What May be Charged Directly to a Grant Applying the Concepts of Allowability, Allocability, Reasona

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What May be Charged Directly to a
Grant?Applying the Concepts of Allowability,
Allocability, Reasonableness and Consistency to
Your Job

• taken from ASPIRE

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OMB A-21 Key Concepts

• Chief Aim to have the federal government pay its
  fair share of the costs of research conducted
  at the University.
• Means for achieving this aim principles for
  determining the costs applicable to research and
  development, training, and other sponsored work
  performed by universities under sponsored
  agreements (grants, contracts, and other
  agreements) with the Federal Government.

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The Governments Fair Share of the costs of
Organized Research(net of credits)
Key Concepts
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Facilities and Administrative (F A or
indirect) costs
Key Concepts

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

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What is the F A rate?
Key Concepts
e.g., departmental admin salaries IT
infrastructure FAS SPA salaries
Indirect Costs
F A rate
Direct Costs Cost Sharing
e.g., academic year faculty effort commitments
e.g., materials supplies research personnel
faculty summer salary
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ALLOWABLE Costs
Key Concepts

• They must be reasonable
• They must be allocable to sponsored agreements
  under the principles of A-21
• They must be given consistent treatment through
  application of those generally accepted
  accounting principles appropriate to the
  circumstance
• They must conform to any limitations or
  exclusions set forth in A-21 or in the sponsored
  agreement

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ALLOCABLE Costs
Key Concepts

• A cost is allocable to a particular cost
  objective if the goods or services involved are
  chargeable or assignable to such cost objective
  in accordance with relative benefits received.

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REASONABLE Costs
Key Concepts

• A cost that a prudent person would have incurred
  under the circumstances prevailing when the
  purchase was made.

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CONSISTENCY
Key Concepts

• An institution must use the same practices for
  estimating costs in budgeting a proposal and for
  accumulating and reporting costs.
• Each type of cost may be allocated only once and
  on only one basis to any sponsored agreement or
  cost objective.

OMB A-21 Appendix A - Cost Accounting Standards
9905.501 and 502
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Key Concepts
A-A-R-C Direct Cost Analysis
Allowability
Consistency
Conclusion
Reasonableness
Allocability
Does A-21 say this type of cost is allowable?
Does this item or activity specific-ally benefit
the project?
Would a prudent person have paid this price?
Has this cost been double-counted as both a
direct and indirect cost?
Is the cost allowable as a direct cost?
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Case 1 Administrative salaries
The Facts Professor Academia is writing a
proposal to the NIH for an Obesity Project
involving human subjects. Shed like to have an
administrator to provide support for the Obesity
Project. Here are the tasks shes thinking of
assigning to the new hire
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Proposed Obesity Project administrator tasks
(abbreviated)
Case 1

• Proposal preparation
• Coordinating human subjects
• Project Survey preparation (administrative)
• Arranging travel to a conference on obesity
• Course and committee materials
• Food for weekly lab meeting
• Filing/keeping desk in order
• Administering a journal
• Work related to Education and Obesity

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Case 1

• The Issue
• May Professor Academia put some or all of the
  admins compensation on the proposed Obesity
  Project budget?
• In other words
• Which of the listed tasks would constitute
  allowable effort on the Obesity Project?

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A-A-R-C Direct Cost Analysis
Case 1
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Not mentioned in A-21
Normally allowable only as an indirect cost
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Allowability First Pass
Case 1
Effort
Yes or No?
NO Section F.6. Depart Admin - Indirect
MAYBE or Depart Admin - Indirect?
YES
MAYBE or Depart Admin - Indirect?
NO Section B. Instruction
MAYBE or Depart Admin - Indirect?
NO Section F.6. Depart Admin - Indirect
NO Depart Admin - Indirect or something else?
NO jumping ahead not allocable to this
project, perhaps to E O Project
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A-A-R-C Direct Cost Analysis
Case 1
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Different Purpose Circum-stance Test
Not mentioned in A-21
Normally allowable only as an indirect cost
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FAS Administrative Checklist(really, a different
purpose and circumstance test)
Case 1

• The following three criteria must be met in order
  to be considered for direct charging
• The persons activity can be readily identified
  specifically with the project with a high degree
  of accuracy.
• The position is required by the project scope,
  due to the projects special purpose or
  circumstance.
• The position is specifically budgeted as a line
  item in the proposal budget with duties discussed
  in the budget justification section.

AND, the effort devoted to the project is gt .25
FTE
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Allocability Conclusions
Case 1
Effort
Yes or No?
YES specifically identified YES required by
project scope YES salary and fringe are budget
line items and duties are in budget justification
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A-A-R-C Direct Cost Analysis
Case 1
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Different Purpose Circum-stance Test
Reasonable Test
Not mentioned in A-21
Normally allowable only as an indirect cost
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Reasonable Test
Case 1

• Would a prudent person have paid this price?
• Is the proportion of the persons time devoted to
  coordinating human subjects, survey preparation,
  and arranging travel reasonable?

Salary and Fringe are set by the FAS, so of
course they are reasonable
Lets say YES to both questions
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A-A-R-C Direct Cost Analysis
Case 1
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Different Purpose Circum-stance Test
Reasonable Test
Consistency Test
Not mentioned in A-21
Normally allowable only as an indirect cost
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Consistency Test
Case 1

• Is the percentage of compensation included in the
  proposal budget different from the percentage
  charged to the fund through payroll?
• Double check Are you charging the Obesity
  Project for the costs of some administrative
  tasks that you usually charge to a departmental
  account?

• Lets say NO to both questions

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A-A-R-C Direct Cost Analysis
Case 1
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Different Purpose Circum-stance Test
Reasonable Test
Consistency Test
?
Not mentioned in A-21
Normally allowable only as an indirect cost
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CONCLUSION
Case 1

• Salary and fringe equal to the proportion of an
  administrators time spent finding and
  coordinating human subjects, preparing the
  survey, and arranging travel to the obesity
  conference may be charged to the grant (i.e.,
  theyre ALLOWABLE), provided that
• The proportion is at least 25 of an FTE and,
• The salary and fringe are a specific line item in
  the proposal budget and discussed in the budget
  justification.

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ALLOWABILITY Summary of Conclusions
Case 1
Compensation Effort for
Yes or No?
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But what do I do with the rest of the
administrators salary and fringe?
Case 1

• Determine whether his or her effort spent on
  other projects passes the A-A-R-C analysis (i.e,
  it is allowable as a direct expense on another
  grant.)
• Charge remaining amounts to the appropriate
  departmental account.

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Case 2 Computers and Communications

• The Facts
• Professor Moose just received funding from the
  USAID to do field work in a Distant Land on the
  Far Away Project. He and his research staff will
  be collecting data at the Project site and
  analyzing it there and here in Cambridge.
  Professor Moose often uses his cell phone to stay
  in contact with his research staff in the field
  and with collaborators on the Far Away Project.
  He also does a significant amount of his work by
  email from his home computer, in part because of
  the time difference between Cambridge and the
  site of the Far Away Project, and would like to
  charge the costs of his Internet service to the
  Project award. Hed like to charge the costs of
  the following items or activities directly to his
  Project grant.

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Proposed charges to the Far Away Project
Case 2

• a laptop computer to take with him to record data
  in the field
• a desktop computer for his lab (itll sit in the
  open, common area of his lab so his postdocs and
  students have access to it) for analyzing results
  using a special software program, once he returns
  from the field
• the specialized software
• the cell phone and monthly cell phone service
  fees, including roaming charges
• the costs of his home Internet service

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Case 2

• The Issue
• May Professor Moose put some or all of his
  computer and communications charges on the
  proposed Far Away Project budget?

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A-A-R-C Direct Cost Analysis
Case 2
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Not mentioned in A-21
Normally allowable only as an indirect cost
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Allowability First Pass
Case 2
Charge
Yes or No?
MAYBE Section J.31. Materials and Supplies
(cost lt 5000 and life lt 1 year)
MAYBE Section J.31. Again
YES
MAYBE Section J.9. allowable but usually
treated as FA
NO this is a personal expense
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A-A-R-C Direct Cost Analysis
Case 2
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Allocability Tests
Not mentioned in A-21
Different Purpose Circum-stance Test
Normally allowable only as an indirect cost
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Allocability Test
Case 2

• Was the cost incurred solely to advance the work
  under the sponsored agreement?
• Does the cost benefit the work under the
  sponsored agreement and other projects as well?

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Allocability Conclusions
Case 2
Charge
Yes or No?
YES single use or reasonable allocation plan
for multiple uses
NO multiple uses with no reasonable allocation
plan, indirect
YES single use
NO unlikely to be single use or a reasonable
allocation plan for multiple use, indirect
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A-A-R-C Direct Cost Analysis
Case 2
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Allocability Tests
Reasonable Test
Not mentioned in A-21
Different Purpose Circum-stance Test
Normally allowable only as an indirect cost
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Reasonable Test
Case 2

• Would a prudent person have paid this price for
  the laptop and software?
• If the laptop is for multiple uses, is the
  allocation plan reasonable?

Lets say YES to both questions
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A-A-R-C Direct Cost Analysis
Case 2
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Allocability Tests
Reasonable Test
Consistency Test
Not mentioned in A-21
Different Purpose Circum-stance Test
Normally allowable only as an indirect cost
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CONSISTENCY
Case 2

• Is the amount included in the proposal budget for
  materials and supplies, which includes the costs
  of the laptop and software, grossly different
  from the actual costs charged to the grant?
• Double check Are you charging the Far Away
  Project for the costs of computers and
  communications that you usually charge to a
  departmental account?

Lets say NO to both questions
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A-A-R-C Direct Cost Analysis
Case 2
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct
cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specific-ally benefit the project?
Explicitly NOT allowable
Allowable as direct cost
Allocability Tests
Reasonable Test
Consistency Test
?
Not mentioned in A-21
Different Purpose Circum-stance Test
Normally allowable only as an indirect cost
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CONCLUSIONS
Case 2

• If Professor Moose purchases a laptop
  specifically for the purpose of advancing
  (benefiting) the work of the Far Away Project,
  then the item is readily identified specifically
  with the project with a high degree of accuracy
  and its full cost may be allocated to the
  Project. To treat its cost as a direct charge,
  he should include the cost of laptop in the
  proposal budget under Materials and Supplies
  and describe it in the budget justification.
• The entire cost of the specialized software is
  allowable as a direct cost because it was
  incurred solely to advance the work under the Far
  Away Project.

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ALLOWABILITY Summary of Conclusions
Case 2
Charge
Yes or No?
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But what do I do with the costs of computers and
communications that are not allowable as direct
charges on the Project?
Case 2

• Charge them to the appropriate departmental
  account, unless they are personal expenses, which
  should be covered by the individual faculty
  member.

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Key Concepts
May the cost of this item or activity be treated
as a DIRECT cost? A-A-R-C Direct Cost Analysis
Allowability Does A-21 say this type of cost is
allowable?
Consistency Has this cost been double-counted as
both a direct and indirect cost?
Conclusion Is the cost allowable as a direct cost?
Reasonableness Would a prudent person have paid
this price?
Allocability Does this item or activity
specifically benefit the project?
Explicitly NOT Allowable (e.g., J3. Alcoholic
Beverages)
STOP
Reasonable Test Would a prudent person pay this
price for this item or activity for the
performance of the sponsored agreement? If YES
then the cost is Reasonable.
Consistency Test 1. Have you used different
practices for estimating costs in the proposal
budget and for accounting/billing/ reporting
costs? 2. Have you charged the same cost both
indirectly and directly when it is incurred for
the same purpose and circumstance? If NO to both
questions, then the cost passes the Consistency
Test.
The cost is allowable as a direct cost in the
measure to which it benefits the project
Allocability Test 1. Was the cost incurred
solely to advance the work under the sponsored
agreement? If YES, then the cost is allocable. 2.
Does the cost benefit the work under the
sponsored agreement and other projects as well?
If YES, then the cost must be allocated in the
measure to which it benefited the work under the
sponsored agreement and a written allocation plan
must be in place.
Allowable as Direct Cost (e.g., J31. Materials
Supplies)
NOT explicitly in A-21 (e.g., Specific Gizmos)
Different Purpose Circumstance Test 1. Is
this a non-federal grant? OR 2.a. Can the
cost be identified specifically with the
project? b. Is it required by the projects
scope? c. Is it a line item in the proposal
budget and included in the budget
justification? If YES to 1 or 2 ( all 3
questions), the cost is allowable and allocable
as a direct cost.
Normally allowable only as an indirect
cost (e.g., F6. Departmental Administration)