Guidelines for Grant and Contract Management

307B. Secretarial/Clerical and Other Direct Costs on Federal Research Projects

On July 1, 1994, the Federal government began implementation of new budgeting and costing principles embodied in the U.S. Office of Management and Budget (OMB) Circular A-21, "Cost Principles for Educational Institutions." These changes have serious financial implications in direct and indirect costs for research universities and researchers.

The most significant changes involve salary charges for secretarial/clerical and administrative staff and office supplies, postage, memberships, and telephone. In the revision of OMB A-21, a new section addressing treatment of departmental administration expenses was added. The last three sentences of the new section (F.6.b.) are most troublesome:

"The salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly budgets for administrative or clerical services and individuals involved can be specifically identified with the project or activity. Items such as office supplies, postage, local telephone costs, and memberships shall normally be treated as indirect costs." [emphasis added]

This provision is intended to establish the principle that the salaries of administrative and clerical staff should usually be treated as indirect costs, but that direct charging of these costs may be appropriate where the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support which is significantly greater than the routine level of such services provided by academic departments. Since earlier changes to the Federal regulations already limit the University's recovery of administrative costs through the indirect cost rate, the effect of this change will be a loss of reimbursement to the extent that salaries of administrative and clerical staff previously funded by Federal grants and contracts may no longer be funded from those sources.

Effective immediately, investigators should implement the "Recommended Budgeting Practices" shown below for all new and renewal proposals. The Appendix shows sample budgets, including budget justification language, for multi-investigator or "center" projects and for single investigator projects. In preparing budgets for continuation proposals, investigators are advised to consult with their program officers to determine whether they will permit administrative costs shown below to be charged in budget years beginning on or after July 1, 1994.

RECOMMENDED BUDGETING PRACTICES

  1. CLERICAL/ADMINISTRATIVE SALARIES (INCLUDING SECRETARIAL)

    Under the revised circular A-21 provisions, clerical, secretarial, and administrative salaries must be explicitly budgeted and justified in the budget narrative. Principal Investigators and their departments are responsible for demonstrating that the nature of the work performed under a research project demands clerical and administrative support beyond that routinely provided by departmental budgets.

    OMB has published an interpretation of the new A-21 language including some examples of proposals where direct charging the salaries of administrative or clerical staff may be appropriate:

    Large, complex programs, such as General Clinical Research Centers, Program Projects, environmental research centers, engineering research centers, and other grants and contracts that entail assembling and managing teams of investigators from a number of institutions.

    Projects which involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting, such as epidemiological studies, clinical trials, and retrospective clinical records studies.

    Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars.

    Projects whose principal focus is the preparation and production of manuals and large reports, books and monographs (excluding routine progress and technical reports).

    Projects that are geographically inaccessible to normal departmental administrative services, such as seagoing research vessels, radio astronomy projects, and other research field sites that are remote from the campus.

    Individual projects requiring project-specific database management; individualized graphics or manuscript preparation; human or animal protocol, IRB preparations and/or other project-specific regulatory protocols; and multiple project-related investigator coordination and communications.

    Clearly PIs should be particularly attentive to requests for clerical/administrative assistance. Identification of the individual, clear justification about the nature of the duties and their direct relationship to the sponsored work, and a reasonable level of effort commensurate with the scope of the project are very important. A statement that the PI directly supervises this individual may be helpful. Appropriate language might include:

    • special manuscript preparation skills
    • recruitment and appointment of project employees
    • research institute projects: no university support for research
    • clerical assistance: support for instructional activities is provided elsewhere.

    Agency approval will be assumed if the salary of administrative or clerical staff is budgeted and not specifically denied in the notice of grant award or in related correspondence from the agency to the University.

  2. ADMINISTRATIVE/CLERICAL EFFORT ON REDUCED OR CAPPED OVERHEAD PROJECTS. Training grants or other projects where the indirect cost rate is fixed by the Federal government at a rate below the University's approved rates may include clerical/administrative salaries, even those that are for "routine" clerical or administrative services; PIs should document the need for these services in the budget justification. Mention that the reduced indirect cost rate prevents the University from recovering indirect costs to pay for these services.

  3. TELECOMMUNICATIONS EXPENSE. Telephone instrument expenses (monthly communications service, equipment rental, local calling and voice mail) should be budgeted only where these expenses can be shown to be completely dedicated to a project or set of interrelated projects. When budgeted, telephone instrument related expenses should be justified explicitly in the budget narrative. Telephone instrument related expenses for interrelated projects must be prorated on some defensible basis, such as FTEs of project personnel.

    Long distance telephone toll charges continue to be allowable, though care must be taken to assure that calls are directly related to the project to which they are charged.

  4. MEMBERSHIPS. It may be very difficult to charge memberships to sponsored research projects. PIs should explicitly justify these costs in relationship to the project.

  5. POSTAGE. Budget only postage costs directly related to the conduct of the project, including correspondence with the sponsor and project participants. Budget additional postage costs only where there is an extraordinary need for postage, such as mail surveys. Justify explicitly in budget narrative.

  6. OFFICE SUPPLIES. Items that are used in the course of multiple activities of project personnel are "office supplies," while those used exclusively in support of the project are considered "consumable supplies." Direct charge only those items which:

    are consumed completely in the course of the project;

    can be demonstrated to be used only in the conduct of the project and are not used for other purposes.

    Items such as lab notebooks, diskettes, transparencies, plotter pens, printer paper for research data and reports, pens, tablets, staples, file folders, binders, etc. that are used only for project purposes are justifiable. "Consumable supplies" also include laboratory supplies and materials. When such items are purchased to support the multiple activities of project personnel (e.g. data notebooks for grad students that may also be used as course notebooks), they may not be directly charged to Federal projects. Items that would likely be used for other purposes or not entirely consumed in the course of the project -- wall clocks, calendars, waste cans, paper punches, University stationery, staplers, and the like - should not be directly charged to Federal projects.

GUIDELINES FOR IMPLEMENTING ADMINISTRATIVE COST RESTRICTIONS

  1. Investigators should implement these budgeting recommendations for new and renewal proposals immediately.

  2. Investigators should talk to their program officers for specific instructions about allowing these restricted costs on continuations. If the program officers cannot provide this assurance, PIs should be cautious about including such costs. This is appropriate where there is reason to believe that a fixed amount of funds is committed for a continuation proposal and where agency action to strike these costs would result in a reduced award. If the PI elects not to risk budgeting in these restricted cost categories, the funds should be rebudgeted to other allowable costs. Until practices begin to standardize across programs and agencies, differences in interpretation will inevitably arise.

  3. Where any of these restricted costs are essential to the completion of a project, they should be budgeted and explicitly justified in a budget narrative. Items mentioned in the budget explanation cannot be subsequently disallowed unless they are specifically eliminated from the approved budget.

  4. A-21 provides for secretarial/clerical and administrative salaries to be charged directly to "major" or "center" projects, where explicitly budgeted and justified. Items such as office supplies, postage, and monthly telephone line charges must be included in approved budgets and explicitly justified if they are to be charged directly.

  5. It has been suggested that budgeting some amount of faculty academic year salary would free up funds to cover project costs that cannot, because of these new restrictions, be charged directly to sponsored projects. This practice would comply with A-21, and some divisions at the University of Chicago (principally the Division of Biological Sciences) have routinely budgeted faculty effort other than summer salary. Whether this is in the interest of a given investigator or his/her unit is a matter to be decided at the unit level. Some agencies are particularly strict about faculty salary charges.

  6. In recent years, most Federal agencies have greatly expanded budget flexibility to universities. However, this expanded authority (sometimes referred to as "FDP" flexibility) cannot be used to justify charging the restricted costs described above that are not included in the approved budgets.

CHARGES ON EXISTING PROJECTS

Existing projects may continue to expend funds in accordance with prior practice. If a grant has been charging a restricted cost without prior budget approval, we will permit those charges to continue during the current budget period. However, when a proposal is submitted for the next budget period, specific budget identification and justification as described above will be expected.

RESPONSIBILITY FOR COMPLIANCE

In the section below, Circular A-21 established the University's responsibility for compliance with these and other cost regulations. Principal investigators and their departments are responsible for assuring that costs assigned to Federal projects are appropriate. Restricted cost categories and other inappropriate charges can be readily detected in audits, and resulting disallowances must be reimbursed to the Federal government.

"C.4.d.(1) Cost principles. The recipient institution is responsible for ensuring that costs charged to a sponsored agreement are allowable, allocable, and reasonable under these cost principles."

SAMPLE BUDGETS

Two sample budgets with suggestions for areas needing specific justification because of these new A-21 restrictions are available from Research Administration. For further information about proposal budget preparation, please contact URA. For questions about charges against Federal projects and application of OMB A-21 cost principles, please contact the Comptroller's Office, at 2-1944.

National Institute of Health (NIH)
Treatment of Administrative and Clerical Salaries Under NIH Grants and Cooperative Agreements Awarded to Educational Institutions

(NIH Guide, September 23, 1994, volume 23, number 34)

In July 1993, OMB Circular A-21, "Cost Principles for Educational Institutions," Section F.6. b., was revised to define the criteria for charging salaries of administrative and clerical staff to Federally sponsored grants and cooperative agreements. This revision clarified the principle that the salaries of administrative and clerical staff should usually be treated as indirect costs, but that direct charging of these costs may be appropriate where the nature of the work performed under a particular project requires an extensive amount of administrative or clerical support that is significantly greater than the routine level of such services provided by academic departments. The charging of these costs directly would need to meet the general criteria for direct charging in Section D.1. - i.e., "be identified specifically with a particular sponsored project... relatively easily with a high degree of accuracy," and the special circumstances requiring direct charging of these services would need to be justified to the satisfaction of the awarding agency in the grant or cooperative agreement application.

Some examples of circumstances where direct charging the salaries of administrative or clerical staff may be appropriate are as follows:

Large, complex programs, such as General Clinical Research Centers, primate centers, programs projects, environmental research centers, engineering research centers, and other grants and contracts that entail assembling and managing teams of investigators from a number of institutions.

Projects that involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting such as epidemiological studies, clinical trials, and retrospective clinical records studies.

Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars.

Projects where the principal focus is the preparation and production of manuals and large reports, books and monographs (excluding routine progress and technical reports).

Projects that are geographically inaccessible to normal departmental administrative services, such as seagoing research vessels, radio astronomy projects, and other research field sites that are remote from the campus.

Individual projects requiring significant amounts of projects-specific database management; individualized graphics or manuscripts preparation; human or animal protocol, IRB preparation and/or other project-specific regulatory protocols; and multiple project-related investigator coordination and communications.

These examples are not exhaustive nor are they intended to imply that charging of administrative or clerical salaries would always be appropriate for the situations illustrated in the examples above. Where direct charges for administrative and clerical salaries are made (as with other administrative type costs, e.g., telephones, postage, books and journals) , care must be exercised to assure that costs incurred for the same purpose in like circumstances are consistently treated as direct costs for all activities. This should be accomplished through a "Direct Charge Equivalent" or other mechanism that assigns the costs directly to the appropriate activities.

NIH Implementation

For those institutions subject to OMB Circular A-21, the NIH will implement the revision effective with budget period start dates on or after October 1,1994, for competing grants and cooperative agreements. For noncompeting grants and cooperative agreements, the NIH will not make any adjustments to the committed level, nor will future year commitments be adjusted. Nonetheless, the principles of A-21 address the appropriate allocation of these costs with implementation based on the negotiated indirect cost rate agreement in effect for each institution. Thus, grantee institutions that have negotiated indirect rates based on the revised principles contained in Section F. 6. b may not directly charge administrative or clerical salaries when inconsistentent with the Circular, even though these cost may not have been deleted form the noncompeting award.

The revision also affects any postaward rebudgeting of funds for the purpose of charging administrative or clerical salaries. Where grant or cooperative agreement applications do not anticipate the need to directly charge administrative and clerical salaries, institutions may rebudget funds, without awarding office prior approval, to cover these costs when consistent with the criteria and examples described above. For example, administrative or clerical salaries not identified in the application could be charged to the Training Related Expenses associated with Institutional National Research Service Awards (T32) when the activity involves a large amount of tracking and completion of forms directly to the purpose of the grant.

The Implementation of this revision will not have any impact on the peer review of grant applications. Reviewers will continue to base any recommended budget reduction on whether the cost requested is warranted or justified for the project. Reviewers should not recommend deletion of requested administrative and clerical staff salary support based solely on the provisions contained in Circular A-21. The awarding unit staff will determine, in accordance with A-21, whether or not the costs are allocable as a direct cost under the particular project.

INQUIRIES

Questions should be addressed to the awarding agency's Grants Management Officer when it is unclear whether or not administrative or clerical staff salaries may be charged directly.

National Science Foundation (NSF)
Guidance on Direct Charging of Clerical and Administrative Salaries by Colleges and Universities

(NSF Bulletin, February 1995, volume 22, number 6)

The Office of Management and Budget (OMB) guidance issued in July of 1994 provided criteria for direct charging of clerical and administrative salary costs to federal awards to institutions of higher education. The OMB guidance clarified a July 1993 change to OMB Circular A-21, Cost Principals for Educational Institutions.

Organizations subject to A-21 must follow the provisions of that Circular and the OMB guidance in preparing new proposals to NSF. Where clerical or administrative salaries are requested as direct costs, proposals should include specific justifications of the circumstances. NSF program officers and grants officers are responsible for reviewing such requests for their need, reasonableness, and appropriateness as direct charges. NSF concurrence to charge such costs directly will be reflected by their inclusion in the approved NSF award budget.

For those NSF awards that currently include these salaries as direct costs, NSF does not expect to adjust existing award amounts or funding levels for future increments under existing continuing grants.

In administering NSF awards, situations may arise where the institution did not anticipate the need to directly charge clerical or administrative salaries in its proposal. For those awards, institutions may rebudget funds to cover these costs, using the institution's rebudgeting authority, without further NSF approval.

In all the above circumstances, institutions may only charge clerical and administrative salaries to NSF awards where these costs are consistent with the provisions of OMB Circular A-21 and the OMB guidance.

Copies of the OMB guidance are available by calling NSF's Division of Contracts, Policy, and Oversight, (703) 306-1243.
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