Types of Costs

Two types of costs are associated with sponsored projects: Direct costs and Facilities and Administrative (indirect) costs.

  • Direct costs can be identified with a particular sponsored project or can be assigned directly to such activities relatively easily with a high degree of accuracy. Examples include:
    • Salary of a researcher (including benefits)
    • Salary of a technical staff member (including benefits)
    • Laboratory supplies, chemicals, and glassware purchased for a project
    • Travel to a conference to present results of the project
  • Facilities and Administrative (F&A) costs—also called indirect or overhead costs—are incurred for common or joint objectives. Therefore, they cannot be identified readily with a particular sponsored project. Examples include:
    • Building utility or maintenance costs
    • Salary of a departmental administrator
    • Library costs

Total Costs of a Sponsored Project – Generally, the cost of a sponsored project is the sum of the allowable direct costs plus the allocable portion of the allowable F&A costs.

The nature of the cost is not the determining factor in distinguishing Direct from F&A costs; it is whether or not the cost can be identified with a particular sponsored project.

Factors That Affect Allowability of Costs – Four Cost Principles

All costs charged to sponsored projects must meet the following cost principles:

  • Allowable – permissible according to the terms and conditions of the award
  • Allocable – must provide a “benefit” to the project
  • Reasonable – the “prudent person” test – Would a prudent person purchase the item at this cost? The cost is necessary for the performance of the activity
  • Consistent – the cost is consistently treated and is consistent with established Institute policies and practices
  • Adequately documented  – in accordance with Institute policies and procedures