The University of Texas at Arlington

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The University of Texas at Arlington Office of
Research and Office of Accounting and Business
Services Brown Bag Training Session Two Indirect
Costs
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Definition of Indirect Costs

• 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.
• These are REAL COSTS
• More correct terminology is Facilities and
  Administration (FA) Costs

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Components of FA Costs

• Facilities
• Buildings depreciation or use allowance
• Equipment depreciation or use allowance
• Operations and maintenance
• Library

4
Components of FA Costs (contd)

• Administration
• General administration
• Departmental administration
• Sponsored projects administration
• Student services
• Capped at 26 (per OMB A-21)

5
Determination of FA Rate

• Ratio of FA Expenses
• MTDC BASE
• FA expenses actual FA costs
• MTDC base all sponsored program expenses (funds
  from sponsor University cost share) less
  specific items excluded

6
Determination of FA Rate (contd)

• Rate agreement negotiated with cognizant audit
  agency (DHHS)
• We always get less than our actual rate

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How is FA Rate Applied

• Percent of Modified Total Direct Cost (MTDC)
• Direct Costs
• Identified specifically with a particular
  sponsored project, instructional activity or
  other institutional activity, or
• Can be directly assigned to such activities
  relatively easily and accurately

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How is FA Rate Applied (contd)

• MTDC All Direct Costs except
• Equipment
• Subcontract amounts in excess of 25,000
• Tuition remission
• Rental costs
• Scholarships/fellowships
• Participant support costs

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How is FA Rate Applied (contd)

• Percentage of MTDC (defined in previous slide)
• Percentage of MTDC (defined in program guidelines
  or contract terms and conditions)
• Reduced rate applied to Total Direct Cost
• Off-Campus rate of 26 can only be used if the
  sponsored activity takes place in a facility for
  which rent is paid as a direct costs
• If the program guidelines do not specify a rate,
  we use 48

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What are the Regulations

• Office of Management and Budget (OMB) Executive
  Office of the President
• OMB Circulars
• OMB A-21 Cost Principles for Educational
  Institutions
• OMB A-110 Uniform Administrative Requirements for
  Grant and Other Agreements with Institutions of
  Higher Education, Hospitals and Other Non-Profits
• http//www.whitehouse.gov/omb/circulars/index.html

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OMB Circulars

• Determine if costs is allowable
• Eligible for reimbursement
• Permitted by terms of sponsor
• Examples of unallowable costs are personal items,
  alcohol, entertainment, promotional items

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OMB Circulars (contd)

• Determine if costs is allocable
• Assigned to one or more cost objective on some
  reasonable basis
• Cost objective may be sponsored agreement or FA
  activity

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Quiz

• Can the following be charged directly to a
  sponsored agreement and, if so, under what
  circumstances?

• Telephone service and long distance calls

• Telephone equipment and line charges normally
  treated as FA and CANNOT be charged directly to
  the sponsored agreement

• Long distance charges should be direct charges if
  allocable to the sponsored project

• Centers supported in whole by Federal Funds

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Quiz (contd)

• Office Supplies

• Normally treated as FA and CANNOT be charged
  directly to the sponsored agreement

• Exceptions Some items (such as computer disks)
  may be used specifically for the project and may
  be allowed as direct costs

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Quiz (contd)

• Copy Charges

• Ordinarily CANNOT be charged directly to the
  sponsored program

• Exceptions

• Specific items (such as survey instruments,
  dissemination costs) are allowed by funding agency

• These items are explicitly indicated in the
  proposal budget

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Quiz (contd)

• Memberships and Subscriptions

• Personal memberships and subscriptions are not
  allowed since they are considered personal costs

• Institutional memberships and subscriptions for
  professional organizations or publications are
  allowable

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Quiz (contd)

• Administrative Salaries

• The salaries of administrative and clerical
  staff should normally be treated as FA 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. (A-21 Sect F.6.b.2)

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Quiz (contd)

• Examples of Major Projects

• Large centers that may include managing teams of
  investigators

• Projects which involve extensive database
  management

• Projects that require making travel and meeting
  arrangements for large numbers of participants,
  such as conferences and seminars

• Projects whose principal focus is the preparation
  and production of manuals and large reports,
  books and monographs (excluding routine progress
  and technical reports)

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Brown Bag Training Session Three

• December 19th, 2002