Direct Cost Categories
Direct vs. Indirect Costs
Direct vs. Indirect Costs
Direct costs are defined as those costs that can be "Identified specifically with a particular sponsored project, instruction, other sponsored activity, or other institutional activities" (OMB Circular A-21.D.1)
Examples include salaries, fringe benefits, travel, equipment, services, consulting fees, expendable materials and supplies, publication fees, communication costs, participant support costs, subawards, and tuition.
(AKA institutional costs, overhead costs, facilities and administration costs)
Indirect costs are defined as "general institutional costs (OMB Circular A-21.F.1) incurred for common and joint objectives – i.e. O & M, depreciation, capital improvements, general admin, sponsored programs admin, department administration, and library"
Indirect costs are not easily identified to a specific project or activity. They are calculated in a budget as a percentage of direct costs.
Click a title below for more information....
A subaward or subcontract can be distinguished from a service or consultant by the nature of the work they will perform. An organization is considered a subaward when it:
- Makes substantial contributions to the project that may not be reduced to a set price per unit;
- Has its performance measured against whether the objectives of the project are met; and
- Has responsibility for programmatic decision making.
UAF requires specific documentation to certify commitment of each subrecipient. Remember, the university claims F&A recovery on only the first $25,000 of each subaward, even if the project spans multiple years.
Each UAF subrecipient organization is required to provide OSP with a Subrecipient Commitment Form (Form OSP-007). This form should be completed and signed by the Authorized Organization Representative (AOR) and the PI for the subrecipient. Along with this form, the subrecipient is required to include at a minimum:
- A statement of work to be performed by the subrecipient organization/PI in the proposed project;
- An itemized budget and justification for the work to be performed by the subrecipient;
- Other documents as needed (i.e. CVs, C&Ps, copies of F&A or benefits agreements, copies of IRB or IACUC protocols, etc.)
UAF PIs who plan to be subrecipients on other institutions' projects, should check with the prime institution to determine what documentation to provide. At the minimum, OSP requires a statement of work, budget, and budget justification.
For further information regarding subrecipients, see The Office of Grants and Contracts Administration's subaward section manual.
Note regarding "Sub-subrecipients": Unless substantial justification can be made, a subrecipient should generally not request any further subawarding of their portion of work. Instead, the prime awardee should budget all subawards/subcontracts so that they fall under the prime's authority.
Treatment of Cross-MAU/Cross-Department Activities in Sponsored Programs
If one MAU (the prime) writes a proposal which includes activity that will be conducted by one or more of the other UA MAUs (for example, UAA submits a proposal which includes work that will be completed UAF), the work completed by UAA, UAF, and UAS IS NOT treated as a subrecipient. UA is one institution so no subaward or subcontract arrangement can exist even when activities cross MAUs or departments within an MAU. All costs incurred should be included in the prime MAU's proposal budget. It is helpful for the various activities to be clearly identified with each specific MAU. For proposal submissions to the National Science Foundation, a collaboration between MAUs is appropriate unless prohibited by the program competition.
In general, the F&A cost rate for the primary MAU should be used for the whole proposal unless the activity at other locations is material. However, the funding agency may require multiple rates for the proposed project regardless of materiality to the project. Agency guidelines and requirements are the primary consideration in deciding if it is appropriate to use multiple rates. In addition, if the activity at the primary campus is 90% or more of the total project then the activity at other locations is probably not material to the project and doesn't warrant the use of multiple rates. Contact UA Cost Analysis for more information.
Note: NSF requires subawardee budgets & justifications be entered in FastLane's budget section and not in the Special Information and Supplementary Documentation section!
Equipment is defined as any item which will retain its usefulness beyond one year. UAF's threshold for equipment is $5,000 per piece of equipent/unit. F&A costs are not charged on equipment.
Periodically, in the course of research, there is a need to build a piece of customized equipment for functionality that does not currently exist. Fabricating this piece of equipment would normally take place at the University and may follow a phase of Research and Development. The cost of fabricating that piece of equipment needs to be properly accounted for so that it can be valued, tagged, and recorded as an asset to be depreciated over its useful life.
Fabricated equipment consists of non-expendable, tangible, personal property, physically constructed by University of Alaska activity at the University. The fabricated equipment must have a total acquisition cost of $5,000 or more, is free-standing, is complete in itself, does not lose its identity when affixed to or installed in other property, and is expected to be used by the university for more than one year.
- The need to fabricate an asset comes about when equipment does not already exist off the shelf or additional functionality needs to be added to an existing piece of equipment.
- Fabricated equipment must be University titled (not a deliverable or agency-owned asset).
- Equipment fabrication must meet the same definition as equipment, i.e., has a total fabrication cost greater than $5,000 and a useful life of greater than one year.
All materials, supplies, and services from outside vendors or authorized internal recharge activities used in the fabrication are exempt from indirect costs if title is retained by the University. Department labor, travel, or other operating expenses associated with the fabrication such as salaries of Principal Investigators, graduate student researchers, or other comparable personnel who participate in the fabrication process are not included in the acquisition cost of the item and are subject to indirect costs.
Costs that MAY be included in Fabricated Equipment:
Allowable costs that may be included in the cost of equipment fabrication must be incurred in association with constructing the approved design following the completion of the R&D phase.
- Design Costs - including procurement of drawings and schematics based on the approved final design , development of component specifications and development/production of operating documents and flow charts. Need to clearly differentiate between R&D design costs and allowable design costs. For example, we could say «Work prior to and through completion of a non-working model would be considered R&D. After a build-to specification is complete, work to fabricate a working item, including design modifications caused by fabrication or discovered design flaws, would be considered allowable.
- Recharge services and supplies internal to the University required for building the approved design
- Services external to the University (Service contracts) if required for fabrication of the equipment and incurred after the completion of the R&D phase
- Supplies and Materials required for the fabrication
- Construction Costs - if it meets the fabrication criteria and is to be used for its designed purpose only or if it does not meet the fabrication criteria, but contributes directly to the design of another item that does meet the fabrication criteria .
- Equipment (off the shelf). The purchase request must indicate that the equipment is being acquired on a fabrication budget.
- Maintenance contract (first year only) on a sub-component (if in place at the time the asset is initially put into use)
- Software If sole use is for the fabricated item, or it is a critical part of the equipment (i.e. Equipment would not function without it, and its development is performed only because it is directly associated with the equipment)
- Modification Costs of Existing Equipment (if adding new functionality) Note that a dding new functionality i nvolves something other tha n expandin g on an existing functionality.
- Testing Costs to confirm proper assembly only. Testing to see if an item produces intended results or whether it works in a specific environment is an R&D event and is not allowable.
- Travel If travel supports both testing and research, the travel costs must be prorated between the two types of effort .
- Modification Costs of Fabricated Equipment only if prior to initial use or deployment for research. Design flaws discovered in the first use or deployment: redesign falls under R&D and is not allowable; fabrication of the changes to the equipment and/or its software are allowable.
- Installation Costs if necessary to make sure the fabricated equipment is functioning properly prior to initial use and if directly related to the installation.
Costs that MAY NOT be included in Fabricated Equipment
Unallowable costs in a fabrication include:
- Research and Development (R&D). I f the fabricated item has not been built previously and require s design, significant testing and redesign/modification before an actual working item is obtained , the cost s incurred up to the point that there is a proven , approved design are deemed to be R&D and will not be included in the cost of fabrication. R&D costs may be incurred either at the University or by an external vendor providing contractual services including design, testing and modifications. The cost of building the original fabricated asset (i.e., capitalized cost subject to depreciation) should not be significantly different than the cost of building subsequent assets.
- Cannibalized parts (parts removed from an existing asset that has already been recorded, capitalized, and fully depreciated)
- Maintenance contracts other than for first year or if not in place at the time the asset is initially put into use .
- Modification Costs of existing Equipment if not adding substantial new functionality
- Modification Costs of Fabricated Equipment if after initial use or deployment for research
- Repairs and Maintenance
- Replacement parts
- Replacement supplies (e.g. batteries)
- Spare Parts
- Supplies (that do not become an actual part of the item, e.g. books, tools, paper towels, test equipment, etc.)
- Testing (if data gathered is to be used in research)
- Travel (if it supports research or the R&D phase or is made to discuss design issues)
Materials and Supplies
Materials and supplies are project-specific, expendable, and cost less than $5,000 per item. Budgets should clearly itemize supply lists when they are over $1,000. Be sure to differentiate between expendable supplies used in the lab and office and supplies used in the field.
Supplies should always be referred to as "project supplies" in the budget and justification. Since office supplies are not easily identifiable for a specific project and perceived for common use, they are normally an indirect cost.
Salary and Benefits
Calculating Salary and benefits for faculty and staff
Budgeting someone full time technically equals 10.5 months. Why?
- There are 2080 total work hours in a year (80 hours * 26 pay periods)
- The average leave accrual rate is 6.46 hours/payperiod (per Statewide BOR Regulations 04.06) or 167.96 hours/year
- There are 12 holiday days/year (New Year's - 2 days, MLK, Spring Break, Memorial Day, Fourth of July - 2 days, Labor Day, Thanksgiving - 2 days, and Christmas - 2 days)
- Leave hours + holiday hours = 263.96 hours/year
- 2080 - 263.96 = 1816.04 hours full time (without leave and holidays)
- 1816.04 * 12 / 2080 = 10.477 months or 10.5 months
(Note: Faculty and staff may not charge more than their base salary rate to a sponsored project. See OMB A-21, Section J.10 - Compensation for Personal Services.)
- Ask your fiscal technician for an updated hourly salary figure for all faculty and other personnel in your budget.
- Multiply this number by 173.33 (174) hours. This will give you salary per month.
- Multiply by the number of months in your budget.
- Multiply this figure by the appropriate leave benefit percentage (see benefit table). This will give you the "loaded salary." Check with your fiscal technician to determine the job classification for each personnel listed on your budget.
- Take the "loaded salary" and multiply it by the appropriate staff benefits rate (see benefit table).
- List the staff benefits figure on the "fringe benefits" line of your budget.
Example of a faculty member's (ECLS F9) salary:
($40/hr)(173.33hrs/month)(2 months)(1.017 leave benefit rate) = $14,102 in salary
($14,102 loaded salary)0.319 staff benefit rate) = $4,499 in staff benefits
A 3% cost of living increase should be included each year of the project to cover salary increases. For unionized faculty UNAC faculty (job group F9), ACCFT faculty (job group A9, AR), Adjunct faculty (job group FT, FW), a 4.5% cost of living increase is recommended to cover salary increases.
How is overtime determined?
Overtime is paid at 1-1/2 times your regular rate of pay, for hours worked over 40 hours per week. Sick leave, holiday leave or annual leave hours do not count as hours worked in a week in determining overtime. For example, if an employee uses 8 hours annual leave on Monday and works 40 hours Tuesday – Saturday, all time will be at the regular rate of pay. Leave and benefits do not accrue on overtime pay.
Student salary calculation
Check with your Fiscal Officer/Business Office for student salary as it varies between each unit/department.
A student working 20 hrs/wk for two semesters (ECLS GN or SN) plus extra time on holidays may work a total of 760 hrs. A student working 40 hrs/wk all summer (ECLS GT or ST) may work 560 hrs. FT summer work also accrues staff benefits of 8.0%. Total hours for a whole year: 1320.
Calculating a student stipend: ($hourly)(1320)
Calculating student benefits: ($hourly)(560)(.08)
Graduate student compensation will be gradually increasing to bring the stipend rates up to national norms, click here for current rates.
You must request tuition for a graduate student researcher unless the sponsor will not pay tuition costs (include documentation w/proposal). If you wish to supply tuition from another source, include a memo confirming the source and available funds with the proposal.
Health CareSince FY08, all proposal budgets including graduate students must also include health insurance for the graduate students. The UAF Graduate School has released the new graduate student health insurance rates for the 2011/2012 academic year (http://www.uaf.edu/gradsch/health-insurance/plan-costs-and-contacts/).
Fall: $714 (8/25/12 - 1/11/13)Spring + Summer: $1,245 (1/12/13 - 8/24/13)Summer: $537 (5/24/13 - 8/24/13) (offered only in specific cases)Annual equivalent: $1,959.00
For proposal budgeting purposes, increase health insurance rates by 7% in subsequent years. Student health care fees should be listed as a separate budget line item under benefits.
Student health care are subject to F&A (account code 1949) if they are provided to the student as part of a research or teaching assistantship. When these costs are included as part of a scholarship or fellowship, they DO NOT recover F&A and are excluded from the MTDC base (account code 6105).
Services and Consultants
When preparing the budget, include all expenses to be incurred for services during the project period, such as: media services, computer services, lab analyses, consulting, animal care, boat and air charters, and UAF Recharge Center fees. Services also include both oral and written communication costs related to the project such as toll charges, fax, postage, and publication costs. When describing consultant costs in the budget justification, mention any consulting fees and address why the individual is required for the task.
Service or Subaward?
A service can be distinguished from a subaward by the nature of the work the service provider will perform. An organization is considered a vendor service when it:
- Provides similar goods and services to different clients within normal business operations;
- Operates in a competitive environment; and
- Provides goods and services ancillary to the operation of the program at a set price per unit
UAF Recharge Center Fees
Recharge center rates are treated as a direct cost and cannot be included as an MTDC exclusion. The rates are not "fully loaded' and do not include building depreciation, administration costs, etc., which are then recovered through F&A. The recharge rates are "actual ulitilization" rates, which only cover the actual costs for the recharge services such as labor, materials and supplies, depreciation on equipment, etc. If you have other questions about how the recharge rates are developed, please contact SW Cost Analysis).
Current UA employees CANNOT be paid as consultants on UAF proposals. However, emeritus faculty can be paid as consultants on UAF proposals only if:
- They have not been paid as a UA employee in the past 12 months;
- They are not doing a service that would fall under the normal scope of work of any UA employee;
- They are not using university resources such as office space, equipment, labs, etc. to perform the service(s);
- They are not being supervised on a day-to-day basis; and
- They are given a set task to complete with an expected deliverable.
All items deemed services will have full F&A charged against them, unless it can be demonstrated that the vendor can be treated as a subaward under the following policy:
Treating Vendor Services as Subawards
"If a department believes that it has a contract for allowable goods and services that should not recover F&A costs on the excess over $25,000, that department must be able to clearly demonstrate that the contract does not require the same level of F&A support as other contracts for goods and services. To qualify for the exclusion, the vendor contract must meet the following criteria:
- The contract must be in excess of $50,000.
- Normally, the primary administrative costs associated with the contract are only the initial costs incurred in the bidding process.
- Limited additional administrative costs will be incurred as a result of the short-term of the contract, few types of goods and/or services purchased, quantity of goods purchased is small, or the vendor will receive a small number of payments.
The unit should follow the same process used by their respective MAU for F&A waivers by providing a written request explaining the need and justification for exceptional treatment to their respective campus’s Chief Financial Officer or authorized designee for review and approval. MAUs that currently charge a penalty to departments for waivers have the option of treating these situations as exceptions to those penalties."
If a PI or department wants to treat a vendor as a subaward, fill out the Request for Waiver to Treat Vendor Service Contract as Subaward form. Notice of intent to seek a waiver should be given to OSP as far in advance as possible. There are no guarantees that a waiver will be granted and it could require the budget to be changed, so lead time is key with these request. This form will be required for such requests and should be included with the proposal package to OSP. The memo is an internal UAF document only for review and approval of a waiver.
First determine what travel expenses the granting agency will allow (travel costs to meetings and field sites), and then itemize the cost of each trip. Break down by location, per diem, number of participants, and number of trips.
- For Alaska per diem rates, use the daily lodging rate for the Alaskan city and add $52/day maximum for meals and incidentals per UA Board of Regents policy . More information is available in the UAF Travel Regulations.
- Domestic Per Diem Rates
- Fly America Guidelines (On a federally funded grant, the traveler must exit and enter the U.S. on an American carrier.)
- Foreign Per Diem Rates
- There are no University restrictions on traveling to a country with a current travel warning.
However, travelers are encouraged to contact UA Statewide Risk Management if there is any potential danger involved during the travel.
- U.S. State Department Travel Warnings
Tuition and Other Direct Costs
You must request tuition for a student researcher unless the sponsor will not pay tuition costs (include documentation w/proposal). If you wish to supply tuition from another source, include a memo confirming the source and available funds with the proposal.
Please note that students must be in the state for 2 years to qualify for the in-state tuition rate, or they can apply for resident status after residing in the state for one year under the university's "bona fide resident" provision. Students having non-immigrant visa status are not eligible for Alaska residency.
For budget planning on proposals, the OSP recommends 2 years of out-of-state tuition. Full time graduate students are enrolled in 9 credits each semester (18 credits for academic year).
- Graduate Fall 2009 resident tuition is $338 per credit
- Graduate Fall 2009 non-resident tuition is $691 per credit
- No more than 18 credits can be taken for undergraduate students and no more than 14 credits for graduate students; per UAF policy http://www.uaf.edu/catalog/current/academics/regs1.html
Here are some examples of Other Direct Costs. This list is not all-inclusive.
- Air/Vessel Charters - see Services and Consultants
- Animal Care Costs
- Consultants - see Services and Consultants
- Graduate Student Tuition - see Tuition
- Page charges/publication costs
- Participant Support Costs - This is an NSF-specific cost category, defined by NSF as "...costs of transportation, per diem, stipends and other related costs for participants or trainees (but not employees) in connection with NSF-sponsored conferences, meetings, symposia, training activities and workshops. (See Chapter II, Section D.7) Generally, indirect costs (F&A) are not allowed on participant support costs. The number of participants to be supported must be entered in the parentheses on the proposal budget. These costs also must be justified in the budget justification section of the proposal. Some programs, such as Research Experiences for Undergraduates, have special instructions for treatment of participant support." Note: Because this is a sponsor-specific exclusion from the MTDC base when charging F&A and not applicable to all sponsors, F&A should be charged on similar costs to all other sponsors unless explicity prohibited by sponsor or program guidelines.
- Sample analysis - see Services and Consultants
- Shipping of equipment/supplies to field locations
- Toll/Communication charges
- UAF Recharge Center costs