Effective December 26, 2014, The Office of Management and Budget (OMB) implemented new guidance, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Required for Federal Awards replacing previous guidance found in Circulars A-21, A-110 and A-133. Subpart E of the Uniform Guidance establishes the cost principles that must be used to determine allowable costs of work performed by the University under Federal awards. These principles are also used as a guide in the pricing of fixed-price contracts and subcontracts.
Based on the Uniform Guidance, the following are a summary of the important considerations when determining whether a cost can be charged to a Federal award. There may be additional flexibility and/or restrictions related to specific non-federal sponsored projects.
Costs charged to a Federal award must be allowable, reasonable and allocable.
Allowable costs are necessary and reasonable for the performance of the award; are not restricted in Uniform Guidance or the terms and conditions of the Federal award; are consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the University; are not be included as a cost or used to meet cost sharing or matching requirements of any other Federally; and are adequately documented.
A cost is considered reasonable if the type of the goods or services acquired and amount does not exceed that which would be incurred by a prudent person under similar circumstances.
A cost is allocable to a Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with the benefits received.
Any credits or receipts received by the University that relate to costs charged to a Federal award must be credited the award as a cost reduction or submitted as a cash refund to the sponsor, as appropriate.
If there is a residual inventory of unused supplies that were charged to the Federal award, and the total aggregate value exceeds $5,000 upon termination or completion the project, or the supplies are no longer needed, the applicable amount must be credited to the award as a cost reduction.
Direct and Indirect (F&A) Costs
Direct costs are those costs that can be identified specifically with a particular Federal award. Typical costs charged directly to Federal award are the salaries and wages and related fringe benefits of employees who work on the award, costs of materials, laboratory supplies (e.g., chemicals), telephone toll charges, animals, animal care costs, computer costs, travel costs, specialized shop costs or other items of expense incurred for and directly benefit the Federal award. Administrative and clerical salaries & items such as office supplies, postage, local telephone costs, and memberships should normally be treated as indirect (F&A) costs and not directly charged to Federal awards.
Indirect (F&A) costs are those costs incurred for a common or joint purpose benefiting more than one cost objective and not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved.
Last updated: 02/05/2019