Direct / Indirect CostsIntroductionThis procedural statement governs the consistent treatment of the allocation of direct costs and indirect (F&A) costs charged to Federal and non-Federal grants, contracts, and other sponsored programs. The regulations for determining costs charged to federally sponsored programs at educational institutions are set forth in the U.S. Office of Management and Budget’s Uniform Guidance 2 CFR §200.400. This concept is reinforced and emphasized in the Cost Accounting Standards Board’s Cost Accounting Standards (CAS), particularly number 502. DefinitionsCAS 502 (48 CFR 9905.502-40) specifically says: All costs incurred for the same purpose, in like circumstances, are either direct costs only or indirect costs only with respect to final cost objectives. No final cost objective shall have allocated to it as an indirect cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included as a direct cost of that or any other final cost objective. Direct Costs are defined by 2 CFR 200.413(a) as: Those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Indirect (F&A) Costs are defined by 2 CFR 200.56 as: Costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. In 2 CFR 200.414(a) “Facilities’’ is defined as depreciation on buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. ‘‘Administration’’ is defined as general administration and general expenses such as the director’s office, accounting, personnel and all other types of expenditures not listed specifically under one of the subcategories of ‘‘Facilities’’. ApplicationFor any cost to be direct charged to a sponsored program, it must meet all the following criteria:
This is true for both federally funded and non-Federal awards, and whether or not they are costs for situations that are considered to be either like or unlike circumstances. The following costs are usually treated as F&A costs for sponsored projects. They may be treated as direct costs only under unlike circumstances.
Like circumstances applicable to Federal awardsCAS 502 requires that costs charged to Federal awards need to follow a university’s normal treatment of such costs across all units of the university, considered like circumstances. The following are examples of costs in like circumstances:
Unlike circumstances applicable to Federal awardsIn rare circumstances when certain criteria are met, CAS 502 contains an exception to the basic rules that allows for a cost that would normally be treated as an indirect cost to instead be direct charged to a federal award. An unlike circumstance may exist when an activity or the use of a cost item is substantively greater in amount or different in purpose than is typical. The criteria needed to justify such exceptions include:
On occasion, a Federal sponsor specifically requires a direct cost that would typically be considered an F&A cost. This would also be considered an unlike circumstance. In order to substantiate the exception, documentation must contain a description of the unique situation that creates the unlike circumstance. For example: the program is supporting a 3-month field program located at a remote camp that is several hours from a population center by air. Certain office supplies normally considered to be indirect (F&A) costs must be purchased by the program for use at the base camp as they are otherwise unavailable. The cost will also need to be adequately documented at the time of purchase. The following are examples to illustrate when a situation may or may not meet the criteria listed above.
Unlike circumstances applicable to non-Federal awardsNon-Federal programs at Rice University must follow the same policies and procedures Federal awards use for budgeting, justifying, expending, and documenting costs to their programs. |