Direct Costs on Sponsored Projects
- Vice President for Research
- Associate Vice President for Research Administration
- Pamela Webb
All direct costs charged to sponsored projects awarded to the University of Minnesota must be allowable, allocable, necessary and reasonable for carrying out the objectives of the sponsored project as defined in Uniform Guidance (2 CFR 200). To be consistent in managing direct costs, the University extends these requirements to both federal and nonfederal sponsors.
In addition all direct costs must be:
- charged to sponsored projects as defined in the Administrative Policy: Documenting/Financial Transactions;
- separately budgeted and accounted for subject to terms of sponsoring agency;
- charged at their actual prices;
- travel costs must comply with the most restrictive travel policy of either the U/M or Sponsor;
- all administrative type costs (see a Direct Cost Allowability grid) are explicitly included in the budget justification or have received prior approval of the sponsor;
- direct costs charged to sponsored projects that result in a cost overrun or deficit spending must be moved to a non-sponsored account in accordance with Administrative Procedure: Moving Uncollectible Costs to Non-Sponsored Programs;
- subaward classification, development, initiation, monitoring, invoice processing, modifications and closeout must be in accordance with Administrative Procedure: Charging Subaward Costs to Sponsored Projects and
- internal controls must be in place to identify the expense charged to sponsored projects in accordance with the Administrative Policy Reconciling and Verifying General Ledger Accounts and Other Financial Information;
Unacceptable direct charging practices include:
- purchasing items simply to use an unobligated balance;
- rotating costs among projects;
- charging the budget amount (in contrast to charging an amount based on actual costs/usage);
- assigning charges to an award before the cost is incurred (except as an encumbrance);
- charging an expense exclusively to an award when the expense has supported other activities/awards and
- applying a "departmental tax" to projects for clerical, secretarial, and administrative costs
Principal Investigators (PIs) are responsible for ensuring that all direct costs charged to their sponsored projects comply with this policy. Certified Approvers (CAs) and departmental approvers also have responsibilities for reviewing and approving certain transactions on sponsored projects to ensure that they comply with this policy.
Reason for Policy
This policy has been developed to meet the requirements set forth in the Uniform Guidance (UG or 2 CFR 200) as it is applicable to Institutions of Higher Education. PIs, CAs and departmental approvers involved in reviewing and charging direct costs to sponsored projects must understand and follow this policy and related procedures to ensure that direct costs are properly charged and documented to meet the UG regulations.
|Primary Contact(s)||Pamela Webbemail@example.com|
|Direct charging policy questions||SPA Grant Administrator||612-624-5599|
- Allocable Costs
- A cost is allocable to a particular sponsored project or other cost objective if the goods and services involved are chargeable or assignable to that sponsored project or cost objective in accordance with relative benefits received.
- Allowable Costs
- Costs that are (a) reasonable; (b) allocable to sponsored projects under the principles and methods outlined in Uniform Guidance (UG or 2 CFR 200); (c) given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances; and (d) conform to any limitations or exclusions set forth in Uniform Guidance (UG or 2 CFR 200) or in the sponsored agreement as to types or amounts of cost items.
- A dealer, distributor, merchant, or other seller providing goods or services that are required for the conduct of a program.
- Direct Costs
- “Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.” (OMB Uniform Guidance 200.413a).
- Pass-through Entity
- An entity that provides a prime sponsored award to a subrecipient to carry out a portion of the prime sponsored award’s program. (Example: UMN receives an award from the NIH. A portion of that award will be done by another university by way of a subaward issued from UMN to the other university. UMN is the pass-through entity. NIH -> UMN -> Other University.)
- Reasonable Costs
- “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” (OMB Uniform Guidance 200.404).
- Sponsored Project
- An externally funded activity that is governed by specific terms and conditions. Sponsored projects must be separately budgeted and accounted for subject to terms of the sponsoring organization. Sponsored projects may include grants, contracts (including fixed price agreements), and cooperative agreements for research, training, and other public service activities.
- A formal written agreement made between the University and a subrecipient in order for the subrecipient to perform a portion of the University’s scope of work under a sponsored project or program that incorporates the sponsored award terms and conditions.
- An entity that receives a subaward from a pass-through entity to carry out part of a program; but does not include an individual that is a beneficiary of such program. The subrecipient may be a domestic or foreign educational institution, for –profit, non-profit organization or government. An individual cannot serve as a subrecipient.
- Uniform Guidance (UG or 2 CFR 200)
- This document establishes uniform regulations for each federal agency to follow regarding the administration of projects sponsored by the federal government. In addition, each federal agency has its own regulations that are listed in the Code of Federal Regulations (CFR) and explained in its policy handbook (if it has one).
- Principal Investigators (PIs)
- Ensures the appropriateness of all charges on sponsored projects. Ensure the consistent application of direct costing practices to their federal and non-federal sponsored projects with the assistance of the department research administrator (DRA), Sponsored Projects Administration (SPA), and Sponsored Financial Reporting (SFR). Prepares proposal budgets, approves subrecipients, justifies costs, initiates and oversees the incurring of project costs, manages subawards and tracks costs.
- Department Research Administrator (DRA)
- Assists principal investigators in preparing proposal budgets, justifying costs, manages subawards, charging costs and tracking costs. Ensures consistency of charging practices within the unit, reviews sponsored project proposals for justification of direct costs requested, especially when costs normally charged as F&A/indirect are proposed as direct costs. In conjunction with principal investigators, maintains financial records for reviews by internal or external auditors.
- Department Approver
- The individual in the department, usually the departmental accountant or administrator that is responsible for reviewing financial transactions for accuracy (including accounts being charged), appropriateness, and compliance with applicable policies and procedures. Takes action to approve or return financial transactions based on the review.
- Certified Approver (CA)
- A Certified Approver (CA) is an individual who has been authorized by the Vice President for Research and appointed by his/her Associate Dean for Research to approve/deny certain financial transactions based on administrative (type of activity, dollar thresholds) requirements of the University and sponsor. CA reviews for accuracy (including accounts being charged), appropriateness and compliance with applicable policies, procedures and Sponsor agreement. Takes action to approve or return financial transactions based on the review.
- Department Head/Center Directors
- Establishes effective processes and controls that will ensure compliance with this policy. Communicates these practices to all employees involved with sponsored research within the department.
- Collegiate Research Associate Dean
- Establishes effective processes and controls that will ensure compliance with this policy. Communicates these practices to all employees involved with sponsored research within the college and departments. Assigns certified approvers within the unit.
- Sponsored Projects Administration (SPA)
- Assists in interpretation of federal regulations, such as Uniform Guidance (UG or 2 CFR 200) and sponsor policy. Develops and maintains policies and procedures in accordance with the regulations.
- Sponsored Financial Reporting (SFR)
- Assists in interpretation of federal regulations and sponsor policy. Develops and maintains policy and procedures in accordance with the regulations. Prepares and submits to sponsors all required financial invoices and reports.
- Administrative Policy: Processing Accounting Transactions
- Administrative Policy: Reconciling and Verifying General Ledger Accounts and Other Financial Information
- Administrative Policy: Selling Goods and Services to University Departments.
- Administrative Policy: Traveling on University Business
- Administrative Procedure: Moving Uncollectible Costs to Non-Sponsored Programs
- SPA Procedure: Managing Sponsored Projects at the University of Minnesota
- Subaward information and resources for working with subawards
- Subaward Roles and Responsibilities
- PI Quick Guide: Major Changes in the Uniform Guidance Affecting Proposal Budgets and Charging of Direct Costs
- Uniform Guidance (UG or 2 CFR 200)
- October 2019 - Comprehensive Review, Minor Revision. 1. Minor revisions for clarify and consistency 2. Titles (certified approver and department research administrator) standardized throughout policy and procedure3. Clarification to update sponsored financial reporting responsibilities.
- August 2015 - New Policy. Elevates the components of charging direct costs by moving the former procedure into to its own policy. Provides examples of allowable and unallowable direct costs in the new appendix. Formalizes practices and procedures around subawards into one University procedure. Clarifies changes related to the new OMB Uniform Guidance, where needed.