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Charging Administrative and Clerical Costs as Direct

Find out when you can charge administrative or clerical costs as direct costs in major projects.

Background

The September 1994 revision of OMB Circular A-21 established the principle that administrative and clerical expenses are normally indirect costs. A project that can be designated as a major project is an exception permitted by this regulation.

Learn more about Sponsored Project Non-Salary Direct and Indirect (F&A) Costs.

A direct cost

  • Meets all the tests for an allowable cost.
  • Is allocable to the project. The cost can be identified specifically or logically with a particular sponsored project or program or can be directly assigned to such activity relatively easily and accurately; or the work is incurred solely to advance the work under the sponsored project
  • Provides a clear and supportable benefit to the project

An indirect (also called a "facilities and administrative," or F&A) cost

  • Is an allowable cost that doesn't provide a direct and identifiable benefit to a particular sponsored project or program
  • Is incurred for common or joint cost objectives
  • Includes costs that would normally be considered direct, but which are immaterial in amount
  • Can include administrative or clerical salary expense or related benefit cost for employees who perform non-technical support activities. Examples:
    • Departmental administration: Campus business activities, correspondence, report preparation, editing and publishing, filing, copying, office contact, space management, equipment inventory, travel planning, newsletter or brochure preparation
    • Information systems: Maintaining general departmental databases and equipment servicing
    • Personnel/ Human Resources functions: Hiring, supervising, training, evaluating, terminating, counseling, payroll, time-keeping, coordinating effort reporting
    • Financial and budgeting functions: Monitoring funds and ledgers, reconciling expenditures, preparing journals, reconciling and correcting transactions, managing budgets, preparing and processing cost transfers, managing recharges
    • Bookkeeping: Preparing fund worksheets and report of fund status
    • Purchasing: Pricing, ordering, processing, and tracking purchase orders and invoices
    • Contracts and grants administration: Bid and proposal oversight, budget preparation
    • Regulatory committee requirements: Human subject oversight, IRB preparation

Major projects

A major project is a sponsored project requiring an extensive amount of administrative or clerical support that goes beyond the routine level of such services provided by academic departments. In major projects, administrative or clerical staff salaries may sometimes be considered direct instead of indirect costs.

Note that this major project requirement applies to federal sponsors only. For non-federal sponsors, you may charge administrative and clerical expenses that are allowable, allocable, and reasonable without demonstrating the existence of a major project. (See examples of major projects.)

Criteria for charging administrative and clerical costs as a direct expense

For administrative or clerical costs to be treated as direct, both of the following tests must be met:

  1. Definitional test: Does the sponsored project to which you wish to charge administrative or clerical costs meet the criteria for a major project?
    • When you include administrative or clerical costs in a proposal, indicate why the project is a major project, particularly in the budget justification.
  2. Empirical test: Consider the employee whose salary you wish to charge as a direct expense. The percent of time that employee works on the sponsored project (their percent of effort) must satisfy one of the following:
    • The percent of effort is at least 15% of either the employee's total annual effort or the employee’s effort during a definable period with the project. (A definable period could be, for instance, a month or a number of months.)
    • The employee’s salary is distributed using a labor clearing fund approved for this purpose, and at least 80% of the employee’s effort is assigned to sponsored projects.

Exceptional circumstances

In exceptional circumstances, you may charge administrative or clerical effort as a direct cost, even if the cost is less than the percent specified in the empirical test. You must adequately document why this effort is required to support the major project and obtain advance approval of the CAS compliance officer.

More information

See Step Through the Direct and Indirect Cost Decision. Step-by-step instructions help you determine where and how a particular cost may be charged to a sponsored project.