General Provisions General Provisions for Selected Items for Selected Items

of Costof Cost

OMB A-21 Section JOMB A-21 Section J

ObjectivesObjectives

• Understand what are allowable and Understand what are allowable and unallowable costs to Federal grantsunallowable costs to Federal grants

• Understand the importance of Understand the importance of properly budgeting for costs on properly budgeting for costs on Federal grantsFederal grants

• Understand the consequences of Understand the consequences of improperly documenting costs on improperly documenting costs on Federal grantsFederal grants

OMB A-21 Section JOMB A-21 Section J

• Lists 54 items of costLists 54 items of cost• Failure to mention a particular item Failure to mention a particular item

of cost is not intended to imply that of cost is not intended to imply that it is either allowable or unallowable; it is either allowable or unallowable; rather, determination as to rather, determination as to allowability in each case should be allowability in each case should be based on the treatment provided for based on the treatment provided for similar or related items of cost.similar or related items of cost.

Direct vs. Indirect CostDirect vs. Indirect Cost

A cost is either A cost is either

Allowable or UnallowableAllowable or Unallowable

AndAnd

Direct or IndirectDirect or Indirect

F&A CostsF&A Costs

• F&A costs are those that are incurred F&A costs are those that are incurred for common or joint objectives and for common or joint objectives and therefore cannot be identified readily therefore cannot be identified readily and specifically with a particular and specifically with a particular sponsored project, an instructional sponsored project, an instructional activity, or any other institutional activity, or any other institutional activity.activity.

• Items of cost must be treated Items of cost must be treated consistently across the Institution with consistently across the Institution with respect to direct or indirect applicationrespect to direct or indirect application

Allowable Direct

Allowable Indirect Unallowable

EquipmentAdministrative

SupportEntertainment

F&A Costs

Terms of AgreementTerms of Agreement

In case of a discrepancy In case of a discrepancy between the provisions of a between the provisions of a specific sponsored agreement specific sponsored agreement and the provisions of the OMB, and the provisions of the OMB, the agreement should govern.the agreement should govern.

BudgetingBudgeting

• Be specific about what you need to Be specific about what you need to complete the projectcomplete the project

• Be sure to budget your items in the Be sure to budget your items in the correct value categorycorrect value category

• Be specific about what you label Be specific about what you label things, e.g., advertising vs. marketingthings, e.g., advertising vs. marketing

• Be sure to read the proposal Be sure to read the proposal guidelinesguidelines

Proposal GuidelinesProposal Guidelines• In some cases the proposal In some cases the proposal

guidelines determine how the guidelines determine how the items of cost will be labeleditems of cost will be labeled

• In case of a discrepancy In case of a discrepancy between the provisions of a between the provisions of a specific sponsored agreement specific sponsored agreement and the provisions in the and the provisions in the accounting system, the accounting system, the agreement should governagreement should govern

ConsequencesConsequences• During an audit, costs deemed unallowable During an audit, costs deemed unallowable

must be removed from the grant along with must be removed from the grant along with the associated F&A costs incurredthe associated F&A costs incurred

• Cost transfers that are not properly Cost transfers that are not properly documented may be considered documented may be considered unallowable and must also be removed unallowable and must also be removed from the grantfrom the grant

• These unallowable items become These unallowable items become uncommitted voluntary cost share, i.e., uncommitted voluntary cost share, i.e., costs to the department!costs to the department!

Commonly Asked Commonly Asked QuestionsQuestions

• Are clerical salaries allowed on Federal Are clerical salaries allowed on Federal grants?grants?– Generally allowable as an F&A expenseGenerally allowable as an F&A expense

• Are office supplies allowed on Federal grants?Are office supplies allowed on Federal grants?– Generally allowable as an F&A expenseGenerally allowable as an F&A expense

• What about general purpose equipment, such What about general purpose equipment, such as copy machines, computers, and typewriters?as copy machines, computers, and typewriters?– Unallowable, except where approved in advance by Unallowable, except where approved in advance by

the sponsoring agencythe sponsoring agency• What about memberships, subscriptions, and What about memberships, subscriptions, and

professional organizations?professional organizations?– Allowable, except civic, community organizations, Allowable, except civic, community organizations,

country clubs, or social clubscountry clubs, or social clubs

Commonly Asked Commonly Asked QuestionsQuestions

• Are recruiting costs allowed on Federal grants?Are recruiting costs allowed on Federal grants?– Allowable under strict conditionsAllowable under strict conditions

• Are rental cost of buildings and equipment Are rental cost of buildings and equipment allowed?allowed?– Allowable under strict conditionsAllowable under strict conditions

• Are scholarships and student aid costs Are scholarships and student aid costs allowable?allowable?– Only if the purpose of the sponsored agreement is to Only if the purpose of the sponsored agreement is to

provide training to selected participants (e.g., NIH provide training to selected participants (e.g., NIH Kirschstein-NRSA fellows)Kirschstein-NRSA fellows)

– Tuition remission can be paid in lieu of wages to Tuition remission can be paid in lieu of wages to students under certain circumstances (see section J.8 students under certain circumstances (see section J.8 for reporting requirements)for reporting requirements)

Commonly Asked Commonly Asked QuestionsQuestions

• What about Stipends?What about Stipends?– These are Payments made to an individual These are Payments made to an individual

under a fellowship or training grant in under a fellowship or training grant in accordance with preestablished levels to accordance with preestablished levels to provide for the individual’s living expenses provide for the individual’s living expenses during the period of training. A stipend is not during the period of training. A stipend is not considered compensation for the services considered compensation for the services expected of an employee.expected of an employee.

– Stipends are not allowable under research Stipends are not allowable under research grants even when they appear to benefit the grants even when they appear to benefit the research project.research project.

– Although stipends are not considered salaries, Although stipends are not considered salaries, this income is still subject to Federal and, this income is still subject to Federal and, sometimes, State income tax.sometimes, State income tax.

Questions?Questions?