This document discusses federal regulations and guidance regarding direct and indirect costs that can be charged to sponsored projects and grants, including OMB Circular A-21 and 2 CFR 200 Uniform Guidance. It defines direct costs as those that can be specifically identified with a particular project or activity. Indirect costs, also called facilities and administrative (F&A) costs, include expenses like depreciation and general administrative support. The document outlines cost principles for determining whether costs are allowable, allocable, and reasonable and provides examples of direct and indirect expenses.

1. Sponsored ProjectsSponsored Projects
Grant AccountingGrant Accounting
Direct & Indirect CostDirect & Indirect Cost
Controller’s OfficeController’s Office
Sponsored Projects Shared ServicesSponsored Projects Shared Services
Financial Research ComplianceFinancial Research Compliance

2. Federal RegulationsFederal Regulations
OMB Circular A-21 –Cost principlesOMB Circular A-21 –Cost principles
for awards & funding appropriations prior to 12/26/14for awards & funding appropriations prior to 12/26/14
2 CFR Subpart E Cost principles 200.4002 CFR Subpart E Cost principles 200.400
for new awards & new funding appropriations as of 12/26/14for new awards & new funding appropriations as of 12/26/14
or greateror greater

3. OMB 2 CFR 200 UniformOMB 2 CFR 200 Uniform
GuidanceGuidance
Subpart E-Cost Principles 200.400Subpart E-Cost Principles 200.400
The Accounting practices of the non-Federal entityThe Accounting practices of the non-Federal entity
must be consistent with these cost principles, andmust be consistent with these cost principles, and
must provide for adequate documentation to supportmust provide for adequate documentation to support
cost charged to Federal awardscost charged to Federal awards

4. 2 CFR 200 Uniform Guidance2 CFR 200 Uniform Guidance
Subpart E- Cost PrinciplesSubpart E- Cost Principles
Uniform Guidance 2 CFR 200 Subpart E inUniform Guidance 2 CFR 200 Subpart E in
conjunctionconjunction withwith Appendix III & IV are the principlesAppendix III & IV are the principles
for determining costs both direct & indirect to grants,for determining costs both direct & indirect to grants,
contracts and other agreementscontracts and other agreements
Defines Direct versus Facilities & Administrative Costs (F&A)Defines Direct versus Facilities & Administrative Costs (F&A)
Defines costs that can be included in F&A rateDefines costs that can be included in F&A rate
Prescribes methods to distribute F&A costs to various functionsPrescribes methods to distribute F&A costs to various functions
of the universityof the university
Sets Standards for cost allowabilitySets Standards for cost allowability

5. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Direct CostDirect Cost
Direct costsDirect costs
Are those costs that can be identified specificallyAre those costs that can be identified specifically
with a particular final cost objective, such as awith a particular final cost objective, such as a
Federal award, or other internally or externallyFederal award, or other internally or externally
funded activity, or that can be directly assigned tofunded activity, or that can be directly assigned to
such activities relatively easily with a high degree ofsuch activities relatively easily with a high degree of
accuracy.accuracy.

6. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Direct CostDirect Cost
 AllowableAllowable
 AllocableAllocable
 ReasonableReasonable
 Consistent TreatmentConsistent Treatment

7. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Direct CostDirect Cost
AllowableAllowable
Conform to any limitations or exclusions set forthConform to any limitations or exclusions set forth
in these principles or in the Federal award as toin these principles or in the Federal award as to
types or amount of cost Items.types or amount of cost Items.

8. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Direct CostDirect Cost
AllocableAllocable
A cost is allocable to a particular Federal award orA cost is allocable to a particular Federal award or
other cost objective if the goods or servicesother cost objective if the goods or services
involved are chargeable or assignable to thatinvolved are chargeable or assignable to that
Federal award or cost objective in accordance withFederal award or cost objective in accordance with
relative benefits received.relative benefits received.

9. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Direct CostDirect Cost
ReasonableReasonable
A cost is reasonable if, in its natureA cost is reasonable if, in its nature
and amount, it does not exceed thatand amount, it does not exceed that
which would be incurred by a prudentwhich would be incurred by a prudent
person under the circumstances prevailing at theperson under the circumstances prevailing at the
time the decision was made to incur the cost.time the decision was made to incur the cost.

10. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Direct CostDirect Cost
Consistent treatmentConsistent treatment
A cost may not be assigned to a Federal award asA cost may not be assigned to a Federal award as
a direct cost if any other cost incurred for the samea direct cost if any other cost incurred for the same
purpose in like circumstances has been allocatedpurpose in like circumstances has been allocated
to the Federal award as an indirect cost.to the Federal award as an indirect cost.

11. Top Five Risk Areas of GrantTop Five Risk Areas of Grant
AccountingAccounting
 Inappropriately charging awards (salaries, travelInappropriately charging awards (salaries, travel
equipment, lab supplies, etc.)equipment, lab supplies, etc.)
 Direct vs. indirect chargingDirect vs. indirect charging
 Late cost transfersLate cost transfers
 charging awards based on availability of funds andcharging awards based on availability of funds and
not benefit receivednot benefit received
 Service center ratesService center rates

12. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples IndirectIndirect
(F&A)Cost(F&A)Cost
Indirect (F&A) costs must be classified within twoIndirect (F&A) costs must be classified within two
broad categories:broad categories:
FacilitiesFacilities
AdministrationAdministration

13. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples Indirect (F&A)CostIndirect (F&A)Cost
““FacilitiesFacilities’’ is defined as depreciation on buildings,’’ is defined as depreciation on buildings,
equipment and capital improvement, interest on debtequipment and capital improvement, interest on debt
associated with certain buildings, equipment andassociated with certain buildings, equipment and
capital improvements, and operations andcapital improvements, and operations and
maintenance expenses.maintenance expenses.

14. 2 CFR 200 Subpart E Cost2 CFR 200 Subpart E Cost
PrinciplesPrinciples IndirectIndirect
(F&A)Cost(F&A)Cost
““AdministrationAdministration ’’ is defined as general’’ is defined as general
administration and general expenses such as theadministration and general expenses such as the
director’s office, accounting & administrativedirector’s office, accounting & administrative
personnel, and associated supplies needed to performpersonnel, and associated supplies needed to perform
these duties.these duties.

15. Administration CostAdministration Cost
Example of Departmental Administrative (DA) costsExample of Departmental Administrative (DA) costs
 financial Analyst, administrative managerfinancial Analyst, administrative manager
 toner, photo copiertoner, photo copier
 paper, penspaper, pens
 postagepostage
 local telephone costslocal telephone costs
 membershipsmemberships
 and other costs which support the basic missionsand other costs which support the basic missions
of the University (Instruction, Research, Clinical,of the University (Instruction, Research, Clinical,
Other Sponsored Activities).Other Sponsored Activities).

16. 2 CFR 200 Uniform2 CFR 200 Uniform
GuidanceGuidance Subpart E -Subpart E -
Administration CostAdministration Cost
The salaries of administrative and clerical staff and
other administrative costs should normally be
treated as indirect (F&A) costs. Direct charging of
these costs may be appropriate only if all of the
following conditions are met:
 Administrative or clerical services are integral to a project or
activity
 Individuals involved can be specifically identified with the project
or activity
 Such costs are explicitly included in the budget or have the prior
written approval of the Federal awarding agency
 The costs are not also recovered as indirect costs

17. QuestionsQuestions