Charging Sponsored Programs Policy
|POLICY TITLE:||Carnegie Mellon University Charging Sponsored Programs Policy|
|DATE OF ISSUANCE:||This policy was originally issued on July 5, 1994 and updated on January 22, 2004. This version of the Charging Sponsored Programs Policy was approved on November 12, 2020.|
|ACCOUNTABLE DEPARTMENT/UNIT:||Controller’s Office. Specific questions regarding policy content should be directed to the senior director, Cost Analysis and Sponsored Projects.|
|ABSTRACT:||The purpose of this policy is to ensure appropriate treatment of all costs incurred in support of sponsored programs in compliance with Uniform Guidance (UG).|
This statement sets forth the Policy for appropriate charges to sponsored programs, including treatment of salary and non-salary administrative costs, incurred in support of sponsored research projects in compliance with the Office of Management and Budget (OMB) 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance).
This Policy applies to expenditures charged to all sponsored projects. Particular attention is paid to salary and benefit costs related to administrative and clerical staff and certain non-salary expenses, which are incurred in performance of sponsored awards. Exceptions may be made for non-federal sponsored awards, which do not pay overhead when the sponsoring agency’s policies allow administrative costs to be charged as a direct cost.
1.2 General Understanding
1.2.1 Main Guidance
1.2.2 Unallowable Costs
Unallowable costs should never be charged directly to a federally sponsored award. If an unallowable cost is discovered during routine periodic award reviews, a cost transfer should be immediately submitted to correct the error.
a. Computing Devices
Machines used to acquire, store, analyze, process and publish data and other information electronically, including accessories (or “peripherals”) for printing, transmitting and receiving or storing electronic information.⁴
b. Direct Costs
Charges 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.⁵
c. Facility & Administrative (F&A)/Indirect Costs
Costs 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.⁶
3.0 Roles and Responsibilities
The following roles and responsibilities have been established to provide reasonable assurance of internal control over compliance requirements. All CMU faculty and staff are responsible for monitoring the expenditures throughout the lifecycle of the award to ensure all charges to sponsored awards comply with the sponsor requirements and with Uniform Guidance.
3.1 The Principal Investigator (PI) and Department/Local Level Managing Unit
The PI and department/local level managing unit are responsible for:
- Determining applicability of all direct costs included in the proposal budget. Specifically determining all criteria has been met before including administrative costs in a federal proposal budget.
- Identifying and documenting any requests for direct-charged administrative expenses in the budget and budget justification with sufficient detail to describe the necessary benefit to the project.
- Ensuring only approved administrative costs are direct-charged to awards on which those particular administrative costs have been approved.
- Identifying and removing any inappropriate direct charges or unapproved administrative charges during routine reviews of financial activity on all federal awards for which they are responsible.
- Obtaining prior sponsor approval, as required, when it is determined that the direct charging of administrative costs is appropriate but was not included in the original budget.
3.2 Office of Sponsored Programs (OSP)
OSP is responsible for:
- Reviewing proposals to determine if administrative costs were budgeted and justified appropriately complying with sponsor guidelines and University Policies and Procedures.
3.3 Sponsored Projects Accounting (SPA)
SPA is responsible for:
- Coordinating with department during award closeout to clarify any potential issues and remove unallowable direct costs according to federal and sponsor guidelines and University Policies and Procedures.
3.4 Foundation Relations (University Advancement)
Foundation Relations is responsible for:
- Serving as the primary point of contact engaging private foundations for the purposes of advancing university sponsored program initiatives.
- Advising departments, as needed, regarding requests for proposals from private foundations.
- Confirming a foundation sponsor’s indirect cost policy prior to proposal submission and/or obtaining approval from the foundation to budget indirect costs, or a portion thereof, in the absence of sponsor provided guidance.
4.1 The Four Guiding Principles
There are four guiding principles or criteria used to determine whether a cost can be charged to a sponsored agreement: allowability, reasonableness, allocability and consistency. These criteria, which are defined below, apply for both direct and indirect (F&A) costs. For a given cost to be charged to a sponsored agreement, all four of these criteria must be met.
For a cost to be considered allowable, it must:
- Not be designated as “unallowable” under the Uniform Guidance, specifically subpart E – Cost Principles.
- Adhere to agency-specific policies and award-specific terms and conditions regarding specific items of cost.
- Adhere to university policies regarding specific items of cost.
For a cost to be considered reasonable, all of the following conditions must be met:
- Recognized as necessary for the operation of the institution or the performance of the agreement.
- Consistent with the requirements imposed by arms-length bargaining, federal or state laws and regulations and ethical business practices.
- Related to an action and/or in an amount deemed within the norms of business conduct (i.e., passes the “prudent person” test).
For a cost to be considered allocable, it must:
- Be incurred solely to advance the work under a sponsored agreement; or
- Benefit both the sponsored agreement and other work of the institution, in proportions that can be approximated through the use of reasonable methods; and
- Be assignable to the benefiting activities without undue effort or cost.
For a cost to meet the requirement of consistency, it must be treated in the same manner (i.e., as either direct or indirect) when used in like circumstances. This means that for all categories of costs, all activities within the university must account for such in the same manner when incurred in similar circumstances.
4.2 Direct Costs
A direct cost of a sponsored agreement is one that can be identified specifically with that sponsored project or that can be assigned to the sponsored project relatively easily with a high degree of accuracy.
General cost categories that may be charged as direct costs to individual sponsored agreements include, but are not limited to:
- Salaries, wages and related fringe benefit costs of sponsored project personnel. Such individuals typically include the PIs, research associates/assistants and technicians.
- Laboratory/scientific/technical materials, services and supplies obtained from internal, as well as external, vendors.
- Capital equipment costs.
- Travel costs.
- Consultant/subcontract costs.
- Participant support costs.
- Other direct costs as specifically required, budgeted and/or approved as necessary to accomplish the purposes of the individual sponsored agreement.
If a cost benefits two or more projects/activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects/activities based on the proportional benefit. If the cost benefit cannot easily be discerned, the cost should be considered indirect and be included in the facilities and administrative category.
4.3 Indirect Costs
Indirect costs of sponsored agreements are those that are incurred for common or joint objectives and cannot be identified readily or specifically with a particular sponsored project or any other institutional activity.
Costs that are normally charged as indirect costs of sponsored agreements (via an F&A rate) include, but are not limited to:
- Costs related to the university’s physical infrastructure, including building and equipment depreciation, interest associated with external debt issuances to finance facilities-related projects and operations and maintenance (e.g., utilities, janitorial services).
- Costs of the university’s libraries.
- General administrative costs, including central offices such as the Office of the President, Office of the General Counsel (OGC), Office of Human Resources (OHR) and the Finance Division, including Payroll Services.
- Sponsored project administrative costs, including the Office of Sponsored Programs (OSP), Sponsored Projects Accounting (SPA), Cost Analysis and Office of the Vice President for Research (OVPR).
- Departmental administrative costs such as salaries, wages and related fringe benefit costs of departmental personnel who provide administrative support to the sponsored project personnel, including administrative and clerical staff, office equipment, subscriptions and memberships and local telephone and network communications.
- Materials, supplies and services of a more general nature, such as office supplies, general/administrative copying services and office equipment maintenance. Any cost included in the categories above that is incurred for the same purpose, in like circumstances, must be treated either as a direct cost only or as an indirect cost only of the university’s sponsored agreements.
4.4 Unlike Circumstances
In certain circumstances, costs that are normally charged as indirect costs to sponsored agreements may be charged as direct costs of those agreements. For these costs to be appropriate direct costs, they must be incurred in circumstances that are different or unlike the circumstances in which they are normally incurred. Generally, an unlike circumstance is defined as an activity/use of the cost item that is substantively greater in amount or different in purpose than is typical.
Specifically, to direct charge a cost that would ordinarily be charged as indirect, all of the following requirements must be met:
- The sponsored agreement has an extraordinary need for the item or service that is beyond the level of services normally provided by departmental administration.
- The cost can be specifically identified to the technical scope of work conducted under the project and is appropriately documented.
- The cost is specified in the proposed budget of the sponsored agreement and the special circumstances requiring direct charging are justified in the proposal.
- The sponsoring agency accepts (i.e., does not specifically disapprove) the cost as part of the project’s direct cost budget.
The evaluation of unlike circumstances is made on a case-by-case basis. Every effort should be made to address and evaluate these situations during proposal preparation to guarantee approval as a direct cost. If, however, these costs are identified during the course of the project, the principal investigator is required to maintain sufficient justification of the unlike circumstance, which may include written approval from the sponsor. If these costs are not clearly identified in the budget justification, the additional documentation prepared by the PI must be submitted to SPA during the award closeout process to determine allowability of the charge. If the documentation supports unlike circumstances, the cost may be charged directly to the sponsored project.
4.5 Administrative and Clerical Salary Costs
In instances where sponsored projects require personnel expenses normally identified as administrative costs, such costs may be charged to sponsored agreements as direct costs only when all of the following conditions are met⁷:
- Administrative or clerical services are integral to a project or activity.
- Individuals involved can be specifically identified with the project or activity.
- Such costs are explicitly included in the budget or have the prior written approval of the sponsored awarding agency.
- The costs are not also recovered as indirect costs.
4.6 Inclusion of Administrative and Clerical Salary Costs in Program Budget
Where administrative or secretarial salary costs are contemplated as direct charges to a sponsored award, such costs must be specifically itemized in the proposed budget, which will be transmitted to the funding sponsor. The OSP can assist with the development of proposal budgets and can answer questions relative to a specific proposal or award.
4.7 Administrative Non-Salary Costs
The Uniform Guidance requires that certain departmental expenses related to the normal administration of sponsored programs generally be treated as F&A costs and reimbursed as part of the institution's overhead rate.
4.7.1 Materials and supplies costs, including costs of computing devices⁸
Costs incurred for materials, supplies and fabricated parts necessary to carry out a federal award are allowable.
Purchased materials and supplies must be charged at their actual prices, net of applicable credits. Withdrawals from general stores or stockrooms should be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consistently applied. Incoming transportation charges are a proper part of materials and supplies costs.
Materials and supplies used for the performance of a federal award may be charged as direct costs. In the specific case of computing devices, charging as direct costs is allowable for devices that are essential and allocable, but not solely dedicated, to the performance of a federal award with appropriate budget justification in the proposal budget.
4.7.2 Publication and printing costs⁹
Publication costs for electronic and print media, including distribution, promotion and general handling, are allowable. If these costs are not identifiable with a particular cost objective, they should be allocated as indirect costs to all benefiting activities of the non-federal entity.
Page charges for professional journal publications are allowable where:
- The publications report work supported by the federal government.
- The charges are levied impartially on all items published by the journal, whether or not under a federal award.
4.8 Sponsor Requirements
Sponsors may have more restrictive guidelines; departments should consult the OSP when in doubt about the acceptability of a proposed cost.
5.0 Related Information
5.1 2 CFR Part 200 – Uniform Administration Requirements, Cost Principles and Audit Requirements for Federal Awards (i.e., Uniform Guidance)
¹ §200.412 Classification of costs
² §200.413 Direct costs
³ §200.414 Indirect (F&A) costs
⁴ §200.20 Computing devices
⁵ §200.413 Direct costs
⁶ Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs)
⁷ §200.413 Direct costs
⁸ §200.453 Materials and supplies costs, including costs of computing devices
⁹ §200.461 Publication and printing costs