Direct Expenses/Costs are allowable, reasonable and allocable as defined by Federal Uniform Guidance 2CFR200 sections 200.403, 200.404 & 200.405. When allowable and reasonable costs are directly attributable to specific work under a sponsored agreement & allocated appropriately they should be consistently treated and comply with University policy. See Charging Expenditures for a summary of allowable direct expenses/costs on sponsored projects see Allowable and Unallowable Direct Costs
Federal regulations outline federal cost principles and requirements. Michigan Tech projects must adhere to these standards for federally sponsored projects. In addition, non-federal awards must be treated consistently. The basic requirements are:
- Costs must be necessary and responsible for the performance of the sponsored agreement. Failure to adequately document a cost could result in a disallowance of a legitimate charge.
- For costs benefiting more than one sponsored project, the relative benefit must be approximated through the use of reasonable basis reflecting use or level of service. Costs should be allocated to the "users" in proportion to the benefits received.
According to the Basic Considerations in the federal regulations any costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns, or other fund considerations to avoid restrictions imposed by law, or by terms of the sponsored agreement or for other reasons of convenience.
The awarding agency guidelines and/or University policy may be more restrictive than the guidelines discussed in this document.
Faculty and Other Salaries
When a sponsored project includes a portion of your salary, or that of another university employee, that portion will be charged to the sponsored project index. Payroll forms that include a sponsored project index are forwarded to Sponsored Programs Accounting for approval before going to the payroll office.
Salaries, wages and fringe benefits are allowable costs to federal and non-federal sponsored projects, so long as they reasonably reflect the work performed on the project and are documented by the University Payroll Certification System. Salaries and fringe benefits are paid at the university's approved rates. Read more about how to apply these charges to a sponsored project.
Clerical and Administrative Salaries & Wages
As stated in Federal regulations, clerical and administrative salaries should generally be assigned to federal sponsored agreements as Facilities and Administrative (F&A) costs. Direct charging of these costs may be appropriate as long as the criteria outlined in the following federal regulations 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 awarding agency; and
- The costs are not also recovered as indirect costs.
If all of these requirements are met, PIs/departments should add a new justification statement to proposals to facilitate the required agency approval.
*Michigan Tech has determined that integral means: (1) the services are essential, vital, or fundamental to the project or activity; AND (2) a minimum of 10% FTE is budgeted in the project's budget year or there are documented special circumstances.
Fringe benefits are automatically generated when payroll is charged. In order to determine the fringe benefit rate that is charged to your index please use the current approved fringe benefit rate, found on the Research Facts and Figures Page. The rate that is charged to your account is the lower of the effective rate at the time of proposal or the current rate.
Non Salary Expenditures
Federal regulations outline federal cost principles and requirements. Michigan Tech projects must adhere to these standards for federally sponsored projects. In addition, non-federal awards must be treated consistently. Please become familiar with the basic requirements for both. We have also provided a number of forms and flow charts to help you understand the method for charging expenses to a sponsored account
Compensation for personal services represents the largest expense charged to sponsored projects. Charges or cost sharing for personal services on all project for research, training and service must produce an equitable distribution of charges to an employee's activities.
Salaries and wages are charged to sponsored agreements using three methods. Departments are responsible for allocating the expenses to the appropriate project. All salary and wages charged to sponsored projects are certified by the Principal Investigator. All adjustments are authorized by the Principal Investigator and any other appropriate administrator.
- If a significant change is known prior to the submission of the biweekly payroll cycle, the department administrator updates and resubmits to Payroll Services the EPAF or the ESCF form.
- The employee, department coordinator, PI, or Co-PI can indicate changes to the initial labor distribution in the Labor Distribution Override section of the biweekly time sheet.
- Salary & wages can be adjusted on an after-the-fact basis by using the Reallocation of Payroll Funds Form. Also see the Reallocation of Expenditure Policy. The PI, Co-PI and any other appropriate department administrator authorizes all after-the-fact adjustments to salary & wages charged to sponsored projects. Prior to the data entry of the after-the-fact adjustments in the Banner payroll system, Sponsored Programs Accounting verifies the availability of funds in the sponsored project, and the allowability of the request, including whether the request falls within the time period of the agreement and any budget flexibility constraints.
Direct Charging of F&A Costs
The costs would need to meet the federal criteria for direct charging. They need to be identified specifically with a particular sponsored project with a relatively high degree of accuracy. Any special circumstances would need to be justified to the satisfaction of the awarding agency in the grant application or contract proposal.
When charging a sponsored program index it should be timely and preferably prior to 90 days of the incurred expense. There are several steps to be followed and several questions to ask before processing expenses. The flowcharts listed in the "What Form do I Use" section will guide you through those steps and questions.
The Financial Services and Operations web site provides a guide on what forms to use to charge expenses or receive reimbursement. Some of the most-needed forms for sponsored programs include:
- Purchase Orders
- Purchase Order processing (with budget checking procedure flow chart)
- Invoices (non P.O. expenses)
- Invoice Processing flow chart
- Journal Voucher/Inter-Account Bill Processing
- Journal Voucher/Inter Account Bill Processing Flow Chart
- Credit Card
- Reallocation of Expenditures
- Fabricated Equipment Procedures and Form
- Independent Contractors/Consultants
Sponsored Programs role in the approval process of expenditures charged to sponsored projects
In the event that an expenditure is being charged to a sponsored project it will be routed to Sponsored Programs Accounting for approval. Sponsored Programs Accounting will review the expenditure for the following:
- The expenditure was incurred within the start & end date of the sponsored project.
- The sponsored project has enough remaining funds to cover the cost and any associated Facilities & Administrative costs.
- The expenditure is within the budget restrictions of the sponsored project.
- The expenditure complies with Federal regulations, project specific requirements assuring reasonableness, allocability and allowability.
If Sponsored Programs Accounting approves the expenditure it is forwarded to Financial Services & Operations or Human Resources/Payroll as appropriate for continued processing. If Sponsored Programs Accounting disapproves the expenditure the appropriate personnel will be notified and the request will be returned.