Transcript Direct Costing - Controller's Office

Direct and F&A
Costing
Date
Presenter Name
Presenter Phone Number
Presenter E-mail
Recent audit activity
• DHHS (NIH) OIG
audit of Brandeis
University
• Approximately 10%
of direct costs
charged are being
questioned
• http://oig.hhs.gov/
oas/reports/region
1/10601502.pdf
2
Goal for this class
• To maximize the costs that may be
directly charged to Federal
sponsored projects and be compliant
with OMB Circular A-21
3
Sources of guidance
• OMB Circular A-21
• UT Fiscal Policy 205 Sponsored
Grants & Contracts
– Sections 11-15 provide UT’s
interpretation of OMB Circular A-21
costing requirements
• See Appendix 2
• Award document provisions
4
Federal funding
• A-21 is applicable to Federal & Federal
flow-thru awards
– UT gets an award directly from a Federal
agency such as NSF (National Science
Foundation)
– UT gets an award from a Federal agency thru a
pass-thru organization
• For example, NASA awards Vanderbilt $1 million.
Vanderbilt subcontracts $250,000 to UT to perform
a portion of the work. The prime source of funding,
NASA, is usually mentioned in the award document.
All Federal rules, including A-21, are passed down to
UT.
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OMB Circular A-21
• Describes charging practices on Federal &
Federal flow-thru awards
– Only allowable costs may be charged
• Certain costs are never allowable
– Common sense clauses
• Charges must be reasonable & allocable
• Charging practices must be consistent
– Some costs are normally considered to be
direct costs & some are normally considered to
be F&A costs
• This prevents double charging the Federal
government for the same cost
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Direct or F&A costs?
(see Appendix 1 for list)
• Direct costs
– Salaries, staff
benefits, supplies,
long-distance phone
calls, travel,
equipment,
subcontracts
– Exception to “basic
support” costs
• Due to nature of
project technical
work
• F&A costs
– Facilities costs
• Bldgs, equip,
electricity, library
– Admin costs
• “Basic support” cost
– Clerical & admin
salaries, phone line
charges, office
supplies
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What expenses
does F&A recover?
• Facilities
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Buildings
Sidewalks
Electricity / fuel
Equipment
Library
Security
Custodial
• Administrative
– Dept clerical &
admin staff salaries
– Research office
– Basic office
supplies & expenses
– Portion of other
admin costs – Dept
Head, Dean, system
charge, etc.
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Exceptions
• Sometimes it is appropriate to
directly charge costs that are
normally considered to be included in
F&A
– Major projects as defined by Exhibit C
of A-21
• See slide # 10
– Unlike circumstances test
9
A-21 Exhibit C
• Examples of "major project" where direct
charging of administrative or clerical staff
salaries may be appropriate
– This is an important section to help you justify
direct charging some costs that are normally
considered to be F&A costs
– Example:
• Projects that require making travel and meeting
arrangements for large numbers of participants, such
as conferences and seminars
10
Major projects per A-21
11
Unlike circumstances test
• The “unlike circumstances” test is
used to determine if the cost may be
charged directly rather than in F&A
– The actual activities charged directly
are not the same as the activities
included in UT’s F&A rate
12
Direct cost justification form
• This form should
be submitted to
the campus / unit
research office
with the proposal
• This shows that UT
is trying to be
compliant
13
Research office approval
• The campus / unit research office will
review the Direct Cost Justification
form along with the proposal
– Approval by the research office and by
the sponsor in the award document
budget does not guarantee that the
costs will not be later disallowed during
audit
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Deciding factors
• The campus / unit research office is
looking for a justification on the form and
in the proposal that meets one of the
“major project” exceptions per A-21
Exhibit C and meets the “unlike
circumstances” test
– They will also look for consistency between the
justification written on the form and the
content of the proposal, including the proposal
budget, budget justification, and statement of
work
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Example #1
• Dr. Jones is proposing that a sponsor grant UT $100,000 for
a seminar. Included in the proposed direct costs are the
following charges that are generally considered to be F&A
costs:
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411000 Admin salaries 50% of secretary $15,000
421000 Benefits associated with secretary $4,200
433100 Printing $5,000
435100 Postage $1,000
439100 Operating supplies $2,000
• The costs fall under the “major projects” exception
– Projects that require making travel and meeting arrangements
for large numbers of participants, such as conferences and
seminars
• The costs meet the “unlike circumstances” test
– A PI’s normal duties would not require such a high level of
secretarial support and the other administrative and basic
support type of costs
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Example #2
• Dr. Jones has included $5,000 in his proposal
budget for a computer, $3,000 for specialized
photography software, and $5,000 for a digital
camera that he needs for the project.
– The computer he intends to buy is much more powerful
than is ordinarily needed for desktop computing. The
extra processing power and storage are needed to run
the special software and digital camera. The computer
will be located in a lab and will be used incidentally for
non-project related work, such as checking email.
• The costs meet the “unlike circumstances” test
– The computer and software needed for this project are
“unlike” normal desktop computers in that they must be
more powerful and specialized.
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Training classes
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1 Overview of Accounting for Sponsored Projects
2 OMB Circulars & Cost Accounting Standards
3 Understanding F&A Costs
4 Direct Costing
5 Cost Transfers & Closeout
6 Cost Sharing
7 Subcontract Monitoring
8 Advanced Topics
9 Invoicing, Reporting & Cash Receipts
10 Sponsored Projects Reports in IRIS
• Other – IRIS reporting for sponsored projects
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Appendix 1
Normal treatment of costs
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Appendix 2
UT Fiscal Policy
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Direct Costs and Facilities and Administrative Costs
University policy requires that grants and contracts bear the full cost of rendering the service. Full cost includes the
direct costs and recovery of facilities and administrative costs at the full rate that has been negotiated with and
approved by the federal audit agency for the particular campus or institute rendering the service. Obligations for cost
sharing should be limited to amounts that can be justified as appropriate to accomplish the stated objectives of the
university. Direct and facilities and administrative costs are defined as follows.
Direct Costs
When charging expenses to federally (includes federal flow-through) sponsored projects, university faculty and staff
must ensure the appropriateness of the charges. The guidelines below are designed to assist faculty and staff in
determining the appropriateness of certain charges on either federal awards to UT or awards that involve pass through
of federal funds. These are intended to clarify certain details of charges that are allowable as direct costs under the
restrictions included in Office of Management and Budget (OMB) Circular A-21. While the explicit language of the
Circular should be applied to clarify any situation arising regarding allowable charges, these guidelines may be referred to
in justifying charges included in proposals submitted for approval by the appropriate UT research office. These
guidelines are not intended to be exhaustive, but do include specific mention of cases that are known to arise and that
may not be immediately determinable from A-21.
–
Allocable. The cost must have a direct benefit and be directly attributable to the project or activity being
performed. For example, an investigator purchases a piece of equipment to conduct a sponsored project. This
equipment is allocable to that project and can be charged as a direct cost to the project. The investigator also
purchases office supplies for general office use. These office supplies are not directly attributable to a specific
project and are therefore not allocable and cannot be charged as a direct cost to the project.
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Allowable. The cost must be allowed by university policy, sponsor policies, and OMB Circular A-21. For example, an
investigator has three lab technicians working on a project and charges their salaries to the project. These are
allowable costs to the project and can be charged as direct costs. The investigator takes the three lab technicians
out to lunch during the project. This expense is an unallowable cost to the project and cannot be charged as a
direct cost. See a list of UNALLOWABLE COSTS on federal and federal flow-through sponsored projects. These
costs should never be proposed or charged on a federally-funded sponsored project even though they may be
allowable as a standard business practice under the university's fiscal policies. For more detailed information
about these unallowable costs, see OMB Circular A-21, Section J.
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Appendix 2
UT Fiscal Policy
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Reasonable and Necessary. The cost must be reasonable and necessary for the performance of the project. For
example, an investigator purchases lab supplies to complete the work on his project. These supplies are reasonable
and necessary to the performance of the project and can be charged as direct costs. The investigator also
purchases a new microscope that was on sale at the store. The microscope is not needed for the current project,
but may be needed for an upcoming project. This expense is not reasonable and necessary for the performance of
the current project and therefore cannot be charged as a direct cost.
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Consistently Treated. All costs incurred for the same purpose, in like circumstances, are either direct costs only
or Facilities and Administrative (F & A) costs only. The university cannot double-charge the government for similar
costs by directly charging a cost to a sponsored project and by including the same type of cost in the F & A rate
charged to the sponsored project. For example, a bookkeeper purchases stamps for the department. Investigator
A uses five stamps for various mailings related to his project and Investigator B uses eight stamps for various
mailings related to her project. If the cost of the stamps is included as a direct cost to Investigator A's or B's
sponsored project, and similar costs (stamps) incurred in like circumstances (general purpose) are included in the
university's F & A rate, the cost of stamps is not treated consistently.
Any expense that does not meet all of these criteria should not be directly charged to a federally sponsored
project. The fact that a cost requested in a budget is awarded as requested does not ensure a determination of
allowability. The university is responsible for presenting costs consistently and must not include costs associated
with its F&A rate as direct costs. See attached EXAMPLES of costs normally considered to be direct costs versus
F & A costs. Additional details to provide guidance to faculty and staff follow below.
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Appendix 2
UT Fiscal Policy
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Facilities and Administrative (F & A) Costs
Facilities and administrative costs are usually stated as a percentage of modified total direct costs for larger university
entities and as a percentage of salaries and wages for smaller entities. Modified total direct costs are the total of all
direct costs except for the following cost elements: student maintenance fees (4441XX), cost sharing (4444XX),
equipment (461XXX), and subcontracts exceeding $25,000 (4821XX), real estate rental (4413XX), and patient care
costs.
F&A costs include use allowances, operations and maintenance expenses, general and administrative expenses,
departmental administration expenses, sponsored projects administration, library expenses, and student administration
and services. Lease and rental expenses, along with utility charges and basic service changes (including phones, network
port charges, building maintenance fees, etc.) are allowable as direct expenses if the location of the activity is not owned
by the university.
•
Administrative costs such as salaries for clerical positions or items such as office supplies and postage are generally
viewed by the federal government as facilities and administrative (F & A) costs. Within limited circumstances,
administrative costs may be directly charged to a federally sponsored program. The rules for directly charging these
administrative costs are found in OMB Circular A-21 section F.6.b(2) and F.6.b(3), along with Exhibit C.
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OMB Circular A-21 F.6.b(2):"The salaries of administrative and clerical staff should normally be treated as F &
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OMB Circular A-21 F.6.b(3): "Items such as office supplies, postage, local telephone costs, and memberships
A costs. Direct charging of these costs may be appropriate where a major project or activity explicitly budgets
for administrative or clerical services and individuals involved can be specifically identified with the project or
activity. 'Major project' is defined as a project 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."
shall normally be treated as F & A costs."
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Appendix 2
UT Fiscal Policy
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OMB Circular A-21 Exhibit C:"Examples of "major projects" where direct charging of administrative or clerical
staff salaries may be appropriate.
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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.
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Projects which 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).
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Projects that require making travel and meeting arrangements for large numbers of participants, such as
conferences and seminars.
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Projects whose principal focus is the preparation and production of manuals and large reports, books and
monographs (excluding routine progress and technical reports).
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Projects that are geographically inaccessible to normal departmental administrative services, such as research
vessels, radio astronomy projects, and other research field sites that are remote from campus.
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Individual projects requiring project-specific database management; individualized graphics or manuscript
preparation; human or animal protocols; and multiple project-related investigator coordination and communications."
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Appendix 2
UT Fiscal Policy
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If a principal investigator wishes to charge any of the type of expenditures described in 14 above directly to a federally
sponsored program (or federal flow-through), the following criteria must be satisfied:
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The charges must be clearly spelled out in the initial budget submitted to the sponsoring federal agency.
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An explanation of why these charges should be made directly to the project should be provided, and the relationship of
the charges to the scope of the work of the project should be clearly identified in the proposal. The DIRECT CHARGE
JUSTIFICATION FORM must be completed and submitted with the proposal for approval by the campus or unit
research office.
•
For clerical and administrative salary costs, it is important to describe how the nature of the work performed differs
from general clerical services provided in the department and how this work is an integral part of achieving programmatic
goals of the project.
•
Some examples of projects considered to meet the criteria above, and thus allowing the direct charging of clerical and
administrative support include:
Instances where sponsored projects require the services of administrative and clerical staff, and may be budgeted on
federally sponsored projects as direct costs occur when:
•
•
•
•
the
the
the
the
services are required by the project scope;
cost can be accurately identified to the project;
approved project budget clearly describes the need for the services; and
expense is justified within "Unlike Circumstances" exception outlined in the OMB Circular A-21, Exhibit C.
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Appendix 2
UT Fiscal Policy
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Some specific examples include:
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Projects for which the scope of the project requires making travel and meeting arrangements for large numbers of
participants, such as conferences and seminars, then since administration of arrangements for such participants are
beyond the normal scope of activity of university units, such costs are allowable as a direct cost.
•
Projects which serve as a hub, prime contractor or fiscal agent, or are contracted to provide logistics for multiinstitutional activities. The scope may include arranging for contracts and agreements and providing business services for
other entities, or administering grant programs. Such projects may involve a large number of subcontracts, contracts and
purchase orders, which are beyond the scope of activity of the clerical staff or normal university units.
•
Projects which provide data services including data entry, database products and data verification and which require
administrative staff with detailed program knowledge in addition to high level clerical skills in order to maintain the data.
•
Computer purchases, and the purchase of computer peripherals (including attached storage devices and printers as well
as removable devices such as USB devices) are allowable as direct costs on a sponsored project if they are specifically
required for the completion of the project and funding for them is included in the initial budget submitted in the proposal
for the project. Thus computers required for data collection or storage, analysis, code development or research for a
project are allowable. General purpose computers, for example those used by faculty in carrying out the variety of
activities required of them in meeting their responsibilities for teaching, research, and service, are not allowable as
direct charges even if such computers will be utilized in part to carry out the activities of a sponsored project.
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Appendix 2
UT Fiscal Policy
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Unallowable Costs for Federal and Federal Flow-through Funded Grants and Contracts (per OMB Circular A-21)
These costs should never be proposed or charged to a federal or federal flow-through sponsored project. For more
detailed information about these unallowable costs, see OMB Circular A-21, Section J. Unallowable expenses include (but
are not limited to):
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1. Advertising (except some job recruiting) and public relations (except where directly related to the sponsored
project)
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2. Alcoholic beverages
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3. Alumni activities
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4. Bad debts
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5. Commencement or convocation costs
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6. Donations and contributions made to other organizations
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7. Entertainment costs
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8. Fines and penalties
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9. Fund raising
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10. Goods or services for personal use, including personal use of vehicles
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11. Housing and personal living expenses of current and past officers
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12. Interest expense
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13. Lobbying activities
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14. Losses or cost sharing on other sponsored agreements or contracts
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15. Memberships in civic or community organizations, country clubs, social or dining clubs
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16. Pre-agreement costs, unless specifically allowed
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17. Selling and marketing expenses (except some job recruiting and proposal expenses)
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18. Severance pay in excess of UT’s normal practices
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19. Student activity costs, including publications, clubs, etc.
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20. Airfare other than lowest available discount commercial airfare. UT’s travel policy FI0705, specifically limits
airfare to standard coach fare – no first-class or business fares are allowable.
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