Procedure  |  Direct Costs on Contracts and Grants

Federal sponsors require that direct costs of research be related to specific actions support by a contract or grant. These costs must be reasonable and necessary, not exceeding the costs that would be incurred by a prudent person; and they must be allowable, allocable, and easily identifiable as a benefit to the project. Because institutions provide infrastructure support that is not easily identifiable with specific projects, they are allowed to apply Facilities and Administrative (F&A; formerly indirect costs) support costs to grants and contracts on an average rate basis to help offset the infrastructure costs. Â鶹¹û¶³´«Ã½â€™s F&A rate is negotiated with the U. S. Department of Health and Human Services. The cost pools used to determine Â鶹¹û¶³´«Ã½â€™s rate includes items such as utilities, depreciation, library services, sponsored program administration, and a portion of departmental and central personnel. Because Tennessee Tech is reimbursed for these administrative supplies as a part of the F&A rate, the costs of these items cannot be charged as direct costs.

Procedure

Â鶹¹û¶³´«Ã½ follows the 2 CFR 200.412 in determining the treatment of costs as direct or indirect. Â鶹¹û¶³´«Ã½â€™s F&A costs are consistent with the definitions of specific F&A cost categories in the 2 CFR 200.414. The following criteria must be considered in determining the allowability of a cost charged to grants and contracts:

• Reasonable – a prudent person would have purchased this item and paid this price. Considerations involved in the determination of the reasonableness of a cost are whether or not the cost is of a type generally recognized as necessary for the operation of the institution or the performance of the sponsored project.
• Allocable – expenses can be assigned to the activity based on the benefit derived. A cost is allocable to a grant, contract, or sponsored project if it is incurred solely to advance the work under the contract/agreement.
• Consistently Treated – like expenses must be treated the same in like circumstances. The 2 CFR 200.413 states that no cost can be charged to a grant, contract, or other sponsored project as a direct charge if other costs incurred for the same purpose in the same circumstances have been included in the negotiated F&A rate.

Implementation

It is the responsibility of Â鶹¹û¶³´«Ã½ to determine the allowability of direct costs to a grant, contract, or other sponsored project. The principal investigator/project director is responsible for determining the need for the costs included in the project budget and providing justification for each charge. Prior to submitting the proposal, Research & Economic Development will review the project budget and justification for adherence with 2 CFR 200 or uniform guidance.

The principal investigator/project director and their project bookkeeper are responsible for assuring that costs assigned to projects are appropriate. Requests for direct charging of items normally considered to be F&A costs should be address to Research & Economic Development. Research & Economic Development will be responsible for review and approval of any exceptions to the policy.

For a detailed list of allowable and unallowable costs on grants, click here (based on information from the University of Maine).

Updated March 27, 2018