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Departmental Research Administrators Training Track. Cost Principles 2CFR Part 220 (Formerly OMB Circular A-21 ) Office of Sponsored Programs Engineering 329 [email protected] 410-455-3140 (Phone) 410-455-1876 (Fax) 2CFR Part 220 Emphasizes.

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Departmental Research Administrators Training Track

Cost Principles

2CFR Part 220

(Formerly OMB Circular A-21)

Office of Sponsored Programs

Engineering 329

[email protected]

410-455-3140 (Phone)

410-455-1876 (Fax)

2cfr part 220 emphasizes
2CFR Part 220 Emphasizes

Allowable and Unallowable Costs

Calculating F&A Proposal

Cost Accounting Standards

You will
You Will...

…Learn what costs are allowable and unallowable

…Discover how the F&A Rate is determined

…Learn what F&A costs are

…Explore cost accounting standards (CAS)

Parts of the cost principles for educational institutions
Parts of the Cost Principles for Educational Institutions

Part A -General

Part B -Definition & Terms

Part C -Basic Consideration

Part D -Direct Costs

Parts continued
Parts Continued

Part E - F&A Costs (formerly Indirect Costs)

Part F - Identification of F&A Costs

Part G - Determining F&A Rates

Part H -Methods for small institutions

Part I -Reserved

Part J -Provisions for costs

Part K -Certification of charges

2cfr part 220
2CFR Part 220


A.- Cost Accounting Standards

B.- Disclosure Statement

C.- Examples of Administrative Charges

2cfr 220 part a
2CFR 220Part A

Principles for determining costs applicable to grants, contracts, and other agreements

The principles are designed to provide that the Federal Government bear its fair share of total cost, determined in accordance with generally accepted accounting principles

2 cfr 220 part b
2 CFR 220Part B

Defines terms

Defines allowable and unallowable costs (the “J” section)

Defines methods of indirect cost rate identification and calculation

History of indirect cost rates
History of Indirect Cost Rates

1947 ONR reimbursed universities for indirect costs incurred for Navy contracts

1955DHEW used this approach to set their rate at 8% of Total Direct Costs

1958NIH raised the rates to 15%

1958 The Bureau of Budget introduced the famous Circular A-21

History of 2cfr 220 continued
History of 2CFR 220 Continued

1966 The Government made a commitment to fully reimburse universities for the cost of federally sponsored research

1979 A-21 revision introduced the MTDC concept

1986 A-21 revision capped faculty administration costs @3.6%

Revisions october 1991
Revisions: October 1991

26% Cap on administrative components (GA, DA, SPA)

Certification about unallowable costs required in IDC proposal

New unallowables, e.g. alumni activities, lobbying, trustees travel

Revisions october 19911
Revisions: October 1991

Assurances from major institutions that indirect cost reimbursement for facilities and equipment will be expended for that purpose within 5 years

Can’t shift underrecovery of research sponsored by foreign government, industry or other sponsor to federally funded research

Revisions july 1993
Revisions: July 1993

Two broad categories: Facilities and Administration

26% cap on administrative components retained

Predetermined rates from two to four years is the norm

Revisions july 19931
Revisions: July 1993

Consistent treatment of costs - “Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs.”

New rules on administrative and clerical staff costs- normally treated as indirect costs

Revisions july 19932
Revisions: July 1993

“The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these 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 of activity. Items such as office supplies, postage, local telephone costs, and memberships shall normally be treated as indirect costs.” F.6.b.

Revisions july 1996
Revisions: July 1996

Extend CAS and Disclosure Statement to grants and Cooperative Agreements

Increase maximum equipment capitalization level to $5,000

Change cognizant agency assignments

Revisions july 19961
Revisions: July 1996

Require Fixed F&A rate(s) for entire competitive segment of a project period

Standardize treatment of unrecovered depreciation when institution converts from allowances to depreciation

Revisions july 19962
Revisions: July 1996

Add new conditions for allowability of interest costs

Disallow tuition benefits for employee family members

A 21 revisions july 1998
A-21 Revisions, July 1998

Guidelines for depreciating buildings

Standard forms for F&A proposal

Clarification of charging administrative salaries

Exhibit C

Main objectives of changes
Main Objectives of Changes

Tighten rules on allowability and allocation of costs

Primary focus on F&A costs

Promote greater standardization in treatment of costs

Also directed primarily at F&A costs

Costs are reimbursable by the federal government if they are
Costs are reimbursable by the Federal government if they are:

ALLOWABLE: Under the circulars applicable to the award (2CFR 220)

ALLOCABLE: They can be assigned to the activity on some reasonable basis.

REASONABLE: A prudent person would have purchased this item/paid this price.

If a cost cannot meet the above criteria, it is UNALLOWABLE, no matter what it is for.

Facilities administrative f a costs
Facilities & Administrative (F&A) Costs are:

Costs that cannot be identified specifically with a particular sponsored project

Costs associated with common or joint objectives

Formally identified as indirect costs

Cost are distributed based on activity
Cost are Distributed Based on Activity are:


Organized Research

Other Sponsored Activity

Other Institutional Activities

Definition instruction
Definition: Instruction are:

The teaching and training activities of an institution, whether they are for credit or on a non-credit basis.

Includes departmental research

Definition instruction1
Definition: Instruction are:

Sponsored instruction & training: Specific instructional or training activity established by grant, contract or cooperative agreement

Departmental research: Development and scholarly activities that are not separately budgeted and accounted for.

Definition organized research
Definition: Organized Research are:

All research and development activities of an institution that are separately budgeted and accounted for

Organized research includes
Organized Research Includes: are:

Sponsored Research means all research and development activities that are sponsored by Federal and non-Federal agencies. This includes training individuals in research techniques

University research activities are separately budgeted and accounted for using institutional funds

Definition other sponsored activity
Definition: Other Sponsored Activity are:

Programs and projects financed by Federal and non-Federal agencies that involve work other than instruction and organized research. (e.g... heath service and community service programs)

Definition other institutional activities
Definition: Other Institutional Activities are:

Activities such as operation of:

residence halls

dining halls

student unions





Distribution of f a costs
Distribution of F&A Costs are:

Distribution is proportional to function within the University

Appropriate distribution base:

Facility costs based on functional use of space

Administrative costs based on MTDC

GA - Campus MTDC

DA - Departmental MTDC

2cfr part 2201
2CFR Part 220 are:

Types of costs included in the F&A calculation

Depreciation use allowance
Depreciation & are:Use Allowance

Allocated on basis of usable square feet of space:

Equipment depreciation

Building use allowance

Interest on debt

Operation maintenance
Operation & Maintenance are:

Incurred for the administration, supervision, operation, maintenance preservation and protection of physical plant:

Janitorial & utilities

Repairs & alterations/planning

Care of grounds

Security/hazardous waste disposal

Library are:

Costs incurred for operation and acquisition of materials



Salaries of Librarians

Allocated by category of user




Administrative costs general
Administrative Costs - General are:

Incurred for administrative offices that serve the entire university:

President’s office & legal affairs

Institution wide financial management


Administrative computer center

Departmental administration
Departmental Administration are:

Incurred for administration in:

Dean’s office

Departmental office

Includes 3.6% for faculty preparation of proposals

Organized research units

institutes & centers

Functions such as

Secretarial & clerical staff

Business officers

Sponsored project administration
Sponsored Project Administration are:

Costs incurred by OSP and CGA to administer sponsored projects

review proposals

negotiate awards

collect award dollars

calculate & negotiate F&A rate

keep official financial records


Student administration
Student Administration are:

Incurred for administration of student affairs & services

Dean of Students

Admissions & registrar

Counseling & placement


Health center

Catalogs & materials

Determination of f a rate
Determination of F&A Rate are:

Aggregate F&A costs into pools

Divide pool by functional base


Three major function rates



Other sponsored activity

F a cost calculation
F&A Cost Calculation are:


Financial Statement

Capital Expenditures


UMSA/State Allocation

Building/Equip. Use






DIRECT COST POOLS These become the denominator (base) in the rate calculations



Depreciation of

Building & Equip


Operations &





General &




Other Sponsored


Sponsored Project


Other Institutional


F&A COST POOLS After cross-allocations – these become the numerator in the rate calculations

Student Services


Simplified f a rate calculation
Simplified F&A Rate Calculation are:

Numerator Expenses:


Building Depreciation

Operation & Maintenance (Utilities)

General Administration (Payroll)

Department Administration (Dean, Business Mgr.)

Sponsored Projects Administration

= F & A Rate

Denominator Expenses:

Sponsored Agreements

Non-Sponsored Dept. Research

Cost Sharing/Matching

Negotiation approval of f a rate
Negotiation & Approval of F&A rate are:

Department of Health & Human Services

Cognizant agency is responsible for negotiating and approving rates on behalf of all federal agencies

Fiscal Year 1995 Rate Schedule - Research are:


GeneralAdmin 6,140 83,540 7.35

Department Administration 16,400 83,540 19.63

Sponsored Programs Admin 1,738 79,985 2.17

29.15 26

Building Use Allow 2,144 71,801 2.99

Equipment Use 2,506 71,801 3.49

Building Interest 695 71,801 0.97

Operating & Maintenance Plant 12,646 71,801 17.61

Library 1,357 71,766 1.87

Facilities 26.93

Total on Campus Rate 56.08 52.93

Total Off Campus Rate 29.15 26

2cfr part 2202
2CFR Part 220 are:

The J section

Section j general provisions for selected items of costs
Section J are:General Provisions for Selected Items of Costs

Cost principles apply whether an item is treated as direct or F&A costs

In a case of discrepancy between provisions of a sponsored agreement and section J, the agreement should govern.

Unallowable Costs are:(When charged against Federal agreements, used as cost sharing or placed in the F&A cost base)



(something you do)

Organized fund raising


General public relations & alumni activities

Student Activities

Managing investments solely to enhance income



(Something you buy, a line item)


Alcoholic beverages


Fines & penalties

Moving costs if employee resigns within twelve months

Certain recruitment costs

Unallowable Costs are:(When charged against Federal agreements, used as cost sharing or placed in the F&A cost base)

Certain travel costs

Cash donations to other parties

“Golden Parachute” severance

Interest (except interest paid to outside parties for certain purposes)

Memberships in social, dining or country clubs

Sections j1 j8
Sections J1 & J8 are:

Advertising - allowable for:

Recruiting of personnel for the project

Procurement of goods & services

Disposal of scrap materials

Compensation for employees:

Salaries, wages & fringe benefits

Estimates with a “degree of tolerance” is appropriate

Tuition for family members unallowable on federal awards after 7/1/99

Effort reports j8c 2
Effort Reports are: J8c.2

Reports will reasonably reflect the activities for which employees are compensated

Reports will be signed by the employee, principal investigator or responsible official...

Equipment what is allowable a 21 j16a
Equipment - What is allowable? are:A-21 J16a

Equipment means:

“Article of nonexpendable, tangible personal property having a useful life of more than one year and of cost of $5,000 or more.”

Capital Expenditure means:

Cost of an asset including attachments, accessories, modifications and installation and delivery costs

Equipment what is allowable a 21 j16a1
Equipment - What is allowable? are:A-21 J16a

Special Purpose Equipment:

Equipment used only for research, medical, scientific or other technical activities

General Purpose Equipment:

Equipment which use is not limited to research or technical activities (e.g. office equipment, reproduction & printing equipment and automatic data processing equipment)

Equipment what is allowable a 21 j16a2
Equipment - What is allowable? are:A-21 J16a

Capital expenditures for general purpose equipment, buildings & land are unallowable as a direct charge, except where approved in advance by sponsoring agency

Special purpose equipment charges are allowable as direct when approved by the agency

Section j25
Section J25 are:

Losses on other sponsored agreements or contracts are unallowable

Can’t transfer deficits from one award to another

Amounts claimed as cost sharing can not be included in F&A costs

Other costs
Other Costs are:

Section J28 - Cost of subscriptions to business, professional & technical are allowable

Section J34 - Proposal costs - normally F&A costs

Section J37- Recruiting costs - allowable if reasonable

Major projects for direct charging of administrative salaries a 21 exhibit c
“Major Projects” for Direct Charging of Administrative SalariesA-21 Exhibit C

Complex projects with teams of investigators from various institutions

Projects with extensive data collection

Travel arrangements for lots of people

Projects preparing manuals

Geographically inaccessible to the department administrative staff

Cas cost accounting standards appendix a
CAS - Cost Accounting Standards SalariesAppendix A

CAS 501

Consistency in estimating, accumulating, and reporting costs

CAS 502

Each type of cost is allocated only once and on only one basis to cost objective - consistent treatment as direct or indirect

Cas cost accounting standards appendix a1
CAS - Cost Accounting Standards Salaries Appendix A

CAS 505 Accounting for Unallowable costs

Cost expressly unallowable or mutually agreed to be unallowable shall be identified and excluded from any billing, claim or proposal applicable to a Government sponsored agreement

CAS 506 Accounting Periods

Institution’s fiscal year must be used as the cost accounting period

Consistency is a problem
Consistency is a Problem Salaries

Consistency in estimating, accumulating and reporting costs

Consistency in allocating costs incurred for the same purpose

Should be able to compare proposal estimate with actual costs for any “significant” cost

Consistency concerns
Consistency Concerns Salaries

Inconsistent treatment of costs between:




Cas disclosure statement
CAS Disclosure Statement Salaries

A comprehensive description of an organization’s cost accounting practices

General Information

Central systems and

Group Expenses

F&A Costs


Direct Costs

Deferred Compensation/

Insurance Costs

Depreciation and use


Leave Costs and

Applicable Credits

Questions? Salaries

Main osp contact reference
Main OSP Contact/Reference Salaries

UMBC Office of Sponsored Programs

Engineering 329

[email protected]

410-455-3140 (Phone)

410-455-1876 (Fax)