According to Office of Management and Budget Circular A-21, direct costs are those costs that can be identified specifically with a particular sponsored project, an institutional activity or that can be directly assigned to such activities relatively easily and with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or facilities and administrative costs (formerly indirect costs). 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 should be treated as direct costs of all activities of the institution. Itemized direct costs are line items specified in the grant or contract. They can include direct salaries of persons working on the grant, applicable fringe benefits, travel directly associated with the project, supplies specifically used on the project, contractual services and equipment. The PI or his/her designee must sign all vouchers used to process direct costs. A designee must possess technical knowledge of the research being performed.
In order for a cost to be charged as a direct cost, it must be allowable. To be considered allowable, the cost must meet all of the following federally assigned criteria:
- It must be reasonable.
- It must be allocable to sponsored agreements under the principles and methods provided herein.
- It must be given consistent treatment through the application of generally accepted accounting principles appropriate to the circumstances.
- It must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to the types or amounts of cost items.
When faculty and staff contribute time to work on a grant, that time is to be charged as a “percent of effort”. This percent of effort should be reflective of the number of hours committed to the project and will translate into an equivalent percent of that person’s salary. In most cases, this percent of effort will have been determined during the proposal submission stage. A regular full-time employee who works 40 hours per week works 2,080 hours per year.
Labor Cost DistributionThe grants management module provides a mechanism by which the labor cost (personal expense) can be directly applied to a grant rather than having to come from the home department. The labor cost distribution set up is completed during the account establishment activities.
All personnel paid by GHS payroll and working on a grant will need a Labor Distribution template created to allocate contracted labor percentages directly to the grant from Payroll. The information you will need to provide for each employee template includes:
- The employee’s name, number, and core department number.
- The date the employee starts working on the grant: example 9/01/2014.
- The last day the employee is scheduled to work on the Grant: example 6/30/2015.
- The percentage of time the employee will work on each grant.
At any point in the project when a person’s effort changes or if the person has a change in their assignment, department, etc., it is the PI’s responsibility to notify OSP immediately in writing (by email is acceptable). The labor cost distribution will have to be updated so as to not incorrectly charge the grant and create unnecessary corrections. Each department must develop proper communication channels and address problem areas.
Annual, Holiday, and Sick Leave pay and other paid absences are included in salaries and wages and are claimed on grants, contracts and other agreements as part of the normal cost for salaries and wages.
NIH SalaryCertain sponsors (e.g., National Institutes of Health – NIH) impose a limit or “cap” on the annual rate of pay that may be charged. Under this circumstance, the percent effort will be modified to capture the dollar amount awarded.
Fringe BenefitsFringe Benefits Rates are estimated at a pooled rate and must be applied to all salaries included in a grant budget if the sponsor allows.
All Employees: 56.40%
The following four fringe benefit accounts are used for employee fringe activities which are included in the pooled fringe rate (FICA, retirement, insurance, etc.)
Treatment of Paid Absences
Vacation, holiday, sick leave pay and other paid absences are included in salaries and wages and are claimed on grants, contracts and other agreements as part of the normal cost for salaries and wages. Separate claims are not made for the cost of these paid absences.
Fringe Benefits include, FICA, Health, Life Insurance Unemployment (Stats & Federal), Pension, Workers Compensation, Dental, Tuition Assistances, Disability and Retirement.
Equipment means an article of nonexpendable tangible personal property having a useful life of more than one year, and an acquisition cost of $1,00 or more per unit.
TravelWhen program personnel employed on the project must engage in travel for sponsored project purposes, their expenses for transportation, lodging, subsistence and related items are allowable, unless restricted in the project award document. First class air accommodations are unallowable, except when customary standard airfare would:
- Require circuitous routing
- Require travel during unreasonable hours
- Require excessively prolonged travel
- Greatly increase the duration of the flight
- Result in increased costs that would offset transportation savings
- Result in accommodations not reasonably adequate for the medical needs of the traveler
The PI must document the relevant condition(s), which justify airfare costs in excess of the customary standard commercial airfare, e.g. use of first-class airfare, on a case-by-case basis.
Foreign travel requires prior approval by the sponsor. If approval is not obtained in advance, foreign travel expenses may be disallowed on the grant or contract account.
Local travel is reimbursable at the GHS established reimbursement rate. Travel between facilities is to be reimbursed per the GHS mileage chart.
Travel arrangements can be made via Egencia and charged directly to a grant. Travel reimbursement requests should be completed on the proper travel forms, coded to the grant and submitted to AP Check Request. Currently, the EEM system does not connect to the grants module.
Meetings and ConferencesFor federally sponsored programs, the costs of meetings and conferences are allowable when the primary purpose is the dissemination of technical information; however, some individual sponsors do not allow these costs. Be sure to review the project agreement, consult the sponsor or contact the Office of Sponsored Programs before incurring expenses. These expenses must be specified in the original proposal, even for federal sponsors. The following costs are generally allowed by most sponsors:
- Conference Facilities: Rental of facilities and necessary equipment is allowable.
- Supplies: The purchase of expendable materials and supplies necessary for the meeting is allowable.
- Conference Services: Costs of translation services and of recording and transcribing the proceedings, are allowable.
- Publication Costs: Costs of publishing the proceedings are allowable only if prior approval, in writing, has been given by the sponsor.
- Salaries: Salaries of professional personnel are allowable only in proportion to the time or effort devoted to the preparation and conduct of the conference and summarizing its results.
- Consultant Services and Speaker Fees: Reasonable fees and travel expenses are allowable.
- Meals and Coffee Breaks: When certain meals are an integral and necessary part of a conference (i.e., when there are time restrictions and business must be transacted during lunchtime and meals are ordered in) grant funds may be used for such meals. Meals at a local restaurant with the conference presenter are not considered working meals. Grant funds may also be used for furnishing a reasonable amount of coffee and soft drinks to conference participants and attendees during periodic coffee breaks. An agenda should be included with the direct purchase voucher.
Memberships, Dues, SubscriptionsProfessional personal memberships, dues and subscriptions are not normally charged to sponsored projects. If the sponsor specifically requires and/or mandates them, they may be charged as a direct cost.
Participant SupportParticipant support costs are direct costs for items such as stipends or subsistence allowances, travel allowances and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia or training projects. Participant support costs for students or other external participants (teachers, workshop attendees or students from other universities) may not be charged as a payroll cost.
No participant support allowance may be paid to persons receiving compensation, directly or indirectly, from other federal sources.
To help defray the costs of personal maintenance while participating in a conference or training activity, participants may be paid a stipend, per diem or subsistence allowance, based on the type and duration of the activity, as outlined in the pertinent program announcement and in the award instrument. Such allowances must be reasonable, in conformance with the usual policy of the grantee organization and limited to the days of attendance at the conference plus the actual travel time required to reach the conference location by the most direct route available. If meals or lodging are provided without charge or at a nominal cost (e.g., as part of the registration fee), the per diem or subsistence allowance will be correspondingly reduced.
Payments made directly to or for the benefit of the participant, which are substantiated, are not reportable to the Internal Revenue Service. Direct payments to or payments made on behalf of a nonresident alien are reportable to the Internal Revenue Service. Direct payments such as stipends or allowances paid without substantiation that exceed $600 annually are reportable to the Internal Revenue Service on Form 1099. Specific budget codes must be used for these costs.
Although local attendees may participate along with other attendees in conference meals and coffee breaks, grant funds may not be used to pay per diem or similar expenses for local participants in the conference. This applies even if they are serving as hosts or otherwise participating at meals that are primarily social occasions involving speakers or consultants. Costs of amusement, diversion, social activities and ceremonials, and related incidental costs such as bar charges and personal telephone calls of participants or guests, are unallowable.
EquipmentScientific/Technical (special purpose) equipment that is actually used for the performance of the sponsored agreement is allowable. It should be listed in the project budget prior to processing. The federal definition of equipment, adopted by GHS, is “an article of non-expendable tangible personal property having a useful life of more than one year and an acquisition cost of $5,000 or more.” Some sponsors require prior approval for equipment purchases.
Expenditures for special purpose equipment are allowable as direct costs, provided the acquisition of items with a unit cost of $5,000 or more, is:
- Necessary for the research supported by the grant
- Not reasonably available and accessible
- Of the type normally charged as a direct cost to sponsored agreements
- Purchased in accordance with institutional policies and procedures
All equipment should be ordered well in advance of the end date to ensure that the purchase is necessary for the performance of the research supported by the project. If equipment is ordered during the last ninety days of the project, the principal investigator should include a justification on the requisition. If for any reason equipment that has been ordered in good faith will not be received until after a project has terminated or will be received too late in the project for effective use, all reasonable effort must be made to cancel the order or to charge the equipment to other funds.
General office equipment, used in an office for routine activities, such as fax machines, copiers, modems and computers/upgrades are not allowable.
- BIPAS Patient Charges cannot be directly coded to a grant. OSP should be contacted for the account number to be used to transfer charges out of BIPAS so they are ready to be moved onto a grant.
- Procurement Cards may be obtained so those costs may be directly coded to a grant. Contact OSP for more information about grant associated procurement cards.
- Publication Costs are allowable and may be charged to a grant.
- Computers to be charged to a grant require prior approval by the sponsor and a significant justification as to their allocability to the particular grant.
- Supplies are defined as tangible property other than equipment having acquisition cost less than $5,000 per unit and a useful life of less than one year. Supplies are considered necessary to carry project objectives and are allowable as prescribed in the governing cost principles.
- Special purpose software used only for research, medical, scientific or other technical activities is allowable. Examples include molecular simulation software, data acquisition software, chemical structure software, graphics software, technical drawing software.
- Special purpose supplies used only for research, medical, scientific or other technical activities are allowable. Examples include fuses, chemicals, thermocouples, lab notebooks and glassware.
- General office supplies are not normally charged to sponsored projects and are considered unallowable. Examples of general supplies used in an office for routine activities include copy paper, printer toner cartridges, pens, labels, file folders, calculators, telephones, answering machines, file cabinets and bookcases.
- General software used in an office for routine activities is not normally charged to sponsored projects and is considered unallowable. Examples include word processing packages, spreadsheets and general databases.
- Costs of legal, accounting, consulting services and related costs incurred in connection with the organization, defense of antitrust suits and the prosecution of claims against the government are unallowable. Costs of legal, accounting, consulting services and related costs incurred in connection with patent infringement litigation are unallowable unless otherwise provided for in the grant. Consultant costs should be itemized in the proposal budget. Costs of qualified professional consultants who are not officers or employees of GHS are allowable when reasonable in relation to the services rendered. The employment of consultants must follow written organizational procedures that comply with governing federal cost principles, the expense must be within the limits of the grant funds and reallocations must comply with the grantee’s policies. Some federal agencies restrict the amount that consultants may be paid on federally funded projects to the daily equivalent of an ES-4 federal employee. The compensation limitation to the level of an ES-4 is the limit for personal compensation exclusive of facilities and administrative costs, travel, per diem, clerical services, vacation, fringe benefits and supplies which may be allowed as appropriate. Consultant travel should follow federal guidelines as previously explained under Travel. Contact Grants and Contracts Administration before committing to a consultant or incurring expenses.
- Subrecipient costs: Subawards are issued to a third party when the project requires expertise and/or facilities not available at GHS. The subaward organization must be identified in the approved proposal budget. In determining whether subcontract costs in a particular case are allowable, no single factor or any special combination of factors is necessarily determinative. Subaward agreements are issued by OSP once the prime award is fully executed.
- Facilities and administrative costs are defined as those costs that are incurred for common or joint objectives of GHS and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity or any other institutional activity. These costs are comprised of a number of components. Facilities include depreciation and use allowances, interest on debt associated with certain buildings, equipment and capital improvements, operation and maintenance expenses, and library expenses. Administration includes general administration and general expenses, departmental administration and sponsored projects administration.