Facilities and Administrative Costs
When the Office of Management and Budget revised A-21 in May 1996, indirect costs were renamed facilities and administrative costs. Facilities and administrative costs are defined as those costs that are incurred for common or joint objectives of the University and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity or any other institutional activity. These costs are comprised of a number of components. Facilities includes depreciation and use allowances, interest on debt associated with certain buildings, equipment and capital improvements, operation and maintenance expenses, and library expenses. Administration includes general administration and general expenses, departmental administration and sponsored projects administration.
At the college and department level, salaries of administrative and clerical staff and items such as office supplies, postage, local telephone costs and institutional memberships are normally treated as facilities and administrative costs. Costs normally treated by the University as facilities and administrative costs may be charged to a sponsored project when ALL of the following conditions are met.
- The cost can be readily identified specifically with the project with a high degree of accuracy.
- The costs are incurred for a different purpose or circumstance.
- The cost is explicitly "line-item" budgeted, with written justification, and awarded:
- The cost is separately budgeted in the proposal budget (Note that for certain fixed-price funding arrangements a detailed budget is not required by the sponsor; however, the internal budget should reflect the cost.)
- The budgeted amount reflects a realistic estimate of the cost and, in the case of salary, the percent of effort.
- A reasonable justification is given for the cost. In the case of federal agency sponsors the "Budget Justification" section of the proposal should state that the costs are normally treated as facilities and administrative costs by the institution but are being requested due to a special purpose or circumstance. An explanation of the special circumstance should be clearly outlined in the "Budget Justification."
- The sponsor approves the item in the award. The University relies on the judgment of the principal investigator and other responsible officials to determine whether these circumstances exist for a particular project and requires that proposed direct charges for these costs be fully justified to sponsoring agencies in grant applications and contract proposals. If the sponsoring agency accepts the cost as part of the direct project budget (i.e. does not specifically disapprove the item in the award or other notification to the University), then the University will consider the cost an appropriate direct cost of the project. Conversely, if the sponsoring agency specifically disapproves the cost, the University relies on the sponsor’s judgment that the cost did not meet the criteria for direct charging and will treat the cost as an indirect cost as appropriate. It is the principal investigator's responsibility to notify the Office for Sponsored Programs of any changes made to the proposed budget in pre-award negotiations with the sponsor in which OSP did not participate.
Note that the determining factor in classifying salaries of administrative and clerical staff as direct costs must relate to the different work they perform to meet the exceptional requirements of the project as compared to that of administrative and clerical staff who perform work related to routine departmental or general institutional administration. Generally, a project that requires more of the same type of administrative support as that required for routine departmental or institutional administrative support would not meet the criteria for unlike circumstances.
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 identified with the project or activity. With the sponsor’s specific approval, these costs that are normally treated as facilities and administrative costs and may be charged directly to a sponsored project in unlike circumstances such as:
- Projects involving large, complex programs. Large, complex programs where size, nature and complexity of the activity go well beyond the normal departmental support or there is a functional difference in work by individuals in the same job class. Examples include program project grants, center grants and other sponsored agreements and contracts that entail assembling and managing teams of investigators.
- Projects which involve extensive data management. Projects which involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature and reporting. For example, if a project requires substantial mailing expenses in the performance of the project activities or technical work, postage should be charged as a direct cost of the project.
- Geographically inaccessible projects. Projects that are geographically inaccessible to normal departmental administrative services.
- Projects that require travel and meeting arrangements. Projects that require travel and meeting arrangements such as, but not limited to, conferences, continuing education, workshops and seminars for large numbers of participants.
- Projects involving extensive reports. Projects whose principle focus includes the preparation and production of manuals, large reports, books and monographs (excluding routine progress and technical reports), software and multimedia material.
- Projects involving other specific requirements. Individual projects requiring project-specific database management; individualized graphics or manuscripts preparation; human or animal protocol, IRB preparations and/or other project-specific regulatory protocols; and multiple project-related investigator coordination and communication.