Research Policy Handbook

Charging for Administrative and Technical Expenses (RPH 3.6)

Current version: January 1, 2007

Summary:

Reflects all prior revisions to OMB Circular A-21 which establish the principle that administrative expenses (salaries of clerical and administrative personnel, supplies and other expenses) should normally be treated as Facilities and Administrative (F&A) or indirect costs. The policy also reflects the A-21 circumstances where it is appropriate to charge administrative expenses directly to sponsored agreements. In particular, universities may charge directly those administrative costs that are above what would normally be provided "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." Technical expenses (salaries of Principal Investigators and technical staff, laboratory and other technical expenses) shall be treated as direct costs wherever identifiable to a particular sponsored agreement.

The policy addresses the A-21 instruction that special care should be exercised to ensure that costs incurred for the same purpose in like or similar circumstances are treated consistently as either direct or indirect costs.

In addition, the policy incorporates Stanford's commitment to the Office of Naval Research (ONR) to develop policy pertaining to 1) budget justifications, and 2) treatment of sponsor disapproved administrative charges as cost sharing.

Exception: This policy does not apply to non-federally-funded sponsored projects. Administrative expenses that directly benefit such awards can and should be charged directly to those awards. However, the policy does apply if the non-federal sponsor receives federal funding for the project, specifically adopts A-21 guidelines, or has its own policies restricting administrative charges.

1. POLICY STATEMENT
   

   OMB Circular A-21 requires that routine administrative expenses be treated as Facilities and Administrative (F&A) or indirect costs unless certain circumstances, described in A-21, apply. These exceptions are discussed in Section A.3 below.

   Unlike administrative costs, technical costs shall be treated as direct costs wherever specifically identifiable to a particular sponsored project.

   1. Administrative Expenses - Dean's Offices
      

      Deans' office administrative activities must be consistently treated as F&A costs. Therefore, no Deans' office administrative expenses shall be charged directly to sponsored agreements. Deans' sponsored project activities are subject to the remainder of this policy.

   2. Administrative Expenses - Academic Departments, Institutes, Centers, and Independent Laboratories
      

      Administrative expenses (clerical or administrative salaries, office supplies, cellular or other phone lines, PDAs, copying, bottled water, home internet connections, postage, memberships, etc.) are part of the F&A or indirect cost rate and should not be charged directly to federally-funded sponsored projects except under the circumstances described in 3 below.

   3. Exceptions
      

      While administrative expenses are normally charged through the indirect cost rate, OMB Circular A-21 describes a limited set of circumstances in which administrative expenses may be charged directly to federally-sponsored projects.

      • Due to the nature of the project, administrative costs are significantly above "normal"
        When a federally-funded research project has within its scope one or more elements that make its administrative requirements significantly more burdensome than a normal project, it is considered "major," and these additional administrative costs may be directly charged to the project (see Section B, "Examples of Major Projects").
      • Costs, normally considered administrative in nature, are required to perform the technical scope of work
        Administrative costs that are required to perform the technical scope of work may be directly charged to the project regardless of whether the project is determined to be "major" (see Section A. 6, "Technical Expenses").

      For administrative costs to qualify for direct charging, they must meet the following criteria:

      1. The nature of the project requires significantly more administrative effort or expense than is generally the case. (See Section B "Examples of Major Projects.")
      2. The administrative expenses: 1) can be identified specifically with a particular sponsored project or activity (or can be directly assigned to the project or activity relatively easily with a high degree of accuracy), and 2) provide direct benefit to the project.
      3. The administrative expenses are explicitly listed in the approved proposal budget and are not specifically disapproved in the award notice.
         NIH modular grants or similar grant instruments do not require line-item budgets. (Note: Rebudgeting authority may be used to charge administrative expenses not included in the approved budget if specific rebudgeting authority for clerical and administrative expenses is allowed by award and sponsor rebudgeting guidelines. See, for example, NIH administrative requirements.)
      4. Explicit budget justifications meeting the guidelines in Preparation, Review and Submission of Sponsored Project Proposals (RPH 10.1) are included in the proposal (either in the initial submission or after-the-fact if not known at time of initial submission). These include:
         • a description of the expense or service,
         • an explanation of how this expense or service relates to the activities that make the project "major,"
         • how the expense or service relates to and benefits the project,
         • the anticipated cost,
         • the time period in which it will be utilized, and
         • any other information that will aid the sponsor in evaluating and funding the proposed item.

         Although NIH modular grants or similar grant instruments do not require line-item justifications, Stanford does require an overall justification in the budget narrative that identifies the project as major and describes those aspects of the project that make it major.

   4. Alternatives to direct charging
      
      1. If the administrative expense does not meet the criteria for direct charging as described above, the expense shall not be proposed as a direct cost to a federally funded sponsored project and shall instead be charged to a department or school PTA.
      2. If the proposed administrative expense does meet the criteria for charging directly as described above and:
         1. the sponsor specifically disapproves the expense,
         2. the scope of work is not reduced, and
         3. the expense is still incurred in support of the project,
      3. the expense shall be accounted for as cost sharing. Only the actual effort or supplies expended for the project and not funded by the sponsor shall be cost shared (which may be less than the amount originally proposed). See the Cost Sharing Policy for specific guidance regarding cost sharing PTAs.
      4. Personal use, except in a manner that is incidental and reasonable in light of the employee's duties, must be paid for by the individual.
   5. Specific Identification / Direct Assignment
      

      Departments shall specifically charge administrative expenses to the benefiting award when the above criteria (see 3, above) are met. These expenses shall be charged to the appropriate expenditure type.

      A method of accounting for time, or percent of effort, is required in order to identify the benefit of the administrative and clerical personnel effort to the federal sponsored agreement. This requirement may be met by using the PeopleSoft HR Action Forms (if the level of effort is consistent over extended periods of time), manual effort allocation, or another timekeeping process.

      A method of accounting for supplies and expenses is required in order to identify the benefit of the supply or expense to the federal sponsored agreement. Clear justifications at the time of the charge and quarterly certification of expenses by the principal investigator are needed to meet this requirement.

      Administrative expenses may not be distributed or rotated among sponsored agreements. Departments shall not use any type of pooled allocation method to charge administrative expenses to federal sponsored agreements except from a service center with approved rates, or as described in the following paragraph.

      If an individual cost specifically benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. If an individual cost specifically benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the cost may be allocated to benefited projects on a reasonable basis. This requires a methodology, documented at the time the cost is incurred, that allocates costs based on some common characteristic such as head count, square feet, or some other criteria that reflects the benefit received by the projects. The criteria shall be consistently applied regardless of the projects' available funding.

   6. Technical Expenses
      

      Technical expenses shall be charged directly to sponsored projects if the expense can be specifically identified and provides technical benefit as described in the project's scope of work. The project need not be major, as defined in this policy, for technical costs to be charged directly. Direct charging of these costs may be accomplished through specific identification of the costs to the sponsored project or through service centers or specialized service facilities, as appropriate under the circumstances. Examples of such qualifying expenses include the following:

      • Salaries of PIs and technical staff, and related fringe benefits
      • Laboratory supplies (e.g., chemicals)
      • Telephone toll chargesfor calls related to the scope of work
      • Animals and animal care costs
      • Non-administrative computer costs
      • Travel costs related to the scope of work
      • Specialized shop costs
      • Specialized health and safety supplies, training, and services.

      The above expenses shall be charged using the appropriate expenditure type. Note: General administrative supplies and expenses (see 2, above) used by technical personnel (but not specifically required to accomplish the scope of work) are administrative - not technical - expenses and should be coded accordingly.

2. EXAMPLES OF MAJOR PROJECTS
   

   The following examples of major projects, included in A-21, illustrate projects where it may be appropriate to directly charge administrative expenses. These examples are not exhaustive, but are intended to suggest the kinds of situations where the nature of the research requires a higher-than-normal level of administrative effort/expense. Major projects are those that are administratively intensive and are not necessarily reflective of the amount of funding. Some very large projects are not major, while some small, complex ones are.

   Only the administrative expenses that relate directly to the activities that make the project major may be direct charged. In general, these are activities that relate to accomplishment of the project's statement of work.

   A-21 includes the following examples:

   1. Large complex programs such as General Clinical Research Centers, Primate Centers, Program Projects, environmental research centers, engineering research centers, and other grants and contracts that entail assembling and managing teams of investigators from a number of institutions.
   2. Projects which involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting (such as epidemiological studies, clinical trials, and retrospective clinical records studies).
   3. Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars.
   4. Projects whose principal focus is the preparation and production of manuals and large reports, books and monographs (excluding routine progress and technical reports).
   5. Projects that are geographically inaccessible to normal departmental administrative services, such as research vessels, radio astronomy projects, and other research field sites that are remote from campus.
   6. Individual projects requiring project-specific database management; individualized graphics or manuscript preparation; human or animal protocols; and multiple project-related investigator coordination and communications.