Procedures for Determining Costs Allowability on Sponsored Agreements and Identifying Direct and Indirect Costs on Federal Awards

Note: For all sponsored projects, always refer to the award's specific terms and conditions, which may include additional restrictions on cost allowability, or contact your SPA Representative

Salary, Wages, and Stipends

Definitions

Allowable Costs

2 CFR §200 Subpart E- Cost Principles identifies direct and indirect costs that may be charged to federal grants and contracts, otherwise known as sponsored agreements.  2 CFR §200 Subpart E also identifies those charges that cannot be charged to sponsored agreements and are considered unallowable expenses. 2 CFR §200 Subpart E offers the factors affecting the allowability of costs applied to federally sponsored agreements.

Allowable costs must be:

1. Reasonable - For a cost to be considered reasonable, it must be necessary for fulfillment of the agreement, acquired by means consistent with federal and state laws and regulations, and consistent with University policies and practices.
2. Allocable - A cost is allocable to a sponsored agreement if the goods/services involved are charged in accordance with the relative benefits received by that agreement. To be considered allocable, a cost must be incurred solely to advance the work under the sponsored agreement or benefit both the sponsored agreement and other work of the institution in proportions that can be approximated through use of reasonable cost allocation methods.
   
   Note: Any cost that is allocable to a particular sponsored agreement may not be moved (e.g., cost transfer) to another sponsored agreement in order to meet deficiencies caused by overruns or other funding considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.
3. Treated consistently throughout the University - similar costs normally cannot be treated as both direct and indirect costs.
4. Conform to any limitations or exclusions in the sponsored agreement.

Direct Costs

According to 2 CFR §200.413, direct costs are 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.

• compensation of employees for performance of services under the sponsored agreement including related benefit costs;
• costs of materials consumed or expended in the performance of the work;
• travel, including expenses for transportation, lodging, subsistence, and related items incurred by employees who are traveling on official business directly related to the sponsored project

Indirect/F&A Costs

Costs incurred for common or joint objectives which cannot be identified specifically with a particular sponsored project are treated as indirect costs. Examples include:

• utilities, maintenance and operation
• building and equipment use expenses
• administrative costs (see details below)
• library costs
• student service costs

Most sponsored agreements include a percentage of the direct cost to cover these charges known as the Facilities and Administrative Cost Rate (F&A). 

Administrative Costs

Federal regulations limit instances where administrative costs can be charged to grants and contracts. The following is a list of the types of expenses that are generally not allowable as a direct cost per the Federal government. An exception may be made if there is EXTENSIVE use of such expenses, the expenses have been properly justified/documented in the grant/contract proposal, and they have been approved as a direct cost by the appropriate federal agency.

The most common administrative costs are:

• Administrative and clerical salaries and wages
• Printing and copying costs
• Office supplies
• Postage and mail
• Telephone and internet expense