Issued: September 20, 1996
Owner: Office of Sponsored Programs
Latest Revision: October, 31, 2005
CONSISTENT TREATMENT OF SPONSORED PROGRAMS COSTS
To ensure the consistent treatment of costs associated with sponsored projects as required by Office of Management and Budget (OMB) Circular A-21, “Cost Principles for Educational Institutions”. This policy applies to both federal and non-federal awards received. However, costs that are normally classified as Facilities and Administrative (F&A) (indirect) costs, such as administrative and clerical salaries, may be charged directly to nonfederal awards if permitted by the sponsor's policies or otherwise approved by the sponsor.
Applies to all University of Virginia faculty and staff involved with sponsored programs.
3.0 Policy [Top]
Costs incurred for the same purpose, in like circumstances, are treated uniformly either as direct costs or as F&A costs unless a unique or ‘unlike circumstance’ exists or the non-federal sponsor will allow the cost to be treated as a direct charge.
Normal F&A (Indirect) Costs:
These costs are normally treated as F&A costs and these costs may only be charged as direct costs to federal awards if ‘unlike circumstances’ are present and have been adequately documented, justified and approved by the University and Sponsor if anticipated in the original proposal budget.
1. Administrative and Clerical Salaries and Related Fringe Benefits:
Section F.6.b of Circular A-21 states the following regarding the charging of administrative/clerical salaries: “The salaries of administrative and clerical staff should normally be treated as F&A costs. 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.”
This provision is intended to establish the principle that administrative and clerical staff salaries should normally be treated as F&A costs, but that direct charging of these costs may be appropriate where the nature of the work performed under a specific project/program requires a unique or an extensive amount of administrative or clerical support which is significantly greater than the routine level of such services provided by academic departments. The costs would need to meet the definition of direct costs above.
The following examples, taken from OMB Circular A-21, Exhibit C, are not exhaustive nor are they intended to imply that direct charging of administrative or clerical salaries would always be appropriate for the situations illustrated. Where direct charges for administrative and clerical salaries are made, care must be exercised to assure that costs incurred for the same purpose in like circumstances are consistently treated as direct cost for all activities. This should be accomplished through a ‘Direct Charge Equivalent’ or other mechanism that assigns costs directly to the appropriate activities.
The following examples illustrate circumstances where direct charging of administrative or clerical staff salaries may be appropriate:
Other Costs Classified as Routine Facilities and Administrative (F & A) Costs:
Overall, costs described in Sections 1 and 2 above, may be directly charged only where they meet each of the following requirements:
In summary, if the costs described above meet the conditions of a) and b), as well as c) and d) for administrative and clerical salaries, but were not included in the approved budget of the sponsored agreement, the costs may be charged directly to the award only where the University has re-budgeting authority under federal regulations or the terms of the sponsored award, AND the charge is documented, justified and approved by the respective Chair and the Office of Sponsored Programs or their appointed representative.
An explanation as to why these costs were not included in the initial application to the sponsor or in the contract proposal will be required in addition to written justification regarding the unique or extensive nature of the project/program as it would have been presented to the sponsoring agency.
Please note that these guidelines do not allow for the routine charging of any of these costs to federal awards as in support of general department functions.
NOTE: Costs that would normally be considered as F&A costs, such as administrative and clerical salaries, may be charged directly to non-federal awards if permitted by the sponsor’s policies or otherwise approved by the sponsor. (This is an alternative costing practice regarding non-federal awards only).
4.0 Definitions [Top]
Federal Award: Includes awards received directly from federal agencies as well as federally funded sub-awards received by the University from other organizations.
Direct Costs: Costs which can be identified specifically with a particular sponsored program or project, an instructional activity, or any other institutional activity that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or F & A (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 shall be treated as direct costs of all activities of the institution. Direct Costs to federal awards must also meet the allowability criteria established in Circular A-21, Section C. 2-4.
Facilities and Administrative (F & A) Costs (Indirect Costs): F & A costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity. The University's F&A costs are consistent with the definitions of specific F&A cost categories in Circular A-21, Section F.
Facilities Costs: These costs include the operation, maintenance and use of buildings and equipment and library costs.
Administrative Costs: These costs include general administration and general expenses, departmental administration, sponsored projects administration, student administration and services, and all other types of expenditures not listed specifically under one of the subcategories of facilities.
Consistent Treatment of Costs: Costs incurred for the same purpose, in like circumstances, are treated uniformly either as direct costs or as F&A costs. Consistent treatment of costs is a basic cost accounting principle and is specifically required by OMB Circular A-21 to assure that the same types of costs are not charged to federally sponsored awards both as direct costs and again as F&A costs recovered through a negotiated rate. This concept is further reinforced and emphasized in a Cost Accounting Standard (referred to as CAS 502) that universities are required to follow.
Consistency in this context means that costs incurred for the same purpose, in like circumstances, must be treated uniformly either as direct costs or as F&A costs. Thus, since certain costs, such as administrative and clerical staff salaries, office supplies, postage, local telephone costs, and memberships/subscriptions are normally treated as F&A costs, the same types of costs normally cannot be charged directly to federally sponsored awards, unless the circumstances related to a particular program are clearly different from the normal operations of the institution. For example, although postage is normally treated as an F&A cost, a specific program’s technical goals may require a unique or an extensive need for postage as related to mailings of numerous survey questionnaires. In this case and once documented and justified, it may be appropriate to direct charge that project/program for the postage costs associated with the survey, since this would constitute ‘unlike circumstances’ compared to routine postage requirements.
The University also follows the guidelines in section F.6.b. of Circular A-21which specify the normal treatment of certain costs commonly incurred by academic departments and organized research units.
5.0 References [Top]
Procedure 8-14, “Budgeting Direct Costs of Sponsored Programs”
See also: Office of Sponsored Programs Cost Accounting Standards Guidelines6.0 Approvals and Revisions [Top]
Previous version in effect from 9/20/96 to 1/28/04 available in policy archive.
Previous version in effect from 1/28/04 to 10/31/05 available in policy archive.
(Note: policies VIII.A.6 and VIII.A.8 were merged into VIII.A.6, terminating policy VIII.A.8.)
Maintained by University Comptroller