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Policy Contact: Office of Finance and Budget/Grants and Contracts Administration

1. Purpose

   This policy has been developed to meet the requirements of Cost Principles defined by the Office of Management and Budget (OMB) Uniform Guidance at 2 CFR 200 Subpart E and to assist Principal Investigators/Project Directors (PIs/PDs) as well as department heads, support staff, and Grants and Contracts Administration (GCA) staff to ensure that direct costs are properly charged to Sponsored Projects.

2. Definitions
    
   1. Allocable Costs: Costs necessary for the overall project that are incurred to advance the work under the Sponsored Project, or to benefit a Sponsored Project, in a proportion that can be approximated using reasonable methods or other equitable relationships.
      1. Any cost allocable to a particular Sponsored Project under the principles provided for in this part may not be charged to other Sponsored Projects to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Sponsored Projects, or for other reasons. However, this prohibition would not preclude the University entity from shifting costs that are allowable under two or more Sponsored Projects in accordance with existing Federal statutes, regulations, or the terms and conditions of the Sponsored Projects.
      2. Allocations of direct costs between two or more projects are possible if a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost. The cost must 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 documented basis.
          
   2. Allowable Costs: Costs that are reasonable, allocable, given consistent treatment in like circumstances, and that conform to the limitations of federal regulations, sponsored agreements terms and conditions, and University policies.
       
   3. Direct Costs: Costs that can be identified specifically with a particular final cost objective, such as a 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. These costs include salary and fringe, travel, supplies, publication costs, special purpose equipment, and other costs necessary to conduct the Sponsored Project.
       
   4. Facilities & Administrative (F&A) Costs: University operating costs incurred for common or joint objectives, which cannot be easily allocated to a particular Sponsored Project, an instructional activity, or any other institutional activity, but which provide an overall benefit to the University and sponsored agreement. These costs include Facilities (depreciation on labs, offices, equipment, interest, library and operation and maintenance), Administrative (Purchasing, HR, Accounting, Pre-Award services and Post-Award project management), and departmental office expenses (local telephone costs, general office supplies and postage), etc.
       
   5. Reasonable Costs: If a cost, in its nature and amount, is consistent with what a prudent person would incur under the circumstances prevailing at the time the decision was made to incur the cost.
      1. The reasonableness of a cost’s nature requires considering:
         1. Whether the cost is a type generally recognized as ordinary and necessary for operating a University;
         2. Whether the cost is a type generally recognized as ordinary and necessary for the proper and efficient performance of the Sponsored Project;
         3. The application of federal, state, local, tribal, and other applicable laws and regulations;
         4. The terms and conditions of the Federal award; and
         5. Sound business practices and whether arm’s length bargaining occurred.
      2. The reasonableness of a cost’s amount requires considering:
         1. Market prices for comparable goods/services in the geographic area; and
         2. Whether the price may unjustifiably increase the Sponsored Project’s cost.
      3. Should the cost be associated with a service provided by University Service/ Recharge Centers, the proper Billing Rate for the service constitutes the reasonable cost for the service, pursuant to applicable federal regulation and University Policy 5:8.
          
   6. Sponsored Project: an activity funded by a non-University entity requiring the University, by written agreement, to conduct certain work under a set plan, a set schedule, and a set budget, typically for the purpose of supporting research, instruction or public service through tangible or intangible deliverables that are the ultimate result of the Project.
       
3. Policy
    
   1. All costs on Sponsored Projects must be allowable, allocable and reasonable in addition to being verified by someone in the position to know the appropriateness of the charge.
      1. Sponsored Project PIs/PDs are responsible for ensuring that all direct costs charged to a Sponsored Project are allowable, allocable, reasonable, and consistently treated for carrying out the objectives of the Sponsored Project. All three tests (reasonable, allocable and allowable) must be met before charging a given expense to a Sponsored Project, unless otherwise authorized by statutes or terms of the award or sponsor.
          
   2. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or F&A costs. Cost may not be assigned to a Sponsored Project as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Sponsored Project as an F&A cost.
       
   3. Grants and Contracts Administration (GCA) is responsible for assisting in the interpretation of regulations, sponsoring policies, and reviewing expenses charged to a Sponsored Project for allowability in accordance with Uniform Guidance, sponsors’ terms and conditions, University policies, and the award.
       
   4. The Uniform Guidance Cost Principles include Selected Items of Cost that should be considered in the budget preparation process and post-award management of Sponsored Projects. The following categories describe the normal treatment of costs and do not claim absolute allowability for cost items, as specific situations such as “unlike circumstances,” may warrant exceptions to the treatment of costs. Before approving a cost, individuals should check the award terms and conditions and University policy to ensure that expenses are allowable.
      1. Administrative and Clerical (Non-Integral) Staff Salaries
         1. These expenses should normally be treated as F&A costs.
         2. Direct charging of these costs may be appropriate only if all of the following conditions are met:
            1. The administrative or clerical services are integral to the project or activity, and the nature of the work being performed under a particular project requires an extensive amount (more than routine) of administrative or clerical support;
            2. The individual(s) involved can be specifically identified with the project or activity, and the special circumstances requiring direct charging of the services would need to be justified and documented;
            3. Such costs are explicitly included in the budget or have the prior written approval of the sponsor; and
            4. The costs are not also recovered as F&A costs.
      2. Administrative Expenses
         1. These include office supplies, routine postage, and local telephone costs and are normally treated as F&A costs.
      3. Advertising Costs
         1. These include the costs of advertising media—magazines, newspapers, radio, TV, direct mail, e-mail, social media—and associated administrative costs.
         2. The only allowable advertising costs are those solely for the recruitment of personnel, procurement of goods and services, program outreach, or other specific purposes, all of which must be necessary for the performance of a Sponsored Project.
      4. Compensation-Personal Services (Effort)
         1. These include salaries/wages and related fringe benefits of faculty and staff who are an integral part of the activity or project.
         2. These expenses are allowable as direct costs.
         3. Charges for work performed on Sponsored Projects by faculty members during the academic year are allowable at the IBS (Institutional Base Salary) rate. In no event will charges to Sponsored Projects, irrespective of the basis of computation, exceed the proportionate share of the IBS for that period. For periods outside the academic year, charges for work performed by faculty members on Federal awards during periods not included in the base salary period will be at a rate not in excess of the IBS.
         4. Unallowable costs cannot be made allowable direct costs by categorizing them as personnel compensation.
      5. Computer Port Charges
         1. These expenses are allowable as direct costs, but the cost should be in the budget and justified.
      6. Conferences
         1. These expenses are defined as meetings, retreats, seminars, symposiums, workshops, or events whose primary purpose is the dissemination of technical information beyond the University and is necessary and reasonable for performance under the Sponsored Project. These costs include facility rental fees, speaker fees, costs of meals and refreshments, local transportation, and other incidental items unless further restricted by the terms of the Sponsored Project.
         2. These expenses are allowable as a direct cost.
         3. Conference costs when hosted by the University need to be appropriate, necessary, and minimized to the Sponsored Project.
      7. Contributions and Donations
         1. These include cash, property, and services provided to other entities under the auspices of the Sponsored Project.
         2. These expenses are unallowable as direct costs on a Sponsored Project.
      8. Entertainment Costs
         1. Examples include amusement, diversion, and social activities.
         2. These expenses are unallowable except when they have a programmatic purpose and have prior written sponsor approval.
      9. Equipment and Other Capital Expenditures
         1. Special purpose equipment, which is used only for research, medical, scientific, or other technical activities, is allowable as a direct cost with such equipment having a per unit cost of $5,000 or more requiring prior written approval.
         2. General purpose equipment, which includes office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles, is not allowable as a direct cost except with the prior written approval of the agency.
         3. Capital expenditures that materially increase the value or useful life of land, buildings, or equipment are unallowable as a direct cost except with the prior written approval of the agency.
      10. Hospitality Charges
          1. These include charges in excess of per diem.
          2. These expenses are not normally allowable on a Sponsored Project and can only be charged to a Sponsored Project with prior written sponsor approval.
      11. Maintenance and Repair Costs
          1. These expenses are allowable as direct costs as necessary to carry out the technical and scientific aspects and actual use of the performance of a Sponsored Project, to the extent they are not paid through rental or other agreements.
      12. Materials and Supplies Costs, Including Costs of Computing Devices
          1. Materials, supplies, and fabricated parts that are necessary to carry out a Sponsored Project are allowable as direct costs.
          2. Purchased materials and supplies must be charged at their actual prices, net of applicable credits. Materials and supplies obtained from general stores or stockrooms should be charged at their actual net costs. Incoming transportation and delivery charges are a proper part of materials and supplies costs.
          3. In the specific case of computing devices (under $5,000), charging as direct costs is allowable for devices that are essential and allocable, but not solely dedicated to the performance of the Sponsored Project. Direct charging may not occur if the project has reasonable access to other devices or equipment that can achieve the same purpose, and devices may not be purchased for reasons of convenience or preference.
      13. Memberships and Subscriptions
          1. Memberships and subscriptions in technical or professional organizations or technical periodicals related to and supporting a project are allowable as direct costs, so long as they conform to University Policy 5:2 and the professional organization does not have lobbying as its primary purpose.
      14. Participant Support Costs
          1. These expenses are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to on or behalf of participants or trainees (but not University employees) in connection with conferences or training projects.
          2. Participant support costs are allowable only with prior written approval of the sponsor.
      15. Pre-award Costs
          1. These expenses are allowable only to the extent that they would have been allowable if incurred after the date of the Sponsored Project and only with the prior written approval of the sponsor.
      16. Proposal Preparation Costs
          1. These expenses are the costs of preparing bids, proposals, or applications on potential Sponsored Projects and proposals, including the development of data necessary to support them.
          2. These expenses normally should be treated as F&A costs.
      17. Publication and Printing Costs
          1. These expenses can be charged as direct costs as long as they can be identified with a particular cost objective.
          2. Publication and printing costs incurred after the period of performance, but prior to close-out, are allowable assuming there is an available balance.
      18. Travel Costs
          1. Examples include expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the University.
          2. These expenses are allowable as direct costs. Documentation must justify that participation of the individual is necessary to the Sponsored Project and costs are reasonable and consistent with University Policy 5:15.
      19. Visa Employment Fees
          1. These fees are not allowable as direct costs on sponsored agreements without prior written approval of the sponsor.
4. Procedures
    
   1. For Sponsored Projects, the PIs/PDs need to sign the invoices or Journal Vouchers (JVs) indicating their approval of the direct costs onto a Sponsored Project. Signing authority is allowed to be delegated to someone who has firsthand knowledge of the transaction and the Sponsored Project through completion of a Grants Delegation of Authority Form.
       
   2. To direct charge a cost on a Sponsored Project for unlike circumstances, or for special or unusual costs that could generally be disallowed on the basis of unreasonableness or nonallocability, the cost needs to be specifically identified to the work conducted under the Sponsored Project and appropriately justified and documented. Prior written approval of the sponsor may be required.

5. Responsible Administrator

   The Director of Grants and Contracts Administration, successor, or designee is responsible for annual and ad hoc review of this policy and its procedures. The University President is responsible for policy approval of this policy.

Approved by President on 11/16/2018.

Sources: ; University Policy 5:8

Forms: