Cost Accounting Standards - Policies
Cost Accounting Standards (CAS) Affects New Awards Granted prior to 12/26/2014.
For awards issued after visit Uniform Guidance.
The following statements should serve as the basis for administering all future CAS covered sponsored projects. The lack of available F&A cost funds is an irrelevant factor in your decision making process.
- All Proposals, whether solicited or unsolicited, which may result in CAS covered sponsored awards to the University must be reviewed by the appropriate college and university officials prior to being forwarded to a potential Sponsor (except for Memorandums of Agreement written for $15,000 or less that can be approved at the College level).
- Proposal budgets should be developed utilizing specific items and cost categories which are consistent with the University’s Financial Accounting System (FAS) unless the sponsor requires other presentation. For example, the following major cost categories should be used when determining a budget:
- Fringe Benefits
- Contracted Services
- Supplies and Materials
- Domestic Travel
- Foreign Travel
- Other Travel
- Current Services
- Fixed Charges
- Student Aid
- Subcontractor Costs
- Other Charges
- F&A Costs
It is the responsibility of the college to review these budgets and determine all costs are allowable and allocated correctly between direct and F&A cost categories.
- There are some costs within the major cost categories (as outlined above) that require additional documentation. A narrative budget justification must be prepared if any of the following costs are budgeted within the major cost categories:
- Administrative and clerical salaries (Salaries/Wages)
- General office supplies (Supplies and Materials)
- Postage (Current Services)
- Telephone (Current Services)
- Individual memberships and subscriptions (Fixed Charges)
If the need to incur expenses in these categories occurs during the project (i.e., they were not included in the proposed budget) a narrative budget justification must be prepared before the expenses can be re-budgeted or charged as a direct charge.
The justification must explain the purpose of the costs in sufficient detail to enable those responsible for reviewing the proposed budget to make a determination of whether the cost meets the definition of an “unlike circumstance.” This justification may be included in the narrative of the proposal, as an attachment to the proposal, or separate from the proposal. However, if the justification is not included as part of the proposal it must be prepared and included with the proposal as it is routed through the review process.
If costs are budgeted in the category of “Current Services” the assumption is made that none of these costs are for postage or telephone charges unless a narrative budget justification is provided to support those costs.
If costs are budgeted in the category of “Supplies and Materials” the assumption is made that none of these costs are for general office supplies unless a narrative budget justification is provided to support these costs.
- Costs incurred for the same purpose (i.e., specific cost items) in like circumstances must be budgeted and expended consistently. In other words, when similar circumstances exist throughout separate projects, each specific cost item is to be budgeted/expended as either a direct or an F&A cost consistently in each case.
Listed below are additional policy clarifications for several specific cost issues. These policies are to serve as the basis for budgeting and administering all types of future sponsored awards.
Administrative & Clerical Salaries/Wages/Fringe Benefits
These costs are normally treated as F&A costs and are covered by the negotiated F&A cost rate.
There may be exceptions when the Office of Management and Budget (OMB) permits the direct charging of these costs. Direct budgeting and charging of such costs may be considered where a major project or activity explicitly budgets for administrative or clerical salaries and the individuals
The nature of the work or actual functions performed under a particular project should require an extensive amount of administrative or clerical support which is significantly greater than and in addition to the routine level of such services provided by academic departments.
The following are specific examples of when direct charging of administrative and clerical salaries/wages and fringe benefits might be allowable (with adequate justification in the proposal narrative and upon approval by
- Large complex programs such as centers or other projects that entail assembling and managing teams of PI’s from a number of institutions.
- Specific research activities involving extensive data collection, statistical analysis and entry, database management, surveying, tabulation, cataloging and researching literature.
- 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 or books. (This does not include routine progress and technical reports).
- Projects that are geographically inaccessible to normal departmental administrative services such as seagoing research vessels and other research field sites that are remote from the campus.
All of these circumstances display, with relative ease and a high degree of accuracy, extensive amounts of administrative/clerical effort on a particular project (or in the case of a remote location, inaccessibility to normal departmental services). This effort is considered greater than the routine level of service normally provided by the college or department. However, these examples are not an exhaustive list nor do they imply that direct charging of administrative or clerical salaries would always be appropriate for the situations illustrated in the examples. Projects cannot be grouped together to meet the requirement that there be an extensive amount of support. If the cost does meet the test of extensive amounts of administrative and clerical effort but cannot meet the direct charge criteria stated above the cost must be charged indirect.
The College should provide adequate justification in the proposal narrative for the direct charging of costs in this category, showing that the clerical and administrative salaries met the criteria for unlike circumstances.
Routine account monitoring, proposal processing, typing of general correspondence, manuscripts or technical reports, ordering of supplies and meeting or travel arrangements are not included in the definition for direct charging of administrative and clerical salaries and is covered by the University’s F&A cost rate.
Inadequate funds to support these charges as F&A is not adequate justification for charging this support as a direct charge.
General Office Supplies
Costs include those incurred in support of routine administrative activities associated with instruction, public service, research and other institutional activities, (i.e., paper, pencils, pens, ink, toner cartridges, etc.). These items of cost are considered readily expendable and are treated as facilities and administrative costs covered by the negotiated F&A cost rate. The only exceptions are those wherein the purchase of the supplies
is extensive in nature, can be specifically identified to the project, and meets the definition of a direct charge. The College should provide adequate written justification in the proposal narrative for the
direct charging of costs in this category, explaining that the supplies were a direct benefit to the purpose of the project and can be specifically identified with the project. In addition, support documentation must be
adequately detailed to pass an audit.
- Computers and Peripherals: The original purchase can either be chargedas technical (direct) or general purpose (F&A) depending upon the ACTUAL usage of the items OR more likely, a combination of both (direct
and F&A allocation).
- Replacement Parts: Are to be charged/allocated based on their current ACTUAL usage/benefit to various awards/accounts.
- Upgrades and Additions: Are to be charged based on the proportional benefits received to various awards/accounts.
Postage expense incurred in support of routine administrative communication activities associated with instruction, public service, research, and other institutional activities should not be charged directly to sponsored accounts. The only exceptions are those cases where extensive postage expense is required in support of the goals and objectives of the sponsored award being charged. For example, if the purpose of your project were to survey 10,000 high school students to determine their attitudes on violence in the school system, the postage for the survey would be an allowable direct charge.
The written justification should demonstrate that the postage provided a direct benefit to the purpose of the project, is extensive, and can be specifically identified with the project. In addition, support documentation must be adequately detailed to pass an audit.
Mailing technical reports and other project deliverables are considered part of normal, routine business expenses and are therefore considered F&A costs. Postage expenses include US Mail, Federal Express, UPS,etc. The difference between postage (F&A) and freight (direct) is driven by the item(s) being sent, not the means by which it is sent.
Telephone & Various other Communication Expenses
Communication expenses incurred in support of routine administrative activities associated with instruction, public service, research and other institutional activities should not be charged directly against sponsored
projects. The only exceptions are those relating to equipment charges (dedicated research/lab lines), long distance calls, telegrams, fax long distance charges, and various other communication expenses specific to a project and incurred for the sole direct benefit of the project. Support documentation must be adequately detailed to pass an audit. Installation charges, monthly use charges, local access calls, pagers, etc. are considered F&A costs and should not be charged directly to sponsored accounts.
Cellular Phones – Per NCSU policy, individuals who require cellular telephone service to conduct University business must obtain approval from the dean or department head of their unit. Orders for cellular services and equipment must be placed through the Telecommunications Services Division, Office of Information Technology Services(ITS). Services and equipment must be requested on the Cellular Phone Service Request Authorization form.
The services paid for by the University are to be used in the conduct of University business. These phones and their charges would require an unlike circumstance in order to be charged to a sponsored award.
Use of Personal Cellular Service for Business – Reimbursement of the employee for cellular telephone usage for business calls will be handled the same as making business calls away from the office. The employee may request reimbursement monthly. A copy of the cellular bill denoting business related calls must be submitted for reimbursement, with personal calls blacked out for privacy. No reimbursement will be made for the instrument, monthly fees, or the portion of “free” minutes. The employee should also provide information on how the call relates to the purpose of the project.
Memberships & Subscriptions
Institutional memberships in professional organizations and subscriptions to technical periodicals are normally treated as an F&A cost. They may be charged directly only when related to a specific project and necessary for the successful completion of the goals and objectives of the project. Allocation, when applicable, should be able to be accomplished with relative ease and a high degree of accuracy.
Generally, individual memberships are unallowable. Individual memberships in civic or social organizations are expressly unallowable.
An individual membership or subscription to a professional group or periodical may be allowed as a direct charge to a contract or grant only if the following can be demonstrated:
- An institutional membership is not available or will not meet the needs of the project.
- The cost has been justified (i.e., provides a direct benefit to the purpose of the project) in the proposal or a justification is in the College file if the need arises after the project was awarded.
The classification of this cost is broken down into two categories – the types of books normally found in a University library versus those that are not. The cost of the types of books found in a University library is normally a Facilities & Administrative (F&A) cost. The cost of the types of books not normally found in a University library, such as textbooks, is normally a direct charge to a sponsored project. Due to the nature of this cost, specific documentation must be present for the cost to be allowable as a direct charge on a specific sponsored award. The documentation requirements are discussed below.
Books Normally Found in a University Library
Since this cost is normally an F&A cost, an unlike circumstance must be justified in order to charge the cost as a direct cost. Factors that must be considered are:
- The book(s) are deemed inaccessible from the NCSU library due to heavy use or the inability to place a reserve on the book. These situations must be documented.
- The cost must be allocable to the project(s) with relative ease and high degree of accuracy. Books that will be used to gain an understanding of general knowledge in a field of work would not meet the relative ease/high degree of accuracy test.
- There is specific information contained in the book(s) purchased that is directly related to a specific goal or outcome of the project. For example, a specific testing protocol that must be followed to validate research results.
- Support documentation must be adequately detailed to pass an audit.
Books not Normally Found in a University Library
The cost of this type of book is normally a direct cost. The cost will be allowable as a direct charge if the cost for each book has been adequately justified in the proposal or a justification is in the College file if the need arises after the project was awarded. The important distinction between this type of book and the type of book described above is that the cost does not have to be extensive in nature since no unlike circumstance is required. However, due to the nature of this particular cost it is harder than usual to meet the justification and documentation requirements.
The following factors should be considered when preparing the justification:
The book must be allocable to the sponsored project(s) with relative ease and high degree of accuracy. Books that will be used to gain an understanding of general knowledge in a field of work would not meet the relative ease/high degree of accuracy test. It is often difficult to find a direct correlation/benefit to most sponsored projects with the purchase of general books. The justification must be sufficient to demonstrate compliance with the relative ease/high degree of accuracy test. Examples of supporting statements that are not sufficient to meet this test and would therefore be unacceptable in an audit are “The titles of the various textbooks clearly establish a technical relationship to the project charged” and “The books were needed for the research.”
Printing, Binding, Publication & Copying
These costs are normally direct charges to a contract and grant account as long as you can meet the definition of a direct charge. One important criteria to this definition is that you must be able to specifically identify the charge to a particular project with relative ease and high degree of accuracy and that cost must provide a direct benefit to that project sometime during the life of the award. Charges included in these categories are those normally charged to object code 3400 and any copying costs charged as directed by the definition of object code 2600.
The costs of disseminating research results (i.e. publication costs or page charges) are allowed as a direct charge to the project from which the research was obtained. As with any other direct charge, the cost must meet general A-21 guidelines in that it must be reasonable, necessary, allowable, allocable, timely, non personal and must provide a direct benefit to the project.
With respect to copying costs, if you are using an outside copy service, the invoice should be retained as documentation to support the charge. If you are using a departmental copier, charges must be a per copy charge and must be based on a cost study. In other words, you cannot charge the associated expenses of the copy machine such as toner cartridge, paper, etc. directly to a contract or grant due to allocation problems among the many uses of the machine. The per copy cost must be based on total utilization of all activities (research, instruction, public service and other), not just research usage. In addition you must maintain documentation of the use through a log. Copying of proposals or general correspondence not related to a specific project cannot be charged direct since these costs cannot meet the definition of a direct charge.
Only items costing $5,000 or more and having a useful service life of one year or more should be listed in the equipment line. Please keep in mind that the item must meet both criteria to be considered equipment. If both criteria are not met, the item will be budgeted as a material/supply. Cost estimates should include shipping charges and identify each piece of equipment with a corresponding cost. Provide a generalized specification and justify the need for the equipment in relationship to the statement of work (why do you need the equipment).
Note: The NC State DS-2 CAS Disclosure Statement, which sets forth the capitalization threshold and treatment of capitalized costs, supersedes sponsor guidance to the contrary. As such, it may be necessary to show items costing <$5,000 in the equipment section of a budget to meet a sponsor’s guidelines. These items will be treated as materials and supplies by NC State.
Costs identified to a particular sponsored project for the use of University-owned labs and other service centers should be budgeted, charged, and reported as direct costs. These charges must be based on actual utilization supported by adequate documentation. These charges must also be based on a usage rate approved by the Office of Contracts and Grants. The rate must be approved before the charge is incurred by the sponsored projects.
Lump Sum Vacation Payouts
Terminal leave and severance pay, for contract and grant accounts only, are charged at separation to a reserve account. Funding for the reserve account will come from a component of the contract and grant university benefits charge. For details relating to the actual procedure, please refer to the 12/15/98 memo from Terree Yardley and Karin Wolfe to University Division Level Personnel Contacts.
This procedure allows for the direct charging of the expenditure during the life of the project as a percentage of salary paid under the grant.
A cost used to meet the cost sharing commitments of a Sponsored Project will be allowed only to the extent the charge would meet the criteria as a direct charge. In addition to the specific criteria discussed above the charge must be allowable under the particular facts and circumstances of the award. If the cost would be classified as an F&A charge, it will not be allowed to meet the cost sharing commitments of that particular project.
If Federal flow-through dollars are not discovered by the college during the budgeting process and subsequent to the award it is noted that flow-through is a basis for any amount of funding, any unallowable costs (in accordance with CAS) which has been charged against the award would have to be removed.
Direct or F&A costs should only be charged to a particular project if they relate to the project. Delays in receipt of future funding is not justification for charging costs to an unrelated project. If charges are necessary before the receipt of the funding, a request for a pre-award account should be made through established procedures.
Non-CAS Covered Projects
There has been considerable concern in regards to charging administrative/clerical salaries, postage and office supplies to non-federal contracts and grants. These costs will be considered allowable as direct charges on non-CAS
affected contract and grant accounts.
Please keep in mind that ALL charges to any contract or grant should be necessary, reasonable, allocable and allowable under the terms and conditions of the agreement.
Sponsored Awards Not Subject to CAS Applicability
Alternative costing policies have been implemented for sponsored awards not subject to CAS. Cost accounting policies followed for sponsored awards not subjected to CAS will be dependent upon the individual terms and conditions of the awards and may include additional state or sponsor guidelines and regulations.
Alternative costing policies could impact the classification of certain cost categories. Expenditures that are not allowed as direct charges on sponsored awards subject to CAS, may be considered allowable as direct charges on those awards not subject to CAS as based on the defined criteria reference above.