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The principles are designed to provide that the federal government bear its fair share of total costs, determined in accordance with generally accepted accounting principles, except where restricted or prohibited by law. Agencies are not expected to place additional restrictions on individual items of cost. Provision for profit or other increment above cost is outside the scope of this Circular.

For more details on costs, please refer to OMB Circular A-21

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OMB A-21 provides guidance on direct costs deemed allocable and allowable on projects sponsored by the federal government.

Each of Harvard University's three segments ( University Area, Medical School, and School of Public Health ) has defined direct costs typically charged to sponsored projects in their disclosure statements. Please refer to these for specific guidance.

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• The cost must be allowable under both the provisions of A-21 AND under the terms of a specific award.
• The cost must be allocable; that is, the expense can be associated to a project with a high degree of accuracy. See below for a discussion of appropriate methodologies to match the benefit of an expenditure with the sponsored project.
• The cost must be reasonable, that is the cost reflects what a "prudent person" would pay in a like circumstance.

Unlike Purpose and Circumstances Criteria
Further, A-21 identifies specific costs that may not be charged directly to research or training sponsored awards, except under special conditions. Unless the special conditions apply, these costs must be paid from University funds. These costs include many of the types of costs addressed in this policy such as administrative salaries, postage and express mail, local telephone, copier costs, general office supplies, etc. There are three criteria under which costs generally considered to be indirect may be allowable as direct costs. All three criteria must be met.

• Unlike circumstances exist, that is, this particular sponsored award is different from typical sponsored awards at the University.
• This cost can be associated with the specific sponsored project with a high degree of accuracy
• The awarding agency has approved charging the cost as a direct cost in this awarded budget. (In the event an expense meets the first two criteria but not the third because it was not foreseeable at time of budget submission (e.g., a book not then yet published) seek guidance as indicated above). Note: This criterion will not apply when a modular budget does not require a detailed line item budget - although criteria one and two will apply.
• Note that if the unlike circumstances are not substantiated in practice, then the usual A-21 rules apply and the costs must be treated as indirect and paid from PI discretionary, departmental funds or the department budget.

  NOTE: At Harvard, we have defined all non-federal awards as "different purpose and circumstances" under the provisions of Section F(6)B in OMB Circular A-21. There are two reasons why we have done this:

  • Non-federal awards, in most cases, do not pay full overhead.
  • Non-federal awards will often allow for costs typically deemed "indirect" to be charged directly to the project

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A cost is allocable to a sponsored agreement if:

• It is incurred solely to advance the work under the sponsored agreement.
• It benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods.
• It is necessary to the overall operation of the institution and, in light of the principles provided in the Circular, is deemed to be assignable in part to sponsored projects.

Criterion (1) above indicates the best approach to justify a cost on a specific sponsored agreement. Certain types of costs incurred for the benefit of a specific research agreement may easily be uniquely identified. Examples include approved pieces of equipment, animal costs, or chemicals purchased solely for one project

Other costs may clearly be allowable and reasonable but a question arises: how best to allocate among one or more sponsored agreements that benefit from that cost? The most typical example of a cost that must be allocated among sponsored projects is general laboratory supplies. A-21 acknowledges that it is sometimes impossible to precisely identify or allocate such costs; governing regulations thus allow for the exercise of judgment: "A precise assessment of factors that contribute to costs is not always feasible, nor is it expected. Reliance, therefore, is placed on estimates in which a high degree of tolerance is appropriate." A-21, J8b(1)c.

Allocability Criteria
At Harvard University, an acceptable cost allocation methodology must meet the following criteria:

• The cost allocation methodology must provide a reasonable linkage between the cost incurred and the benefit to individual sponsored agreements.
• The cost allocation methodology must be identified in advance of the allocation of costs and documented in a way that a person unfamiliar with research management would understand.

  For example, a cost allocation methodology should be determined in advance and applied for an entire fiscal year or project period.

• The cost allocation methodology must be applied uniformly to the entire population of sponsored agreements among which similar costs are incurred. The population may consist of the portfolio of sponsored agreements of an individual investigator if the costs, e.g. supply costs, can be segregated from the purchases of all other investigators. Or the appropriate population may be the entire portfolio of research agreements of departments in one similar area.

  For example: If the population is Dr. X's 3 research grants and the cost allocation methodology is total awarded amount, then the costs for pipettes purchased for the lab must be allocated based on the relative size of the three grant budgets.

• It is not acceptable to use "remaining unspent funds" or "that it is this grant's turn" as an allocation methodology.
• Using relative square footage occupied by individual research grants is not likely to be a reliable measure for allocating direct laboratory charges due to use of shared equipment and infrastructure.
• The fact that an awarding agency approved an item in the awarded budget is not adequate justification for charging an expense to that agreement unless all the other criteria noted above are met.

Some acceptable cost allocation methodologies include the following:

• Allocation based on total non-salary grand budget awarded.
• Allocation based on headcount in the library.
• Allocation based on the number of experiments performed.
• Allocation based on the amount of another lab cost that highly correlates to the need for the cost being allocated, e.g. animal costs.

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• Qualifying Grants
  The types of federal awards that typically may include activities similar to the activities cited in OMB A-21 - Exhibit C and thereby where it is possible that administrative salaries will be allowable, if those activities are required, include:
  • P01 / Program Projects
  • R01's with multiple subcontracts and project sites (whether internal or external to Harvard)
  • Cooperative Agreements or Contracts with multiple subcontractors and project sites (whether internal or external to Harvard)
  • Training grants - T series
  • Multiple slot F series fellowships
• Qualifying Positions
  When a sponsored project is sufficiently large or complex or requires extensive administrative or clerical support, we must nevertheless take care in distinguishing the nature of services provided from general administrative support. The nature of specialized administrative or clerical positions that might appear on a sponsored project include:
  
  • Grant Coordinator
  • Research Coordinator
  • Research Assistant
  • Lab Administrator
  Job titles we would normally not expect to be supported on a federal project include:
  • Secretary
  • Grants manager
  • Grants administrator
  • Grant accountant
• Appropriate Amount of Effort
  Normally, if a project's size, complexity or requirements are sufficient to permit direct charging of administrative or clerical salaries, that project will also require a significant amount of that effort. If the sponsor has specific guidelines on effort for a project, then those guidelines must be followed. Otherwise, normally, at least 25% of an individual's effort should be charged to a single project.
• Benefits
  Caution should be exercised when charging benefits to federal awards.
  Key applicable NIH and A-21 principles:
  • NIH: "established organizational policy consistently applied regardless of the source of funds"
  • A-21: "expense are equitably distributed among the institution's activities during that period" ... "equitably apportioned to all activities of the institution."
  Types of benefits most needful of examination:
  • Overtime: possible changes in exempt status require anticipation of overtime; budget proposals should anticipate in straight time
  • Leave (Sabbatical, Parental), severance pay, and accrued vacation payouts are allowable under guidelines of allocability and consistency with institutional practice/policy.
• Additional Resources
  There are two useful checklists developed by FAS and KSG that can help you in the administration of your sponsored award/project salaries. They are:
  • FAS Administrative Checklist
    On the FAS Research Conduct and Administration web site, there is a link to the FAS Administrative checklist. For direct charging of clerical/administrative salaries to federal projects, include this checklist with the Dean's Approval Form for Sponsored Research.
    • This form must be completed and attached to any federally sponsored research proposal that includes administrative or clerical salary expenses.
  • KSG Administrative Checklist
    KSG Research Central Online Forms page includes the Checklist for Direct Charging of Administrative Salaries to Federal Grants.
  • For HMS/Dental School-specific information regarding this and other topics, go to:
    http://www.hms.harvard.edu/spa/
  • For SPH-specific information regarding this and other topics, go to:
    http://www.hsph.harvard.edu/ofs/index.html

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Books
Subscriptions
General Office Supplies
Copier Charges, Copy Cards
Dues and Memberships
Local Travel Costs (Meals, Parking)
Telecommunications, Cellular Phones, Internet Access
Postage, Express Delivery
Other Expenses
Special Considerations for Federal Training Grants

Books
The NIH Grants Policy 11-40 states: "If an organization has a library, then books and journals should generally be provided as part of normal library services and treated as F&A costs rather than being directly charged."

The University's interpretation of this NIH policy is that books may normally not be charged directly to sponsored research projects unless the purchase meets all three tests of unlike circumstances identified above, namely:

• Unlike circumstances exist, that is, this sponsored award is different from typical sponsored awards at Harvard.
• The book cost can be associated with the sponsored project with a high degree of accuracy.
• The awarding agency has approved charging the book cost as a direct cost in the awarded budget.

In addition, the Principal Investigator must provide a written justification supporting the direct charge to the research project.

Examples of allowable book or reprint or copy of article charges:

• Purchase of software, equipment or similar manual to improve efficiency and/or results of PI or lab personnel use of software or equipment used in the specific research project.
• Book associated with a specific research technique or aspect of the research project that will introduce efficiencies to the research, improve quality of results, to get better results from a specific piece of research equipment or from a research experiment.
• Books not available from the library or from other sources or specific books needed so often that a library copy is not sufficient.

Examples of unallowable book charges:

• General or reference texts, including medical dictionaries.
• General software, e.g. a widely used statistical package and associated manuals that will benefit multiple activities.
• Books, manuals, reprints that generally assist the PI in keeping up with his/her field of research.

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Subscriptions
Subscriptions will normally not be allowed as a direct charge to a federal research grant because their content is more general in nature and cannot be identified with a high degree of specificity to an individual research project.

Under unique circumstances, a PI may be able to provide a written justification supporting how the subscription meets the three tests of unlike circumstances described for the allowability of book charges above.

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General Office Supplies
General office supplies will normally not be allowed as a direct charge to a federal award. Because of their general nature they cannot be identified with a specific project with a high degree of accuracy. In instances, however, where the office supplies are not general and can be identified closely with a specific project, eg. special notebooks for laboratory use, supplies for poster or other presentations to disseminate scientific results, specialized supplies for recording or calibrating data, then such costs could be considered direct. Also, office supplies related to specific research projects of trainees on federal training grants could be considered training-related expenses and charged as direct costs.

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Copier Charges, Copy Cards
Copier charges and copier card costs will normally not be allowed as direct charges to federal research or training projects because of the difficulty in identifying the material copied and associating it specifically with an individual sponsored project.

Only copier usage that meets all three criteria for unlike circumstances may be charged directly to a sponsored project. Examples of allowable treatment of copier costs in meeting these criteria are as follows:

• Unlike circumstances exist, that is, this sponsored award is different from typical sponsored awards at Harvard University. Examples of awards with atypical need for copier costs include survey projects.
• Cost can be associated with the sponsored project with a high degree of accuracy. Ideally, the method to identify the copying cost with a specific sponsored project is to have that project's survey or other material copied separately at a copy center where the cost can be differentiated from general copying costs. Alternatively, the use of specific codes on a department copier is an acceptable methodology to identify unusual copying that meets all three criteria. General copying by the lab may not be charged directly to a federal award.
• The awarding agency has approved charging the cost as a direct cost in the awarded budget. Copying costs must be separately identified in the approved project budget.

Note: even when the cost to reprint or copy an article on a specific research technique will provide substantial help in furthering the experiments on a specific grant, it will be difficult to justify a copy charge on a grant unless all three criteria above are met.

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Dues and Memberships
Dues and memberships in professional organizations will normally not be allowed as a direct charge to a federal research grant because their purpose is more general in nature in furthering a PI's knowledge in his/her field and cannot be identified with a high degree of specificity to an individual research project.

Under unique circumstances, a PI may be able to provide a written justification supporting how a dues or membership cost meets the three tests of unlike circumstances.

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Local Travel Costs (Meals, Parking)
Please refer to the Harvard University Travel Policy for the complete text of the University's policy.

Domestic and foreign travel charged to a sponsored project should follow the guidelines set forth in the Harvard travel policy unless the funding agency imposes greater restrictions. In particular, note federal requirements to Fly America i.e. on an American carrier showing the American carrier's flight number. Also note in the HU travel policy the list of non-reimbursable expenses and expenses that may not be directly or indirectly charged to federal projects.

The purpose of this section is to provide more specific guidance about the allowability of charging sponsored projects for the following types of expenditures.

• Local meals and meals with no associated travel

  The cost of purchased meals or food within the local environs will normally not be allowed as a direct charge to a federal research grant because the Harvard employee or trainee is not "traveling" and the cost is normally considered a personal expense. See below for special circumstances for federal training grants.
  When a food or beverage cost meets the following three criteria, and the PI provides written justification of the business purpose of the expenditures and how they relate to the specific research project including purpose of the meeting, list of attendees, beginning and end times, a meal cost may be charged to a sponsored project:

  • The cost must be allowable under both the provisions of A-21 AND under the terms of a specific award. The food and beverages must not be directly related to a social event.
  • The cost must be allocable, that is, the project which pays the expense must benefit from it. More specifically, the food and beverage must be integral to a project-related event.
  • The cost must be reasonable, that is the cost reflects what a "prudent person" would pay in a similar circumstance.

  Examples of allowable food charges:

  • Lunch and refreshments provided for periodic all-day meeting of collaborators on a program project (with formal agenda and participants from different locations).
  • A post-doc being recruited to fill an open position on a research grant travels to Cambridge or Boston. Her meal may be charged to the grant since she is on travel status, but the PI's may not.

  Examples of unallowable food charges:

  • Lab personnel meet weekly to discuss progress on the grant.
  • PI has lunch/dinner with a colleague and discusses research.

• Parking expenses

  Similarly, parking expenses incurred in the local environs will normally not be allowed as a direct charge to a federal research grant because the Harvard employee or trainee is not traveling and there are many low-cost or no-cost alternatives. Again, when a charge meets the following three criteria, and the PI provides written justification, a parking cost may be charged to a sponsored project.

  • The cost must be allowable under both the provisions of A-21 AND under the terms of a specific award.
  • The cost must be allocable; that is, the project which pays the expense must benefit from it.
  • The cost must be reasonable, that is the cost reflects what a "prudent person" would pay.

  Generally, if mileage is reimbursable then so is parking incurred between trip start and end.

  Examples of allowable parking charges:

  • A PI drives within the local environs to meet with collaborators on a specific project.
  • A researcher is working on a federally funded project that is spread among several labs in Cambridge and Boston.
  • Subjects in a research study are reimbursed for parking expenses incurred when they visit the federally-funded study site.

  Examples of unallowable parking charges:

  • A consultant is hired to perform statistical analysis for an NIH-funded project. He comes to Harvard University to do this work. (Consultants should pay their own expenses.)
• Spring water

  The University considers spring water to be an expense that does not inherently meet the three allowability criteria; for example, as allocable to an individual research project. Spring water should normally be charged to a faculty or departmental discretionary account or departmental budget account.

  Under unlike purpose and circumstances, spring water may meet those criteria. One example of a circumstance under which spring water is allowable on a sponsored project is if the water is purchased for use by research subjects.

Note that Harvard Travel Policy may permit spending Harvard funds for these types of expenses but they may not be allowable on sponsored projects. In these cases, the cost should be charged to a faculty or departmental discretionary account.

At Harvard, "local environs" is defined as Harvard University and related areas normally within a 50 mile radius of Harvard Square.

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Telecommunications, Cellular Phones, Internet Access
OMB Circular A-21, Section F6.b(3) notes that local telephone costs "shall normally be treated as F&A costs," i.e. not charged directly to federal projects. Section F 6.b.(1) notes that telephone toll charges "shall be treated as direct cost wherever identifiable to a particular cost objective. Direct charging of these costs may be accomplished through specific identification of individual costs to benefiting cost objectives." In other words, long distance charges may be charged directly to sponsored projects, ideally using specific identification of individual toll calls and projects from the itemized phone bill as documentation.

For the University direct cost charging purposes, we interpret A-21 to mean the following:

Normally treated as F&A cost:
The following types of costs will normally not be allowable as a direct cost on a sponsored project and instead must be charged to a departmental budget account, departmental discretionary or PI discretionary account.

• Local telephone service.
• Base fee for cell phone.
• Internet access or subscription fee [allowable if discrete access is required (as in an off-campus location) solely for the purpose of the project being charged (as in for research data transmission)].

May meet criteria to charge directly:

• Long distance telephone charges.
• Itemized cellular call charges.

For these items to be charged directly to a grant, the charge must also meet the three general federal allowability criteria listed above, namely:

• The cost must be allowable under both the provisions of A-21 AND under the terms of a specific award.
• The cost must be allocable; that is, the project which pays the expense must benefit from it. As noted in A-21, there must be an appropriate methodology to associate a specific cost to the benefiting project. The ideal methodology is specific identification of the person called and the benefit that call provided to the sponsored project.
• The cost must be reasonable, that is the cost reflects what a "prudent person" would pay. Using a cell phone when local telephone service is available may not meet this criterion.

Unlike Purpose and Circumstances
Under exceptional circumstances, local telephone expenses may be directly charged to a sponsored project. Exceptional circumstances apply when a project has a special or unique need for telephone communication. Phone usage must be significantly greater than the routine level required by academic or departmental usage. Procedures must be in place to ensure that the particular line is used exclusively for the project or activity to which it is being directly charged.

Examples of allowable local telephone charges.

• A dedicated line used to conduct a telephone survey.
• A phone line used exclusively to manage a multi-site research project.

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Postage, Express Delivery

• Postage

  OMB Circular A-21, Section F6.b(3) notes that postage costs "shall normally be treated as F&A costs," i.e. not charged directly to federal projects. Postage costs must be charged to a departmental budget account, departmental discretionary or PI discretionary account.

• Express Delivery

  Express delivery charges, e.g. Fed Ex, may be charged directly to a grant when the charge meets the three general federal allowability criteria listed above, namely:

  • The cost must be allowable under both the provisions of A-21 AND under the terms of a specific award.
  • The cost must be allocable; that is, the project which pays the expense must benefit from it. As noted in A-21, there must be an appropriate methodology to associate a specific cost to the benefiting project. The ideal methodology is specific identification of the recipient of the package or express delivery and the benefit of the package contents to the sponsored project.
  • The cost must be reasonable, that is the cost reflects what a "prudent person" would pay.

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Other Expenses

Normally Charged Directly to Sponsored Projects
OMB Circular A-21, Section F 6.b.(1) identifies certain expenses that "shall be treated as direct cost wherever identifiable to a particular cost objective. Direct charging of these costs may be accomplished through specific identification of individual costs to benefiting cost objectives." In other words, as long as specific identification can be made linking an individual expense with a sponsored project, the Circular acknowledges that these costs are normally appropriate as direct charges. The complete list provided in Circular A-21 is as follows:

• Technical staff
• Laboratory supplies (e.g. chemicals)*
• Telephone toll charges*
• Animals
• Animal care costs
• Computer costs
• Travel costs*
• Specialized shop costs

*specific guidance provided above

Yet sponsored projects may incur other types of costs that do not fit in these categories. This section will provide a default treatment for other types of expenditures:

Other costs that may often be charged directly when the three allowability criteria are met:

• Laptop computers
• Desktop computers
• Installation of electrical outlets required for project equipment

Other costs that would not normally be allowable as a direct charge:

• Filing cabinets (normally facilities infrastructure)
• Desks
• General educational / training costs, e.g., software training that cannot be associated with a specific project

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Special Considerations for Federal Training Grants
While all the policies cited above apply to training grants, there are some special considerations for Trainee Related Expenses.

Trainee Related Expenses
Trainee Related Expenses (TRE's) are described in the NIH Grants Policy statement as "funds provided to defray such training costs as staff salaries, consultant costs, equipment, research supplies, staff travel and other expenses directly related to the training program." More specifically, the NIH Guide 26:16, expands the definition of TRE's as intended to "…enhance research training opportunities for individuals." There is probably not another direct cost category that carries a more liberal definition; nevertheless, certain categories must be handled carefully.

The following types of expenses are generally allowable/acceptable:

• Consultant costs including seminar speakers (and their travel, honorarium) and related seminar/symposium expenses.
• Announcements, posters, brochures (including shared recruitment) costs.
• The cost of videotaping seminars because the seminars are trainee-related and trainees would benefit as it provided unquestionable educational value.
• Staff salaries to support training grant administration are also acceptable with the 5% minimum described above.
• Trainee travel including transportation, lodging, meals.
• Book allowance, journal club, data club.
• PI travel and conference fee when attending a conference with trainees.

The following types of expenses are generally not allowable/acceptable:

• Food in general is not an allowable training expense.
• Meals without associated travel are very difficult to justify as a direct cost to a federal award of any type, particularly training grants.
• PI travel and conference fee when attending a conference without trainees.

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Most of these documentation requirements can be met by completing the Vendor Justification Form and by retaining copies of quotes and proposals in department files.

The Vendor Justification Form must be used for documenting all purchase orders $5,000 and over made with federal funds. Section A and Section B of the Vendor Justification Form cover vendor selection justification. Section C covers cost/price analysis requirements.

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Travel and Entertainment
There is information on how to document travel and entertainment in the Travel and Entertainment Online Policy Section" under the heading "Policy Manual".

Procurement
Information on procurement can be accessed by topic area: http://vpf-web.harvard.edu/procurement/procurement.shtml

Required documentation for federally funded purchases can include purchase orders, invoices, copies of competitive quotes or proposals, justification for sole source selection, and cost/price analysis.

Most of these documentation requirements can be met by completing the Vendor Justification Form and by retaining copies of quotes and proposals in department files.

The Vendor Justification Form must be used for documenting all purchase orders $5,000 and over made with federal funds. Section A and Section B of the Vendor Justification Form cover vendor selection justification. Section C covers cost/price analysis requirements.

Common Financial Procedures
Information on how to document common financial procedures: http://vpf-web.harvard.edu/documents/actts_retention_1_23_01.html

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Program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired under federally funded projects, the sale of commodities or items fabricated under an award, license fees and royalties on patents and copyrights, and interest on loans made with award funds.

For federal awards, program income is to be identified by the recipient and handled in one of three ways:

• added to available funds and used for program objectives
• used to finance the non-federal share of the project
• deducted from the new allowable federal costs of the program

Except for research awards, alternative 3 applies unless the awarding agency specifies to the contrary in its regulations or in the award. Alternative 1 applies to research awards by default unless the awarding agency specifies another alternative.

Interest earned on advances of federal funds is not program income. Except as otherwise provided in federal awarding agency regulations or the terms and conditions of the award, program income does not include the receipt of principal on loans, rebates, credits, discounts, etc., or interest earned on any of them.

For more details on program income, please refer to OMB Circular A-110.

For non-federal awards, stipulations around program income should be addressed in the sponsor's terms and conditions or by contacting the sponsor through your pre-award representative.

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A copy of the University's Certificate of Exemption may be required by the vendor as well

Note regarding Certificate of Exemption: this certificate expired in January 2004; a renewal letter, which you should attach to the ST-2 form, is included on the second page and is valid until 01/04/2009.

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Harvard receives most of its funding from the National Institutes of Health (NIH), which is a unit of HHS. For more information about HHS, NIH and our other major federal sponsors, click here

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