Direct & Indirect Costs University Research Administration The University of Chicago

cost accounting

The rights of access in this section are not limited to the required retention period but last as long as the records are retained. Federal awarding agencies and pass-through entities must not impose any other access requirements upon non-Federal entities. Only under extraordinary and rare circumstances would such access include review of the true name of victims of a crime. Routine monitoring cannot be considered extraordinary and rare circumstances that would necessitate access to this information. When access to the true name of victims of a crime is necessary, appropriate steps to protect this sensitive information must be taken by both the non-Federal entity and the Federal awarding agency.

cost principles

The Indirect Costor shall determine each grouping so as to permit use of an allocation base that is common to all cost objectives to which the grouping is to be allocated. The base selected shall allocate the grouping on the basis of the benefits accruing to intermediate and final cost objectives. When substantially the same results can be achieved through less precise methods, the number and composition of cost groupings should be governed by practical considerations and should not unduly complicate the allocation. For contracts subject to full CAS coverage, allocation of indirect costs shall be based on the applicable provisions. For all other contracts, the applicable CAS provisions in paragraphs through of this section apply. The university seeks to apply its federally negotiated F&A rates to all extramurally funded projects. These rate agreements are developed and negotiated based onUniform Guidance , the federal government’s regulation that provides cost principles for federal awards.

Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards

Donated from third parties may include such items as equipment, office supplies, laboratory supplies, or workshop and classroom supplies. Value assessed to donated property included in the cost sharing or matching share must not exceed the fair market value of the property at the time of the donation. Under this procedure, the Federal awarding agency or pass-through entity must advance cash payments to the non-Federal entity to cover its estimated disbursement needs for an initial period generally geared to the non-Federal entity’s disbursing cycle. Thereafter, the Federal awarding agency or pass-through entity must reimburse the non-Federal entity for its actual cash disbursements. Use of the working capital advance method of payment requires that the pass-through entity provide timely advance payments to any subrecipients in order to meet the subrecipient’s actual cash disbursements.

  • Once a rate is acknowledged it is effective until the entity requests a new rate or notifies HHS of changes to the existing rate.
  • Any non-Federal entity that has a current federally-negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to four years.
  • However, in those situations where the non-Federal entity is disposing of real property acquired or improved with a Federal award and acquiring replacement real property under the same Federal award, the net proceeds from the disposition may be used as an offset to the cost of the replacement property.
  • Indirect costs do not vary substantially within certain production volumes or other indicators of activities, and so are considered to be fixed costs.
  • All central service cost allocation plans and related documentation used as a basis for claiming costs under Federal awards must be retained for audit in accordance with the records retention requirements contained in subpart D of this part.
  • The predetermined rate cannot be adjusted except under unusual circumstances.
  • Any organization being awarded cost reimbursable grants and contracts, also having more than one source of funding , needs an indirect cost rate.

Financial obligations, when referencing a recipient’s or subrecipient’s use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment. Federal award does not include other contracts that a Federal agency uses to buy goods or services from a contractor or a contract to operate Federal Government owned, contractor operated facilities . Discretionary award means an award in which the Federal awarding agency, in keeping with specific statutory authority that enables the agency to exercise judgment (“discretion”), selects the recipient and/or the amount of Federal funding awarded through a competitive process or based on merit of proposals. A discretionary award may be selected on a non-competitive basis, as appropriate.

Indirect Cost Negotiations

Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives, and costs must not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modification to the composition of the indirect cost categories is required. The distribution base may be total direct costs (excluding capital expenditures and other distorting items, such as subawards for $25,000 or more), direct salaries and wages, or other base which results in an equitable distribution. The distribution base must exclude participant support costs as defined in § 200.1. All costs included in this proposal to establish billing or final indirect (F&A) costs rate for are allowable in accordance with the requirements of the Federal agreement to which they apply and with the cost principles applicable to those agreements. This section must identify the usual administrative and national policy requirements the Federal awarding agency’s Federal awards may include.

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The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship; or logic and reason, where neither the cause nor the effect of the relationship is determinable. When an allocation can be made by assignment of a cost grouping directly to the function benefitted, the allocation must be made in that manner. When the expenses in a cost grouping are more general in nature, the allocation must be made through the use of a selected base which produces results that are equitable to both the Federal Government and the organization. The distribution must be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to Federal awards. The results of special cost studies must not be used to determine and allocate the indirect costs to Federal awards.

Direct versus Indirect Costs

For example, a lease contract that transfers ownership by the end of the contract may be determined less costly than purchasing through other types of debt financing, in which case reimbursement must be limited to the amount of interest determined if leasing had been used. Costs of insurance required or approved and maintained, pursuant to the Federal award, are allowable. A final decision by an appropriate Federal official to debar or suspend the non-Federal entity, to rescind or void a Federal award, or to terminate a Federal award by reason of a violation or failure to comply with a statute, regulation, or the terms and conditions of the Federal award.

Are salaries a direct cost?

The most commonly used direct costs budget categories include: salaries and wages, fringe benefits, equipment, travel, materials and supplies, participant support costs, publication costs, consultant services, computer services, subawards.

University indirect costs include building and equipment depreciation and use allowance; general administration; departmental, sponsored program, and sponsored project administration expenses; interest; operation and maintenance expenses; library expenses; and student administration and services expense. Most federal agencies and other sponsoring organizations pay the university for indirect costs in addition to the direct costs of a grant or contract award. Indirect costs represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the organization and the conduct of activities it performs. In theory, costs like heat, light, accounting and personnel might be charged directly if little meters could record minutes in a cross-cutting manner. Therefore, cost allocation plans or indirect cost rates are used to distribute those costs to benefiting revenue sources.


If the Federal awarding agency obtains the research data solely in response to a FOIA request, the Federal awarding agency may charge the requester a reasonable fee equaling the full incremental cost of obtaining the research data. This fee should reflect costs incurred by the Federal agency and the non-Federal entity. This fee is in addition to any fees the Federal awarding agency may assess under the FOIA (5 U.S.C. 552).

  • Within sixty calendar days of receiving the appeal, M/OAA/C must notify the recipient of the status (i.e., denied, approved, or more time is needed).
  • This expense category also includes the fringe benefit costs applicable to the salaries and wages included therein, an appropriate share of general administration and general expenses, operation and maintenance, interest expense, and depreciation.
  • State public assistance agencies will develop, document and implement, and the Federal Government will review, negotiate, and approve, public assistance cost allocation plans in accordance with Subpart E of 45 CFR Part 95.
  • Provide any input related to any anticipated changes in business volume, organizational structure, and/or indirect rate structure for the new fiscal year.
  • Also, the non-Federal entity must not preclude potential bidders from qualifying during the solicitation period.

The necessity of contracting for the service, considering the non-Federal entity’s capability in the particular area. Costs of membership in any country club or social or dining club or organization are unallowable. Costs of the non-Federal entity’s subscriptions to business, professional, and technical periodicals are allowable. Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal award are allowable. For any month in which cumulative cash inflows exceed cumulative outflows, interest must be calculated on the excess inflows for that month and be treated as a reduction to allowable interest cost. The rate of interest to be used must be the three-month Treasury bill closing rate as of the last business day of that month.

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