The two main categories in your budget are Direct Costs and Facilities & Administrative (F&A or indirect) Costs. The Office of Management and Budget's Uniform Guidance (2 CFR 200) defines the two categories:
- Direct costs are those 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 (2 CFR 200.413(a))
- Facilities & Administrative Costs (also called indirect costs) are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity (2CFR 200.414).
The University of Arizona’s policy statement on Direct and Indirect Costs of Sponsored Agreements provides further guidance on direct and indirect costs classification according to Uniform Guidance.
Direct Costs
Direct costs are those expenses that can be directly attributed to the work proposed, or are "allocable". They often include the following:
Salaries and Wages: This is usually the largest budget category and includes salary or wages for the faculty, technicians, research associates and assistants, postdoctoral associates and other technical personnel necessary to meet the goals of the project. It is computed as either percent effort, hourly wages or person months. Some Federal sponsors have salary restrictions. The NIH requires a salary cap. The NSF restricts the amount of salary that can be requested, across all NSF awards (NSF Grant Policy Office). NSF states it is the organization's responsibility to define and consistently apply the term "year" in relation to NSF salary compensation. For employees with an academic appointment, the University of Arizona defines a year as mid-August to mid-August (academic year and following summer). For fiscal employees, the University of Arizona defines a year as the fiscal year (July 1 – June 30).
- Administrative Salaries: Administrative and clerical staff salaries should normally be treated as F&A costs. Charging these costs as direct costs is appropriate where the costs are specifically budgeted and justified in the proposal and the services are integral to a project or activity.
Employee Related Expenses (Fringe Benefits): Employee Related Expenses must be included as a percentage of salaries and wages in the proposal budget. The rates vary depending on type of appointment. The ERE Rates page contains information on the current rates and the Financial Services Office's Employee Related Expense (ERE) Rates page contains a breakdown of the rates as well as information on rates for prior years.
Consultants/Independent Contractors: Consultants provide expertise or a service to a particular project, consistent with their normal course of business. They are independent contractors so care must be taken the individual meets the Internal Revenue Service criteria for such a classification.
Equipment: Equipment is defined as tangible personal property (including information technology systems) having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.
Travel: Travel that supports the aims for the project may be allowed by the sponsor.
Participant Support Costs: On federal grants, these costs are direct costs for such things as stipends or subsistence allowances, travel allowances and registration fees paid to or on behalf of participants or trainees (but not employees), in connection with conferences or training projects.
Subawards: When a portion of the grant work is carried out by a subrecipient, the cost may be allowed when specifically budgeted and approved by the sponsor.
Supplies and Materials: Consumables to be used in the performance of your proposed project are included in the supplies and materials category. Examples include laboratory glassware, chemicals, reagents, clinical supplies, laboratory notebooks, and data processing supplies.
Other Costs: This category is used to include various items such as telephone long distance costs, photocopy costs, expendable equipment, contractual services, honoraria, meeting expenses, and subject payments.
- Patient Care Costs: Expenses for this category include costs of any laboratory or clinical procedures that are conducted in an out-patient clinic or in-patient facility.
- Tuition Remission: Tuition remission is a mandatory benefit for students employed as Graduate Research Assistants/Associates (GRAs) budgeted separate and distinct from ERE/fringe benefits.
Facilities & Administrative Costs
Facilities & Administrative (F&A) costs are not itemized on the proposal budget. Rather, they are represented by a percentage of Total Direct Costs (TDC) or Modified Total Direct Costs (MTDC). The applicable federally negotiated F&A rate computed on the MTDC base is the basis for determining costs on a proposal unless the sponsor’s guidelines state otherwise. For additional information on MTDC or TDC calculations, see Cost Bases. Sponsored Projects Services has provided worksheet to help you prorate and calculate for the annual changes in F&A (which result in two rates used for project periods that cross fiscal years).
There may be incidences where the sponsoring agency seeks to reduce or waive the F&A rate. Please see Facilities & Administrative (F&A) Costs for guidance.
Facilities & Administrative Costs in UAccess Financials
The entire F&A cost budget category is encumbered when your project budget is loaded to the UAccess Financials account. The encumbrance is reduced as the F&A costs are charged to the account. Thus, the budget available balance for the F&A cost category is always zero, until the point at which the F&A cost charged to the account exceeds the budget. Differences in the spending pattern, e.g., spending more or less capital than budgeted, influences the calculation of F&A costs and the bottom line available budget balance. It is important to understand how the system works when calculating the available budget balance for your account.
UAccess Financials posts F&A costs on a weekly basis. Overhead-bearing expenditures (modified total direct cost base - MTDC) is multiplied by the F&A cost rate to give the F&A cost charge to the account. See Cost Bases for more information on calculation the modified total direct cost.