CIRCULAR
A-21 (Revised 8/8/00)
CIRCULAR NO.
A-21
Revised
TO THE HEADS
OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT:
Cost Principles for Educational Institutions
1. Purpose.
This Circular establishes principles for determining costs applicable
to grants, contracts, and other agreements with educational institutions
. The principles deal with the subject of cost determination, and
make no attempt to identify the circumstances or dictate the extent
of agency and institutional participation in the financing of a
particular project. The principles are designed to provide that
the Federal Government bear its fair share of total costs, determined
in accordance with generally accepted accounting principles, except
where restricted or prohibited by law. Agencies are not expected
to place additional restrictions on individual items of cost. Provision
for profit or other increment above cost is outside the scope of
this Circular.
2. Supersession.
The Circular supersedes Federal Management Circular 73-8, dated
December 19, 1973. FMC 73-8 is revised and reissued under its
original designation of OMB Circular No. A-21.
3. Applicability.
a. All Federal
agencies that sponsor research and development, training, and other
work at educational institutions shall apply the provisions of this
Circular in determining the costs incurred for such work. The principles
shall also be used as a guide in the pricing of fixed price or lump
sum agreements.
b. In addition,
Federally Funded Research and Development Centers associated with
educational institutions shall be required to comply with the Cost
Accounting Standards, rules and regulations issued by the Cost Accounting
Standards Board, and set forth in 48 CFR part 99; provided that
they are subject thereto under defense related contracts.
4. Responsibilities.
The successful application of cost accounting principles requires
development of mutual understanding between representatives of
educational institutions and of the Federal Government as to their
scope, implementation, and interpretation.
5. Attachment.
The principles and related policy guides are set forth in the
Attachment, "Principles for determining costs applicable to grants,
contracts, and other agreements with educational institutions."
6. Effective
date. The provisions of this Circular shall be effective October
1, 1979, except for subsequent amendments incorporated herein
for which the effective dates were specified in these revisions
(47 FR 33658, 51 FR 20908, 51 FR 43487, 56 FR 50224, 58 FR 39996,
61 FR 20880, 63 FR 29786, 63 FR 57332, and 65 FR 48566). The provisions
shall be implemented by institutions as of the start of their
first fiscal year beginning after that date. Earlier implementation,
or a delay in implementation of individual provisions, is permitted
by mutual agreement between an institution and the cognizant Federal
agency.
7. Inquiries.
Further information concerning this Circular may be obtained by
contacting the Office of Federal Financial Management, Office
of Management and Budget, Washington, DC 20503, telephone (202)
395-3993.
Attachment
PRINCIPLES
FOR DETERMINING COSTS APPLICABLE TO GRANTS,
CONTRACTS, AND OTHER AGREEMENTS WITH
EDUCATIONAL INSTITUTIONS
TABLE OF CONTENTS
A. Purpose
and scope
1. Objectives
2. Policy
guides
3. Application
4. Inquiries
B. Definition
of terms
1. Major functions
of an institution
2. Sponsored
agreement
3. Allocation
4. Facilities
and administrative (F&A) costs
C. Basic
considerations
1. Composition
of total costs
2. Factors
affecting allowability of costs
3. Reasonable
costs
4. Allocable
costs
5. Applicable
credits
6. Costs incurred
by State and local governments
7. Limitations
on allowance of costs
8. Collection
of unallowable costs
9. Adjustment
of previously negotiated F&A cost rates containing unallowable
costs
10. Consistency
in estimating, accumulating and reporting costs
11. Consistency
in allocating costs incurred for the same purpose
12. Accounting
for unallowable costs
13. Cost accounting
period
14. Disclosure
statement
D. Direct
costs
1. General
2. Application
to sponsored agreements
E. F&A
costs
1. General
2. Criteria
for distribution
F. Identification
and assignment of F&A costs
1. Definition
of Facilities and Administration.
2. Depreciation
and use allowances
3. Interest
4. Operation
and maintenance expenses
5. General
administration and general expenses
6. Departmental
administration expenses
7. Sponsored
projects administration
8. Library
expenses
9. Student
administration and services
10. Offset
for F&A expenses otherwise provided for by the Federal Government
G. Determination
and application of F&A cost rate or rates
1. F&A
cost pools
2. The distribution
basis
3. Negotiated
lump sum for F&A costs
4. Predetermined
rates for F&A costs
5. Negotiated
fixed rates and carry-forward provisions
6. Provisional
and final rates for F&A costs
7. Fixed rates
for the life of the sponsored agreement
8. Limitation
on reimbursement of administrative costs
9. Alternative
method for administrative costs
10. Individual
rate components
11. Negotiation
and approval of F&A rate
12. Standard
format for submission
H. Simplified
method for small institutions
1. General
2. Simplified
procedure
I. Reserved
J. General
provisions for selected items of cost
1. Advertising
and public relations costs
2. Alcoholic
beverages
3. Alumni/ae
activities
4. Bad debts
5. Civil defense
costs
6. Commencement
and convocation costs
7. Communication
costs
8. Compensation
for personal services
9. Contingency
provisions
10. Deans
of faculty and graduate schools
11. Defense
and prosecution of criminal and civil proceedings, claims, appeals
and
patent infringement
12. Depreciation
and use allowances
13. Donations
and contributions
14. Employee
morale, health, and welfare costs and credits
15. Entertainment
costs
16. Equipment
and other capital expenditures
17. Executive
lobbying costs
18. Fines
and penalties
19. Goods
or services for personal use
20. Housing
and personal living expenses
21. Insurance
and indemnification
22. Interest,
fund raising, and investment management costs
23. Labor
relations costs
24. Lobbying
25. Losses
on other sponsored agreements or contracts
26. Maintenance
and repair costs
27. Material
costs
28. Memberships,
subscriptions and professional activity costs
29. Patent
costs
30. Plant
security costs
31. Preagreement
costs
32. Professional
services costs
33. Profits
and losses on disposition of plant equipment or other capital assets
34. Proposal
costs
35. Rearrangement
and alteration costs
36. Reconversion
costs
37. Recruiting
costs
38. Rental
cost of buildings and equipment
39. Royalties
and other costs for use of patents
40. Sabbatical
leave costs
41. Scholarships
and student aid costs
42. Selling
and marketing
43. Severance
pay
44. Specialized
service facilities
45. Student
activity costs
46. Taxes
47. Transportation
costs
48. Travel
costs
49. Termination
costs applicable to sponsored agreements
50. Trustees
K. Certification
of charges
Exhibit
A - List of Colleges and Universities Subject to Section J.12.f
of Circular A-21
Exhibit B - Listing of Institutions that are
eligible for the utility cost adjustment
Exhibit C - Examples of "major project" where
direct charging of administrative or clerical staff salaries may
be appropriate
Appendix
A - CASB's Cost Accounting Standards (CAS)
Appendix B -
CASB's Disclosure Statement (DS-2)
Appendix C -
Documentation Requirements for Facilities and Administrative (F&A)
Rate Proposals
PRINCIPLES
FOR DETERMINING COSTS APPLICABLE TO GRANTS,
CONTRACTS, AND OTHER AGREEMENTS WITH
EDUCATIONAL INSTITUTIONS
A. Purpose
and scope.
1. Objectives.
This Attachment provides principles for determining the costs
applicable to research and development, training, and other sponsored
work performed by colleges and universities under grants, contracts,
and other agreements with the Federal Government. These agreements
are referred to as sponsored agreements.
2. Policy
guides. The successful application of these cost accounting
principles requires development of mutual understanding between
representatives of universities and of the Federal Government
as to their scope, implementation, and interpretation. It is recognized
that --
a. The arrangements
for Federal agency and institutional participation in the financing
of a research, training, or other project are properly subject to
negotiation between the agency and the institution concerned, in
accordance with such governmentwide criteria or legal requirements
as may be applicable.
b. Each institution,
possessing its own unique combination of staff, facilities, and
experience, should be encouraged to conduct research and educational
activities in a manner consonant with its own academic philosophies
and institutional objectives.
c. The dual
role of students engaged in research and the resulting benefits
to sponsored agreements are fundamental to the research effort and
shall be recognized in the application of these principles.
d. Each institution,
in the fulfillment of its obligations, should employ sound management
practices.
e. The application
of these cost accounting principles should require no significant
changes in the generally accepted accounting practices of colleges
and universities. However, the accounting practices of individual
colleges and universities must support the accumulation of costs
as required by the principles, and must provide for adequate documentation
to support costs charged to sponsored agreements.
f. Cognizant
Federal agencies involved in negotiating facilities and administrative
(F&A) cost rates and auditing should assure that institutions
are generally applying these cost accounting principles on a consistent
basis. Where wide variations exist in the treatment of a given cost
item among institutions, the reasonableness and equitableness of
such treatments should be fully considered during the rate negotiations
and audit.
3. Application.
These principles shall be used in determining the allowable costs
of work performed by colleges and universities under sponsored
agreements. The principles shall also be used in determining the
costs of work performed by such institutions under subgrants,
cost-reimbursement subcontracts, and other awards made to them
under sponsored agreements. They also shall be used as a guide
in the pricing of fixed-price contracts and subcontracts where
costs are used in determining the appropriate price. The principles
do not apply to:
a. Arrangements
under which Federal financing is in the form of loans, scholarships,
fellowships, traineeships, or other fixed amounts based on such
items as education allowance or published tuition rates and fees
of an institution.
b. Capitation
awards.
c. Other awards
under which the institution is not required to account to the Federal
Government for actual costs incurred.
d. Conditional
exemptions.
(1)
OMB authorizes conditional exemption from OMB administrative requirements
and cost principles circulars for certain Federal programs with
statutorily-authorized consolidated planning and consolidated administrative
funding, that are identified by a Federal agency and approved by
the head of the Executive department or establishment. A Federal
agency shall consult with OMB during its consideration of whether
to grant such an exemption.
(2)
To promote efficiency in State and local program administration,
when Federal non-entitlement programs with common purposes have
specific statutorily-authorized consolidated planning and consolidated
administrative funding and where most of the State agency's resources
come from non-Federal sources, Federal agencies may exempt these
covered State-administered, non-entitlement grant programs from
certain OMB grants management requirements. The exemptions would
be from all but the allocability of costs provisions of OMB Circulars
A-87 (Attachment A, subsection C.3), "Cost Principles for State,
Local, and Indian Tribal Governments," A-21 (Section C, subpart
4), "Cost Principles for Educational Institutions," and A-122 (Attachment
A, subsection A.4), "Cost Principles for Non-Profit Organizations,"
and from all of the administrative requirements provisions of OMB
Circular A-110, "Uniform Administrative Requirements for Grants
and Agreements with Institutions of Higher Education, Hospitals,
and Other Non-Profit Organizations," and the agencies' grants management
common rule.
(3)
When a Federal agency provides this flexibility, as a prerequisite
to a State's exercising this option, a State must adopt its own
written fiscal and administrative requirements for expending and
accounting for all funds, which are consistent with the provisions
of OMB Circular A-87, and extend such policies to all subrecipients.
These fiscal and administrative requirements must be sufficiently
specific to ensure that: funds are used in compliance with all applicable
Federal statutory and regulatory provisions, costs are reasonable
and necessary for operating these programs, and funds are not be
used for general expenses required to carry out other responsibilities
of a State or its subrecipients.
4. Inquiries.
All inquiries from Federal agencies concerning the cost principles
contained in this Circular, including the administration and implementation
of the Cost Accounting Standards (CAS) (described in Sections
C.10 through C.13) and disclosure statement (DS-2) requirements,
shall be addressed by the Office of Management and Budget (OMB),
Office of Federal Financial Management, in coordination with the
Cost Accounting Standard Board (CASB) with respect to inquiries
concerning CAS. Educational institutions' inquiries should be
addressed to the cognizant agency.
B. Definition
of terms.
1. Major
functions of an institution refers to instruction, organized
research, other sponsored activities and other institutional activities
as defined below:
a. Instruction
means the teaching and training activities of an institution. Except
for research training as provided in subsection b, this term includes
all teaching and training activities, whether they are offered for
credits toward a degree or certificate or on a non-credit basis,
and whether they are offered through regular academic departments
or separate divisions, such as a summer school division or an extension
division. Also considered part of this major function are departmental
research, and, where agreed to, university research.
(1)
Sponsored instruction and training means specific instructional
or training activity established by grant, contract, or cooperative
agreement. For purposes of the cost principles, this activity may
be considered a major function even though an institution's accounting
treatment may include it in the instruction function.
(2)
Departmental research means research, development and scholarly
activities that are not organized research and, consequently, are
not separately budgeted and accounted for. Departmental research,
for purposes of this document, is not considered as a major function,
but as a part of the instruction function of the institution.
b. Organized
research means all research and development activities of an
institution that are separately budgeted and accounted for. It includes:
(1)
Sponsored research means all research and development activities
that are sponsored by Federal and non-Federal agencies and organizations
. This term includes activities involving the training of individuals
in research techniques (commonly called research training) where
such activities utilize the same facilities as other research and
development activities and where such activities are not included
in the instruction function.
(2)
University research means all research and development activities
that are separately budgeted and accounted for by the institution
under an internal application of institutional funds. University
research, for purposes of this document, shall be combined with
sponsored research under the function of organized research.
c. Other
sponsored activities means programs and projects financed by
Federal and non-Federal agencies and organizations which involve
the performance of work other than instruction and organized research.
Examples of such programs and projects are health service projects,
and community service programs. However, when any of these activities
are undertaken by the institution without outside support, they
may be classified as other institutional activities.
d. Other
institutional activities means all activities of an institution
except:
(1)
instruction, departmental research, organized research, and other
sponsored activities, as defined above;
(2)
F&A cost activities identified in Section F; and
(3)
specialized service facilities described in Section J.44. Other
institutional activities include operation of residence halls, dining
halls, hospitals and clinics, student unions, intercollegiate athletics,
bookstores, faculty housing, student apartments, guest houses, chapels,
theaters, public museums, and other similar auxiliary enterprises.
This definition also includes any other categories of activities,
costs of which are "unallowable" to sponsored agreements, unless
otherwise indicated in the agreements.
2. Sponsored
agreement, for purposes of this Circular, means any grant,
contract, or other agreement between the institution and the Federal
Government.
3. Allocation
means the process of assigning a cost, or a group of costs, to
one or more cost objective, in reasonable and realistic proportion
to the benefit provided or other equitable relationship. A cost
objective may be a major function of the institution, a particular
service or project, a sponsored agreement, or a F&A cost activity,
as described in Section F. The process may entail assigning a
cost(s) directly to a final cost objective or through one or more
intermediate cost objectives.
4. Facilities
and administrative (F&A) costs, for the purpose of this
Circular, means costs that are 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. F&A costs are synonymous
with "indirect" costs, as previously used in this Circular and
as currently used in Appendices A and B. The F&A cost categories
are described in Section F.1.
C. Basic
considerations.
1. Composition
of total costs. The cost of a sponsored agreement is comprised
of the allowable direct costs incident to its performance, plus
the allocable portion of the allowable F&A costs of the institution,
less applicable credits as described in subsection 5.
2. Factors
affecting allowability of costs. The tests of allowability
of costs under these principles are: (a) they must be reasonable;
(b) they must be allocable to sponsored agreements under the principles
and methods provided herein; (c) they must be given consistent
treatment through application of those generally accepted accounting
principles appropriate to the circumstances; and (d) they must
conform to any limitations or exclusions set forth in these principles
or in the sponsored agreement as to types or amounts of cost items.
3. Reasonable
costs. A cost may be considered reasonable if the nature of
the goods or services acquired or applied, and the amount involved
therefor, reflect the action that a prudent person would have
taken under the circumstances prevailing at the time the decision
to incur the cost was made. Major considerations involved in the
determination of the reasonableness of a cost are: (a) 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 agreement; (b) the restraints or requirements imposed
by such factors as arm's-length bargaining, Federal and State
laws and regulations, and sponsored agreement terms and conditions;
(c) whether or not the individuals concerned acted with due prudence
in the circumstances, considering their responsibilities to the
institution, its employees, its students, the Federal Government,
and the public at large; and, (d) the extent to which the actions
taken with respect to the incurrence of the cost are consistent
with established institutional policies and practices applicable
to the work of the institution generally, including sponsored
agreements.
4. Allocable
costs.
a. A cost
is allocable to a particular cost objective (i.e., a specific function,
project, sponsored agreement, department, or the like) if the goods
or services involved are chargeable or assignable to such cost objective
in accordance with relative benefits received or other equitable
relationship. Subject to the foregoing, a cost is allocable to a
sponsored agreement if (1) it is incurred solely to advance the
work under the sponsored agreement; (2) it benefits both the sponsored
agreement and other work of the institution, in proportions that
can be approximated through use of reasonable methods, or (3) it
is necessary to the overall operation of the institution and, in
light of the principles provided in this Circular, is deemed to
be assignable in part to sponsored projects. Where the purchase
of equipment or other capital items is specifically authorized under
a sponsored agreement, the amounts thus authorized for such purchases
are assignable to the sponsored agreement regardless of the use
that may subsequently be made of the equipment or other capital
items involved.
b. Any costs
allocable to a particular sponsored agreement under the standards
provided in this Circular may not be shifted to other sponsored
agreements in order to meet deficiencies caused by overruns or other
fund considerations, to avoid restrictions imposed by law or by
terms of the sponsored agreement, or for other reasons of convenience.
c. Any costs
allocable to activities sponsored by industry, foreign governments
or other sponsors may not be shifted to federally-sponsored agreements.
d. Allocation
and documentation standard.
(1)
Cost principles. The recipient institution is responsible
for ensuring that costs charged to a sponsored agreement are allowable,
allocable, and reasonable under these cost principles.
(2)
Internal controls. The institution's financial management
system shall ensure that no one person has complete control over
all aspects of a financial transaction.
(3)
Direct cost allocation principles. If a cost benefits two
or more projects or activities in proportions that can be determined
without undue effort or cost, the cost should be allocated to the
projects based on the proportional benefit. If a cost benefits two
or more projects or activities in proportions that cannot be determined
because of the interrelationship of the work involved, then, notwithstanding
subsection b, the costs may be allocated or transferred to benefited
projects on any reasonable basis, consistent with subsections d.(1)
and (2).
(4)
Documentation. Federal requirements for documentation are
specified in this Circular, Circular A-110, "Uniform Administrative
Requirements for Grants and Agreements with Institutions of Higher
Education, Hospitals, and Other Non-Profit Organizations," and specific
agency policies on cost transfers. If the institution authorizes
the principal investigator or other individual to have primary responsibility,
given the requirements of subsection d.(2), for the management of
sponsored agreement funds, then the institution's documentation
requirements for the actions of those individuals (e.g., signature
or initials of the principal investigator or designee or use of
a password) will normally be considered sufficient.
5. Applicable
credits.
a. The term
"applicable credits" refers to those receipts or negative expenditures
that operate to offset or reduce direct or F&A cost items. Typical
examples of such transactions are: purchase discounts, rebates,
or allowances; recoveries or indemnities on losses; and adjustments
of overpayments or erroneous charges. This term also includes "educational
discounts" on products or services provided specifically to educational
institutions, such as discounts on computer equipment, except where
the arrangement is clearly and explicitly identified as a gift by
the vendor.
b. In some
instances, the amounts received from the Federal Government to finance
institutional activities or service operations should be treated
as applicable credits. Specifically, the concept of netting such
credit items against related expenditures should be applied by the
institution in determining the rates or amounts to be charged to
sponsored agreements for services rendered whenever the facilities
or other resources used in providing such services have been financed
directly, in whole or in part, by Federal funds. (See Sections F.10,
J.12.a, and J.44 for areas of potential application in the matter
of direct Federal financing.)
6. Costs
incurred by State and local governments. Costs incurred or
paid by State or local governments on behalf of their colleges
and universities for fringe benefit programs, such as pension
costs and FICA and any other costs specifically incurred on behalf
of, and in direct benefit to, the institutions, are allowable
costs of such institutions whether or not these costs are recorded
in the accounting records of the institutions, subject to the
following:
a. The costs
meet the requirements of subsections 1 through 5.
b. The costs
are properly supported by cost allocation plans in accordance with
applicable Federal cost accounting principles.
c. The costs
are not otherwise borne directly or indirectly by the Federal Government.
7. Limitations
on allowance of costs. Sponsored agreements may be subject
to statutory requirements that limit the allowance of costs. When
the maximum amount allowable under a limitation is less than the
total amount determined in accordance with the principles in this
Circular, the amount not recoverable under a sponsored agreement
may not be charged to other sponsored agreements.
8. Collection
of unallowable costs, excess costs due to noncompliance with cost
policies, increased costs due to failure to follow a disclosed
accounting practice and increased costs resulting from a change
in cost accounting practice. The following costs shall be
refunded (including interest) in accordance with applicable Federal
agency regulations:
a. Costs specifically
identified as unallowable in Section J, either directly or indirectly,
and charged to the Federal Government.
b. Excess
costs due to failure by the educational institution to comply with
the cost policies in this Circular.
c. Increased
costs due to a noncompliant cost accounting practice used to estimate,
accumulate, or report costs.
d. Increased
costs resulting from a change in accounting practice.
9. Adjustment
of previously negotiated F&A cost rates containing unallowable
costs. Negotiated F&A cost rates based on a proposal later
found to have included costs that (a) are unallowable as specified
by (i) law or regulation, (ii) Section J of this Circular, (iii)
terms and conditions of sponsored agreements, or (b) are unallowable
because they are clearly not allocable to sponsored agreements,
shall be adjusted, or a refund shall be made, in accordance with
the requirements of this section. These adjustments or refunds
are designed to correct the proposals used to establish the rates
and do not constitute a reopening of the rate negotiation. The
adjustments or refunds will be made regardless of the type of
rate negotiated (predetermined, final, fixed, or provisional).
a. For rates
covering a future fiscal year of the institution, the unallowable
costs will be removed from the F&A cost pools and the rates
appropriately adjusted.
b. For rates
covering a past period, the Federal share of the unallowable costs
will be computed for each year involved and a cash refund (including
interest chargeable in accordance with applicable regulations) will
be made to the Federal Government. If cash refunds are made for
past periods covered by provisional or fixed rates, appropriate
adjustments will be made when the rates are finalized to avoid duplicate
recovery of the unallowable costs by the Federal Government.
c. For rates
covering the current period, either a rate adjustment or a refund,
as described in subsections a and b, shall be required by the cognizant
agency. The choice of method shall be at the discretion of the cognizant
agency, based on its judgment as to which method would be most practical.
d. The amount
or proportion of unallowable costs included in each year's rate
will be assumed to be the same as the amount or proportion of unallowable
costs included in the base year proposal used to establish the rate.
10. Consistency
in estimating, accumulating and reporting costs.
a. An educational
institution's practices used in estimating costs in pricing a proposal
shall be consistent with the educational institution's cost accounting
practices used in accumulating and reporting costs.
b. An educational
institution's cost accounting practices used in accumulating and
reporting actual costs for a sponsored agreement shall be consistent
with the educational institution's practices used in estimating
costs in pricing the related proposal or application.
c. The grouping
of homogeneous costs in estimates prepared for proposal purposes
shall not per se be deemed an inconsistent application
of cost accounting practices under subsection a when such costs
are accumulated and reported in greater detail on an actual cost
basis during performance of the sponsored agreement.
d. Appendix
A also reflects this requirement, along with the purpose, definitions,
and techniques for application, all of which are authoritative.
11. Consistency
in allocating costs incurred for the same purpose.
a. All costs
incurred for the same purpose, in like circumstances, are either
direct costs only or F&A costs only with respect to final cost
objectives. No final cost objective shall have allocated to it as
a cost any cost, if other costs incurred for the same purpose, in
like circumstances, have been included as a direct cost of that
or any other final cost objective. Further, no final cost objective
shall have allocated to it as a direct cost any cost, if other costs
incurred for the same purpose, in like circumstances, have been
included in any F&A cost pool to be allocated to that or any
other final cost objective.
b. Appendix
A reflects this requirement along with its purpose, definitions,
techniques for application, illustrations and interpretations, all
of which are authoritative.
12. Accounting
for unallowable costs.
a. Costs expressly
unallowable or mutually agreed to be unallowable, including costs
mutually agreed to be unallowable directly associated costs, shall
be identified and excluded from any billing, claim, application,
or proposal applicable to a sponsored agreement.
b. Costs which
specifically become designated as unallowable as a result of a written
decision furnished by a Federal official pursuant to sponsored agreement
disputes procedures shall be identified if included in or used in
the computation of any billing, claim, or proposal applicable to
a sponsored agreement. This identification requirement applies also
to any costs incurred for the same purpose under like circumstances
as the costs specifically identified as unallowable under either
this subsection or subsection a.
c. Costs which,
in a Federal official's written decision furnished pursuant to sponsored
agreement disputes procedures, are designated as unallowable directly
associated costs of unallowable costs covered by either subsection
a or b shall be accorded the identification required by subsection
b.
d. The costs
of any work project not contractually authorized by a sponsored
agreement, whether or not related to performance of a proposed or
existing sponsored agreement, shall be accounted for, to the extent
appropriate, in a manner which permits ready separation from the
costs of authorized work projects.
e. All unallowable
costs covered by subsections a through d shall be subject to the
same cost accounting principles governing cost allocability as allowable
costs. In circumstances where these unallowable costs normally would
be part of a regular F&A cost allocation base or bases, they
shall remain in such base or bases. Where a directly associated
cost is part of a category of costs normally included in a F&A
cost pool that shall be allocated over a base containing the unallowable
cost with which it is associated, such a directly associated cost
shall be retained in the F&A cost pool and be allocated through
the regular allocation process.
f. Where the
total of the allocable and otherwise allowable costs exceeds a limitation-of-cost
or ceiling-price provision in a sponsored agreement, full direct
and F&A cost allocation shall be made to the sponsored agreement
cost objective, in accordance with established cost accounting practices
and standards which regularly govern a given entity's allocations
to sponsored agreement cost objectives. In any determination of
a cost overrun, the amount thereof shall be identified in terms
of the excess of allowable costs over the ceiling amount, rather
than through specific identification of particular cost items or
cost elements.
g. Appendix
A reflects this requirement, along with its purpose, definitions,
techniques for application, and illustrations of this standard,
all of which are authoritative.
13. Cost
accounting period.
a. Educational
institutions shall use their fiscal year as their cost accounting
period, except that:
(1)
Costs of a F&A function which exists for only a part of a cost
accounting period may be allocated to cost objectives of that same
part of the period on the basis of data for that part of the cost
accounting period if the cost is: (i) material in amount, (ii) accumulated
in a separate F&A cost pool or expense pool, and (iii) allocated
on the basis of an appropriate direct measure of the activity or
output of the function during that part of the period.
(2)
An annual period other than the fiscal year may, upon mutual agreement
with the Federal Government, be used as the cost accounting period
if the use of such period is an established practice of the educational
institution and is consistently used for managing and controlling
revenues and disbursements, and appropriate accruals, deferrals
or other adjustments are made with respect to such annual periods.
(3)
A transitional cost accounting period other than a year shall be
used whenever a change of fiscal year occurs.
b. An educational
institution shall follow consistent practices in the selection of
the cost accounting period or periods in which any types of expense
and any types of adjustment to expense (including prior-period adjustments)
are accumulated and allocated.
c. The same
cost accounting period shall be used for accumulating costs in a
F&A cost pool as for establishing its allocation base, except
that the Federal Government and educational institution may agree
to use a different period for establishing an allocation base, provided:
(1)
The practice is necessary to obtain significant administrative convenience,
(2)
The practice is consistently followed by the educational institution,
(3)
The annual period used is representative of the activity of the
cost accounting period for which the F&A costs to be allocated
are accumulated, and
(4)
The practice can reasonably be estimated to provide a distribution
to cost objectives of the cost accounting period not materially
different from that which otherwise would be obtained.
d. Appendix
A reflects this requirement, along with its purpose, definitions,
techniques for application and illustrations, all of which are authoritative.
14. Disclosure
Statement.
a. Educational
institutions that received aggregate sponsored agreements totaling
$25 million or more subject to this Circular during their most recently
completed fiscal year shall disclose their cost accounting practices
by filing a Disclosure Statement (DS-2), which is reproduced in
Appendix B. With the approval of the cognizant agency, an educational
institution may meet the DS-2 submission by submitting the DS-2
for each business unit that received $25 million or more in sponsored
agreements.
b. The DS-2
shall be submitted to the cognizant agency with a copy to the educational
institution's audit cognizant office.
c. Educational
institutions receiving $25 million or more in sponsored agreements
that are not required to file a DS-2 pursuant to 48 CFR 9903.202-1
shall file a DS-2 covering the first fiscal year beginning after
the publication date of this revision, within six months after the
end of that fiscal year. Extensions beyond the above due date may
be granted by the cognizant agency on a case-by-case basis.
d. Educational
institutions are responsible for maintaining an accurate DS-2 and
complying with disclosed cost accounting practices. Educational
institutions must file amendments to the DS-2 when disclosed practices
are changed to comply with a new or modified standard, or when practices
are changed for other reasons. Amendments of a DS-2 may be submitted
at any time. If the change is expected to have a material impact
on the educational institution's negotiated F&A cost rates,
the revision shall be approved by the cognizant agency before it
is implemented. Resubmission of a complete, updated DS-2 is discouraged
except when there are extensive changes to disclosed practices.
e. Cost and
funding adjustments. Cost adjustments shall be made by the cognizant
agency if an educational institution fails to comply with the cost
policies in this Circular or fails to consistently follow its established
or disclosed cost accounting practices when estimating, accumulating
or reporting the costs of sponsored agreements, if aggregate cost
impact on sponsored agreements is material. The cost adjustment
shall normally be made on an aggregate basis for all affected sponsored
agreements through an adjustment of the educational institution's
future F&A costs rates or other means considered appropriate
by the cognizant agency. Under the terms of CAS-covered contracts,
adjustments in the amount of funding provided may also be required
when the estimated proposal costs were not determined in accordance
with established cost accounting practices.
f. Overpayments.
Excess amounts paid in the aggregate by the Federal Government under
sponsored agreements due to a noncompliant cost accounting practice
used to estimate, accumulate, or report costs shall be credited
or refunded, as deemed appropriate by the cognizant agency. Interest
applicable to the excess amounts paid in the aggregate during the
period of noncompliance shall also be determined and collected in
accordance with applicable Federal agency regulations.
g. Compliant
cost accounting practice changes. Changes from one compliant cost
accounting practice to another compliant practice that are approved
by the cognizant agency may require cost adjustments if the change
has a material effect on sponsored agreements and the changes are
deemed appropriate by the cognizant agency.
h. Responsibilities.
The cognizant agency shall:
(1)
Determine cost adjustments for all sponsored agreements in the aggregate
on behalf of the Federal Government. Actions of the cognizant agency
official in making cost adjustment determinations shall be coordinated
with all affected Federal agencies to the extent necessary.
(2)
Prescribe guidelines and establish internal procedures to promptly
determine on behalf of the Federal Government that a DS-2 adequately
discloses the educational institution's cost accounting practices
and that the disclosed practices are compliant with applicable CAS
and the requirements of this Circular.
(3)
Distribute to all affected agencies any DS-2 determination of adequacy
and/or noncompliance.
D. Direct
costs.
1. General.
Direct costs are those costs that can be identified specifically
with a particular sponsored project, an instructional activity,
or any other institutional activity, or that can be directly assigned
to such activities relatively easily with a high degree of accuracy.
Costs incurred for the same purpose in like circumstances must
be treated consistently as either direct or F&A 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.
2. Application
to sponsored agreements. Identification with the sponsored
work rather than the nature of the goods and services involved
is the determining factor in distinguishing direct from F&A
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
F&A 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 F&A costs, and are charged
under a recognized method of computing actual costs, and conform
to generally accepted cost accounting practices consistently followed
by the institution.
E. F&A
costs.
1. General.
F&A costs are those that are 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. See Section F.1 for a discussion
of the components of F&A costs.
2. Criteria
for distribution.
a. Base
period. A base period for distribution of F&A costs is the
period during which the costs are incurred. The base period normally
should coincide with the fiscal year established by the institution,
but in any event the base period should be so selected as to avoid
inequities in the distribution of costs.
b. Need
for cost groupings. The overall objective of the F&A cost
allocation process is to distribute the F&A costs described
in Section F to the major functions of the institution in proportions
reasonably consistent with the nature and extent of their use of
the institution's resources. In order to achieve this objective,
it may be necessary to provide for selective distribution by establishing
separate groupings of cost within one or more of the F&A cost
categories referred to in subsection 1. In general, the cost groupings
established within a category should constitute, in each case, a
pool of those items of expense that are considered to be of like
nature in terms of their relative contribution to (or degree of
remoteness from) the particular cost objectives to which distribution
is appropriate. Cost groupings should be established considering
the general guides provided in subsection c. Each such pool or cost
grouping should then be distributed individually to the related
cost objectives, using the distribution base or method most appropriate
in the light of the guides set forth in subsection d.
c. General
considerations on cost groupings. The extent to which separate
cost groupings and selective distribution would be appropriate at
an institution is a matter of judgment to be determined on a case-by-case
basis. Typical situations which may warrant the establishment of
two or more separate cost groupings (based on account classification
or analysis) within a F&A cost category include but are not
limited to the following:
(1)
Where certain items or categories of expense relate solely to one
of the major functions of the institution or to less than all functions,
such expenses should be set aside as a separate cost grouping for
direct assignment or selective allocation in accordance with the
guides provided in subsections b and d.
(2)
Where any types of expense ordinarily treated as general administration
or departmental administration are charged to sponsored agreements
as direct costs, expenses applicable to other activities of the
institution when incurred for the same purposes in like circumstances
must, through separate cost groupings, be excluded from the F&A
costs allocable to those sponsored agreements and included in the
direct cost of other activities for cost allocation purposes.
(3)
Where it is determined that certain expenses are for the support
of a service unit or facility whose output is susceptible of measurement
on a workload or other quantitative basis, such expenses should
be set aside as a separate cost grouping for distribution on such
basis to organized research, instructional, and other activities
at the institution or within the department.
(4)
Where activities provide their own purchasing, personnel administration,
building maintenance or similar service, the distribution of general
administration and general expenses, or operation and maintenance
expenses to such activities should be accomplished through cost
groupings which include only that portion of central F&A costs
(such as for overall management) which are properly allocable to
such activities.
(5)
Where the institution elects to treat fringe benefits as F&A
charges, such costs should be set aside as a separate cost grouping
for selective distribution to related cost objectives.
(6)
The number of separate cost groupings within a category should be
held within practical limits, after taking into consideration the
materiality of the amounts involved and the degree of precision
attainable through less selective methods of distribution.
d. Selection
of distribution method.
(1)
Actual conditions must be taken into account in selecting the method
or base to be used in distributing individual cost groupings. The
essential consideration in selecting a base is that it be the one
best suited for assigning the pool of costs to cost objectives in
accordance with benefits derived; a traceable cause and effect relationship;
or logic and reason, where neither benefit nor cause and effect
relationship is determinable.
(2)
Where a cost grouping can be identified directly with the cost objective
benefited, it should be assigned to that cost objective.
(3)
Where the expenses in a cost grouping are more general in nature,
the distribution may be based on a cost analysis study which results
in an equitable distribution of the costs. Such cost analysis studies
may take into consideration weighting factors, population, or space
occupied if appropriate. Cost analysis studies, however, must (a)
be appropriately documented in sufficient detail for subsequent
review by the cognizant Federal agency, (b) distribute the costs
to the related cost objectives in accordance with the relative benefits
derived, (c) be statistically sound, (d) be performed specifically
at the institution at which the results are to be used, and (e)
be reviewed periodically, but not less frequently than every two
years, updated if necessary, and used consistently. Any assumptions
made in the study must be stated and explained. The use of cost
analysis studies and periodic changes in the method of cost distribution
must be fully justified.
(4)
If a cost analysis study is not performed, or if the study does
not result in an equitable distribution of the costs, the distribution
shall be made in accordance with the appropriate base cited in Section
F, unless one of the following conditions is met: (a) it can be
demonstrated that the use of a different base would result in a
more equitable allocation of the costs, or that a more readily available
base would not increase the costs charged to sponsored agreements,
or (b) the institution qualifies for, and elects to use, the simplified
method for computing F&A cost rates described in Section H.
(5)
Notwithstanding subsection (3), effective July 1, 1998, a cost analysis
or base other than that in Section F shall not be used to distribute
utility or student services costs. Instead, subsections F.4.c and
F.4.d may be used in the recovery of utility costs.
e. Order
of distribution.
(1)
F&A costs are the broad categories of costs discussed in Section
F.1.
(2)
Depreciation and use allowances, operation and maintenance expenses,
and general administrative and general expenses should be allocated
in that order to the remaining F&A cost categories as well as
to the major functions and specialized service facilities of the
institution. Other cost categories may be allocated in the order
determined to be most appropriate by the institutions. When cross
allocation of costs is made as provided in subsection (3), this
order of allocation does not apply.
(3)
Normally a F&A cost category will be considered closed once
it has been allocated to other cost objectives, and costs may not
be subsequently allocated to it. However, a cross allocation of
costs between two or more F&A cost categories may be used if
such allocation will result in a more equitable allocation of costs.
If a cross allocation is used, an appropriate modification to the
composition of the F&A cost categories described in Section
F is required.
F. Identification
and assignment of F&A costs.
1. Definition
of Facilities and Administration. F&A costs are broad
categories of costs. "Facilities" is defined as depreciation and
use allowances, interest on debt associated with certain buildings,
equipment and capital improvements, operation and maintenance
expenses, and library expenses. "Administration" is defined as
general administration and general expenses, departmental administration,
sponsored projects administration, student administration and
services, and all other types of expenditures not listed specifically
under one of the subcategories of Facilities (including cross
allocations from other pools).
2. Depreciation
and use allowances.
a. The expenses
under this heading are the portion of the costs of the institution's
buildings, capital improvements to land and buildings, and equipment
which are computed in accordance with Section J.12.
b. In the
absence of the alternatives provided for in Section E.2.d, the expenses
included in this category shall be allocated in the following manner:
(1)
Depreciation or use allowances on buildings used exclusively in
the conduct of a single function, and on capital improvements and
equipment used in such buildings, shall be assigned to that function.
(2)
Depreciation or use allowances on buildings used for more than one
function, and on capital improvements and equipment used in such
buildings, shall be allocated to the individual functions performed
in each building on the basis of usable square feet of space, excluding
common areas such as hallways, stairwells, and rest rooms.
(3)
Depreciation or use allowances on buildings, capital improvements
and equipment related to space (e.g., individual rooms, laboratories)
used jointly by more than one function (as determined by the users
of the space) shall be treated as follows. The cost of each jointly
used unit of space shall be allocated to benefiting functions on
the basis of:
(a) the employee
full-time equivalents (FTEs) or salaries and wages of those individual
functions benefiting from the use of that space; or
(b) institution-wide
employee FTEs or salaries and wages applicable to the benefiting
major functions (see Section B.1) of the institution.
(4)
Depreciation or use allowances on certain capital improvements to
land, such as paved parking areas, fences, sidewalks, and the like,
not included in the cost of buildings, shall be allocated to user
categories of students and employees on a full-time equivalent basis.
The amount allocated to the student category shall be assigned to
the instruction function of the institution. The amount allocated
to the employee category shall be further allocated to the major
functions of the institution in proportion to the salaries and wages
of all employees applicable to those functions.
c. Large
research facilities. The following provisions apply to large
research facilities, that are included in F&A rate proposals
negotiated after January 1, 2000, and on which the design and construction
begin after July 1, 1998. Large facilities, for this provision,
are defined as buildings with construction costs of more than $10
million. The determination of the Federal participation (use) percentage
in a building is based on institution's estimates of building use
over its life, and is made during the planning phase for the building.
(1)
When an institution has large research facilities, of which 40 percent
or more of total assignable space is expected for Federal use, the
institution must maintain an adequate review and approval process
to ensure that construction costs are reasonable. The review process
shall address and document relevant factors affecting construction
costs, such as:
- Life cycle
costs
- Unique research
needs
- Special
building needs
- Building
site preparation
- Environmental
consideration
- Federal
construction code requirements
- Competitive
procurement practices
The approval
process shall include review and approval of the projects by the
institution's Board of Trustees (which can also be called Board
of Directors, Governors or Regents) or other independent entities.
(2)
For research facilities costing more than $25 million, of which
50 percent or more of total assignable space is expected for Federal
use, the institution must document the review steps performed to
assure that construction costs are reasonable. The review should
include an analysis of construction costs and a comparison of these
costs with relevant construction data, including the National Science
Foundation data for research facilities based on its biennial survey,
"Science and Engineering Facilities at Colleges and Universities."
The documentation must be made available for review by Federal negotiators,
when requested.
3. Interest.
Interest on debt associated with certain buildings, equipment
and capital improvements, as defined in Sections J.22.e and f,
shall be classified as an expenditure under the category Facilities.
These costs shall be allocated in the same manner as the depreciation
or use allowances on the buildings, equipment and capital improvements
to which the interest relates.
4. Operation
and maintenance expenses.
a. The expenses
under this heading are those that have been incurred for the administration,
supervision, operation, maintenance, preservation, and protection
of the institution's physical plant. They include expenses normally
incurred for such items as janitorial and utility services; repairs
and ordinary or normal alterations of buildings, furniture and equipment;
care of grounds; maintenance and operation of buildings and other
plant facilities; security; earthquake and disaster preparedness;
environmental safety; hazardous waste disposal; property, liability
and all other insurance relating to property; space and capital
leasing; facility planning and management; and, central receiving.
The operation and maintenance expense category should also include
its allocable share of fringe benefit costs, depreciation and use
allowances, and interest costs.
b. In the
absence of the alternatives provided for in Section E.2.d, the expenses
included in this category shall be allocated in the same manner
as described in subsection 2.b for depreciation and use allowances.
c. For F&A
rates negotiated on or after July 1, 1998, an institution that previously
employed a utility special cost study in its most recently negotiated
F&A rate proposal in accordance with Section E.2.d, may add
a utility cost adjustment (UCA) of 1.3 percentage points to its
negotiated overall F&A rate for organized research. Exhibit
B displays the list of eligible institutions. The allocation of
utility costs to the benefitting functions shall otherwise be made
in the same manner as described in subsection F.4.b. Beginning on
July 1, 2002, Federal agencies shall reassess periodically the eligibility
of institutions to receive the UCA.
d. Beginning
on July 1, 2002, Federal agencies may receive applications for utilization
of the UCA from institutions not subject to the provisions of subsection
F.4.c.
5. General
administration and general expenses.
a. The expenses
under this heading are those that have been incurred for the general
executive and administrative offices of educational institutions
and other expense of a general character which do not relate solely
to any major function of the institution; i.e., solely to (1) instruction,
(2) organized research, (3) other sponsored activities, or (4) other
institutional activities. The general administration and general
expense category should also include its allocable share of fringe
benefit costs, operation and maintenance expense, depreciation and
use allowances, and interest costs. Examples of general administration
and general expenses include: those expenses incurred by administrative
offices that serve the entire university system of which the institution
is a part; central offices of the institution such as the President's
or Chancellor's office, the offices for institution-wide financial
management, business services, budget and planning, personnel management,
and safety and risk management; the office of the General Counsel;
and, the operations of the central administrative management information
systems. General administration and general expenses shall not include
expenses incurred within non-university-wide deans' offices, academic
departments, organized research units, or similar organizational
units. (See subsection 6, Departmental administration expenses.)
b. In the
absence of the alternatives provided for in Section E.2.d, the expenses
included in this category shall be grouped first according to common
major functions of the institution to which they render services
or provide benefits. The aggregate expenses of each group shall
then be allocated to serviced or benefitted functions on the modified
total cost basis. Modified total costs consist of the same elements
as those in Section G.2. When an activity included in this F&A
cost category provides a service or product to another institution
or organization, an appropriate adjustment must be made to either
the expenses or the basis of allocation or both, to assure a proper
allocation of costs.
6. Departmental
administration expenses.
a. The expenses
under this heading are those that have been incurred for administrative
and supporting services that benefit common or joint departmental
activities or objectives in academic deans' offices, academic departments
and divisions, and organized research units. Organized research
units include such units as institutes, study centers, and research
centers. Departmental administration expenses are subject to the
following limitations.
(1)
Academic deans' offices. Salaries and operating expenses are limited
to those attributable to administrative functions.
(2)
Academic departments:
(a) Salaries
and fringe benefits attributable to the administrative work (including
bid and proposal preparation) of faculty (including department heads),
and other professional personnel conducting research and/or instruction,
shall be allowed at a rate of 3.6 percent of modified total direct
costs. This category does not include professional business or professional
administrative officers. This allowance shall be added to the computation
of the F&A cost rate for major functions in Section G; the expenses
covered by the allowance shall be excluded from the departmental
administration cost pool. No documentation is required to support
this allowance.
(b) Other
administrative and supporting expenses incurred within academic
departments are allowable provided they are treated consistently
in like circumstances. This would include expenses such as the salaries
of secretarial and clerical staffs, the salaries of administrative
officers and assistants, travel, office supplies, stockrooms, and
the like.
(3)
Other fringe benefit costs applicable to the salaries and wages
included in subsections (1) and (2) are allowable, as well as an
appropriate share of general administration and general expenses,
operation and maintenance expenses, and depreciation and/or use
allowances.
(4)
Federal agencies may authorize reimbursement of additional costs
for department heads and faculty only in exceptional cases where
an institution can demonstrate undue hardship or detriment to project
performance.
b. The following
guidelines apply to the determination of departmental administrative
costs as direct or F&A costs.
(1)
In developing the departmental administration cost pool, special
care should be exercised to ensure that costs incurred for the same
purpose in like circumstances are treated consistently as either
direct or F&A costs. For example, salaries of technical staff,
laboratory supplies (e.g., chemicals), telephone toll charges, animals,
animal care costs, computer costs, travel costs, and specialized
shop costs shall be treated as direct cost wherever identifiable
to a particular cost objective. Direct charging of these costs may
be accomplished through specific identification of individual costs
to benefiting cost objectives, or through recharge centers or specialized
service facilities, as appropriate under the circumstances.
(2)
The salaries of administrative and clerical staff should normally
be treated as F&A costs. Direct charging of these costs may
be appropriate where a major project or activity explicitly budgets
for administrative or clerical services and individuals involved
can be specifically identified with the project or activity. "Major
project" is defined as a project that requires an extensive amount
of administrative or clerical support, which is significantly greater
than the routine level of such services provided by academic departments.
Some examples of major projects are described in Exhibit C.
(3)
Items such as office supplies, postage, local telephone costs, and
memberships shall normally be treated as F&A costs.
c. In the
absence of the alternatives provided for in Section E.2.d, the expenses
included in this category shall be allocated as follows:
(1)
The administrative expenses of the dean's office of each college
and school shall be allocated to the academic departments within
that college or school on the modified total cost basis.
(2)
The administrative expenses of each academic department, and the
department's share of the expenses allocated in subsection (1) shall
be allocated to the appropriate functions of the department on the
modified total cost basis.
7. Sponsored
projects administration.
a. The expenses
under this heading are limited to those incurred by a separate organization(s)
established primarily to administer sponsored projects, including
such functions as grant and contract administration (Federal and
non-Federal), special security, purchasing, personnel, administration,
and editing and publishing of research and other reports. They include
the salaries and expenses of the head of such organization, assistants,
and immediate staff, together with the salaries and expenses of
personnel engaged in supporting activities maintained by the organization,
such as stock rooms, stenographic pools and the like. This category
also includes an allocable share of fringe benefit costs, general
administration and general expenses, operation and maintenance expenses,
depreciation/use allowances. Appropriate adjustments will be made
for services provided to other functions or organizations.
b. In the
absence of the alternatives provided for in Section E.2.d, the expenses
included in this category shall be allocated to the major functions
of the institution under which the sponsored projects are conducted
on the basis of the modified total cost of sponsored projects.
c. An appropriate
adjustment shall be made to eliminate any duplicate charges to sponsored
agreements when this category includes similar or identical activities
as those included in the general administration and general expense
category or other F&A cost items, such as accounting, procurement,
or personnel administration.
8. Library
expenses.
a. The expenses
under this heading are those that have been incurred for the operation
of the library, including the cost of books and library materials
purchased for the library, less any items of library income that
qualify as applicable credits under Section C.5. The library expense
category should also include the fringe benefits applicable to the
salaries and wages included therein, an appropriate share of general
administration and general expense, operation and maintenance expense,
and depreciation and use allowances. Costs incurred in the purchases
of rare books (museum-type books) with no value to sponsored agreements
should not be allocated to them.
b. In the
absence of the alternatives provided for in Section E.2.d, the expenses
included in this category shall be allocated first on the basis
of primary categories of users, including students, professional
employees, and other users.
(1)
The student category shall consist of full-time equivalent students
enrolled at the institution, regardless of whether they earn credits
toward a degree or certificate.
(2)
The professional employee category shall consist of all faculty
members and other professional employees of the institution, on
a full-time equivalent basis.
(3)
The other users category shall consist of all other users of library
facilities.
c. Amount
allocated in subsection b shall be assigned further as
follows:
(1)
The amount in the student category shall be assigned to the instruction
function of the institution.
(2)
The amount in the professional employee category shall be assigned
to the major functions of the institution in proportion to the salaries
and wages of all faculty members and other professional employees
applicable to those functions.
(3)
The amount in the other users category shall be assigned to the
other institutional activities function of the institution.
9. Student
administration and services.
a. The expenses
under this heading are those that have been incurred for the administration
of student affairs and for services to students, including expenses
of such activities as deans of students, admissions, registrar,
counseling and placement services, student advisers, student health
and infirmary services, catalogs, and commencements and convocations.
The salaries of members of the academic staff whose responsibilities
to the institution require administrative work that benefits sponsored
projects may also be included to the extent that the portion charged
to student administration is determined in accordance with Section
J.8. This expense category also includes the fringe benefit costs
applicable to the salaries and wages included therein, an appropriate
share of general administration and general expenses, operation
and maintenance, and use allowances and/or depreciation.
b. In the
absence of the alternatives provided for in Section E.2.d, the expenses
in this category shall be allocated to the instruction function,
and subsequently to sponsored agreements in that function.
10. Offset
for F&A expenses otherwise provided for by the Federal Government.
a. The items
to be accumulated under this heading are the reimbursements and
other payments from the Federal Government which are made to the
institution to support solely, specifically, and directly, in whole
or in part, any of the administrative or service activities described
in subsections 2 through 9.
b. The items
in this group shall be treated as a credit to the affected individual
F&A cost category before that category is allocated to benefiting
functions.
G. Determination
and application of F&A cost rate or rates.
1. F&A
cost pools.
a. (1) Subject
to subsection b, the separate categories of F&A costs allocated
to each major function of the institution as prescribed in Section
F shall be aggregated and treated as a common pool for that function.
The amount in each pool shall be divided by the distribution base
described in subsection 2 to arrive at a single F&A cost rate
for each function.
(2)
The rate for each function is used to distribute F&A costs to
individual sponsored agreements of that function. Since a common
pool is established for each major function of the institution,
a separate F&A cost rate would be established for each of the
major functions described in Section B.1 under which sponsored agreements
are carried out.
(3)
Each institution's F&A cost rate process must be appropriately
designed to ensure that Federal sponsors do not in any way subsidize
the F&A costs of other sponsors, specifically activities sponsored
by industry and foreign governments. Accordingly, each allocation
method used to identify and allocate the F&A cost pools, as
described in Sections E.2 and F.2 through F.9, must contain the
full amount of the institution's modified total costs or other appropriate
units of measurement used to make the computations. In addition,
the final rate distribution base (as defined in subsection 2) for
each major function (organized research, instruction, etc., as described
in Section B.1) shall contain all the programs or activities which
utilize the F&A costs allocated to that major function. At the
time a F&A cost proposal is submitted to a cognizant Federal
agency, each institution must describe the process it uses to ensure
that Federal funds are not used to subsidize industry and foreign
government funded programs.
b. In some
instances a single rate basis for use across the board on all work
within a major function at an institution may not be appropriate.
A single rate for research, for example, might not take into account
those different environmental factors and other conditions which
may affect substantially the F&A costs applicable to a particular
segment of research at the institution. A particular segment of
research may be that performed under a single sponsored agreement
or it may consist of research under a group of sponsored agreements
performed in a common environment. The environmental factors are
not limited to the physical location of the work. Other important
factors are the level of the administrative support required, the
nature of the facilities or other resources employed, the scientific
disciplines or technical skills involved, the organizational arrangements
used, or any combination thereof. Where a particular segment of
a sponsored agreement is performed within an environment which appears
to generate a significantly different level of F&A costs, provisions
should be made for a separate F&A cost pool applicable to such
work. The separate F&A cost pool should be developed during
the regular course of the rate determination process and the separate
F&A cost rate resulting therefrom should be utilized; provided
it is determined that (1) such F&A cost rate differs significantly
from that which would have been obtained under subsection a, and
(2) the volume of work to which such rate would apply is material
in relation to other sponsored agreements at the institution.
2. The
distribution basis. F&A costs shall be distributed to
applicable sponsored agreements and other benefiting activities
within each |
