Contents. These guidelines should be used by Washington University's faculty and staff as the basis for complying with the provisions of the Office of Management and Budget's (OMB's) Circular No. A-21. These guidelines are organized into the following sections:
Ongoing requirements. Sections C, D and I deal with A-21 requirements that should be followed now and in the future.
Revised requirements. Sections E, F, G and H deal with revised requirements that have been added in the latest revision to A-21.
A-21's applicability to non-federal grants and contracts. In general, these guidelines apply to non-federal as well as federal grants and contracts. Exceptions are possible in non-federal cases. Contact the Director of the School of Medicine's Office of Grants & Contracts (362-6876) or the Manager of the Office of Sponsored Projects Accounting (935-7089).
Effective date of revisions to A-21. A-21 was revised and reissued on May 8, 1996. Its new provisions are effective for fiscal years beginning after May 8, 1996 -- at Washington University, the fiscal year that began on July 1, 1996 (i.e., the University's FY97; the 1996-97 school year). Grant applications that include periods following June 30, 1996 must follow revised A-21's requirements.
In general, all grant expenditures after June 30, 1996 are expected to comply with the new provisions of A-21.
Responsibility for compliance. Responsibility for following these guidelines lies primarily with Principal Investigators, department chairs, and business managers, with the general guidance and oversight of the schools. The University's administration is responsible for guidance and training, and for insuring compliance through periodic internal and external audits.
Definition of "grants." In these guidelines, the term "grants" encompasses both grants and contracts.
Definition of "Facilities and Administrative Costs." The May 8, 1996, revision to A-21 replaced the term "indirect cost" with "facilities and administrative (F&A) cost." Within the context of A-21 and this manual the terms "indirect cost" and "F&A" cost are interchangeable.
Allocation of a direct cost across two or more grants. Sections C, D, E and F typically refer to charges to a single grant. These references should be understood to refer also to the charging of a cost to two or more grants, under very specific conditions. Section G describes the rules for allocating costs across two or more grants.
A-21 citations. The parenthetical notation at the end of each reference to A-21 indicates the location of the reference in A-21. This information is provided for anyone who wants to see the context of the citation. If you would like to review or obtain a copy of A-21, contact the Director of the Medical School Office of Grants and Contracts (362-6876) or the Manager of Sponsored Projects Accounting (935-7089).
Questions. If you have questions, contact the Director of the School of Medicine's Office of Grants & Contracts (362-6876) or the Manager of the Office of Sponsored Projects Accounting (935-7089). Department and school business managers may also be helpful sources of information.
Policy. From A-21: "Direct costs are those costs that can be identified specifically with a particular sponsored project … or that can be directly assigned to (such activity) relatively easily with a high degree of accuracy." (D1) Direct charges to a grant should support the grant's purpose and activity. Such charges cannot be assigned arbitrarily, or for the purpose of simplified budget management that is unrelated to the grant's purpose.
Typically, direct charges to a grant are the costs that are necessary to meet its scientific and technical requirements. (The latest revisions to A-21 say that administrative costs are not normally allowable as direct costs. However, under limited and specified conditions, such costs may be charged directly. Sections E and F below provide more details). If a direct cost benefits two or more grants, A-21 provides standards for their allocation across these grants. Section G below provides more details.
Direct charges to grants are also expected to adhere to the awarding agency's restrictions in the Notice of Award, and to support the agency's programmatic intent.
Practice.
The "particular cost objective" requirement means that costs cannot be direct-charged if they are incurred simply for the benefit of research in general, or the interest of the research in general. They must be necessary for the work of a particular grant or group of grants. For example, long-distance telephone costs, travel costs, and photocopy costs cannot be direct-charged unless they are necessary for the work of the grant or group of grants to which the charge is made.
Budgets. Budget submissions should be realistic estimates of cost requirements. The estimates should have documented justification in the Principal Investigator's files. The design of the budget should express the intent of the Principal Investigator and should not be designed by an administrator without the Principal Investigator's participation and approval.
The practices used to estimate costs for a proposal must be consistent with the University's policies for classifying costs as direct or facilities and administration.
Rebudgeting. Rebudgeting within a grant, after the grant is awarded, is allowed if there is a legitimate need to redirect budgeted costs, provided the rebudgeting conforms to the sponsoring agency's rebudgeting guidelines.
Rebudgeting is not allowed for the purpose of relieving financial pressure on a department's unrestricted budget, or on other grants, or to assign costs that could not otherwise be assigned.
Cost transfers. Cost transfers from one grant to another are permitted in order to link a cost more appropriately with the benefit it is providing. For example, if an employee changes his/her ePARS effort percentages from those reported on his/her original ePAR, a payroll cost transfer is the appropriate means of making the corresponding change in salary distribution.
Cost transfers from one grant to another are not permitted in order to solve funding problems or for other reasons of convenience. (C4b)
Cost transfers should be submitted within 90 days of when the error was discovered. In order to meet many sponsor reporting deadlines, any request for a cost transfer should be made within 60 days following the fund expiration date.
Documentation requirement. For audit purposes, an adequate explanation for all rebudgeting and cost transfer actions must be included in the documentation entered in the University's Financial Information System (FIS).
From A-21: "The salaries of administrative and clerical staff should normally be treated as F&A 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 or activity." (F6b)
This provision of A-21 became effective on July 1, 1994 for actual charges to grants. Exceptions are possible for grants with budget periods that begin before July 1, 1994 and end after this date, and for the non-competitive renewal (continuation) years remaining in that project period. (Exceptions must still comply with existing A-21 requirements for linking the benefit of compensation costs specifically to the grant to which the costs are being charged. The limitations noted in Section C4 apply in all cases.)
All of the following four conditions must be met in order to justify charging administrative and clerical salaries (and related fringe benefits) directly to grants:
The "specific association" requirement can be satisfied in one of two ways:
or...
The salaries and related fringe benefits of individuals whose responsibilities do not meet one of these standards cannot be charged directly to a grant. Normal departmental administrative functions that support research activity, such as proposal preparation, accounting, payroll, purchasing, etc. cannot be charged directly to a grant. Such costs may support grant activity -- they may be essential to its completion and success -- but they are classified by A-21 as facilities and administration costs because they do not meet A-21's specific identification standard. (F6b) This standard is repeated in A-21's section D1: "Direct costs are those costs that can be identified specifically with a particular sponsored project ... or that can be directly assigned (to such activity) relatively easily and with a high degree of accuracy."
Administrative and clerical salary costs that do not meet this standard cannot be charged directly.
In summary, the work associated with administrative salaries charged directly to a grant:
In practice, it is anticipated that administrative and clerical salaries will be approved by granting agencies primarily for large projects such as centers, program grants, etc.
Policy. From A-21: "Items such as office supplies, postage, local telephone costs and memberships shall normally be treated as F&A costs." (F6b) On May 8, 1996, OMB incorporated four Cost Accounting Standards (CAS) into Circular A-21. These standards defined more stringent requirements for direct-charging costs that are normally facilities and administrative. However, A-21 does not absolutely bar such costs from being charged directly to a grant. To direct-charge, the new rules do require that a normally F&A cost must be specifically identified with the grant and be incurred under unlike or special circumstances. For example, postage for correspondence between collaborators is the usual or normal circumstance for that cost and should not be charged directly to a grant. Postage for mailing survey instruments to subjects constitutes unlike circumstances and should be charged directly to the benefiting grant. CAS requires the University as a whole be consistent on its treatment of direct and F&A costs. This interpretation differs from previous University policy that required consistency at the department level only.
Administrative costs of this kind (e.g., office supplies, postage, local telephone, memberships) may be charged directly to grants but only if the cost supports activity that is directly related to the work of the grant and the link between the cost and activity is close and clear. The circumstances surrounding the cost must also be unlike the normal circumstances for incurring that cost. (Assignment of such costs through a general departmental "tax" would not typically be close or clear enough to justify them as direct costs.)
The "Quick Reference Guide" provides specific and detailed guidance on appropriate means of establishing this link and identifying unlike circumstances. These methods may not cover all occasions. Written suggestions for other methods, or questions about the appropriateness of the current methods, are welcome. Suggestions and questions should be directed to the Director of the School of Medicine's Gifts, Grants and Contracts Office (362-6876) or the Manager of Sponsored Projects Accounting (935-7089).
Practice:
As noted above, these types of costs must normally be treated as F&A costs. The above examples illustrate appropriate documentation methods when unlike circumstances support an exception to the normal rule.
"Direct costs are those costs that can be identified specifically with a particular sponsored project ... or that can be directly assigned to (such activity) relatively easily and with a high degree of accuracy." (D1) Whenever a cost can be identified with and charged to a single grant without administrative difficulty, it should be so charged1. The allocation guidelines below for charging a cost to a group of two or more grants should be used only when the cost directly benefits the group.
From A-21: "If a cost benefits two or more (grants) in proportions that can be determined without undue effort or (administrative expense), the cost should be allocated to the (grants) based on the proportional benefit." (C4d(3)) When the proportional benefit rule is used, the required close linkage of cost with grant activity, as described in Sections C, D, E and F, continues to apply. The process and documentation guidelines described in those sections continue to apply. Under the provisions of this section, the difference is that those requirements apply to a specified group of grants, not to a single grant.
Specifically:
The cost in question should be specifically identifiable with the group of grants relatively easily, and with a high degree of accuracy.
Credible documentation of this identification must be maintained by the department.
Administrative costs cannot normally be directly charged to such groups of grants unless the costs clearly meet the criteria specified in Section E or F.
The proportional benefit mechanism is a special provision of the direct-charging rule. Thus, to be direct-charged using proportional benefit, a normally F&A cost must pass both the specific identification and unlike circumstances tests for all grants to which the cost is being charged.
Distribution of allowable direct costs by proportional benefit is an automated feature of FIS.
From A-21: "If a cost benefits two or more (grants) in proportions that cannot be determined because of the interrelationship of the work involved, then ... the costs may be allocated or transferred to benefited projects on any reasonable basis..." (C4d(3))
These guidelines assume that the interrelatedness rule will be used infrequently, because in most cases the proportional benefit rule will provide an administratively convenient distribution that fairly reflects the proportional benefit of the cost to each grant in the group.
Interrelatedness can be used as a basis for charging costs under the following conditions:
Policy. A-21 specifically defines some costs as normally direct: "...salaries of technical staff, laboratory supplies (e.g., chemicals), telephone toll charges, animals, animal care costs, computer costs, travel costs, and specialized shop costs shall be treated as direct cost wherever identifiable to a particular cost objective." (F6b) A-21 also specifically defines some costs as normally F&A costs: "The salaries of administrative and clerical staff should normally be treated as F&A costs. Items such as office supplies, postage, local telephone costs, and memberships shall normally be treated as F&A costs." (F6b) While normally treated as F&A costs these costs may, under certain specified circumstances, be charged directly.
Provisions of A-21 mandate consistency in making the decision to treat a particular type of cost as direct or F&A: "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." (D1)
This requirement has two purposes. One is to help insure that costs are assigned correctly by requiring that they be assigned consistently. A second purpose is to avoid inappropriate charges to the federal government for a grant when it is charged directly for specified costs - then charged again, through payments made to the University for reimbursement of F&A costs, for the same type of costs incurred for the same purpose and in similar circumstances elsewhere in the University.
The Cost Accounting Standards, recently incorporated into A-21, mandate that consistency be maintained on an institution-wide basis. While mandating consistency, A-21 rarely defines explicitly the "purposes" and "circumstances" that determine when a given type of expense should be treated as a direct or F&A cost. Thus, the tests a particular transaction must pass to be direct-charged to a federally sponsored agreement may vary by type of cost within an institution. To charge a normally F&A cost directly to a grant, the cost must be specifically identified with the work of that grant and pass the unlike circumstances test. To charge a normally direct cost directly to a grant, the cost must only be specifically identified with the work of that grant. These rules must be consistently applied across the University (i.e., all similar circumstances must be treated consistently by all subdivisions of the University). Divergence in the treatment of costs between departments, even when consistent within a department, is no longer allowed.
Principal Investigators (PIs) are the primary financial managers as well as the principal scientific investigators for each of their respective grants. While departmental administrators and Central Fiscal Unit personnel provide PIs essential management support in this area, it is the investigator who must make the crucial financial decisions related to expenditures. In this role as primary financial manager, investigators should follow the fundamentals presented below. This section is an overview and does not supplant the guidance provided in each granting agency's guidelines or the direction provided in applicable federal circulars such as A-21 or A-110.
Expenditure Monitoring. A Principal Investigator or designee should authorize 2all charges made to grants. In addition to this authorization, PIs should review each grant's overall financial status no less frequently than quarterly. A basic review of financial information should include:
The PI can access financial data associated with his/her grants via the Faculty Financial Reporting Tool which is available within the ResearchGateway. Additionally, the PI can coordinate a review of financial data/reports from the Administrative Information System (AISystem), the Reporting, Analysis and Planning System (RAPS) or WebFocus with the appropriate department administrative staff. Noted below are the related URLs for these systems.
FFR via Research Gateway: https://research.wustl.edu/Pages/ResearchGateway.aspx,
AIS: https://aisinfo.wustl.edu/psp/ps/?cmd=login,
RAPS: http://raps.wustl.edu/RAPS%20Apps.htm
WebFOCUS: https://wufocus.wustl.edu/approot/focusmenu/logon.html,
In addition, PIs should continue to review and sign salary authorization forms and PAR documents.
Documentation. Careful and clear documentation of actions is proof of the investigator's conscientious exercise of the fiduciary responsibility inherent in the expenditure of public funds (note: Electronic forms, authorizations and approval maintained/retained within the University systems are deemed sufficient documentation). Moreover, such documentation is an important element in facilitating the annual Circular A-133 audit, program specific audits or Inspector General audits. Proper documentation for charges or cost transfers to a grant should pass the "stand alone" test. An interested party, without additional explanation, must easily understand the paper audit trail for a charge or transfer. For example, the documentation for a payroll cost transfer should explain the reasons for the transfer. An explanation that merely states "to correct an error" is not sufficient. Documentation will also be a key determining factor in establishing "unlike circumstances" in support of direct-charging normally indirect costs.
Documents available within AISystem and WUSTL Marketplace containing electronic approvals will be retained for departmental reference accordance with University's record retention policy.
Grant Close-out. Department administrators and PIs should submit all valid expenses to FIS, clear all encumbrances and overdrafts within 60 days of the grant expiration date
These guidelines should not be understood as a comprehensive and legal restatement of all of A-21's requirements. They represent the University's best judgment about the appropriate application of A-21's requirements to the charging of costs to research grants at Washington University, at this time, and under present and reasonably foreseeable circumstances. Within A-21's framework, these guidelines are meant to provide flexibility and support the University's research activities. They deal with the present and the future, and do not imply any judgment, pro or con, about charging practices prior to their issuance.
All members of the University's research community are expected to follow these guidelines. Questions about them, including questions about their applicability to A-21, should be directed to Sponsored Projects Accounting (935-7089) or the Offices of Sponsored Research Services (Danforth Campus - 935-5825 / Medical School - 362-6876.)
Future revisions to these guidelines may be necessary based on:
experience with these guidelines;No matter how flexible, these guidelines will require substantial attention and effort in their continued application. The University's administration, and the administrations of each of the schools, realize that day-to-day responsibility for compliance rests with Principal Investigators, with essential support from department research administrators. Their understanding and care are critical, and appreciated.interpretations and mandates by federal agencies, if these are issued;
the experience of other institutions;
the level of compliance with these present guidelines.