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: Processing, Documenting, and Approving Financial Transcations;
- 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 University 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.