Sneak Preview: Guidance Sets Administrative Costs Provision

October 3, 2014 | By Jerry Ashworth | Post a Comment

xgran_bookshot(The following was excerpted from an article in the Federal Grants Management Handbook.) The Office of Management and Budget’s uniform grant guidance clarifies how nonfederal entities should treat the salaries of administrative and clerical staff when charging these costs to their federal award.

Direct costs in the uniform guidance are “costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy” (§200.413).

According to §200.413(c), administrative and clerical staff salaries should normally be treated as indirect (or “facilities and administrative”) costs. However, direct charging of these costs may be appropriate only if all of the following conditions are met:

  • administrative or clerical services are integral to a project or activity;
  • individuals involved can be specifically identified with the project or activity;
  • such costs are explicitly included in the budget or have the prior written approval of the federal awarding agency; and
  • the costs are not also recovered as indirect costs.

“Treating these costs as indirect is now the default, and you can only [charge them as direct] if they meet all of these requirements,” Leigh Manasevit, Esq., partner with Brustein & Manasevit, PLLC, told attendees during a recent webinar sponsored by Thompson Information Services.

While the guidance doesn’t specifically define what “integral” services are, Manasevit posited that these are services that are required for the project or activity to function. For example, the person directing or coordinating a Department of Education Title I grant program would be integral to the program. But what about an accountant working on the Title I program? “The federal grant requires accounting because you couldn’t possibly meet the accountability and documentation [requirements] without accounting, so it’s a fair interpretation to say that if [the accountant] is working on accounting work designed to support that particular grant, [the accountant] would be integral,” he said.

Still, Manasevit noted that even if the accountant is integral, he or she would have to meet the other three conditions. He warned attendees that if they include these salary costs as direct and they don’t meet all of the conditions, the charges would deemed an improper payment. If the federal award was a large and complex award, and required a dedicated grant accountant to just the one grant project, then the grants accountant possibly could be considered a direct administrative cost to the project.

All grants, however, require accounting in order to meet the accountability and documentation requirements of each award, not just ED’s Title I grant. If the same accountant was not dedicated to the grant project, divided his or her time among several grants and did not document time and effort for each particular project, then the accountant’s time should not be charged as a direct cost, even though it was integral to the project. The time was shared, “incurred for a common or joint purpose, benefitting more than one cost objective, and not readily assignable,” as defined in the uniform grant guidance (§200.56) for indirect costs.

Under these circumstances, the recipient organization may wish to include grants accounting as an indirect cost to reduce the burden of bookkeeping and documentation for each project, because every grant project requires grants accounting and there may be several grants accountants in an accounting department who share this responsibility. If the nonfederal entity is a recipient of multiple federal awards, the indirect cost route, as noted in the uniform grant guidance (§200.413(c)), may be the best default strategy for recovery of costs relating to this type of administrative cost.

Clerical assistance, on the other hand, is not usually structured in a central office department, like grants accounting. It could be practical to assign clerical assistance as a direct administrative cost to a project, particularly if the position meets all four criteria above.



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