OMB Circular A-21, Cost Principles for Educational Institutions, identifies direct and indirect costs that may be charged to federal research grants and contracts. The cost principles also identify those charges that cannot be charged to grants and are considered unallowable expenses.
OMB Circular A-21 offers four tests to determine the allowability of costs applied to federally sponsored agreements. In addition to conforming to any limitations or exclusions in the sponsored agreement, all expenses charged to sponsored accounts must:
- Be allowable. Allowable expenses are reasonable and necessary, allocable to sponsored projects, given consistent treatment and conform to any limitations or exclusions set forth in the relevant federal regulations (if applicable), the sponsored agreement and the University policy.
- Be allocable. An expense is allocable if it is incurred solely to advance the work under the agreement or if it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.
- Be reasonable. A reasonable cost is one that a prudent person would have incurred under the circumstances prevailing when the purchase was made.
- Be consistently treated. Costs incurred for the same purpose, in like circumstances, must be treated consistently as either a direct or indirect (F&A) costs.
Allowable and Unallowable Costs
Type of Expense
|Alcohol||Unallowable as an entertainment expense.||Unallowable|
|Animals||Allowable for the acquisition, care, and use of experimental animals, contingent upon compliance with the applicable requirements of the PHS Policy on Humane Care and Use of Laboratory Animals||Allowable|
|Books and Journals||If an organization has a library, books and journals generally should be provided as part of normal library services and treated as F&A costs.||Allowable|
|Consultant Services||A consultant is an individual retained to provide professional advice or services for a fee but usually not as an employee of the requiring organization.||Allowable|
|Donor Costs||Allowable for payment to volunteers or research subjects who contribute blood, urine samples, and other body fluids or tissues that are specifically project related.||Allowable|
|Dues or Membership Fees||Generally, allowable as an F&A cost for organizational membership in business, professional, or technical organizations or societies.||Allowable|
|Entertainment Costs||This includes the cost of amusements, social activities, and related incidental costs.||Unallowable|
|Equipment||Allowable for purchase of new, used, or replacement equipment as a direct cost or as part of F&A costs, depending on the intended use of the equipment.||Allowable|
|Fringe Benefits||Allowable as part of overall compensation to employees in proportion to the relative amount of time/effort devoted by the employees. Must be consistent with university policy.||Allowable|
|Insurance||Insurance usually is treated as an F&A cost.||Allowable|
|Sabbatical Leave||At Tufts University, sabbatical leave salary costs are allowable as a direct cost to sponsored agreements as a component of the University’s fringe benefit rate. Since sabbatical leave costs are included in the fringe benefit rate assessed to salaries, these salary costs cannot be charged again as a direct cost to a grant.||Allowable|
|Salaries and Wages||Compensation for personal services covers all amounts, including fringe benefits, paid currently or accrued by the organization for employee services rendered to the grant-supported project.||Allowable|
|Stipends||Payments made to an individual under a fellowship or training grant in accordance with pre-established levels. Payments are intended for living expenses during training.||Allowable|
|Telephone Cost||Basic phone is generally an F&A cost. Toll calls may be a direct cost providing the cost can be specifically identified to a sponsored agreement.||Allowable|
|Travel||Allowable as a direct cost where such travel will provide direct benefits to the project.||Allowable*|
*Foreign travel should be budgeted and justified in the grant/contract proposal. When approval is required by the awarding agency and the expense is not included in the award budget, the request for prior approval must be made through the Office of Research Administration.
Costs incurred for common or joint objectives which cannot be identified specifically with a particular sponsored project should be treated as indirect costs. Examples include the cost of utilities, maintenance and operation, building and equipment use expenses, administrative costs, library costs, and student service costs. Most sponsored agreements include a percentage of the direct cost to cover these charges. This percentage is known as the Facilities and Administration rate (F&A) or, formerly, the Indirect Cost rate.
Federal regulations limit instances where administrative type costs can be charged to sponsored projects. The following is a list of those types of expenses that are generally not allowable as a direct cost per the Federal government. An exception may be made if there is EXTENSIVE use of such expenses, the expenses have been properly justified/documented in the grant/contract proposal, and have been approved by the appropriate federal agency.
Please contact your Post Award Financial Specialist if you have any specific questions about any of these administrative costs.
*Postage: US Mail, FEDEX, etc. Please note that shipping of research material to a funding agency or to another institution/company directly involved in the research is acceptable. The appropriate PeopleSoft account to be used is 5416.
Note: A justification is needed from the PI to create an ‘unlike circumstance’ where an administrative type of cost would be accepted by a federal auditor. An unlike circumstance is determined as such due to the nature of the work being performed ~ creating a special or unique need or when there is extensive consumption/use of particular items. Examples are provided below. In addition, please see the full administrative cost policy.
The following scenarios are examples of unallowable administrative costs:
Example #1: A Principal Investigator completes a business expense reimbursement form to be reimbursed for the cost of his cell phone. The cell phone is not used for personal purposes. For Tufts business, the cell phone is used for telephoning staff in the lab, calls to various potential donors and scientists associated with all of the grants for which he currently oversees. This is an inappropriate direct cost charge because the cell phone is not specific to one unique research project.
Example #2: While ordering supplies from STAPLES, the department includes a set of six 3-ring binders to be used in the laboratory. Because the PI conducts research in the lab, she asks the department manager to transfer the cost of the binders to the grant. This type of charge is unallowable as a direct cost because the volume of binders is not substantial nor was it demonstrated that the binders are essential to the success of one specific research grant.
The following scenarios are examples where exceptions were made:
Example #1: A federally funded research grant specializing in HIV/AIDS research requires an extraordinary amount of pendaflex and manila folders in order to keep track of the hundreds of volunteer subjects and their medical records. Because the volume is so great and the data being collected needs to be kept confidential and separated, an unlike circumstance for the purchase of these office supplies exists.
Example #2: USAID funds a research project whose focus is on providing veterinary services for migrant farmers’ cattle in Africa. The majority of the research is being conducted overseas in the field where means of communications are limited. In order to conduct the research the investigator must have the dedicated services of a telephone and fax machine from a site. This expense would be considered an exception.
Example #3: A center at Tufts has a mission of providing workshops for teachers in the public schools of Massachusetts and providing them desktop materials during the week long seminars and for the teachers to take back with them. Because of the logistics involved and the high volume of desktop publishing, an administrative salary would be an acceptable direct cost expense.