Indirect Costs Assignment
Purpose of Guidelines
The purpose of these guidelines is to provide information about Indirect Costs Assignment / Cost Pool Development in preparation of the Indirect Cost proposal. The University of Florida must comply with the requirements of Uniform Guidance 2 CFR 200 and Cost Accounting Standards (CAS) 48 CFR 9905.501, 9905.502, 9905.505, and 9905.506.
Uniform Guidance 2 CFR 200 defines indirect costs as those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, and instructional activity or any other institutional activity. These costs are usually classified and accumulated in the following indirect cost categories; depreciation/use allowances, operations and maintenance, general administration/general expenses, department administration, sponsored projects administration, library, and student administration/services. Each category may have several cost pools, costs that are grouped together because they are like in nature and use of the same allocation method for distribution to the various cost objectives will be fair and equitable.
Cost Accounting Standard (CAS) 9905.501 requires consistency estimating, accumulating and reporting costs. Accumulation has already occurred at the object code level. See University of Florida Policy on Charging Costs Directly to Sponsored Projects.
Cost Accounting Standard (CAS) 9905.502 requires consistency in allocating costs incurred for the same purpose. Proper care must be taken in allocating costs that are usually considered indirect. See University of Florida Policy on Charging Costs Directly to Sponsored Projects.
Cost Accounting Standard (CAS) 9905.505 requires identification and correct treatment of unallowable costs. Unallowable costs must be identified and excluded. Unallowable activities must be identified and allocated to Other Institutional activities. See University Policy on Unallowable costs.
Cost Accounting Standard (CAS) 9905.506 requires consistency in the cost accounting period. This is necessary in order for accuracy in rate development and rate application. It requires that the same time period be used for the development of the indirect cost pools and direct cost pools (bases).
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Code of Federal Regulations Title 2: Grants and Agreements Part 200 (2 CFR 200).
- To assign an item of cost, or a group of items of cost, to one or more cost objectives. This term includes both the direct assignment of cost and the reassignment of a share from an indirect cost pool.
Cost Objective (200.28)
- Cost Objective means a program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc. A cost objective may be a major function of the non-Federal entity, a particular service or project, a Federal Award, or an indirect (Facilities & Administrative (F&A)) cost activity, as described in Subpart E-Cost Principles.
Direct Costs (200.413)
- Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded 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 (F&A) costs.
Indirect (facilities & administrative (F&A)) costs (200.56)
- Indirect (F&A) costs means those costs incurred for the common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved.
- Principal Investigator on a grant, contract or cooperative agreement. This person bears the main responsibility for costs that are charged to that agreement.
In order to correctly and fairly allocate indirect costs for the purposes of the indirect cost proposal, it is necessary to first identify and segregate costs as either direct or indirect in nature. (We call these segregated costs, cost pools.) This requires that costs are correctly recorded in the accounting system (recorded to the correct account code and program) and then carefully assigned to the appropriate cost pool.
Per 2 CFR 200: The overall objective of the indirect cost allocation process is to distribute the indirect costs to the major functions of the university in proportions reasonably consistent with the nature and extent of their use of the university’s resources. In order to do this it is necessary to group indirect costs together, so that costs that are like in nature and in terms of their relative contribution to the particular cost objectives to which they can be appropriately distributed can be pooled.
Multiple cost pools may be warranted to accurately assign costs to the relevant cost objective. Separate indirect cost pools should be established:
- when certain activities should receive only a portion of central indirect costs because they provide their own administrations
- for certain items/categories of expenses which relate to specific areas of the university
- for service facilities where output is measurable and allocable based on organized research, instructional, or other activities at the University
Although much of these guidelines have already been implemented, an effective date of December 26, 2014 is set to allow for university wide training at the department level so as to ensure compliance and consistency.
Responsibility for compliance
Responsibility for following these guidelines lies primarily with Cost Analysis which is responsible for development and review of the indirect costs pools. Cost Analysis is also responsible for the development of the indirect cost proposal. Principle Investigators, Department Chairs and fiscal personnel with the general guidance and oversight of the colleges, schools and divisions are responsible for recording costs to the correct account code and chartfield string. The University of Florida administration is responsible for guidance and training and for insuring compliance through periodic internal and external audits.
Correct accumulation of indirect costs begin at the department level where many of the costs are first incurred and recorded. In order to comply with Uniform Guidance 2 CFR 200 and 48 CFR CAS 9905.501, 9905.502 and 9905.505 it is imperative that departments understand and correctly record all costs. See University Policy on Charging Costs Directly to Sponsored Projects for guidance regarding the consistency in estimating, accumulating and reporting costs (as required in CAS 9905.501) and for information of those costs which are required to be charged indirectly (and examples of when such charges as administrative and clerical salaries may be direct charged (as required in CAS 9905.502) Any questions regarding original coding of charges or cost transfers can be addressed to The Office of Contracts and Grants, 392-1235, which is the central unit designated to carry out oversight.
Cost Analysis Responsibilities
Cost Analysis staff are responsible for developing and reviewing the indirect cost pools. This is done in accordance with Uniform Guidance 2 CFR 200 and the related Cost Accounting Standards (CAS) 48 CFR 9905.501, 9905.502, 9905.505 and 9905.506.