Research Policy Analysis and Coordination
Chapter 7-700: Related University References
A-21 establishes principles for determining allowable direct and indirect costs.
A-21 cost principles apply to all federal awards to educational institutions except capitation awards, loans, fellowships, and other awards under which the institution is not required to
account to the government for actual costs incurred. The principles also apply to awards made to educational institutions under subgrants or cost-reimbursement subcontracts where the ultimate source of funding is the federal government.
SUMMARY OF PROVISIONS APPLICABLE TO DIRECT COSTS
See Chapter 6-F01 for a general discussion of the provisions of this Circular.
Sections J.1 through J.54 of A-21 provide principles to be applied in establishing the allowability of certain costs to federal awards. Those allowable costs that are generally treated by the University as direct costs are defined above in 7-200 through 7-224.
All items in A-21, Section J. are identified as "allowable," "unallowable," or "allowable with
prior approval." Costs specifically identified as "allowable" may be charged to federal awards so long as the relevant standards specified by A-21 for that type of cost are met, the general standards of allocability and reasonableness (as discussed in 6-F01) are met, and the type of cost is not specifically prohibited by the terms of the particular federal award to be charged.
Costs specifically identified as "unallowable" may not be charged to a federal award.
Costs specifically identified as "allowable with prior approval" (or equivalent language) that are not included in an approved award budget or waived by the terms of the award must be approved in accordance with 7-330 and Chapter 2 of this Manual before such costs may be charged to a federal award. Such costs include:
J.18.a.(4) General purpose equipment J.18.a.(3) Special purpose equipment J.18.a.(1) Capital expenditures
J. 36. Pre-agreement costs
The Circular states that: "Failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable; rather determinations as to allowability in each case should be based on the treatment provided for similar or related items of cost."
PRIMARY UNIVERSITY RESPONSIBILITY
The Associate Vice President and Systemwide Controller -- Financial Accounting under
the Chief Financial Officer is responsible for the implementation of the provisions of A-21 in University-wide accounting policy. The Associate Vice President – Financial Accounting develops the accounting policy and implementing instructions published in the Corporate Accounting Manual.
Costing Policy & Analysis (CP&A) is the designated University contact with the Department of
Health and Human Services (DHHS), Division of Cost Allocation (DCA). CP&A advises on A-
21 costing policy interpretations with respect to the allowability of direct and indirect costs and coordinates with DCA on the allowability of direct and indirect costs, on the negotiation and calculation of facilities and administrative rates, and on OMB Circular A-133 audit matters.
Campus Contracts and Grants Officers are responsible for approving proposals to and awards from federal agencies which incorporate and are in accordance with the cost principles of A-21, including prior approval requirements, unless waived by the terms of the award.
Campus Controllers are responsible for procedural implementation and compliance with A-21 and for billing sponsored projects in accordance with the approved budget, including subsequent approved changes in the budget.
UNIVERSITY POLICY IMPLEMENTATION
Overall policy guidance for implementing the direct-cost-related provisions of A-21 is contained in this Manual chapter.
This section of the State Administrative Manual (SAM) provides policy guidance to State agencies on costs to be recovered whenever the agency purchases goods or services from others.
This SAM section is usually incorporated in interagency agreements between The Regents of the University and the State under which the State supports research, training or public service programs at the University. The applicable provisions of this SAM section become binding on such agreements once they are fully signed.
SUMMARY OF PROVISIONS
This SAM section defines direct costs as "those which can be identified specifically with a particular cost objective." Kinds of direct costs mentioned are (a) "personal service costs incurred in meeting the cost objective;" and (b) "operating expenses and equipment costs incurred in meeting the cost objective, such as the cost of contracts, travel expenses, etc." Indirect costs are defined as “those support costs which benefit more than one cost objective/organizational unit.” In practice, the University uses OMB Circular A-21 as a guide in determining allowable costs on State-funded agreements (See 7-F01).
UNIVERSITY POLICY IMPLEMENTATION
Overall policy guidance for implementing the direct cost-related provisions of the State Administration Manual is contained in this Manual chapter. The SAM section states that the policy for State departments is full cost recovery, including both direct and indirect costs, on interagency agreements. However, the State has no written statewide policy regarding the reimbursement of indirect costs when contracts are awarded to the University or to non-State entities.