Purpose of Policy
The Federal Office of Management and Budget (OMB) has issued regulations which limit those instances where the salaries of administrative/clerical staff and other nonsalary administrative costs may be charged as a direct cost to grants and contracts awarded by Federal agencies. This policy is issued to formally implement these rules and to set forth guidance on when such costs may, and may not, be directly charged to Federal awards. This policy is effective July 1, 1998.
Additionally, the Cost Accounting Standards Board (an organization within OMB) has published rules that requires Tufts and other universities to formally disclose their accounting practices to the federal government. Our policy for administrative costs will be consolidated with other Tufts University accounting policies and submitted to the government to meet the CASB requirements.
The following highlights sections of the policy for your review. The full text can be found by clicking above on purpose of policy.
Background: The Office of Management and Budget (OMB) provides principles for determining direct and indirect costs to sponsored grants and contracts. Based on changes made to cost principles for educational institutions, certain costs previously treated as direct costs are now normally only allowable as indirect costs. These include administrative/clerical salaries, local telephone costs, dues/memberships, office supplies and postage. Any exceptions must be fully justified and approved in Grants/Contracts and meet the federal cost accounting standards described in this policy. Sponsored Programs Accounting and the Office of Vice Provost for Research have worked and will continue to work with departments to assure that Tufts is in compliance with these regulations. For more information, please click here.
Consistent Treatment of Direct and Indirect Costs: Consistent treatment of costs is a basic cost accounting principle and is specifically required by OMB to assure that the same types of costs are not charged to grants and contracts both as direct costs and indirect costs. Every effort should be made by principal investigators/administrators to classify costs incurred for the same purpose, in like circumstances, consistently as either direct or indirect. For more information, please click here.
Criteria for Charging Direct Costs: Costs that can be identified specifically with a particular sponsored project or can be directly assigned to such activities relatively easily should be treated as direct costs. Salaries and fringe benefits of faculty, research associates, research assistants, research technicians, post-doc fellows and graduate students should be treated as direct costs. In addition, nonsalary expenses such as laboratory supplies, animal, animal care, travel, etc. should be treated as direct costs as well. For a more detailed listing, please click here.
Criteria for Charging Indirect Costs: Costs which cannot be identified readily and specifically with a particular sponsored project should be treated as indirect costs. Facility costs and departmental administration are examples of expenses that should be treated as indirect costs. Similarly, salaries associated with administrative activities should be classified as indirect costs. Please click here for a more elaborate description.
Criteria for Charging Administrative/Clerical Salaries: These costs may be treated as direct costs when the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support. These situations are considered "unlike circumstances." For a list of examples of "unlike circumstances" where the direct charging of salaries of administrative or clerical staff may be appropriate, click here.
Criteria for Charging Non-Salary Administrative Costs: Direct charging of these costs may be appropriate if they can be specifically identified to a project and the nature of the work performed creates a unique need for the item(s). Click here for further details.
Administrative/Clerical Salaries Not Charged to Grants: There often exists within each department a core of administrative personnel who support the various departmental academic missions by providing general support services or "departmental administration". These costs are recovered in part by the institution through the reimbursement of indirect costs. Accordingly, these core administrative costs should not be charged directly to grants/contracts. For more information about this type of baseline service charge, click here.
Responsibility of Principal Investigator: Tufts relies primarily on principal investigators and project directors to determine whether direct charges for administrative/clerical salaries, office supplies, postage, memberships and similar costs are appropriate for a particular project. These costs must be fully justified in the grant/contract and in accordance with this policy. Please click here for a more in depth explanation.
Responsibility of Office of Vice Provost & Sponsored Programs: The Office of Vice Provost is responsible for assuring that proper justifications are made within proposals demonstrating the need for such costs as direct costs. Sponsored Programs Accounting will assure that these types of charges are budgeted for or subsequent rebudgeting approval has been obtained from the Office of Asssociate Provost for Research/Federal Agency.
Sensitive Subcodes:Provided on this link is a list of expense codes that are associated with administrative expenses. Charges that appear in these subcodes must be fully justified, approved by the agency, and meet the cost accounting standards of this policy.
Over the years, there has been a great deal of regulatory change aimed at limiting the costs which may be recovered either directly or indirectly through Federal grants and contracts. Effective July 1, 1994, OMB revised its Circular A-21, Cost Principles for Educational Institutions, which sets forth principles for determining direct and indirect costs applicable to federally sponsored grants and contracts. As a result of the changes to this Circular, certain costs previously treated as direct costs are now normally allowable only as indirect costs and therefore, recoverable only through the application of the indirect cost rate. These administrative costs include administrative and clerical salaries, office supplies, memberships, local telephone service, and postage.
Since the Circular was revised, the Office of Sponsored Programs Accounting, as a practice, has been monitoring these types of administrative costs on grants and contracts and taking the necessary action to assure that the University is in compliance with these regulations. In addition, the Office of Government Resources has incorporated the revised A-21 cost principles into the budgets of grant and contract applications. As part of the CASB requirement we have now formalized our practices and procedures into this policy for administrative costs, for submission to the federal government.
Consistent treatment of costs is a basic cost accounting principle and is specifically required by Circular A-21 to assure that the same types of costs are not charged to grants and contracts both as direct costs and as indirect costs. This concept is further reinforced and emphasized in a recently issued Cost Accounting Standard (referred to as "CAS 502") that universities are required to follow. Consistency in this context means that costs incurred for the same purpose, in like circumstances, must be treated uniformly either as direct costs or as indirect costs. Since certain costs, such as office supplies and postage, are treated as indirect costs, the same types of costs cannot be charged directly to federal grants or contracts, unless the circumstances related to a particular program are clearly different from the normal operations of the institution. For example, although postage is normally treated as an indirect cost, a particular program may have a special need for an extraordinary amount of postage because of the mailing of hundreds of survey questionnaires. In this case, it would be appropriate to charge that program directly for the postage related to the questionnaires, since the postage for the questionnaires would constitute "unlike circumstances" compared to routine postage requirements.
Every effort should be made by principal investigators/administrators to classify costs incurred for the same purpose, in like circumstances, consistently as either direct or indirect costs. The consistency requirement applies to Tufts University as a whole. Costs must be classified consistently across all the departments and other organizational units of the university.
Per OMB Circular A-21, Costs that can be identified specifically with a particular sponsored project, instructional activity, or other institutional activity, or can be directly assigned to such activities relatively easily with a high degree of accuracy should be treated as Direct Costs. Salaries and fringe benefits of faculty, research associates, research assistants, research technicians, postdoctoral fellows and graduate students, associated with effort on research projects, instructional activities and other direct cost objectives should be treated as direct costs.
Regarding nonsalary expenses, the costs of laboratory supplies (e.g., chemicals, glassware, compressed gases and liquids, etc.) instructional supplies, animals, animal care and other specialized services, travel, consulting/honoraria services, equipment, subawards, long distance telephone toll charges and similar items identifiable to research, instruction, or other direct cost objectives should be treated as direct costs.
Per OMB Circular A-21, Costs incurred for common or joint objectives which cannot be identified readily and specifically with a particular sponsored project, instructional activity or other institutional activity, should be treated as indirect costs. Facility costs and departmental administration, are examples of expenses that should be treated as indirect costs.
Salaries and fringe benefits of administrative and clerical staff should normally be treated as indirect costs, as required by Circular A-21. However, in accordance with supplementary guidance on this subject issued by OMB, these costs may be treated as direct costs when the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support and the costs otherwise meet the general criteria for direct charging in Circular A-21 (i.e., can be identified specifically with the project). These situations are considered "unlike circumstances".
- Large, complex programs, such as Program Projects, International Projects, General Clinical Research Centers, 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 which involve data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting, such as epidemiological studies, clinical trials, and retrospective clinical records studies.
- Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars; extensive desktop publishing of workshop materials.
- 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 seagoing research vessels, radio astronomy projects, and other research field sites that are remote from the campus.
- Individual projects requiring project-specific database management; individualized graphics or manuscript preparation; human or animal protocol, IRB preparations and/or other project-specific regulatory 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 would always be appropriate for the situations illustrated in the examples. Where direct charges for administrative and clerical salaries are made, care must be exercised to assure that costs incurred for the same purpose, in like circumstances, are consistently treated as direct costs for all activities.
Non Salary Administrative Costs
The costs of office supplies, postage, local (basic) telephone costs, and membership should normally be treated as indirect costs. Direct charging of these costs may be appropriate if both the following two conditions exist:
When considering charging these types of costs directly to the grant the principle investigator should exercise special care to ensure that, per OMB Circular A-21, the conditions noted above have been met and this situation would constitute "unlike circumstances" rather than normal circumstances.
Although there are differences among the various schools/centers, there often exists within each department a core of administrative personnel who support the various departmental academic missions by providing general support services, including secretarial and clerical support, procurement of material services, and accounting and bookkeeping. This core of general support services at the academic department level which supports a broad range of activities, including federally sponsored research, comprises what the Federal Circular defines as "departmental administration", and is recovered in part by the institution through the reimbursement of indirect costs. Accordingly, schools/centers may not directly charge Federal grants or contracts for any portion of the salary of individuals who are engaged in providing this type of baseline departmental service. Similarly, schools/centers may not assess a "tax" or other similar means of assessing charges to Federal grants and contracts as a means of recovering the cost of administrative effort.
As indicated earlier, the University’s policies permit direct charges for administrative and clerical salaries, office supplies, postage, local telephone expenses, and memberships for business, technical and professional organizations only under special circumstances consistent with Circular A-21. In implementing these policies, the University relies primarily on principal investigators and project directors to determine whether direct charges for administrative or clerical salaries, office supplies, postage, memberships, and similar costs are appropriate for a particular project in accordance with established University policies, and to fully justify these costs to sponsoring agencies in grant applications and contract proposals. If the sponsoring agency accepts the cost as part of the direct cost 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. On the other hand, if the sponsoring agency specifically disapproves the cost, Tufts will rely on the sponsoring agency’s judgement that the cost did not meet the criteria for direct charging and will treat the cost as an indirect cost.
Where the need to incur costs directly on federal grants or contracts has not been anticipated, and therefore not included within the project budget, the principal investigator must obtain written approval from the Office of Vice Provost for Research /appropriate Federal agency to rebudget funds before charging those costs to a federal grant/contract.
The Office of Vice Provost for Research will assure that proper justification is included in the grant/contract proposal to demonstrate a special or unique need for administrative and clerical salaries, office supplies, memberships, local telephone service, postage and other costs that would normally be treated as an indirect cost. The Office of Sponsored Programs Accounting will assure that these types of costs are budgeted for in the grant/contract award or subsequent rebudgetting approval has been obtained from the Office of Vice Provost for Research or Federal agency. Costs not properly justified/approved will be removed from federal grants/contracts.