University of Connecticut Health Center Research Administration & Finance Allowable Costs September 24, 2007

ALLOWABLE COSTS OMB Circular A-21 “Cost Principles for Educational Institutions” Contents of Circular: Sets forth allowability principles for the reimbursement of costs associated with Federally sponsored agreements (Direct & F&A) Describes costs that can be included in the F&A rate Describes the determination and application of F&A rates DIRECT COSTS: 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

ALLOWABLE COSTS FACILITIES AND ADMINISTRATIVE COSTS (F&A): Costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, or other institutional activity. –Departmental Administration –Building utility and maintenance costs –Depreciation –Library Costs –Office Supplies –Local Telephone Costs –Memberships

ALLOWABLE COSTS FACTORS AFFECTING ALLOWABILITY: –REASONABLE: A prudent business person would have purchased this item and paid this price; –ALLOCABLE: They can be assigned to the activity on some reasonable basis; –CONSISTENTLY APPLIED: Like costs must be treated the same in like circumstances, as either direct cost, or as F&A. DETERMINING ALLOCABILITY A cost can be allocable as direct or indirect (F&A) A cost is allocable as a direct cost if the goods or services provided are assignable in accordance with the relative benefits received: –It is incurred solely to advance the work under the sponsored agreement; –It benefits both the work under the sponsored agreement and other work of the institution in proportions that can be approximated; –If a cost benefits two or more interrelated projects in proportions that cannot be determined the cost may be allocable on any reasonable basis A cost is allocable as an indirect cost if it is necessary for the overall operation of the institution

ALLOWABLE COSTS WHAT DOES “ALLOWABLE” MEAN? AN ALLOWABLE COST IS ONE THAT IS ELIGIBLE FOR REIMBURSEMENT BY THE FEDERAL GOVERNMENT CONTRAST WITH: PERMISSIBLE BY UCHC – PER ADMINISTRATIVE POLCIES AND PROCEDURES: –Business Class Airfare for international flights ALLOWABLE BY AGENCY – COSTS PERMITTED BY THE POLICIES OF THE SPONSORING AGENCY OR TERMS OF THE AWARD –“Major projects” – would allow administrative salaries

ALLOWABLE COSTS UCHC Policy Section J of A-21 “Failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable; rather, determination as to allowability in each case should be based on the treatment provided for similar or related items of cost.” “In case of a discrepancy between the provisions of a sponsored agreement and the provisions listed… (in A-21)… the agreement should govern.”

ALLOWABLE COSTS ADVERTISING AND PUBLIC RELATIONS UNALLOWABLE: Except for: –The recruitment of personnel required for the performance by the institution of obligations arising under the sponsored agreement; –Cost of help wanted advertising that includes color, is excessive in size, or includes advertising material for other than recruitment purposes is unallowable. –Procurement of goods & services for the performance of the sponsored agreement; –Disposal of scrap or surplus materials acquired in the performance of the sponsored agreement

ALLOWABLE COSTS DONATIONS & CONTRIBUTIONS UNALLOWABLE: However, donated services and property may be used to meet cost-sharing or matching requirements. DONOR COSTS ALLOWABLE: For payment to volunteers or research subjects who contribute bodily fluid samples or tissues that are specifically project related.

ALLOWABLE COSTS HONORARIA UNALLOWABLE: when primary intent is to confer distinction on, or to symbolize respect, esteem or admiration for the recipient of the honorarium. ALLOWABLE: Payment for services rendered, such as a speaker’s fee. 1)Must relate to the project; i.e., support the grant objective; 2)Cost must be reasonable; 3) Should not be a co-collaborator, or contractor.

ALLOWABLE COSTS MEMBERSHIPS, SUBSCRIPTIONS & PROFESSIONAL ACTVITY COSTS UNALLOWABLE: 1)Memberships in Social, Dining or Country Clubs, Civic or Community Organizations ALLOWABLE: 1)Memberships in Business, Technical & Professional Organizations – as INDIRECT ONLY 1)Memberships in Business, Technical & Professional Organizations – as INDIRECT ONLY 2)Costs of Subscriptions to Business, Professional, Technical Periodicals – as INDIRECT ONLY CAVEAT: If the costs are incurred for the specific performance of the sponsored program (membership dues associated with conference registration), they may be charged directly to a sponsored project. Costs would need to be explained and justified in the budget narrative; if modular, explained and justified in the internal project budget that is approved by ORSP.

ALLOWABLE COSTS MEALS/ENTERTAINMENT NIH POLICY MANUAL: “Allowable for subjects and patients under study, or where specifically approved as part of the project activity, provided such charges are not duplicated in patients’ per diem or subsistence allowance, if any.” ALLOWABLE: 1) As part of a planned conference (as long as they are not claimed when provided as part of the conference): 2)As part of a planned trip (noted in the budget justification) UNALLOWABLE: 1) Meal costs which do not substantiate the business purpose of the expenditure (may be considered as entertainment, and therefore unallowable); 1) Meal costs which do not substantiate the business purpose of the expenditure (may be considered as entertainment, and therefore unallowable); 2) Meal costs associated with the entertaining of guests visiting the Health Center on official business are allowable as an indirect cost to the institution, but are not considered direct costs to a sponsored program. 2) Meal costs associated with the entertaining of guests visiting the Health Center on official business are allowable as an indirect cost to the institution, but are not considered direct costs to a sponsored program.

ALLOWABLE COSTS RELOCATION COSTS UNALLOWABLE: Relocation costs are unallowable when there is a change in the grantee organization. ALLOWABLE: Costs incurred incidental to the relocation of an employee, provided the move is for the grantee’s benefit. CAVEAT: If employee resigns for purposes within his/her control within 12 months of hire, all relocation costs must be credited back to the grant. SEPARATION COSTS Starting in FY 2005, separation costs (accrued vacation/ sick pay, etc.) for grant funded employees are UNALLOWABLE, and should be charged to the account

ALLOWABLE COSTS TAXES As a tax exempt organization, reimbursement of sales and use taxes for materials and equipment are UNALLOWABLE and should not be charged to a grant. TRAVEL CONSISTENT – with institution’s travel policy REASONABLE – should not exceed charges normally allowed by the institution COMMERCIAL AIRLINE TRAVEL Ensure compliance with US flag carrier guidelines. 1)Fly American – to furthest interchange point; Costs in excess of the lowest available commercial discount airfare is generally UNALLOWABLE 2) Be aware of “Permissible by Institution” vs. “Allowable by Agency”

ALLOWABLE COSTS TRAVEL (cont’d.) MILEAGE: Reimbursable for round trip less traveler’s normal round trip commute; Ensure that traveler is working on the grant that will reimburse the cost of the trip; Define the “Home Site” for all employees; Consult UCHC Finance website for new guidelines and mileage reimbursement forms; MAKE YOUR STAFF & RESEARCHERS AWARE!!

ALLOWABLE COSTS COST TRANSFERS NIH POLICY “Cost transfers that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official for the grantee.”

ALLOWABLE COSTS UCHC POLICY (Updated June 2005) Covers both payroll and other direct costs TRANSFERS: Must be a direct benefit to the project account being charged; Must be supported by documentation that contains a full explanation of how error occurred and a certification of the correctness of the charge to the new account; The transfer of an overdraft or any direct cost item incurred in the conduct of one sponsored project may not be transferred to another sponsored project account merely for the sake of resolving a deficit or an allowability issue. TIMING Requests must be received in Research Finance within 120 days of the date of the original transaction; When a Report of Expenditures is due, transfer requests must be received within 45 days of the grant end date. An LDCA that corrects DIRECT COST expenditures less than $2,500 will not be processed. Instead a transfer voucher should be prepared to transfer these cost to a non-sponsored program account. LDCAs and transfer vouchers to move amounts less than $1,000 into a sponsored program will not be accepted.