Charging of Direct and Facilities and Administrative (Indirect) Costs
July 1, 1998
As a recipient of federal awards, Creighton University is obligated to comply with rules and regulations promulgated by various federal offices. These offices include sponsoring agencies such as the National Institutes of Health and National Science Foundation and regulatory agencies such as the Office of Management and Budget (OMB). The OMB has adopted regulations from the Cost Accounting Standards Board (CASB) and applies them to educational institutions. This policy has been established to meet the compliance standards set forth in OMB Circular A-21, Cost Principles for Educational Institutions, and 48 Code of Federal Regulations Part 9905, Cost Accounting Standards for Educational Institutions. This policy establishes consistent practices for defining, charging, and coding direct and indirect costs to University accounts. These practices must be consistently applied in like circumstances for all accounts (federally sponsored accounts and all others). Those involved in charging costs to university accounts must understand and comply with this policy in order to meet federal costing standards and ensure that costs are allocated to accounts in a manner that is an accurate reflection of the expenses incurred.
The cost of a sponsored agreement is comprised of the allowable direct costs incident to its performance, plus the allocable portion of the allowable facilities and administrative (F & A) costs. Similar costs incurred in like circumstances must be consistently treated as either direct or F & A across all functions or activities of the institution, unless special/unlike circumstances exist. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution. Appendix I lists the University account codes and whether a particular account would normally be treated as a direct cost or F & A. This Appendix should be used to determine when it is appropriate to direct charge a cost to a sponsored agreement or any other institutional activity.
Appendix I also lists the University account codes that have been identified as unallowable. All unallowable costs must be charged to the appropriate account in Appendix I or to the appropriate fund and organization for that activity. In addition to those accounts listed in Appendix I, the following activities have been defined in A-21 as unallowable:
- Alumni Activities
- Commencement Costs
- Fund Raising Costs
- Lobbying Costs
- Public Relations Costs
- Selling/Marketing Costs
- Student Activity Costs
This policy should be known and understood by the following groups of individuals:
- Vice Presidents
- Department Chairs
- Department Administrators
- Principal Investigators
- Other Accounting/Finance Personnel
- Grants Administration Personnel
- Controller's Office Personnel
- Internal Audit Personnel
Direct Costs are charged to federally sponsored agreements, an instructional activity, or any other institutional activity when the costs can be specifically identified to the agreement, an instructional activity, or any other institutional activity with relative ease and with a high degree of accuracy. These costs meet the allowability criteria established in OMB Circular A-21 and are not expressly disallowed in the award budget. When the item of expense is of benefit to multiple projects and can be directly assigned with relative ease and with a high degree of accuracy, the portion that is directly charged is based upon the relative benefits received by that project.
Facilities and Administrative (F and A) Costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored agreement, an instructional activity, or any other institutional activity. F & A costs are broad categories of costs that include depreciation and use allowances, interest on certain forms of debt, operation and maintenance expenses, general administrative expenses, departmental administration expenses, sponsored projects administration and library expenses. These costs meet the allowability and allocability criteria established in OMB Circular A-21 and are not expressly disallowed in the award budget.
Special/Unlike Circumstances must be documented to allow the charging of costs differently from the specifications in Appendix I. Normally the documentation of a special/unlike circumstance will take place during the proposal submission stage. The Unlike Circumstance Documentation Form will be used to record the required information and will become a part of the grant files maintained by Grants Administration and the Controller's Office. All of the following conditions must be met and documented in defining a special/unlike circumstance that would allow the cost treatment to deviate from Appendix I:
1) The cost can be readily identified specifically with the project with a high degree of accuracy;
2) The cost is incurred for a different purpose or circumstance as defined below;
3) The cost is explicitly budgeted, with justification, and awarded, or the cost must be permitted within rebudgeting authority granted by the sponsor:
a) The cost is separately budgeted in the proposal budget;
b) The budget amount reflects a realistic estimate of the cost and, in the case of salary, the percent of effort;
c) A reasonable justification is given for the costs. An explanation of the unlike circumstance should be clearly outlined in the budget justification.
d) The sponsor approves the item in the award.
e) If the cost requires institutional and/or sponsor prior approval after the award is made, the approval must be secured before the cost is incurred.
Direct charging administrative and clerical salaries to projects may be appropriate in the following circumstances:
1.) Industrial/Commercial - Projects sponsored by these organizations are proposed and awarded for the benefit of the sponsor and/or the University. Due to the nature of these projects (fixed price agreements, proposals not always requiring budgets, etc.) conditions 3a through 3e above may not always be met. In those cases it will be necessary to fill out the Unlike Circumstance Documentation Form with as much information as possible.
2.) Foundations and Not-for-profit agencies and associations - Projects sponsored by these organizations are proposed and awarded for the benefit of the sponsor and/or the University. The guidelines of these organizations may specify the costs to be charged to a project. Examples include the research projects funded through Health Future Foundation.
3.) State Sponsored Agreements - The University complies with State agency regulations and statutory requirements. The State sponsored Cancer and Smoking Disease Research Program is included in this category.
4.) Training Grants - Training grants are for a different purpose (training) than a traditional research project. Training grants usually identify a line item budget for 'institutional allowance' which authorizes direct charging of normally treated indirect costs as appropriate if they are reasonable, specifically identified with the project, and budgeted in the award.
5) Geographically Inaccessible Projects - Projects that are geographically inaccessible to normal departmental administrative services (the project takes place in a site remote from Omaha).
6.) Projects that require travel and meeting arrangements such as, but not limited to conferences, continuing education, workshops and seminars for large numbers of participants.
7.) Projects involving large, complex programs. Large, complex programs where size, nature and complexity of the activity go well beyond the normal departmental support or there is a functional difference in work by individuals in the same job class. Examples include program project grants, center grants, grant for the Experimental Programs to Stimulate Competitive Research (EPSCoR), and other sponsored agreements and contracts that entail assembling and managing teams of investigators.
8.) Projects which involve extensive data management. Projects which involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, reporting, etc.
9.) Projects involving extensive reports - Projects whose principle focus includes the preparation and production of manuals, large reports, books and monographs (excluding routine progress and technical reports), software and multimedia material.
10.) Projects involving other specific requirements that could be considered a special circumstance.
Costs Other than Administrative and Clerical Salaraies that are normally treated as F & A may be charged direct if incurred for a different circumstance and purpose. The purpose and nature of the costs will be the determing factor. Examples include: postage if the projects requires large mailings; animal food or animal cages if the costs are required by the project and are not part of the animal care per diem rate; and telephone line charges if the project requires extensive telephone surveys to conduct the project.
Grants Administration and the Controller's Office must approve all special/unlike circumstances.
Unallowable Costs are identified in Circular A-21. These costs cannot be charged as a direct cost to federally sponsored projects, included in the development of the Indirect Cost Rate nor included in Service Center rates. The circular requires Creighton University to certify that unallowable costs are excluded from the University's rates. A charge may be allowable by Creighton University standards but unallowable for charging to the federal government either as a direct cost of a sponsored program or as part of the Indirect Cost Rate.
Allocability of Costs - If a direct cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit.