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direct charging of administrative and clerical costs

Regulatory Guidance: OMB Circular A-21. Section F.6.bThis requirement applies to all federal, SNJ direct and pass-through funding or any other non-federal sponsor that incorporates A-21 into its award terms and conditionsRequires administrative and clerical expenses to be normally treated as F

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direct charging of administrative and clerical costs

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    1. Direct Charging of Administrative and Clerical Costs

    3. Regulatory Guidance: OMB Circular A-21 Section F.6.b states: “…direct charging may be appropriate where the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support which is significantly greater than the routine level of such services provided by academic departments”. The costs must meet the criteria in section D.1 – i.e. - Be identified specifically with a particular sponsored project relatively easily with a high degree of accuracy, AND - The special circumstances requiring direct charging of the services would need to be justified to the satisfaction of the awarding agency in the grant application or contract proposal.

    4. Regulatory Guidance: OMB Circular A-21 Continued Cost Accounting Standards 502 Requires consistency in the way RU assign costs to sponsored agreements. All costs incurred for the same purpose, in like circumstances be treated as either a direct cost or indirect cost, not both.

    5. What is the big issue here? Direct charging administrative and clerical expenses to applicable sponsored programs, unless they are truly “major” projects is a direct violation of Circular A-21. Auditors will disallow administrative and clerical salaries if you do not adequately substantiate that the costs charged to the award were commensurate with the direct effort provided to on a major project. Auditors can conduct “interviews” with any personnel whose salary is direct charged to verify the amount of effort that they have devoted to the project. It also creates an issue with the development of the University’s F&A rate in the general and the departmental administrative cost pools specifically.

    6. Consistency Costs which are incurred for the same purpose and in like circumstances must be treated consistently as either direct or F&A and applied on a consistent basis throughout the University.

    7. Costs Normally Included in the F&A Cost Rate Administrative and clerical expenses that fall within the routine services normally provided by academic departments are treated as F&A costs. As a general rule, such routine services cover the general business of the department as a whole, and may include some limited support to faculty to enable them to conduct their teaching and scholarly activities These expenses include, but not limited to administrative or clerical salaries, office supplies, postage, memberships, local telephone costs, photocopy costs, network charges and cell phones

    8. At Rutgers… RU requires that 4 criteria be met to direct charge administrative expenses to a sponsored project: The expense must be: 1. Incurred for the performance of a major project or activity and be significantly greater than the routine level of such services provided by the administering unit. 2. Specifically identified in the proposal budget and justification as directly benefiting the project with a high degree of accuracy and provide direct benefit to the project

    9. At Rutgers - Continued Explicitly budgeted in the proposal budget and are not specifically disapproved in the award notice (aka approved by the sponsor) Note: NIH modular grants or other grant instruments that do not require line-item budgets are in general small projects, therefore administrative or clerical expenses should not be directly charged. 4. Supported by a written budget justification Explicit justification for all administrative or clerical charges must be included in the proposal as well as a justification how the project constitutes as a major project.

    10. Examples of “Major Programs” where direct charging may be appropriate Large complex programs, such as program projects and other grants and contracts that entail assembling and managing teams of investigators from a number of institutions Projects which involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature and reporting (such as clinical trials) 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 monograms (excluding routine progress and technical reports)

    11. Examples of “Major Programs” where direct charging may be appropriate (Continued) Projects that are geographically inaccessible to normal departmental administrative services, such as research vessels and other research field sites that are remote from campus Individual projects requiring project-specific database management, individualized graphics or manuscript preparation; human or animal protocols, and multiple-project related investigator coordination and coordination Note: These examples are not exhaustive nor are they intended to imply that direct charging would always be appropriate in these cases.

    12. Additional General Guidance NIH always requires approval for the subsequent addition of administrative or clerical costs. Non-federal sponsors may have regulations and requirements either disallowing such expenses, or requiring advance approval. Because of the sensitivity of these costs, even if an award has expanded authority, justification for non-budgeted administrative or clerical costs must be provided to, and approved by the sponsor

    13. What could happen - HHS Audit of Duke OIG recommended that Duke in 2009: (1) Refund $1.7 million (2) Revise it’s policies to comply with OMB A-21 and to ensure consistent treatment of administrative and clerical costs In a sample of 114 transactions, 35 were determined to be problematic. The University’s project files contained no documentation that the involved grants, contracts or other agreements met the definition of “major projects”. The University provided no persuasive evidence that the nature of the work performed on the projects, or any other circumstances, justified any unusual degree of administrative and clerical support to accomplish project objectives.

    14. Duke: Salaries Examples of erroneous thinking: One PI stated that he considered clerical salaries “…specific to creating, copying, and assembling the annual progress report …” to be allowable. Another PI cited the need to “…arrange travel and process paperwork for travel expenses for the study assessment teams” although the detailed project budget included only $10,811 of annual staff travel costs.

    15. Duke: Other Admin Costs Examples of sampled costs deemed inappropriate: A laptop computer justified as being solely used for project data and allowed the employee “the opportunity to work from home or wherever she may be located at anytime of the day”. The employee was budgeted at 5% effort for the project. A swivel chair of $193 was charged to the project. The University’s justification was that the program’s budget has a line item for office supplies. Letter trays cost $47 were treated as a direct cost. The University’s explanation was that it was a major project requiring “separate files for patient and site information”. Local telephone line charges, pager services, copier paper, scissors, postage, pens, markers, file folders, envelopes

    16. Duke: Other Admin Costs Examples of sampled costs deemed appropriate: Production costs of spiral bound reference books for 300 teachers Postage and express delivery charges whereby the project required mass mailings to program participants and shipments of biological samples

    17. In Summary – Administrative and Clerical Costs Generally unallowable as direct charges Are normally considered to be F&A Direct charging may only be permitted when it meets the conditions described in OMB Circular F.6.b and University policies and procedures.

    18. Discussion and Questions?

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