Direct Charging of Administrative and Clerical Costs

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Direct Charging of Administrative and Clerical
Costs
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Regulatory Guidance OMB Circular A-21

• Section F.6.b
• This 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 conditions
• Requires administrative and clerical expenses to
  be normally treated as FA costs, not as direct
  costs except when the expenses are used to
  support a major project or activity.

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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.

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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.

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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 Universitys FA rate in the general and the
  departmental administrative cost pools
  specifically.

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Consistency

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

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Costs Normally Included in the FA Cost Rate

• Administrative and clerical expenses that fall
  within the routine services normally provided by
  academic departments are treated as FA 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

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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

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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.

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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)

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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.

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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

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What could happen - HHS Audit of Duke

• OIG recommended that Duke in 2009
• (1) Refund 1.7 million
• (2) Revise its 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 Universitys 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.

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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.

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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 Universitys justification was that
  the programs budget has a line item for office
  supplies.
• Letter trays cost 47 were treated as a direct
  cost. The Universitys 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

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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

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In Summary Administrative and Clerical Costs

• Generally unallowable as direct charges
• Are normally considered to be FA
• Direct charging may only be permitted when it
  meets the conditions described in OMB Circular
  F.6.b and University policies and procedures.

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Discussion and Questions?