Cost Accounting Standards

The University of California, Santa Barbara (UCSB) has developed charging practice guidelines for sponsored awards in accordance with the Uniform Guidance and associated Cost Accounting Standards (CAS).

INTRODUCTION

Federal regulations mandate that universities establish consistent practices for defining and charging costs either directly or indirectly. 2 CFR Chapter I and Chapter II Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards sets forth the principles for determining the costs – direct vs. indirect (previously called facilities & administrative (F&A)), allowable vs. unallowable, etc. – applicable to federally sponsored awards and acceptable allocation methodologies.

As a recipient of federal awards, UCSB is required to periodically prepare F&A cost rate proposals that comply with the guidelines set forth in Uniform Guidance Sections 200.412 through 200.415.

It is the responsibility of principal investigators, department heads and administrators to understand and comply with this guidance in order to prevent disallowance of costs by the federal government. The actual sponsored award agreements may incorporate additional project specific requirements.

The allowability of a particular charge to a particular Award-Project-FRU-Function CCOA combination always depends on specific facts, circumstances, terms, conditions, restrictions, and policies in effect at the time of the charge. Therefore, this document is intended to provide general guidelines for charging. More detailed information is contained in Unallowable Costs.

For information on related topics:

• Cost Sharing

Definition of Costs

• Direct Costs are those costs that can be identified specifically with a particular sponsored award or that can be directly assigned to such activities relatively easily with a high degree of accuracy.
  • Refer to Uniform Guidance 200.405 Allocable costs. and 200.413 Direct costs. for additional information.
• Indirect Costs (also referred to as Facilities & Administrative (F&A) Costs) are those costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored award.
  • Refer to Uniform Guidance 200.414 Indirect (F&A) costs for additional information​.
• Unallowable Costs and Activities are costs and activities that cannot be directly charged to a federal contract or grant, nor can they be included in F&A rate calculations.
  • Refer to Uniform Guidance sections 200.420 through 200.476 for additional information.

Principles for Charging Costs to sponsored awards

In order for an expense to be considered appropriate as a direct cost the charge must be:

• Allowable – The cost must be allowable per the terms and conditions of the sponsored award, under applicable sponsor regulations, Uniform Guidance, 200.403, and University policies.
• Reasonable – The cost may be considered reasonable if the nature of the goods or services acquired and the amount involved reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made. Key factors in determining reasonableness are defined in Uniform Guidance, 200.404.
• Allocable – The cost must benefit the project and be directly attributable to the project or activity being performed. The cost can only be assigned and allocated to the project(s) based on that portion of the expense that represents the direct benefit to the project. In order to ensure allocable standards are met, refer to Uniform Guidance, 200.405.
• Consistently treated – Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs in order to avoid possible double charging of Federal awards. Refer to Uniform Guidance, 200.412 - 200.414, for additional information.

Guidelines for Direct Charging Administrative Cost to Federal Projects

A. Treatment of Administrative Salaries and Benefits on Extramural Funds

Standard Treatment

In accordance with Uniform Guidance 200.413, the salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. The following departmental activities are considered routine administrative and clerical activities. As such, these costs are generally, unless justification is provided, not to be charged as a direct cost:

• General departmental administration
• Contracts and grants administration¹
• Personnel activities/payroll/human resources
• Accounting and budgeting activities
• Financial monitoring
• Processing vouchers and payments
• Administrative data entry
• Newsletter/brochure preparation
• Processing and tracking routine purchase orders
• Maintaining departmental databases
• Departmental reception activities

Non-Standard Treatment of Administrative Salaries and Benefits

Under certain circumstances the administrative salaries and benefits may be charged directly to a federal project. Per Uniform Guidance, Cost Principles 200.413, the following conditions must be met:

1. Administrative or clerical services are integral² to a project or activity.
2. Individuals involved can be specifically identified with the project or activity.
3. Such costs are explicitly included in the budget or have prior written approval of the federal awarding agency³.
4. These costs cannot also be recovered as indirect costs.

B. Treatment of Non-Salary Administrative Expenses

1. Standard Treatment

In accordance with Uniform Guidance the following examples of non-salary expenses are normally to be treated as F&A costs and should not be budgeted in proposals or charged to sponsored awards as direct expenses as the costs are incurred for a common or joint purpose benefitting more than one objective and/or sponsored award.

Examples of these indirect costs include:

• Basic telephone line and equipment charges and local telephone services
• Routine postage costs and mail stop charges
• Routine reproduction
• Ordinary repairs and maintenance for state-supported space in UCSB-owned buildings
• Office supplies used for administrative activities
• Employee ID badges
• Fingerprinting (in some cases)
• Memberships in technical and professional organizations
• Subscriptions to professional or technical periodicals that may already be available through the campus library.
• Equipment depreciation

2. Non Standard Treatment of Non-Salary Administrative Expenses

In accordance with Uniform Guidance, non-salary administrative expenses may be budgeted and charged as a direct cost to sponsored awards if the cost is vital to the performance of the sponsored award. In these special circumstances the administering departmental unit must maintain documentation and justification that explains and supports the following conditions.

• The expense can be specifically identified, with relative ease and high degree of accuracy with the sponsored award.
• The sponsored award must require non-salary administrative expenses that are significantly greater than the routine level of support.

To ensure reasonableness and allocability of non-salary administrative expenses being charged as direct costs, it may be necessary for the administering departmental unit to seek prior written approval from the sponsor. Consult Appendix III to Part 200 B.6 Departmental Administration Expenses for additional information and a listing of cost items for which prior approval may be required.

V. UNALLOWABLE CATEGORY OF EXPENSES

Unallowable expenditures are costs for activities that may not be directly charged to a federal contract or grant, and often non-federal grants and contracts, and which also must be excluded from federal F&A rate calculations. Unallowable expenditures are excluded from F&A rate calculations through the use of appropriate unallowable Accounts (see Unallowable Costs). These Accounts must be used to charge unallowable expenditures, regardless of the Award-Project charged.

VI. GUIDELINES FOR DIRECT-CHARGING NON-FEDERAL PROJECTS

Under UCSB policy, it is permissible to charge normal department administration costs to any non-federal sponsored award fund that benefits from the costs and that are allowed per the sponsor terms and conditions. When this occurs, such costs will then be treated as direct costs of the sponsored award charged, not as F&A costs. Refer to the UCOP Contract & Grant Manual for additional information.

VII. CHARGING CHILDBEARING AND CHILDREARING LEAVE, EMPLOYEE SEPARATION ADMINISTRATIVE COST, AND AWARD TERMINATION, TO SPONSORED AWARDS

Guidance regarding the allowability of all costs, including leave, pensions, and unemployment benefits, is based on Uniform Guidance 200.431, sponsor award terms and conditions, and UCSB policy.

In general, UCSB maternity policy for birth and adoptive mothers begins two weeks before birth and ends six weeks after the birth (eight weeks for cesarean section). The maternity leave pay is under the University's Pregnancy Disability Plan. The 8 weeks of short-term disability is a fringe benefit and is funded centrally; it cannot be charged to sponsored awards and is not considered paid time off. However, depending on the type of award it may be allowable as part of the fringe benefit or indirect cost line-item budget. In these instances, the supporting documentation from the sponsor will be required.

Inclusive of the University's Pregnancy Disability Plan benefits, UCSB faculty members are entitled to a full 12 weeks of child-rearing benefits. Effective July 1, 2019, UCSB began providing 12 weeks of paid leave for both childbearing (CB) and childrearing (CR) leave to Health Sciences Compensation Plan (HSCP) faculty. To provide funding to support leaves, the campus began an assessment on faculty salaries of 1.25% beginning July 2019. This benefit should be used to offset the associated pay posted to the sponsored award for the leave period.

Effective July 1, 2021, the University implemented the Pay for Family Care and Bonding (PFCB) program. This program is a University of California system-wide program applicable to all UC campuses. Beginning in 2023 the income replacement benefit was expanded to provide eligible UC Employees up to eight workweeks of income replacement calculated at 100 percent of eligible earnings. To provide funding to support this leave, the costs are part of the university’s composite benefit rates. This benefit is used to offset the associated pay posted to the sponsored award for the leave period resulting in no cost to the project.

Under specific circumstances employee separation, administrative expense, and award termination expense can be charged to federal awards. See Appendix D for references and additional information.

VIII. EFFORT REPORTING (Retired)

Effort is the portion of time spent on a given professional activity expressed as a percentage of the total professional activity for which an individual is employed by the University of California. Total professional activity includes research, teaching, patient care, administrative and other University appointed activities.

Uniform Guidance requires an effort certification system that:

• Is supported by a system of internal controls which reasonably assures that the charges are accurate, allowable, and properly allocated
• Reasonably reflects the total activity of the employee (100% effort)
• Confirms effort expended after-the-fact in compliance with the established accounting policies and practices of the University
• Requires certification to be incorporated into the institution’s official records

UCSB utilizes the Effort Reporting System (ERS) to report on and certify the effort for each employee who works on a federally sponsored agreement. Per academic policy APM-110, faculty is responsible for (1) teaching, (2) research and other creative work, (3) other professional activity, and (4) University and public service. Some sponsor agencies, such as agencies of the federal government (e.g., NIH), prohibit faculty from devoting 100% of their effort to sponsored activities when their academic appointment requires them to be engaged in non-sponsored activities. As such, the following activities must be paid from sources other than sponsored funds unless they are specifically approved activities of a sponsored award:

• Teaching
• Clinical and professional activities such as seeing patients outside of the context of a sponsored human subject study, patient consultation, patient care, etc.
• University and public service (University service includes institutional governance, service on institutional committees, and department administrative activities)
• Preparation of new or competing proposals (unless current funding allows it, such as a K award)

Information related to the retired effort reporting certification process remains available on the Controller’s Office website for reference.

IX. PROJECT COST OVERRUNS

Costs that exceed the budget on a sponsored agreement should be tracked and accumulated. The excess costs (i.e., deficits) must be transferred to a discretionary Fund-Project in accordance with the UCOP Contract & Grant Manual.

X. RECHARGE COSTING PRACTICES

A recharge is the assessment and collection by one university unit for products or services furnished to another university unit. The Campus Budget and Resource Management department has established policies and procedures for charging organizational units for products or services that include all allowable costs associated with providing the products or services.

Recharges must be charged to the benefiting activity. Recharge costs are allowable costs to a sponsored award as long as the department recharging the project has followed the guidelines in UCSB Administrative Policy 1300, Recharges & Common Cost Allocations and the recharge rate(s) have been approved by the Office of Budget and Planning. See the Office of Budget and Planning - Income & Recharge Program for more information.