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OMB CIRCULAR A21:. Making It Work for You. What is OMB A-21?. A portion of the Code of Federal Regulations, specifically the Office of Management and Budget (OMB), that is used in determining the allowable costs of work performed by colleges and universities under sponsored agreements.

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omb circular a21


Making It Work for You

what is omb a 21
What is OMB A-21?
  • A portion of the Code of Federal Regulations, specifically the Office of Management and Budget (OMB), that is used in determining the allowable costs of work performed by colleges and universities under sponsored agreements.
  • Note: These principles are designed to ensure that the Federal Government bear its fair share of total costs associated to research.
when should it be used
When should it be used?
  • determining costs applicable to grants, contracts, and other agreements with educational institutions.
  • working with any Federal agencies that sponsor research and development, training, and other work at educational institutions
  • used as a guide in the pricing of fixed price contracts and subcontracts where costs are used in determining the appropriate price.
  • Note: Some costs normally allowed under A-21 may be unallowable in the specific program application (RFP, PA, Project Guidelines). Ie: No foreign travel allowed, no capital equipment allowed.
four categories of major functions in an educational institution section b 1
Four categories of major functions in an educational institution (Section B-1):
  • Instruction
  • Research
  • Other Sponsored Activity
  • Other Institutional Activity
  • Instruction
    • the teaching and training activities of an institution
      • Sponsored instruction and training means specific instructional or training activity established by grant, contract, or cooperative agreement.
definitions continued
Definitions, continued:
  • Research
      • Organized research means all research and development activities of an institution that are separately budgeted and accounted for.
      • Sponsored research means all research and development activities that are sponsored by Federal and non Federal agencies and organizations.
      • University research means all research and development activities that are separately budgeted and accounted for by the institution under an internal application of institutional funds.
      • Departmental research means research, development and scholarly activities that are not organized research and, consequently, are not separately budgeted and accounted for.
definitions continued7
Definitions, continued:
  • Other Sponsored Activity
    • Other sponsored activities means programs and projects financed by Federal and non Federal agencies and organizations which involve the performance of work other than instruction and organized research.
        • health service projects
        • community service programs
          • any of these activities are undertaken by the institution without outside support may be classified as other institutional activities
definitions continued8
Definitions, continued:
  • Other Institutional Activity
    • means all activities of an institution except:
      • instruction, departmental research, organized research, and other sponsored activities, as defined previously
      • F&A cost activities as defined in this circular
      • specialized service facilities as defined in this circular: including:
        • operation of residence halls and dining halls
        • hospitals and clinics
        • student unions
        • intercollegiate athletics
        • bookstores, etc…
F&A Rates are Categorized by these Major Functions of Research:

For WSU the new rates for starting 07/01/07 for each of these categories are (Calculated as Modified Total Direct Costs)







Other Sponsored Activity:



other topics addressed in a 21
Other topics addressed in A-21
  • Cost Accounting Procedures
    • Section C: Items 5-12, deal with subjects related to applicable costs, cost allowances for the university and non-compliance to the procedures.
  • F&A Costs, Negotiation, and Agreement:
    • Sections E-I relate to:
      • the development of Facilities and Administration policies, rates, allowable costs in F&A
      • reporting and auditing standards
f a costs
F&A Costs:

Facilities and administrative costs (a.k.a: F&A or Indirects) Section E:

  • 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. F&A costs are those involving resources used mutually by different individuals and groups, making it difficult to assess precisely which users should pay what share.
  • Procedures to Calculate F&A: Simplified or Other
    • Simplified version is for smaller universities.
    • As a larger institution, WSU uses Modified Total Direct Costs as the method of calculation
    • Section H explains the different methods and defines small and larger university categories.
  • What does Indirect Costs (F&A) pay for?
      • General Administration Sponsored Projects Administration
      • Library Expenses
      • Plant Operation and Maintenance
      • Depreciation or Use Allowance on Building and Equipment
      • Student Administration and Services
Cognizant Federal Agency-Section 11 (a):
    • A “cognizant agency" means the Federal agency responsible for negotiating and approving F&A rates for an educational institution on behalf of all Federal agencies.
    • Cost negotiation cognizance is assigned to the Department of Health and Human Services (HHS) or the Department of Defense's Office of Naval Research (DOD), normally depending on which of the two agencies (HHS or DOD) provides more funds to the educational institution for the most recent three years.
    • WSU’s cognizant Federal Agency is Department of Health and Human Services (HHS)
Reporting and auditing standards-Section B.14:
  • Educational institutions that received aggregate sponsored agreements totaling $25 million or more subject to this Circular during their most recently completed fiscal year shall disclose their cost accounting practices by filing a Disclosure Statement (DS 2).
  • Cost adjustments shall be made by the cognizant agency if an educational institution fails to comply with the cost policies in this Circular or fails to consistently follow its established or disclosed cost accounting practices when estimating, accumulating or reporting the costs of sponsored agreements.
a 21 s nuts and bolts for a research administrator
A-21’s nuts and bolts for a Research Administrator
  • Composition of Total Costs-Section B.1-4
      • The cost of a sponsored agreement is comprised of the allowable direct costs incident to its performance, plus the allocable portion of the allowable F&A costs of the institution
  • Direct Costs-Section D
    • Direct costs are those 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.
    • Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or F&A costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution.
composition of total costs section b 2
Composition of Total Costs-Section B.2
  • Allowability of costs (It’s an ART!)
    • Allocable to sponsored agreements described in A-21
    • Reasonable
    • Treated consistently in the application of those generally accepted accounting principles appropriate to the circumstances
a llocable
  • it is incurred solely to advance the work under the sponsored agreement
  • it benefits both the sponsored agreement and other work of the institution
  • is deemed to be assignable to the project
      • Any costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.
      • Any costs allocable to activities sponsored by industry, foreign governments or other sponsors may not be shifted to federally sponsored agreements.
r easonable
  • A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved, reflect the actions a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.
  • See OMB Circular A-21 Section C.3 for major considerations involved in the determination of the reasonableness of a costs.
t reated c onsistently
Treated Consistently
  • Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or F&A costs.


  • Costs conform to any limitations or exclusions in these principles or in the sponsored agreement.
direct costs section d
Direct Costs-Section D
  • Are those allowable costs that can be identified specifically within the performance of the scope of work or are necessary for the completion of the specific project. They are easily assigned to a specific research project and paid directly from that project.
  • Are identified specifically with the sponsored work rather than general cost of the project. Determining the direct costs from F&A costs should be of consideration.
standard direct costs
Standard Direct Costs:
  • Salaries and Wages
  • Personnel Benefits
  • Materials and Project Specific supplies
  • Project Related Travel
  • Equipment Purchased for the Project
  • Long Distance Telephone Charges
  • Project Specific Photocopying
  • Other costs can be allocated as Direct but are not as common. (See Section D)
major projects cost determination
Major Projects Cost Determination
  • Major projects are defined as those requiring an amount of administrative or clerical support significantly greater than the routine level provided by academic departments. Direct charging of administrative or clerical 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 projects cost determination22
Major Projects Cost Determination

Major program project determination is not as easy as it sounds. The project must validate the significance of administrative or clerical support.

The next slides provide some examples of Major Program Projects consistent with OMB A-21.

major project examples
Major Project Examples
  • 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
  • Projects that are geographically inaccessible to normal departmental administrative services
    • such as research vessels, radio astronomy projects, and other research fields 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 communications
unallowable costs section j
Unallowable Costs-Section J
  • Donations or contributions.
  • Development/fundraising costs.
  • Entertainment costs. (shows, sporting events, meals, lodging, etc.)
  • Fines and penalties for violations of Federal, State, and local or foreign laws and regulations
  • Goods or services for personal use (including gifts).
  • Housing and personal living expenses of the institution’s officers (including past officers).
  • Individual memberships and subscriptions.
  • Interest, fund raising, and investment management costs.
unallowable costs continued
Unallowable Costs, Continued:
  • Lobbying costs.
  • Losses on other sponsored projects
  • Proposal preparation costs
  • Recruiting costs that are excessive.
  • Relocation costs (if employee leaves voluntarily within 12 months of hire).
  • Selling and marketing costs.
  • Student activity costs unless specifically allowed in the sponsored agreement.
  • Travel costs in excess of commercial coach airfare
  • Trustee travel and subsistence costs.
what you should remember about omb a 21
What you should remember about OMB A-21:
  • Guide to how all costs associated to sponsored projects are developed, accounted for, and recorded.
  • Determining allowable costs is an ART: Allowable, Reasonable, and Treated Consistently
  • F&A is a negotiated rate through DHHS that entails many general cost functions of the university.

Is a hammer a direct cost or a general cost under F&A?

  • Depends on what kind of hammer it is?
  • If a standard hammer that can be used in the department for anything, if so it can not be charged as a direct cost.
  • If it’s special hammer with capabilities designed specifically for the project, it can be charged as a direct cost.
A PI wants to charge 3 desk top computers totaling $9,000 on a proposal he’s submitting to NSF, is this acceptable?
  • What does NSF guidelines say? What are computers considered according to OMB?
  • Could these be listed as “Equipment”?
OMB says:
  • "Equipment" means an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of the capitalization level established by the institution for financial statement purposes, or $5000.
  • "Special purpose equipment" means equipment which is used only for research, medical, scientific, or other technical activities. Examples of special purpose equipment include microscopes, x-ray machines, surgical instruments, and spectrometers.
  • "General purpose equipment" means equipment, which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles.
  • Unless the computer(s) can be dedicated solely to the project, they can not be charged as a Direct cost of the project. This would be a cost covered by F&A.