UG and the campus disclosure statement (DS-2) outline which costs are direct and which costs are indirect.
The cost principles as defined in Uniform Guidance provide the basis for determining the procedures used to identify direct costs. Costs incurred to support a project are treated as direct costs and are charged to sponsored projects when the costs can be specifically identified to the project with relative ease and with a high degree of accuracy.
Direct costs may be expensed to your sponsored project. The expense must meet all the tests for allowability. The sponsored project may bear the full amount of or the allocable portion of the expenditure. The expense is included in the financial report to the agency on the financial status report. Direct costs must be allowable per UG, NC State, the terms and conditions of the award document, and the DS-2. When the university handles a particular type of cost as a direct cost of sponsored projects, all costs incurred for the same purpose in like circumstances must be claimed as direct costs of all activities of the institution.
Indirect costs (F&A) are comprised of expenses that are not directly attributable to a specific sponsored project. Therefore, they are not charged to sponsored projects in the same manner as direct costs. Indirect costs are charged based on rates negotiated with the federal government. Indirect costs represent expenses that benefit university operations, including items such as administrative-staff salaries, electricity and NC State University Libraries.
More about Direct vs. Indirect Costs
- To prevent the charging of unallowable costs to federal awards
- To standardize university costing practices
- To standardize requirements for recipients of federal funds
Learn about Pre-Award Spending
An allowable cost meets the following conditions:
- The cost is reasonable (passes prudent person test)
- The cost is allocable (sponsored project benefits from the expenditure)
- The expense is treated consistently
- The cost is allowable as defined by UG or per the terms and conditions of the sponsored project*
*Specific award terms and conditions take precedence over the provisions of UG.
An unallowable cost is an expense that can’t be paid by your sponsored project. These costs are often explicitly disallowed by UG or university or state policy. NC State is charged with identifying and removing such costs before proposal submission, award billing or reporting.
More about Allowable vs. Unallowable Costs
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More about Cost Transfers
More about Cost Sharing
More about Effort Reporting