Accounting for Operations and Maintenance Costs

Directive Statement

This directive establishes the proper methods of accounting for operations and maintenance (O&M) costs. Uniform Guidance 2 CFR 200 establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions. According to Uniform Guidance 2 CFR 200 sections 200.402, “The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits.”

The tests of allowability of costs under these principles in section 200.403 are:

1. Be necessary and reasonable for the performance of the Federal award
2. Be allocable thereto under these principles:
   • Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity
   • Be accorded consistent treatment: “A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.”

Reason for Directive

Identifying and allocating operations and maintenance cost must follow principles defined in Uniform Guidance 2 CFR 200 and the Cost Accounting Standard (CAS) 48 CFR 9905.502 to which the University of Florida must adhere.

Cost Accounting Standard (CAS) 48 CFR 9905.502-40 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 Charging Costs Directly or Indirectly to Sponsored Projects for more information.

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

Who must comply?

1. Principal Investigators (PIs)/Departments are responsible for correctly recording any O&M costs that are directly charged to a sponsored project
2. Due care must be taken to ensure these costs are allowable
3. 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. Contracts and Grants will also periodically review, by account 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 ensuring compliance through periodic internal and external audits.

Guideline Issues

1. 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)
2. These costs must be reasonable, identifiable specifically to the sponsored project, and stated in the budget or allowed by the agency
3. 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
4. The operations and maintenance costs included in recharge rates must be excluded from the University’s indirect cost pool
5. 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)

Last Reviewed

Last reviewed on 03/20/2024

Resources

2 CFR 200 Quick Reference Guide

Uniform Guidance 2 CFR 200

48 CFR 9905 – Cost Accounting Standards (CAS) for Education Institutions

Training

RSH260: Cost Principles

RSH206: Cost Principles Advanced Topics

Contacts

Contracts & Grants: (352) 392-1235

Cost Analysis: (352) 392-5778