The cost principles as defined in OMB Circular A-21 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.
The classification of this cost is broken down into two categories – the types of books normally found in a University library versus those that are not. The cost of the types of books found in a University library is normally a Facilities & Administrative (F&A) cost. The cost of the types of books not normally found in a University library, such as textbooks, is normally a direct charge to a sponsored project. Due to the nature of this cost, specific documentation must be present for the cost to be allowable as a direct charge on a specific sponsored award. The documentation requirements are discussed below.
Books Normally Found in a University Library
Since this cost is normally an F&A cost, an unlike circumstance must be justified in order to charge the cost as a direct cost. Factors that must be considered are:
- The book(s) are deemed inaccessible from the NCSU library due to heavy use or the inability to place a reserve on the book. These situations must be documented.
- The cost must be allocable to the project(s) with relative ease and high degree of accuracy. Books that will be used to gain an understanding of general knowledge in a field of work would not meet the relative ease/high degree of accuracy test.
- There is specific information contained in the book(s) purchased that is directly related to a specific goal or outcome of the project. For example, a specific testing protocol that must be followed to validate research results.
- Support documentation must be adequately detailed to pass an audit.
Books not Normally Found in a University Library
The cost of this type of book is normally a direct cost. The cost will be allowable as a direct charge if the cost for each book has been adequately justified in the proposal or a justification is in the College file if the need arises after the project was awarded. The important distinction between this type of book and the type of book described above is that the cost does not have to be extensive in nature since no unlike circumstance is required. However, due to the nature of this particular cost it is harder than usual to meet the justification and documentation requirements.
The following factors should be considered when preparing the justification:
The book must be allocable to the sponsored project(s) with relative ease and high degree of accuracy. Books that will be used to gain an understanding of general knowledge in a field of work would not meet the relative ease/high degree of accuracy test. It is often difficult to find a direct correlation/benefit to most sponsored projects with the purchase of general books. The justification must be sufficient to demonstrate compliance with the relative ease/high degree of accuracy test. Examples of supporting statements that are not sufficient to meet this test and would therefore be unacceptable in an audit are “The titles of the various textbooks clearly establish a technical relationship to the project charged” and “The books were needed for the research”.
Reimbursement for Rental of Motor Vehicles and gasoline will be budgeted under Travel if paid as part of a travel reimbursement. However, rental of motor vehicles will charged under Fixed Charges if paid separately from gasoline.
- Rental of Motor Vehicles should be budgeted under Fixed Charges account code: 54310.
- Gasoline/Diesel Fuel includes the payments for supplies and materials normally used in the operation, maintenance, and repair of state-owned motor vehicles. It includes the costs of fuels, oils, lubricants, fluids, tires, batteries, etc., and minor accessories and should be budgeted under Supplies and Materials account code 52510.
Please contact the Office of Information Technology (OIT) for rates on special computer services. An inflationary rate of 5% is recommended for these types of services; however, this increase is not a requirement. OIT may be reached via telephone at: 919-515-4357.
Honoraria to non-employees should be paid from account code 51950. Please visit the Board of Governors website for additional information for more information.
Equipment maintenance is an allowable charge on a sponsored project if it is required in order to complete the objectives of the project. Maintenance should be documented and charge proportionately to project. For example, if the equipment being maintained is used 50% of the time on the project, then only 50% of the maintenance charge should be charged to the sponsored project’s account. This charge may not be allowed by some Sponsors. Please check the Sponsor’s RFP and contract terms & conditions for allowable/unallowable costs.
Equipment warranties on a sponsored project are allowable if the pieces of equipment were also purchased on the project. Please note that warranties are rarely charged to a 5-ledger account. Therefore, you should look at warranties on a case-by-case basis. Please identify and document how a warranty would benefit the project. You should also pro-rate the cost of the warranty based on the equipment’s usage. For example, if the piece of equipment is only being used 70% of the time for the project, then you should only charge 70% of the warranty to the project. Additionally, you may need to pro-rate the cost of the warranty based on length of time. For example, you may have a five year warranty on a three year project. In this case, you can only charge 3 years worth of the warranty to that project. This charge may not be allowed by some Sponsors. Please check the Sponsor’s RFP and contract terms & conditions for allowable/unallowable costs.
This budget category would be used for services to transport or move resources owned or used by the institution. An example of this would be moving a piece of equipment to another location. It could also be used for departmental moving expenses. This would be considered an allowable direct charge. It would NOT include project deliverables, technical reports and other such items sent by the US Mail, UPS, Federal Express, etc. It excludes the costs incurred when materials, equipment, and/or resources are originally acquired; these initial transportation costs are added to the asset cost. This charge may not be allowed by some Sponsors. Please check the Sponsor’s RFP and contract terms & conditions for allowable/unallowable costs.
General Office Supplies
Costs include those incurred in support of routine administrative activities associated with instruction, public service, research and other institutional activities, (i.e., paper, pencils, pens, ink, toner cartridges, etc.). These items of cost are considered readily expendable and are treated as facilities and administrative costs covered by the negotiated F&A cost rate. The only exceptions are those wherein the purchase of the supplies is extensive in nature, can be specifically identified to the project, and meets the definition of a direct charge. The College should provide adequate written justification in the proposal narrative for the direct charging of costs in this category, explaining that the supplies were a direct benefit to the purpose of the project and can be specifically identified with the project. In addition, support documentation must be adequately detailed to pass an audit.
- Computers and Peripherals: The original purchase can either be charged as technical (direct) or general purpose (F&A) depending upon the ACTUAL usage of the items OR more likely, a combination of both (direct and F&A allocation).
- Replacement Parts: Are to be charged/allocated based on their current ACTUAL usage/benefit to various awards/accounts.
- Upgrades and Additions: Are to be charged based on the proportional benefits received to various awards/accounts.
Honoraria: Regulations on External Professional Activities and Honoraria
In accordance with the Board of Governors’ policy on external professional activities, University personnel sometimes may engage in compensated activities that are not a part of University employment. For example, some sit on boards of directors of various private corporations, pursue opportunities that fall within the Board of Governor’s definition of external professional consulting, or conduct official duties as a State employee for which an honorarium is received. In those instances when an employee has engaged in these types of activities, the following shall apply:
- Pursuit of Private Interests in Which Extra Income is Earned. For senior academic and administrative officers who pursue activities for pay that are not a part of their University employment, it is important that overlapping compensation be avoided. If a senior academic or administrative officer engages in an activity from which external income is earned, that is not a part of their University employment, annual leave must be used if such activities take place within the conventional work week (i.e., between 8:00 a.m. and 5:00 p.m., Monday through Friday).
- Employment-related Duties for Which an Honorarium is Received. Senior academic and administrative officers and EPA non-faculty employees may engage in employment-related activities for which an honorarium is received. In those instances, the employee shall not receive an honorarium when State-reimbursed travel, work time, or resources are used or when the activity can be construed as related to the employee’s State position or official duties on behalf of the State. In these instances the employee may request that the honorarium be paid to the University. The honorarium may be retained by the employee only for activities performed during non-working hours or while the employee is on annual leave, if all expenses are the responsibility of the employee or a third party that is not a State entity and the activity has no relation to the employee’s State duties.
- Honoraria to an employee should be budgeted under salaries carrying the appropriate fringe benefit. However, honoraria to a non-employee should be paid under contracted services.
Please visit the Board of Governors website for additional information.
Insurance on a piece of equipment is an allowable charge if the piece of equipment was also purchased on the project, and if the University does not already have insurance coverage for the item purchased. Please contact the office of Insurance and Risk Management, in order to identify if the University does or does not automatically cover the item in question. If insurance is needed, we must pro-rate the cost of the insurance based on the equipment’s usage for the project. For example, if the piece of equipment is only being used 70% of the time for the project, then we should only charge 70% of the insurance premium to the project. This charge may not be allowed by some Sponsors. Please check the Sponsor’s RFP and contract terms & conditions for allowable/unallowable costs.
Memberships and Subscriptions
Institutional memberships in professional organizations and subscriptions to technical periodicals are normally treated as an F&A cost. They may be charged directly only when related to a specific project and necessary for the successful completion of the goals and objectives of the project. Allocation, when applicable, should be able to be accomplished with relative ease and a high degree of accuracy. Generally, individual memberships are unallowable. Individual memberships in civic or social organizations are expressly unallowable. In fact, an individual membership or subscription to a professional group or periodical may be allowed as a direct charge to a contract or grant only if the following can be demonstrated:
- An institutional membership is not available or will not meet the needs of the project.
- The cost has been justified (i.e. provides a direct benefit to the purpose of the project) in the proposal or a justification is in the College file if the need arises after the project was awarded.
NCSU’s negotiated federal Facilities & Administration (F&A) rate accounts for normal and routine photocopy usage. As with telephone charges, in special circumstances photocopy charges may be accounted for in a project’s direct costs. These costs must be in direct support of the project and verifiable through project records. For example, a project, which needs to copy participant survey responses in triplicate and provide them to three project members for coding, would be considered as costs directly attributable to the project. A photocopy log and Wolf Copy records would serve as verifiable records of these charges.
Postage expense incurred in support of routine administrative communication activities associated with instruction, public service, research, and other institutional activities should not be charged directly to sponsored accounts. The only exceptions are those cases where extensive postage expense is required in support of the goals and objectives of the sponsored award being charged. Mailing technical reports and other project deliverables are considered part of normal, routine business expenses and are therefore considered F&A costs. Postage expenses include US Mail, Federal Express, UPS, etc. All shipping costs for purchases are charged to the same account code as the items being purchased. The difference between postage (included in our indirect cost rate) and freight (direct cost item) is driven by the item(s) being sent not the means by which it is sent.
Rental fees are an allowable cost on a sponsored project (i.e. renting: a building, an auditorium, a room, etc.). These charges will be budgeted in the category “fixed charges”. Please visit the Expense Accounts page from the NCSU Controller’s site for more information regarding the different type of rental properties.
Printing, Binding, Publications & Copying
These costs are normally direct charges to a contract and grant account as long as you can meet the definition of a direct charge. One important criterion to this definition is that you must be able to specifically identify the charge to a particular project with relative ease and high degree of accuracy and that cost must provide a direct benefit to that project sometime during the life of the award. Charges included in these categories are those normally charged to object code 3400 and any copying costs charged as directed by the definition of object code 2600.
The costs of disseminating research results (i.e. publication costs or page charges) are allowed as a direct charge to the project from which the research was obtained. As with any other direct charge, the cost must meet general A-21 guidelines in that it must be reasonable, necessary, allowable, allocatable, timely, non personal and must provide a direct benefit to the project.
With respect to copying costs, if you are using an outside copy service, the invoice should be retained as documentation to support the charge. If you are using a departmental copier, charges must be a per copy charge and must be based on a cost study. In other words, you cannot charge the associated expenses of the copy machine such as toner cartridge, paper, etc. directly to a contract or grant due to allocation problems among the many uses of the machine. The per copy cost must be based on total utilization of all activities (research, instruction, public service and other), not just research usage. In addition you must maintain documentation of the use through a log. Copying of proposals or general correspondence not related to a specific project cannot be charged direct since these costs cannot meet the definition of a direct charge.
Inflation suggested at 5% per year but not mandatory.
Costs identified to a particular sponsored project for the use of University-owned labs and other service centers should be budgeted, charged, and reported as direct costs. These charges must be based on actual utilization supported by adequate documentation. These charges must also be based on a usage rate approved by the Office of Contracts and Grants. The rate must be approved before the charge is incurred by the sponsored projects. Please obtain the rate and basis of the rate for the budget justification. For example: The project requires time on a service center’s piece of equipment, in order to complete one of the objectives of the project. The total amount budgeted is $1,500, which includes 20 hours at a cost of $75 per hour. For further information, please contact Contracts and Grants Service Center Coordinator at 515.8808
Study Abroad Fees
Lump sum study abroad fees (for example: tuition at foreign institutions, housing, accident/health insurance, cultural events, airfare, meals) are a direct charge on sponsored project. Indirect costs are charged on the entire lump sum amount unless otherwise specifically excluded.
Telephone and Various Other Communication Expenses
Communication expenses incurred in support of routine administrative activities associated with instruction, public service, research and other institutional activities should not be charged directly against sponsored projects. The only exceptions are those relating to equipment charges (dedicated research/lab lines), long distance calls, telegrams, fax long distance charges, and various other communication expenses specific to a project and incurred for the sole direct benefit of the project. Support documentation must be adequately detailed to pass an audit. Installation charges, monthly use charges, local access calls, pagers, etc. are considered F&A costs and should not be charged directly to sponsored accounts.
Cellular Phones – Per NCSU policy, individuals who require cellular telephone service to conduct University business must obtain approval from the dean or department head of their unit. Orders for cellular services and equipment must be placed through the Telecommunications Services Division, Office of Information Technology Services (ITS). Services and equipment must be requested on the Cellular Phone Service Request Authorization form.
The services paid for by the University are to be used in the conduct of University business. These phones and their charges would require an unlike circumstance in order to be charged to a sponsored award.
Use of Personal Cellular Service for Business – Reimbursement of the employee for cellular telephone usage for business calls will be handled the same as making business calls away from the office. The employee may request reimbursement monthly. A copy of the cellular bill denoting business related calls must be submitted for reimbursement, with personal calls blacked out for privacy. No reimbursement will be made for the instrument, monthly fees, or the portion of “free” minutes. The employee should also provide information on how the call relates to the purpose of the project.