UVM must consistently estimate, charge, accumulate, and report direct, indirect, and allowable costs on sponsored projects in compliance with federal cost principles and the University’s cost accounting standards (PDF), which are overseen by Cost Accounting Services, part of University Financial Services.

The University's Cost Policy on Sponsored Agreements (PDF) provides guidelines and guidance for charging allowable expenses to sponsored agreements. The policy also provides the framework for consistent usage of the University’s cost accounting practices to prevent unallowable costs and double charging of costs on sponsored agreements. The Cost Policy on Sponsored Agreements provides detailed guidance in the following areas:

  • Federal Cost Principles
  • Direct Cost Classification and Charging on Sponsored Agreements
  • Indirect Costs (Facilities and Administrative Costs)
  • Unlike Circumstances Guiding Principles
  • Direct Cost Justification and Documentation

Federal Cost Principles

Costing principles or criteria from the federal Uniform Guidance are used to determine whether a cost can be charged to a sponsored agreement. These criteria apply for both direct and indirect (Facilities & Administrative) costs, which are defined below. For a given cost to be charged to a sponsored agreement, all of these criteria must be met.

1. Reasonable

For a cost to be considered reasonable, it must be:

  • Generally recognized as ordinary and necessary for the operation of the University or the proper and efficient performance of the federal award.
  • The applied restraints or requirements imposed by the University are reasonable in such factors as: sound business practices; arm's-length bargaining; Federal, state, local, and other laws and regulations; and terms and conditions of the Federal award.
  • Costs incurred were reasonable in comparison to market prices for comparable goods or services for the geographic area
  • The individuals concerned acted with prudence in the circumstances considering their responsibilities to the University, its employees, where applicable its students or membership, the public at large, and the Federal Government.
  • University doesn't deviate from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost.

2. Allocable

For a cost to be considered allocable, it must:

  • Be incurred solely to advance the work under a sponsored agreement, or
  • Benefit both the sponsored agreement and other work of the institution, in proportions that can be approximated through the use of reasonable methods, and
  • Be assignable to the benefiting activities without undue effort or cost.
  • Costs on a particular Federal award are not charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards.

3. Allowable

For a cost to be considered allowable, it must:

  • Not be designated as “unallowable” under SUBPART E - Costing Principles of the Federal Government's Uniform Guidance
  • Adhere to sponsor-specific policies and award-specific terms and conditions regarding specific items of cost
  • Adhere to University policies regarding specific items of cost.
  • 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.
  • Be determined in accordance with generally accepted accounting principles (GAAP)
  • Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period
  • Be adequately documented


Examples of Direct Charging Typical Indirect Costs

The following examples are intended to provide guidance on what may be considered an unlike circumstance of a typical indirect cost scenario. These examples are not exhaustive nor are they intended to to imply that direct charging would always be appropriate for the situations illustrated. See a list of account codes and descriptions that require a Direct Cost Transfer Form to be completed.

Administrative or Clerical Staff

Administrative salaries are allowable as a direct charge to federal projects, as long as the following conditions are met:

  • Administrative or clerical services are integral to a project or activity;
  • Individuals involved can be specifically identified with the project or activity;
  • Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and
  • The costs are not also recovered as indirect costs

When administrative salaries are considered integral to a project, investigators must continue to complete the Direct Cost Justification Form (PDF), describing the integral nature of the administrative or clerical staff member’s effort is to the work of the project.

When integral to the work, administrative or clerical salaries must be included in the budget and budget justification of the proposal. Please note that the Direct Cost Justification Form must be submitted and approved by SPA staff prior to proposal submission.

When administrative or clerical salaries are not included in the proposal but are determined later to be integral to the work, prior approval from the sponsor is required before directly charging the effort. Prior approval must be obtained either via annual progress reports or via separate letter to the sponsor’s administrative office. See below for additional details.

Books and Subscriptions

Books, subscriptions, reprints or a copy of article charges which may be justifiable as being unlike circumstances are:

  • Purchase of a software, equipment or similar manual to improve efficiency and/or results of PI or lab personnel use of software or equipment used in the specific research project.
  • Book associated with a specific research technique or aspect of the research project that will introduce efficiencies to the research, improve quality of results, improve results from a specific piece of research equipment or improve results from a research experiment.
  • Books which are not available from the library or from other sources.
  • Specific books needed so often that a library copy is not sufficient.

Dues and Memberships

Dues and membership fees which may be justifiable as being an unlike circumstance are:

  • The registration costs for a PI to attend a specific meeting or conference to present research findings includes membership fees but it is more costly to attend as a non-member.
  • The request for a proposal requires the individual to hold a current membership.

Copier Charges, Copy Cards

General copying  may not be charged directly to a sponsored agreement. However, the use of specific codes on a department copier is an acceptable methodology to identify copying charges for a sponsored agreement. The copying charges must be to solely to advance the work under the sponsored agreement.

Equipment Maintenance Agreements/Service Contracts

General purpose equipment maintenance or service agreements may not be charged directly to a sponsored agreement. Maintenance agreements  or service contracts on scientific/technical equipment which are used to specifically to advance the purpose of a sponsored agreement may be direct charged if either one of the two following allocation approaches are used:

  • Actual usage of the related equipment is tracked e.g. a log and the usage information is the basis for allocation
  • The PI can apply the proportional benefit rule without undue effort or cost to the applicable sponsored agreements

Facility Costs

Facility costs such as building costs, utility costs, space rental charges and work orders which may be justifiable as being an unlike circumstance are:

  • The sponsored agreement is classified as off-campus and the facility costs are not paid for by the University
  • Special arrangement and alterations costs are specifically incurred for the sponsored agreement

General Office Supplies

Office supplies may be appropriate as a direct cost if the work takes place at a remote site or the scope of work requires an excessive amount of office supplies for tasks unique to the project. Projects that require extensive workshops or training seminars frequently need excessive office supplies to develop handouts for the participants. The following examples of justifications for office supplies that may be considered an unlike circumstance:

  • Significant supplies for mailings, brochures and reports will be used for a sponsored agreement.
  • Significant office supplies will be used to fulfill a sponsor's request to send Standard Operating Procedure manuals to other agencies
  • An unusually large amount of office supplies are required to prepare brochures and educational training materials for workshops.
  • Envelopes used to mail an unusually large number of research questionnaires
  • Paper, folders, and page charges for producing manuals, conference materials, human subject files, manuscripts, survey instruments, scientific data when such activity is a primary objective of the project
  • Office supplies for participants in an externally funded conference or seminar hosted by the campus. Example: Conference grants


Postage may be appropriate as a direct cost when it is excessive, involves requirements to mail to foreign countries, and can be tied to scope of work as an unlike circumstance. An example of a justification that may be considered an unlike circumstance is:

  • Postage is required to mail scientific materials e.g. biological samples in dry ice.
  • Postage to conduct research surveys or patient follow-up letters

Note: Postage expenses include US Mail, Federal Express, UPS, etc. All shipping costs for purchases should be charged to the same account code as the items being purchased. 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 and Internet Access

The University interprets local telephone costs to include local telephone service charges for voice/data access. Cellular phone costs and subscription fees for internet access are typically indirect costs. Under exceptional circumstances, local telephone expenses may be directly charged to a sponsored agreement. Exceptional circumstances may apply when:

  • A dedicated line used to conduct a telephone survey.
  • A phone line used exclusively to manage a multi-site research project.
  • Local telephone Service - A hotline or crisis line that is specifically required by a sponsored agreement
  • A dedicate fax machine and voice port is necessary to ensure confidentiality of transmitted patient information

Procedures must be in place to ensure that the particular line is used exclusively for the project or activity to which it is being directly charged.


Cost Policy FAQs

Does the cost policy apply to all sponsored agreements?

The cost policy applies to all sponsored agreements, federal and non-federal. However, the costs identified as “normally F&A” may be directly charged to a non-federal project if approved (does not specifically disapprove) by the sponsor. For this purpose a federal sponsored agreement includes federal awards received directly by the University as well as subawards received by the University under federal awards to other organizations.

Are federal formula grants such as Hatch and Smith-Lever subject to the cost policy?

Yes. Federal formula grants such as Hatch, McIntire-Stennis, Multi-State, Animal Health and Smith Lever are subject to this policy. The federal formula grants are subject to Uniform Guidance which is the primary regulations from which the cost policy was derived.

May I charge a normal F&A cost directly to a federal sponsored agreement whose F&A rate is less than the federal negotiated F&A rate?

In general, no. By accepting a federal sponsored agreement, the University is waiving its right to recovery the difference between the negotiated F&A rate and the sponsored agreement F&A rate. If a cost is incurred in unlike circumstances, the federal government may approve the direct charging of normal F&A costs.

What is an unlike circumstance?

Generally, an unlike circumstance is defined as an activity/use of an item or service which is substantially greater in amount or different in purpose than the normal use of that item. To direct charge a normal indirect cost on a federal sponsored agreement, specific requirements must be met.

How do I assess whether a cost is substantially greater in amount or different in purpose than the normal use of that cost type?

A series of the key justification questions are available to assess whether a normal F&A cost was incurred in unlike circumstances. If you are unsure whether your justification meets the threshold of an unlike circumstance, reference the unlike circumstance examples for more insight on what might constitute an unlike circumstance.

Why can department administrative type costs be direct charged on experiment station and extension sponsored agreements without an unlike circumstance justification?

Experiment station and extension F&A rates do not include a department administrative cost component so departmental costs may be direct charged. However, administrative costs which are direct charged to experiment station and extension sponsored agreements must still meet the reasonableness, allocability and allowability federal cost principles and other sponsor specific regulations.

May I direct charge administrative and facility costs on federal formula grants without justification of it being an unlike circumstance?

Yes. Since federal regulations on federal formula grants do not allow the application of F&A rates, direct charging of administrative and facility costs may be allowable if they meet the reasonableness, allocability and allowability cost principles and other sponsor specific regulations.

How do I allocate a cost which benefits two or more sponsored agreements?

Costs should be proportionally allocated to each sponsored agreement without undue effort or cost (proportional benefit rule). Click here for a list of reasonable allocation methods. Written documentation which describes the allocation method and its reasonableness should be retained for audit purposes.

What justification is required to direct charge a normal F&A cost as part of my sponsored agreement proposal package?

The justification must be sufficient for an independent review to assess its merit. In addition, the proposal's budget narrative must specifically describe the unlike circumstance and relevance of the cost to the work being conducted under the sponsored agreement.

Is it appropriate to direct charge administrative or clerical salaries to NIH modular grants e.g. R01 grant?

Due to the modular grant budget year limit of 250K, administrative or clerical costs do not typically rise above the normal F&A costs required to administratively support the scope of work funded by a budget of this magnitude.

Is there a minimum amount of effort required before an administrative or clerical person rises to a level beyond normal F&A costs?

No. However, the person would typically be working on a major project and the effort would be allocable without any undo effort or cost. Minimal effort of 5% or less would typically not rise to a level beyond normal F&A costs.

May I justify a normal F&A costs as a direct cost after the sponsored agreement has been awarded?

Yes. Prior to processing the charge on the sponsored agreement, submit a direct charge justification form to SPA for consideration and obtain their approval. SPA may need to establish a new budget category for a non-salary cost as part of this approval process.

When may it appropriate to direct charge a laptop to a sponsored agreement?

When the usage of computing devices are essential to the programmatic work of the sponsored agreement and the usage is allocable, direct charging of the computing device may be appropriate on the sponsored agreement. If a device is funded 100% from a federal sponsor, incidental use of the electronic device for non-project purposes is allowed and may never interfere with the project use or require the device to be removed from where the project work is being conducted. The electronic device may not be used to conduct administrative tasks such as ordering supplies or grants management as these tasks are typically not directly charged to a sponsored agreement.

Are office supplies allowed as a direct cost on a sponsored agreement?

Typically, no. However, sponsored agreements which require excessive mailings, brochures, manuals or materials for conferences may have office supply requirements in excess of the normal F&A costs and incur costs in unlike circumstances.

May I allocate my monthly port charges for the telephone located in my office and research lab to the active sponsored agreements during each month?

Typically, no. Local telephone costs are considered a F&A cost. Dedicated telephone lines to conduct surveys, manage a multi-site project, provide a hot line or provide patient confidentiality may be appropriate unlike circumstances to direct charge local telephone expenses.