Cost Accounting Standards

Included on this page:

• Definition/Background
• Applies to
• Process
• Department responsibilities
• GCA responsibilities
• Helpful hints
• References

In 1994, the Cost Accounting Standard Board (CASB) established CAS. CAS was extended to grants and cooperative agreements in Circular A-21 in 1996.

• Four standards and disclosure statements are the components of CAS.
• The standards apply to all grants, contracts and cooperative agreements (collectively called sponsored agreements).
• The disclosure statement requirement applies to all institutions receiving $25 M (regardless of amounts of individual awards
• The University of Washington (UW) and other universities receiving federal funds are required to comply with the Cost Accounting Standards (CAS) set forth in Appendix A, OMB Circular A-21 (Cost Principles for Educational Institutions).
• In accordance with these standards, the UW submitted a Disclosure Statement that describes cost accounting practices and methodologies in effect at the UW. It was approved in November 1999 by DHHS, the UW’s cognizant agency.

CAS Standards:

CAS 501: Consistency in Estimating, Accumulating and Reporting Costs by Educational Institutions

• An educational institution's practices used in estimating costs shall be consistent with the educational institution's cost accounting practices used to accumulate and report costs. Applies to costs charged as well as cost sharing (costs that are contributed).
• GIM-1 provides guidance

CAS 502: Consistency in Allocating Costs Incurred for the Same Purpose by Educational Institutions

• All costs incurred for the same purpose, in like circumstances, are either direct costs or Facilities & administrative costs.

CAS 505: Accounting for Unallowable Costs

• Unallowable costs shall be identified and excluded from any billing, claim, application, or proposal applicable to a Sponsored Agreement.

CAS 506: Consistency in Using the Same Accounting Period for Purposes of Estimating, Accumulating and Reporting Costs.

• Educational institutions shall use their fiscal year as their cost accounting period

Disclosure Statement is a comprehensive description of an organization’s cost accounting practices and includes direct costs, indirect costs (Facilities & Administration), depreciation and use allowance, leave costs and applicable credits, deferred compensation/insurance costs and central systems and group expenses.

Direct Costs are costs incurred to support a project and are charged to sponsored projects when the costs can be specifically identified to the project with relative ease and with a high degree of accuracy and are allowed by all terms and conditions governing a particular award.

Facilities & Administrative Costs (indirect costs) are general institutional expenditures that are incurred for common or joint objectives benefiting instruction, research, or public service and therefore cannot be readily identified with a particular sponsored project.

By definition, Unlike Circumstances exist when costs are:

• above the normal level of services or items required for a project.
• for technical expertise or items not otherwise needed by department are required.

CAS Covered Sponsored Projects: (budget type 05)

1. All federal awards
2. All awards that contain any federal flow-through money
3. All awards where the terms and conditions of the proposal or award documents reference OMB Circular A-21 or Cost Accounting Standards
4. Any sponsored project whose funds are being used as cost sharing on a CAS covered project. Only the individual cost(s) being used as cost sharing will be subject to the definitions of direct charges and "unlike circumstances
5. Awards not covered under CAS are still subject to the requirements listed in the award and University and State guidelines.

Sponsor approval of a budget does not in and of itself constitute approval of the specific line items. The sponsor assumes you have complied with A-21, the University’s Disclosure Statement, the University’s F&A cost proposal, and any other regulations cited.

Unallowable Costs:

Costs considered "unallowable" must be identified and may not be budgeted, charged or reported to a sponsor. (See OMB A-21, Part J)

• Direct costs are directly charged when specifically identified.
• Direct costs that require additional documentation/justification and sponsor approval:

A budget justification must be prepared if any of the following costs are budgeted within the cost categories:

1. Administrative and Clerical Salaries (see details below)
2. Office Supplies (details below)
3. Routine Copying (details below)
4. Basic Telephone (details below)
5. Memberships, Journals and Subscriptions (details below)

1. Administrative and Clerical Salaries:

Direct charging of such costs may be considered where a major project or activity explicitly allows for administrative or clerical salaries and the individuals involved can be specifically identified with the project or activity. The nature of the work performed under a project should require an extensive amount of administrative or clerical support that is significantly greater than the routine level of services provided by the department. The following are specific examples of when direct charging of administrative and clerical salaries might be allowable:
• 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.
2. Office Supplies:
   Supplies can be directly charged when:
   the purchase of the supplies is extensive in nature,
   they can be specifically identified to the project and meet the definition of a direct cost.
3. Basic Telephone:

Long distance telephone expenses for telephone calls, fax transmittals and various other communication expenses specific to a project and incurred for the sole direct benefit of the project may be allowed as a direct charge. Installation charges, monthly use charges, local access calls, pagers, etc. are considered F&A costs and should not be charged directly to sponsored accounts.
4. Memberships, Journals and Subscriptions:

An individual membership or subscription to a professional group or periodical must be indirectly charged unless specifically and solely related to the sponsored award.
• Distribution of direct costs:
• Proportional Benefit Rule: cost is allocated according to the proportion of benefit provided to each project, i.e. lab supplies allocated between two grants based on quantity used.
• Interrelationship Rule: cost is distributed based on any ‘reasonable’ basis when it is not possible to determine the proportional benefit rate, i.e.lab supplies allocated based on allocation of employees salaries to each grant.
• Consistency:
• Same costs cannot be charged as both direct and indirect costs.
• Costs must be treated uniformly (as either a direct or an indirect cost) unless there are unlike circumstances.

Cost accounting policies for sponsored awards not subjected to CAS will be dependent upon the individual terms and conditions of the award. 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. All charges to any contract or grant should be necessary, reasonable, allocable and allowable under the terms and conditions of the agreement.

Cost share policy

• Propose cost sharing only when required by agency guidelines, delineated in specific program announcements or when considered as part of the proposal evaluation process.
• Mandatory by statute or program requirement as a condition of the award.
• Voluntary when proposed but not required.
• Costs used to meet cost sharing requirement must meet criteria of an allowable direct cost of that particular project.

• Documentation placed in award proposal when directly charging costs that are normally indirect.
• Indirect costs charged directly only when unlike circumstances exist and are justified in award proposal or file.
• Rebudgeting (if allowable) to be justified, documented and filed in departmental file
• Develop and follow Delegation of Signature Authority policy. Ensure authorized signatures are on all required documents according to GIM 14
• Document mandatory and voluntary cost sharing

• Selective review for compliance with costing policies.

Ask five questions to determine allowability to directly charge normally indirect costs:

1. Unlike circumstances?
2. Unlike circumstances documented in proposal?
3. Expense on indirect cost list?
4. May UW rebudget?
5. Unlike circumstances documented and in file?

Refer to GIM 23 for a list of costs that may be charged directly to a project or must be charged indirectly GIM 23

Refer to CAS compliance chart for allowability and inconsistent costing examples.

Refer to Charges to Federally Sponsored Agreement Flowchart.

References:

• OMB Circular A-21

Principles for Determining Costs Applicable to Grants, Contracts, and other Agreements with Educational Institutions

• Spring 2001 Cost Accounting Standards Training
(PowerPoint slides)
• Grant & Contract Fiscal Administration Class Reference Page R29-Flowchart for determining whether to charge to a grant or contract
• NIH Guide for Grants and Contracts
• NIH Policy Statement
• NFS Award and Administration Guide
• Office of Naval Research ONR Research Grant Terms and Conditions
• GIM 21 Cost Sharing on Research Supported by Federal Agencies
• GIM 23 Costing Policy for Sponsored Research Agreements
• GIM 14 Delegation of Signature Authority
• Administration and clerical salary policy
• cashelp@u.washington.edu

Grant and Contract Accounting
A Department of Financial Management
gcaques@u.washington.edu
Modified: March 6, 2008