Purpose of Guidelines

The purpose of these guidelines is to provide information about the identifying and allocating operations and maintenance cost as defined in OMB Circular A-21 and Cost Accounting Standard (CAS)502 to which the University of Florida must adhere.

Background

Circular A-21 establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions. According to OMB A-21, "The cost of a sponsored agreement is comprised of the allowable direct costs incident to its performance, plus the allocable portion of the allowable indirect costs of the institution, less applicable credits. The tests of allowability of costs under these principles are:

1. they must be reasonable;
2. they must be allocable to sponsored agreements under the principles and methods provided herein;
3. they must be given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances; and
4. they must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items."

Cost Accounting Standard (CAS)502 requires consistency in allocating costs incurred for the same purpose. "All costs incurred for the same purpose, in like circumstances, are either direct costs only or indirect costs only with respect to final cost objectives. No final cost objective shall have allocated to it as an indirect cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included as a direct cost of that or any other final cost objective. Further, no final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included in any indirect cost pool to be allocated to that or any other final cost objective. See University of Florida Policy on Charging Costs Directly to Sponsored Projects.

This means there must be consistency in accounting campus-wide; all costs for similar circumstances must be charged the same.

Definitions

A-21 Office of Management and Budget (OMB) circular of Cost Principles for Educational Institutions.

Allocation

The process of assigning a cost, or a group of costs, to one or more cost objectives, in reasonable and realistic proportion to the benefit provided or other equitable relationship.

Cost Objective

May be a major function of the institution, a particular service or project, a sponsored agreement, or an indirect cost activity.

Operation and Maintenance

Those costs that have been incurred for the administration, supervision, operation, maintenance, preservation, and protection of the institution's physical plant. They include expenses normally incurred for such items as janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment, care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal; property, liability and all other insurance relating to property; space and capital leasing; facility planning and management; and, central receiving.

Direct Costs

Those costs that can be identified specifically with a particular sponsored project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution.

Indirect Costs

Those costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity.

Guideline Issues

Operation and maintenance costs may be charged directly to sponsored agreements, subject to the requirements contained in the direct charging policy (i.e., they must be treated consistently for all major functions of the institution when incurred for the same purpose). These cost must be Reasonable, Identifiable specifically to the sponsored project, and stated in the budget or allowed by the agency.

Operations and maintenance costs may be charged directly to sponsored agreements (subject to the allowability criteria in University of Florida Policy on Unallowable Expenses) through service center recharge rates. The operations and maintenance costs included in recharge rates must be excluded from the University's indirect cost pool (see University of Florida Policy on Recharge Center Rate Development and Application Procedures).

All other operations and maintenance costs may be included in the indirect cost proposal. (These costs are therefore charged to grants and contracts through the indirect cost rate; see University of Florida Policy on Indirect Cost Allocation).

The effective date of these guidelines is July 1, 1996.

Although much of these guidelines have already been implemented, an effective date of July 1, 1996 is set to allow for university wide training at the department level so as to insure compliance and consistency.

Responsibility for compliance

PIs/Departments are responsible for correctly recording any O&M costs that are directly charged to a sponsored project. Due care must be taken to insure these costs are allowable. PIs/Departments are encouraged to call Contracts & Grants before charging O&M to a sponsored project.

Responsibility for following these guidelines lies primarily with Contracts and Grants which is responsible for development of the annual indirect cost proposal. Contracts and Grants will also periodically review, by object code, costs normally charged indirectly that have been directly charged to sponsored agreements. Explanation of appropriateness or reversal of charges may be required. The University of Florida administration is responsible for guidance and training and for insuring compliance through periodic internal and external audits.