COSTING POLICY
SPENDING GUIDANCE FOR SPONSORED PROJECTS
Scope and Purpose
As a recipient of federal
funding, Drexel University must comply with the regulatory standards of OMB Circular
A-21, Cost Principles for Educational Institutions
(A-21).
Recent
A-21 revisions mandate all universities to tighten costing practices for University accounts with expenses
supported by external funds. Expenses must be charged consistently and costs must be supported
with adequate documentation.
As a recipient of federal awards in excess of $25 million
annually, Drexel
University is also required to disclose its practices to the federal
government for charging costs (either direct or F&A/indirect) to sponsored and
non-sponsored accounts.
This policy defines and
establishes University practices
for charging direct and facilities and administrative (F&A or indirect) costs
to University accounts.
This policy also provides investigators and university staff with costing guidance
and promotes consistency in estimating and charging costs in order to assure responsible
stewardship of external funds and regulatory compliance.
Policy
Costs will be allowable and consistently charged as either direct or indirect expenses
in accordance with OMB Circular A-21 and the following guidelines. If a Principal Investigator (PI) or staff fails to comply with this policy, the University may suspend or withdraw
proposal submissions for the PI and may suspend work on a sponsored project. Non-compliance
may also lead to other disciplinary actions in accordance with University policies.
Specific
Requirements
Allowable Costs
Allowable costs are those which are (a) reasonable and necessary; (b) allocable to
sponsored projects under the principles and methods outlined in A-21; (c) given
consistent treatment through the application of those generally accepted accounting
principles appropriate to the circumstances; and (d) conform to any limitations
or exclusions set forth in A-21 or as specifically cited in the sponsored agreement.
Direct Costs
can be identified
specifically with a particular sponsored project or another institutional activity
and can be assigned to activities relatively easily with a high degree of accuracy.
(A-21, Section D1)
In general,
an expense may be charged to a project as a direct cost
if it meets the following criteria:
1.
The expense is budgeted as
a direct cost and accepted by the sponsor; and
2.
The expense conforms to A-21 definitions for institutional consistency of cost treatment
in like circumstances; and
3.
The expense meets the A-21
definitions for allowability, reasonableness and allocability to the project.
F&A (Indirect) Costs
are those
expenses incurred for common or joint objectives that cannot be readily and specifically
identified with a particular sponsored project. Costs that generally fall into this
category include memberships, subscriptions, general-purpose computers and office equipment, routine office supplies, local (basic) telephone charges,
postage, etc.
Direct Charging Normal Indirect Costs
In some cases, expenses normally
charged as indirect, may be charged directly to the sponsored project.
To meet the consistent treatment requirements, additional
documentation is
required to show the "unlike circumstances",
as defined in A-21. The requirements for “unlike circumstances” are as follows:
·
The project has a special need for the item or service that is beyond the level
of services normally provided.
·
The cost can be specifically identified to the work conducted under the project
and is appropriately documented.
·
The cost is specified in the proposed budget of the sponsored agreement and the
special circumstances requiring direct charging are justified in the grant/contract
proposal.
·
The sponsoring agency accepts the cost as part of the project's direct cost budget
and does not specifically disapprove the cost in the award or other notification
to the University.
·
For programs that do not require submission of a project
budget to the sponsoring agency (such as NIH modular grants), the cost must be justified
to, and be approved by Research Compliance and Administration.
·
If the cost
was not included in the approved budget of the sponsored agreement, it may be charged
directly to the agreement only where the University has rebudgeting authority under
Federal regulations or the terms of the sponsored agreement, and the charge is justified
and approved by the
ORCA
. The justification must be in writing and provide the same information that would
have been provided to the sponsoring agency or
ORCA
in the proposed project budget. The justification must also explain why the costs
were not in the original budget. Approval of these requests will be given where
the
ORCA
is satisfied that the sponsoring agency would have approved the costs had they been
in the original budget. These conditions also apply to rebudgeting under NIH modular
grants.
See Appendix A for specific requirements for directly charging administrative and
clerical salaries and fringe benefits to sponsored agreements.
Proportional Benefit Rule – Definition and Application
Under some circumstances, a
direct expense may benefit and may be specifically identifiable with two or more
sponsored projects or sponsored projects and other activities in proportions that can be reasonably determined. In those
cases, the cost should be allocated based on the proportional benefit to the project.
If a cost benefits two or more activities in proportions that cannot
be determined because of the interrelationship of the work involved, the costs may
be allocated or transferred (add link or reference to COSTING POLICY) to the benefited
activities on any reasonable basis that is consistent with these guidelines.
When the proportional benefit rule is used, the required close linkage of the cost
with a sponsored activity continues to apply. The criteria for allocation
of costs to two or more cost objects are as follows:
·
The cost in question should be specifically identifiable with the sponsored
projects and other activities with a high degree of accuracy; and
·
Credible documentation of this identification and the methodology used to
assign amounts to the cost objects must be maintained by the department and attached
as documentation to the University voucher used to charge the cost to the sponsored
project in the University accounting system.
For personnel costs
that directly benefit two or more sponsored projects, the proportional benefit rule is applied when the Principal
Investigator (PI) or his/her designee authorizes the distribution of staff salary
and associated fringe benefits across two or more sponsored projects.
This authorization should reflect the PI’s best judgment of the
proportional benefit of the salary and fringe benefit to each project.
The University’s effort reporting
system documents that the distribution of actual salary and wages reflects the appropriate
proportional distribution of compensation.
A-21 Section J.8.b (2) (c) requires "confirmation of activity allocable to each
sponsored agreement."
For non-personnel costs
that directly benefit two or more sponsored projects, the proportional benefit rule can be used for expenses
other than personnel that directly benefit two or more sponsored projects as long
as:
·
The cost in question qualifies as a direct cost under these guidelines; and
·
The cost pays for something that specifically benefits two or more sponsored
projects; and
·
A proportional distribution of the
cost can be reasonably devised.
Unallowable Costs
The charging of certain expenses to sponsored project is expressly prohibited by
A-21 Section J. Some of these costs are allowable under certain
circumstances. The specific provisions of A-21, Section J. should be consulted for
specific guidance. Unallowable costs include, but are not limited to, those incurred
for the following:
Unacceptable Direct Costing Practices
The following direct costing practices are unacceptable:
·
Assigning costs that are part of normal administrative support to sponsored projects.
(For example, charging salaries for normal departmental administration and faculty effort on proposal writing, etc.).
·
Rotation of charges among sponsored projects without establishing the direct benefit
to each sponsored project.
·
Assigning charges to the sponsored project with the largest remaining balance.
·
Assigning charges to sponsored projects on the basis of ability to pay (i.e. largest
budget).
·
Charging the budgeted amount in contrast to charging an amount based on actual usage.
·
Describing a cost as something other than what it is.
(For example, describing office supplies as lab supplies on an invoice to be recorded into the accounting
system.)
·
Charging cost exclusively to sponsored projects, when the expense supports other
non-sponsored activity. (For example, charging only sponsored projects for
department recharge activity when service is provided free of charge to non-sponsored
users.)
Appendix A
Guidance for Selected Cost Items
Administrative and Clerical Salaries
Administrative and clerical
salaries should normally be treated as indirect costs.
They may be charged directly only under exceptional circumstances.
Circular A-21, Section F.6.b. states:
“Direct charging of these
costs may be appropriate where a major project or activity explicitly budgets for
administrative or clerical services and individuals involved can be specifically
identified with the project or activity.
"Major project" is defined as a project that requires an extensive amount of administrative
or clerical support, which is significantly greater than the routine level of such
services provided by academic departments.”
Examples of major projects:
·
Large, complex programs, such as general clinical research centers, primate centers,
program projects, environmental research centers, engineering research centers,
and other grants and contracts that entail assembling and managing teams of investigators
from a number of institutions.
·
Projects that involve extensive data accumulation, analysis and entry, surveying,
tabulation, cataloging, searching literature, and reporting (such as epidemiological
studies, clinical trials, and retrospective clinical records studies).
·
Projects that require making travel and meeting arrangements for large numbers of
participants, such as conferences and seminars.
·
Projects whose principal focus is the preparation and production of manuals and
large reports, books and monographs (excluding routine progress and technical reports).
·
Projects that are geographically inaccessible to normal departmental administrative
services, such as research vessels, radio astronomy projects, and other research
field sites that are remote from campus.
·
Individual projects requiring project-specific database management, individualized
graphics or manuscript preparation, human or animal protocols, and multiple project-related
investigator coordination and communications.
These examples are not intended
to imply that direct charging of administrative salaries is always appropriate for
the situations illustrated in the examples.
Administrative and clerical salaries may be charged directly if they meet all of
the following conditions:
·
They fall within the special circumstances
described in Circular A-21, F.6.b.
·
The individuals have responsibilities specifically
related to the work of the project, the
effort is material, and the
effort devoted to the project is
documented in the University time and effort reporting system.
·
The title(s), percent of effort, and salary amount(s) for the clerical/ administrative
position(s) are included in the approved budget
of the sponsored agreement, and the special circumstances requiring direct charging
of the services are justified in writing
in the approved budget of the sponsored agreement.
·
The sponsoring agency accepts the cost as part of the project's
direct cost budget and does not specifically disapprove the cost in the award or
other notification to the University.
·
For programs that do not require submission of a project
budget to the sponsoring agency (such as NIH modular grants), the cost must be justified
to, and be approved by Research Compliance and Administration.
·
If the cost
was not included in the approved budget of the sponsored agreement, it may be charged
directly to the agreement only where the University has rebudgeting authority under
Federal regulations or the terms of the sponsored agreement, and the charge is justified
and approved by the
ORCA
. The justification must be in writing and provide the same information that would
have been provided to the sponsoring agency or
ORCA
in the proposed project budget. The justification must also explain why the costs
were not in the original budget. Approval of these requests will be given where
the
ORCA
is satisfied that the sponsoring agency would have approved the costs had they been
in the original budget. These conditions also apply to rebudgeting under NIH modular
grants.
For instance, the examples
would be appropriate when the costs of such activities are incurred in unlike circumstances;
i.e., the actual activities charged direct are not the same as the actual activities
normally included in the institution's
indirect (F&A) cost pools, or, if the same, the indirect activity costs are
immaterial in amount.
It would be inappropriate
to charge the cost of such activities directly to specific sponsored agreements
if, in similar circumstances, the costs of performing the same type of activity
for other sponsored agreements were included as allocable costs in the institution's F&A cost pools
Advertising
Advertising costs that can be charged to federally sponsored projects are those
solely for:
(1)
The recruitment of personnel required for performance of the sponsored agreement,
including participant enrollment for clinical trials.
(2) The procurement
of goods and services for performance of the sponsored agreement.
(3) The disposal of scrap or surplus materials acquired in performance of the sponsored agreement.
(4) Other specific
purposes necessary to meet the requirements of the sponsored agreement.
Any other advertising costs are not allowable to federally sponsored projects.
Compensation
The effort percentages in
the project proposal should normally be used for initially charging salary costs
to the project. However, adjustments should be made to the effort percentage and
salary charge if use of the proposed effort percentage is inappropriate because
of changes in an individual’s workload since submission of the proposal (i.e., the
award of more grants than anticipated). If a reduction of 25 percent or more from
the budgeted effort percentage occurs for a PI, co-PI or other key personnel, sponsoring
agency notification and approval are required. (Note: this reduction is 25 percent
of the budgeted effort percentage, not 25 percent of the individual’s total effort.
For example, a reduction from 40 percent to 30 percent would be a 25 percent reduction
of the budgeted effort percentage.) All direct effort on sponsored agreements must
be confirmed by effort reports and adjustments to the salary charges must be made
if actual effort as shown on the effort report differs materially from the charged
effort.
If a salary exceeds the NIH
salary cap, the salary
amount exceeding the cap is unallowable.
For example:
A P.I. earns $200,000 in annual salary and
spends 20% effort on a project.
Assume that the NIH salary cap is $183,500.
Only 20% of $183,500 = $36,700 may be charged to the grant, but the project effort
is valued at 20% of $200,000 = $40,000.
The difference is unallowable ($40,000-$36,700 = $3,300).
Consulting
External consulting costs are allowable when a consulting agreement exists and a
specific invoice documents the charges. Under normal circumstances, University employees
may not be considered consultants. In the unusual event
that the consultation is across departmental lines and the work performed is in
addition to the individual’s normal departmental responsibilities, the University
may approve these consulting charges to a sponsored project.
Each case will be considered on an individual basis.
Entertainment
Costs incurred for alcohol, social events, entertainment, and any items related
thereto, such as meals, lodging, rentals, transportation, and gratuities are unallowable.
Equipment
Consistent with University policy, equipment means an article of nonexpendable tangible
personal property, having a useful life of more than one year and an acquisition
cost of $5,000 or more per unit. The cost of the equipment includes the net
invoice price of the equipment, including the cost of any modifications, attachments,
or auxiliary apparatus necessary to make it usable for the purpose
for which it was acquired.
In accordance with A-21,
special-purpose equipment means equipment that is
used only for research, medical, scientific or other technical activities. NIH policy allows such equipment as direct charges, provided that the
acquisition of items having a unit cost of $25,000 or more is approved in advance
by the NIH.
Other sponsoring organizations may also have restrictions.
If the sponsored agreement does not specifically address equipment,
check with the sponsor regarding restrictions.
General-purpose
equipment means equipment, the use of which is not limited
only to the special purposes outlined previously. Examples include office
equipment and furnishings, printing equipment and computer equipment. Depreciation
on such
general-purpose items are included in the University F & A rate and are unallowable
as direct charges, except in the case of unlike circumstances. Direct
charging general-purpose equipment must meet the requirements listed under “Direct
Charging Normal Indirect Costs” on page 2.
Maintenance and Repairs
Necessary maintenance, repairs or upkeep of directly charged project-specific equipment that neither
adds to the permanent value of the property nor appreciably prolongs its intended
life but keeps it in efficient operating condition is allowable within the grant
period.
If a maintenance agreement cost or a repair cost benefits more than
one sponsored agreement or other activity, the cost must be allocated to the various
projects and activities based on the benefit directly received by each.
See
the proportional benefit rule for discussion of appropriate distribution methodology.
Meals
Working meals and/or recruiting meals are not allowable as a direct charge to federally
sponsored projects unless incurred in connection with travel, conferences, or subject
meals.
Membership Dues
Memberships often have broad benefit to multiple activities and
are specifically classified as indirect costs in A-21. Direct charges for memberships must meet the requirements listed under
“Direct Charging Normal Indirect Costs” on page 2.
General-Purpose Computers, Software and
Computer Supplies
General-purpose computers, computer supplies and office software, such as word processing
and spreadsheet programs, are considered indirect costs charged through the F&A
rate, unless special purpose and unlike circumstances is clearly documented (See
Attachment A). Specific-purpose computers, software and supplies may be directly
charged, if direct benefit to the project can be demonstrated.
Office Supplies, Telecommunications Charges,
Postage and Printing/Duplication
Office supplies, postage,
and local telephone line charges are normally treated as indirect costs. These costs
may be charged directly in unlike circumstances, such as projects that involve large
mail or telephone surveys. Direct charges for office supplies, telecommunication
charges, postage and duplication must meet the requirements listed under “Direct
Charging Normal Indirect Costs” on page 2.
Normal telecommunications charges, fax charges, modem costs, cellular phones and
other related costs, are indirect costs and included in the F&A rate within
the departmental administration component. They may only be charged as direct costs in unlike circumstances, such
as field work or project-related travel.
Long distance charges that
are specifically identifiable to a project may be directly charged.
Proposal Preparation Costs
Costs of preparing proposals and applications for acquiring sponsor funding, including
typing, copying, mailing, long distance telephone charges, etc., are indirect costs
included in the department administration component of the F&A rate.
Recharge Activities and Service Centers
Service centers are department or functional units that perform specific technical
services primarily for the benefit of the University. Service Centers include
"recharge centers" and "specialized service facilities", defined in Section J of
A-21. The Animal Facility is a specialized service facility. Cost
of services provided are allowable as direct costs to sponsored projects where such
costs are required under the scope of the project.
All usage must be accounted
for and services must be charged to all users based on actual
usage (units of service)
using uniform, non-discriminatory rates. The rates must be based on the
actual direct cost of providing the service. Rates must be approved by Sponsored
Project Finance and be revised on an annual basis upon review of actual direct
expenses and charges to users.
Remodeling/Leasehold Improvements
Special arrangements and alteration costs incurred specifically for the sponsored
project are allowable direct costs when the sponsor has approved the work in advance.
Travel
Travel is an allowable direct cost when directly attributable to specific work under
a sponsored project.
Costs of meetings and conferences are allowable when the primary purpose is the
dissemination of technical information and the cost is budgeted. Meals, transportation, facility rentals, and other items incidental
to such meetings and conferences are also allowable direct costs.
All travel costs charged
to sponsored projects must comply with Drexel travel policy.
Costs, including meals, must be itemized and supported by receipts.
Tuition and Medical Insurance
Tuition and medical insurance remission are allowable as part of a total compensation
package for students and post doctoral trainees/fellows working on sponsored projects,
and may be charged directly to sponsored projects if approved by the sponsor.
Tuition and medical insurance remissions are part of the total compensation package for the student.
Reference Links
Federal Office of Management and Budget
Circular A-21 - Cost Principles for Educational Institutions
NIH Grants Policy Statement
NSF Grant Policy Manual
Cost Sharing, Matching, and In-Kind Contributions on Sponsored Projects
Cost Transfers
Removing Uncollectible Costs Charged to Sponsored Projects
F&A Cost Rates