|
Medical College of Georgia Administrative
Policies and Procedures
Office of Primary Responsibility:
Division of Sponsored Program Administration
No. 7.0.08
Direct Charging Policy
1.0 Purpose
To provide the institutional standard for determining how costs are charged
to sponsored agreements.
2.0 Definitions
2.1 OMB Circular A-21:
This document from the federal Office of Management and Budget defines cost
principles for educational institutions, including appropriate charges to
federal awards.
2.2 Direct Costs:
Expenses that are specifically associated with a particular sponsored
project. Direct cost expenses can be identified to such activities
relatively easily with a high degree of accuracy.
2.3 Facilities and
Administrative costs (F&A: also referred to as indirect costs or overhead):
Those costs associated with the conduct of sponsored activities that are
incurred for common or joint objectives and therefore are not readily
identifiable with a specific project.
2.4 Allowable Costs: In
general, expenses are chargeable to sponsored projects only if they are:
2.4.1 Reasonable:
A prudent person would have purchased this item and paid this price.
Considerations involved in the determination of the reasonableness of a
cost are whether or not the cost is of a type generally recognized as
necessary for the operation of the institution or the performance of the
sponsored project, federal and state regulations, sponsored agreement
terms and conditions, and the extent to which the actions taken with
respect to the incurrence of the cost are consistent with established
institutional policies and practices.
2.4.2 Allocable:
Expenses can be assigned to the activity based on the benefit derived. A
cost is allocable to a sponsored project if it is incurred solely to
advance the work under the sponsored agreement.
2.4.3 Consistently
Treated: Like expenses must be treated the same in like
circumstances. Office of Management and Budget Circular A-21 states that
no cost can be charged to a sponsored project as a direct charge if other
costs incurred for the same purpose in the same circumstances have been
included in any Facilities and Administrative cost pool.
2.4.4 In conformity to
any limitations or exclusions set forth in OMB Circular A-21:
A-21 defines categories of costs that are allowable as direct costs,
allowable as indirect costs, and unallowable (see section 4.1, Cost
Categories).
2.5 Major Project: A
project that requires an extensive amount of administrative or clerical
support/supply costs that are significantly greater than the routine level
of services provided by academic departments.
2.6 Disclosure Statement
(DS-2): A requirement of Circular A-21 that educational institutions
file a statement with their federal cognizant audit agency that describes
the cost accounting practices of the institution.
2.7 Cost Accounting
Standards (CAS): The Cost Accounting Standards, implemented in 1980 by
the Cost Accounting Standards Board, outline standards to achieve
consistency in cost accounting practices. These standards address the
measurement, assignment, and allocation of costs to the federal government.
Four of the standards are applicable to educational institutions and were
incorporated into Circular A-21.
2.8 Cost Sharing.
Project expenses that are not reimbursed by the sponsor. For the Medical
College of Georgia Cost Sharing Policy (see Policy
7.0.05).
3.0 Background
Federal sponsors require that direct costs of research be related to
specific actions supported by a grant. Those costs must be reasonable and
necessary, not exceeding the costs that would be incurred by a prudent
person, and they must be allowable, allocable, and easily identifiable as a
benefit to the project receiving the charge. Because institutions provide
infrastructure support that is not easily identifiable with specific
projects, they are allowed to apply Facilities and Administrative (F&A;
formerly indirect costs) support costs to federal grants and contracts on an
average rate basis to help offset the infrastructure costs. As required by
the federal Office of Management and Budget (OMB) Circular A-21, the Medical
College of Georgia negotiates a Facilities and Administrative cost rate
agreement with the federal government to arrive at the F&A reimbursement
rate. This rate is applicable to all federal awards that do not restrict
F&A costs (e.g., training awards). In the process of developing the F&A
rate proposal, a number of institutional cost pools are applied to identify
the indirect cost of conducting research. Those cost pools include obvious
items, such as utilities, depreciation, library services, sponsored program
administration, and a portion of departmental and central personnel, to be
assigned to the institution’s research infrastructure costs. They also
include other “administrative” items (such as office supplies, postage,
local telephone costs, journals, and memberships) in proportion to research
spending relative to total institutional spending. Because the institution
is reimbursed for these administrative supplies as a part of the F&A rate,
those cost items normally cannot be charged as direct costs.
Circular A-21 does allow these expenses to be charged
directly to a sponsored project in certain circumstances. Direct charging
may be appropriate where a major project or activity
explicitly budgets for administrative or clerical services/supplies, and
these costs can be specifically identified with the project or activity.
Examples of major projects (taken from OMB Circular A-21 Exhibit C) where it
may be allowable to direct charge expenses that are normally treated as F&A
costs are identified below:
-
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.
-
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 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 exhaustive nor are they intended to imply that direct
charging of administrative or clerical salaries or clerical supplies would
always be appropriate for the situations illustrated in the examples. For
instance, the examples would be appropriate when the costs of such
activities are incurred in unique circumstances. It would be
inappropriate to charge the cost directly if in similar circumstances the
costs are charged as institutional operating expense and are included in
the F&A base.
4.0 Policy
The Medical College of Georgia (MCG) follows the general guidelines in
sections D and E of Circular A-21 in determining the treatment of costs as
direct or indirect. MCG’s F&A costs are consistent with the definitions of
specific F&A cost categories in section F of Circular A-21. It is the
responsibility of the department incurring the cost to classify costs
incurred for the same purpose, in like circumstances, consistently as either
direct or F&A costs.
4.1 Cost categories:
Following is a list of costs that are normally either direct or F&A costs to
sponsored projects under “like” circumstances.
4.1.1 Normally Direct
Costs: the following should normally be directly charged to sponsored
accounts. However, the terms of the specific agreement and the sponsoring
agency’s regulations must be reviewed prior to determining the
appropriateness of costs for an individual project. Note also that direct
costs must meet the criteria in section 2.4 above, i.e., allowable,
directly benefiting the project, reasonable, and consistently treated.
4.1.1.1 Salaries and Wages/Employee
Benefits: Faculty, technicians, research associates and assistants,
including graduate research assistants and other students performing
scientific or technical work, post doctoral associates and other
technical and programmatic personnel necessary to meet the goals of the
project.
4.1.1.2 Professional and Consulting Fees:
Specific restrictions may apply to hourly and daily rates. An
individual may not normally be an employee and a consultant on the same
sponsored agreement.
4.1.1.3 Repairs and maintenance: Costs
incurred for necessary maintenance, repair, or upkeep of property
(purchased as a direct charge to the project) that neither add to the
permanent value of the property nor appreciably prolong its intended
life but keep it in an efficient operating condition.
4.1.1.4 Special purpose equipment:
equipment that is used only for research, medical, scientific, or other
technical activities.
4.1.1.5 Supplies: Laboratory and
scientific supplies, chemicals, glassware, field supplies, compressed
gases and liquids, radioactive material, and animals. These items
should be charged to projects based on benefit derived. If multiple
projects are being supported in one lab there must be documented a
reasonable method of allocation of charges to all projects.
4.1.1.6 Telephone: long distance charges
necessary to carry out the objectives of the sponsored project.
4.1.1.7 Travel required to carry out the
objectives of the sponsored project.
4.2 Normally F & A: The
following are normally treated as F&A costs and are not directly charged to
sponsored agreements nor used as cost sharing. These costs are charged to
institutional funds and recovered through applications of the F&A rate.
4.2.1 Accounting and audit
costs.
4.2.2 Computer Services or Use
Fees: Routine, standard computer services, hookups and networking costs,
including MIS/ITD/Networking costs are normally F&A.
4.2.3 Salaries and
Wages/Employee Benefits: Administrative and clerical positions such as
administrative assistants, accountants, office personnel, student office
workers, purchasing agents and buyers; administrative activities of
directors and assistant/associate directors, executive assistants, and
other administrators.
4.2.4 General purpose
equipment: Equipment whose use is not limited only to research, medical,
scientific or other technical activities. Examples of general-purpose
equipment include office equipment (personal computers, FAX machines,
typewriters, copiers) and furnishings (desks, chairs, file cabinets), air
conditioning equipment, reproduction and printing equipment, and motor
vehicles.
4.2.5 Legal services,
insurance, general recruitment advertising, repairs and maintenance of
general purpose (see 4.2.4 above) equipment and facilities.
4.2.6 Supplies: Office
supplies (printers, scanners, paper, toner, post-its, markers, hole
punchers, binders, folders, forms,) custodial supplies, parts and supplies
associated with repair and maintenance of general purpose equipment and
facilities, lab coats, scrubs, general purpose books and reference
materials.
4.2.7 Library
costs/collections/acquisitions.
4.2.8 Travel related to
administrative activities.
4.2.9 Postage (including
express delivery, etc.); basic telephone service, installation, repair,
and line charges; fax line charges; cellular phone purchase and use fees;
utilities.
4.2.10 Dues/memberships in
professional and technical organizations, subscriptions (other than those
specifically required for the performance of the sponsored activity).
4.3 Unallowable: The
following types of costs may not be charged to a federally
sponsored agreement either directly or as F&A
costs. This is a quick reference. Please be aware that there are some
exceptions to some of the categories listed.
4.3.1 Advertising, Public
Relations and Promotional Costs: Institutional promotion of MCG is
unallowable. Some types of advertising, such as recruitment of
study patients or study personnel, may be allowable.
4.3.2 Alcoholic beverages.
4.3.3 Alumni activities.
4.3.4 Bad debts.
4.3.5 Charitable
contributions, donations or gifts (cash, services or property).
4.3.6 Commencement and
convocation expenses
4.3.7 Contingency provisions
4.3.8 Entertainment costs
4.3.9 Fines and penalties
4.3.10 Food Costs: For
seminars or patient incentives, food costs may be appropriate as a direct
cost when related to the specific needs of the agreement, in which case
they usually are authorized as part of the agreement. Food costs for
routine operations or staff meals are not allowable except in the course
of travel or as part of a bona fide meeting related to the terms of
project. Documentation, including the names of those in attendance, their
social security number or employee ID, must be provided in order to
directly charge food to a sponsored agreement.
4.3.11 Fund raising and
investment management costs.
4.3.12 First class or other
non-coach class travel.
4.3.13 Honoraria/awards (i.e.,
a payment without service). Speaker’s fees or other payments involving
the provision of service are allowable if they are related to the work of
the project being charged.
4.3.14 Personal use of goods
or services.
4.3.15 Student activity costs.
5.0
Approval of Exceptions:
5.1 Federal regulators have
stated that sponsor approval of a budget does not constitute approval of the
specific line items. The sponsor assumes that researchers at MCG have
complied with A-21, the Cost Accounting Standards, our F&A proposal
assumptions, and any other applicable regulations. A cost that may be
allowable at one institution as a direct charge may not be allowable at
another because of the differences in the Disclosure Statement and the F&A
cost proposal. There would be no way for the sponsor to make a
determination of allowability because of these variables; therefore, it is
the institution’s responsibility to exercise this judgment. In general, if
a cost were to be incurred whether or not a project were being carried out,
the cost should not be direct charged to the project but should be treated
as an F&A cost. If a Principal Investigator believes that any of the costs
listed in section 4.2.2 are appropriate as direct costs, they should be
included in the proposal budget and be fully justified on the basis of
unique or mitigating scientific/technical needs of the project. If the
Principal Investigator determines that there is a need for these types of
costs but they were not included and justified in the original budget
submitted to the sponsor or to the Division of Sponsored Program
Administration, the
Principal Investigator may request an exception to direct charge the costs. In accordance with Circular A-21 requirements,
MCG requires written justification to be provided to the Division of
Sponsored Program Administration Sponsored Accounting Office for an item normally considered an
F&A cost to be directly charged to a sponsored project. The justification
must specifically address how the cost would benefit the project, how the
charge would be assigned to the project with a high degree of accuracy, and
what the unique or mitigating scientific/technical needs of the project
are. A satisfactory justification will answer the following questions:
5.1.1 Does the cost provide a
direct benefit to the purpose or objective of the project?
5.1.2 Can the cost meet the
definition of a direct cost? Can the cost be specifically identified with
a project with relative ease and with a high degree of accuracy, and is it
allowed by the terms and conditions governing the particular award?
5.1.3 For clerical and
administrative salaries, do the facts and circumstances meet the criteria
to qualify as an exception as described by the OMB guidelines (see section
3.0)?
5.2 The justification must be
submitted to the Department’s OCG sponsored accountant on the form
“Justification to Charge Normally F&A Costs as Direct”.
5.3 Examples of exceptional
circumstances:
5.3.1
Administrative/Managerial/Clerical Salaries/Wages/Benefits: These
costs may only be authorized for projects where the nature of the work
performed requires an extensive amount of administrative or clerical
support. Such costs might be appropriate for:
-
Large complex programs such as program projects
and other agreements that entail assembling and managing teams of
investigators from a number of departments or institutions.
-
Projects that involve extensive data
accumulation, entry and analysis, surveying, tabulation, cataloging,
searching literature and reporting.
-
Projects that require travel and meeting
arrangements for large numbers or participants, such as conferences and
seminars.
-
Projects whose principal focus is the
preparation and production of manuals and large reports, books and
monographs (this does not include routine progress and technical reports
or scientific manuscripts).
-
Projects that are geographically inaccessible to
normal departmental administrative services, such as seagoing research
vessels, radio astronomy projects and other research field sites that
are remote from the campus.
5.3.2 General Purpose
Equipment: Computers, printers, and other selected items may be
appropriate as a direct cost when the Principal Investigator is able to
certify that the equipment is necessary for the unique
scientific/technical tasks of the specific agreement. Example:
-
A computer that is only used to store and access
a large scientific database may be appropriate as a direct cost. (A
computer used for processing reports, manuscripts, correspondence and
publications would not be appropriate. A copier normally services many
diverse functions and projects and would not be appropriate as a direct
cost.)
5.3.3 Membership Dues:
Appropriate as a direct charge on an exception basis only: (1) where
membership is a mandatory requirement of the specific agreement; or (2)
for training/fellowship programs where the membership is authorized for a
trainee as part of the trainee’s development/training program; or (3)
where the membership is required/included as part of the registration
costs for a conference and participation in the conference is directly
related to the specific needs of the agreement.
5.3.4 Office Supplies:
Extraordinary costs for office supplies used specifically for the
technical/scientific needs of the agreement may be appropriate as a direct
cost. Examples:
-
Paper,
envelopes or computer paper, used as part of a survey mailed to
participants for an epidemiological study may be appropriate. (Paper,
envelopes or computer paper used as part of the administration of the
project or for routine correspondence and publications would not be
appropriate.)
-
Three ring binders or notebooks used to organize
class material for a workshop on a project that has the stated objective
of presenting a three-month workshop for teachers would be an
appropriate direct cost since the binders provide a direct benefit to
the purpose of the project. (Binders or notebooks used to maintain
general information would not be appropriate.)
5.3.5 Postage:
Extraordinary costs for postage, Federal Express or courier directly
related to the scientific/technical needs of the agreement may be
appropriate. Examples:
-
Costs of shipping project samples to a
laboratory or a collaborator for analysis may be appropriate, as would
costs for mailing large epidemiological surveys. (Mailing costs for
routine correspondence or mailing proposals, manuscripts, or reports
would not be appropriate.)
-
Shipping costs for returning a piece of
equipment may be appropriate if the equipment was originally purchased
on the agreement.
5.3.6
Subscriptions/Books/Periodicals: Costs may be appropriate as a direct
cost when the Principal Investigator is able to certify that the
publication is a necessary requirement for the scientific/technical
completion of the specific agreement and that it does not benefit other
agreements or activities. (This situation would be very rare.
Publications that provide a general benefit to research and teaching
activities would not be a direct cost.)
5.3.7 Telephone: The
cost of telephone lines may be appropriate for a project requiring
extensive telephone surveying where the function of specified staff is to
telephone respondents. Costs would only be permitted for the dedicated
lines, not for all telephone services supporting the lab or office in
which the project is based. (Local telephone charges are not appropriate
where the purpose is to provide general telephone accessibility to the
staff or a lab).
Pagers/cellular telephone costs may be appropriate
for an individual whose primary task is to travel from location to
location to gather data or conduct patient surveys and that person must
maintain contact on a continual basis, as part of the specific needs of
the agreement. Costs would be allowable only if the pager/cellular
telephone is being used solely to support the project. (In the case of an
individual who has multiple duties or works on several agreements or where
the pager/cellular telephone is not an integral part of the specific tasks
associated with the agreement, costs of a pager/cellular telephone would
not be appropriate as a direct cost. If the pager/cellular telephone is
needed primarily because the person needs to be reachable by staff, such
costs may not be directly charged to a sponsored agreement.)
5.4 Cost Accounting Standards
require consistent treatment of costs in “like circumstances” across an
institution. Consequently, “unlike circumstances” must be
demonstrated/justified if a cost that is normally considered F&A is to be
budgeted, charged and reported. The following arguments cannot be used to
demonstrate “unlike circumstances”:
-
The sponsor has approved the item without review
by the institution.
-
The department does not have sufficient F&A cost
money returned to support projects.
-
The sponsor limits or will not pay F&A costs.
-
The sponsor is
willing to pay for the cost as a direct charge.
6.0 Responsibility:
Caution should be exercised in requesting and approving the direct
charging of costs normally treated as F&A costs. Restricted cost categories
and other inappropriate charges can be readily detected in audits, resulting
in disallowances that must be reimbursed to the federal government. In
recent months, several institutions have had sponsored program audit
findings resulting from direct charging items that are normally considered
F&A costs. The items charged were disallowed, and the institutions were
required to return the funds to the federal government and lost the ability
to use those funds for allowable charges.
6.1 Principal Investigators and
their Departments are responsible for assuring that the costs assigned to
projects are appropriate.
6.2 Requests for direct charging
of items normally considered to be F&A should be addressed to the
Division of Sponsored Program Administration.
6.3 Departments should not
contact sponsors directly regarding fiscal/administrative matters.
6.4 The Division of Sponsored
Program Administration shall be responsible for review and approval of exceptions (see Section 5.0) and shall have final decision authority.
6.5 Each administrative unit
must provide sufficient institutional funds to funded investigators to allow
them to purchase general purpose equipment, supplies and other items that
fall into the F&A category.
Date: 23
April 2004 | Rev. No.: | Rev. Date:
| No. 7.0.08 |