Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution (see "Treatment of Direct Costs" below).
Identification with the sponsored work rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect costs of sponsored agreements. Typical costs charged directly to a sponsored agreement are the compensation of employees for performance of work under the sponsored agreement, including related fringe benefit costs to the extent they are consistently treated, in like circumstances, by the institution as direct rather than indirect costs; the costs of materials consumed or expended in the performance of the work; and other items of expense incurred for the sponsored agreement, including extraordinary utility consumption. The cost of materials supplied from stock or services rendered by specialized facilities or other institutional service operations may be included as direct costs of sponsored agreements, provided such items are consistently treated, in like circumstances, by the institution as direct rather than indirect costs (see " Treatment of Direct Costs" below), and are charged under a recognized method of computing actual costs, and conform to generally accepted cost accounting practices consistently followed by the institution. [Office of Management and Budget Circular A-21, Section D.]
Treatment of Direct Costs
The government requires that the major research colleges and universities disclose in writing their general practices regarding classification of costs as direct costs as practices may vary between universities (e.g., University X may routinely budget and charge as direct costs long distance telephone expenses, while University Y does not).
At Stevens, there are certain "like circumstances" where costs are consistently treated as direct costs of sponsored projects. Conversely, there are certain "like circumstances" where costs are not considered direct costs, and should NOT be budgeted or charged as direct costs on sponsored projects. However, in all cases, the following standard applies:
Identification with the sponsored work (i.e., the scope of work) rather than the nature of the goods or services is the determining factor in determining direct costs. [Office of Management and Budget Circular A-21, Section D.]
Examples of Costs that are NOT Normally Considered as Direct Costs at Stevens (because an item is not shown below does not mean it is de facto an allowable cost)
At Stevens, the following costs are NOT normally budgeted and charged as direct costs of sponsored projects:
Salaries of individuals engaged in routine departmental or administrative work that benefits all activities of the department (instruction, research, training, public service, etc.), i.e., there is no direct relationship to a specific sponsored project's scope of work
Supplies and materials for routine departmental or administrative activities of the department that benefit all activities of the department (instruction, research, training, public service, etc.), i.e., there is no direct relationship to a specific sponsored project's scope of work
Other costs such as travel, repairs, fees and services, local and long distance telephone expenses, copying and postage that are for routine departmental or administrative use, and do not have a direct relationship to a specific sponsored project's scope of work
General office items with multi-functional use such as computers, fax machines, answering machines, staplers, hole punches, filing cabinets, chairs, desks, calculators, waste baskets, etc.), that do not have a direct relationship to a specific sponsored project's scope of work
Examples of Costs that ARE Normally Considered as Direct Costs at Stevens
At Stevens, the following costs ARE normally budgeted and charged as direct costs. The common element is that the cost is necessary to perform the project's stated scope of work.
Salaries and fringe benefits of faculty, technicians, post docs, graduate research assistants and other staff engaged in performing sponsored project's scope of work
Supplies and materials necessary for performing sponsored project's scope of work
Other costs such as travel, subcontracts, repairs, maintenance, fees and services, telephone expenses, copying, postage, etc., necessary for performing sponsored project's scope of work
Capital equipment that is approved by the sponsor (or internally approved if allowed by the sponsor)
Service/maintenance agreements on capital equipment approved by the sponsor (or internally approved if allowed by the sponsor)
Identification with the sponsored work (i.e., the scope of work) rather than the nature of the goods or services is the determining factor in determining direct costs. [Office of Management and Budget Circular A-21, Section D.]
EXAMPLES
Clerical Salaries
Clerical salaries CAN be budgeted and charged as direct costs under certain circumstances. Simply knowing the "nature of the good or service", e.g., clerical salary, is not sufficient to determine whether the cost is an appropriate direct charge to a sponsored project. In order to make the determination, one must know the cost's relationship to the sponsored work. For example:
Clerical salaries that are paid to individuals entering data from a survey that is part of the sponsored project's scope of work may be appropriately charged as direct costs.
Clerical salaries that are paid to individuals for routine administrative work such as processing purchase requisitions, reviewing monthly ledgers, processing new proposals, etc., and that benefit all aspects of a department, including research, are normally NOT appropriate direct cost charges. [NOTE: An exception may exist for program/project or "center" sponsored agreements where routine administrative work has been described in the scope of work and approved/funded by the sponsoring agency.]
Other Examples
Following are other examples of costs and the circumstances under which they may be incurred. For each cost/circumstance, it is indicated whether the cost would be budgeted and charged as a direct cost under Stevens direct charge guidelines.
Direct Cost?
| Yes | No |
|---|
Salaries expense incurred under the following circumstances...... | | | 1. | Processing purchase orders on a research grant (such as an "R01") | | X | 2. | Processing purchase orders on a center/program project grant (admin effort documented in proposal as part of scope of work) | X | | 3. | Proposal development (writing, editing, copying and mailing proposals) | | X | 4. | Principal investigator effort to write annual project report (may include next budget year's proposal) | X | | 5. | Data entry (data collected under project scope of work) | X | | 6. | Data entry--financial transactions for a research grant are entered into financial shadow system
(Note: may be considered a direct cost if part of the administrative budget on a program/project or center grant AND approved by the sponsor.) | | X |
Supplies and/or services expense incurred under the following circumstances......
| | | 1. | Copying costs for copying purchase orders, monthly ledgers | | X | 2. | Copying costs for annual progress reports | X | | 3. | Mailing costs for shipment of research materials and deliverables if necessary to perform the project's scope of work | X | | 4. | Copying costs for copying forms to mail out to survey recipients (survey is part of project scope of work) | X | | 5. | Manila folders for general office use | | X | 6. | Manila folders for filing survey responses, lab results | X | |
Identification with the sponsored work (i.e., the scope of work) rather than the nature of the goods or services is the determining factor in determining direct costs. [Office of Management and Budget Circular A-21, Section D.)
Justification required in proposals that budget certain costs as direct costs:
For the following cost items (and for any others that a layperson may consider routine and administrative in nature), specific written justification as to the relationship between the cost and the proposed project's scope of work should be completed and submitted to the Faculty Support Center (for Office of Sponsored Research)as a part of the proposal to the sponsoring agency. The documentation should explain the direct benefit relationship between these cost items and the proposed scope of work.
- Clerical and administrative salaries
- Office Supplies
- Postage
- Local telephone charges
- Memberships
- Subscriptions
- Answering machine/beepers
- Items generally thought of as having multi-functional use (staplers, hole punches, filing cabinets, chairs, desks, computers, printers, fax machines, calculators, waste baskets, etc.)
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