-21, the federal government replaced the term "indirect costs" with "facilities and administrative costs."
Examples: Building operation and maintenance expenses are F&A costs.
|Indirect costs||See "Facilities and administration costs."|
|Proposal routing form||An internal form used to route a proposal for sponsored funding through the process of administrative review and approval.|
|Reasonable costs||"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" ( 2 CFR 200.404).|
|Unallowable costs||"Unallowable cost means any cost which, under the provisions of any pertinent law, regulation, or sponsored agreement, cannot be included in prices, cost reimbursements, or settlements under a sponsored agreement to which it is allocable" (CAS 9905.505). These unallowable costs cannot be included in the budget.
Example: Entertainment costs on federally sponsored projects are unallowable costs.
|Principal investigator (PI)||
|Office of Sponsored Programs||
|Vice President of Administration and Finance||
Origination date: August 2008
Last amended date: May 2020
Next review date: