OMB Uniform Guidance Direct Charging Clerical and Administrative Salaries
Institutions that conduct sponsored research are all dealing with recent federal and institution budget constraints, which have translated to reduced support for sponsored projects. For many researchers, this “pinch” has most likely been felt at the local level – limited funds to support the administrative staff they rely on so heavily in their departments, centers or institutes.
Faced with the prospect of losing administrative support, a preferable alternative for some might be to recover these costs directly on awards. Of course, many limitations already exist for the direct charging of administrative and clerical salaries on sponsored projects. OMB Circular A-21 requires that any project charged these specific types of salaries be classified as a Major Project (“a project that requires an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments”). Translation of OMB A-21 and Appendix C has historically placed strain on the relationship between local units building administrative salaries into proposal budgets and central oversight offices disallowing these costs or debating the classification of an award as “Major Project.”
Changes to Federal Requirements: Amount to “Very Little
So, what has the newly issued Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards from the Office of Management and Budget (Uniform Guidance) changed with regard to direct charging administrative and clerical salaries?
The answer is “very little.” Per CFR 200.413, “The salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct charging of these costs may be appropriate only if all of the following conditions are met: (1) Administrative or clerical services are integral to a project or activity; (2) Individuals involved can be specifically identified with the project or activity; (3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and (4) The costs are not also recovered as indirect costs.” The Uniform Guidance clarifies the allowability of these direct charges – which have always been allowable as long as the provisions of the Cost Principles (Reasonable, Allocable, and Consistently Treated) were applied to the cost.
Both the new and the old regulations state that, first and foremost, “salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs,” because at the core, most administrative support indirectly supports all sponsored projects and non-sponsored activities and are part of the Facilities and Administrative Costs.
Previous AND Current Requirements: Allocable, Reasonable and Unlike Circumstances
The Uniform Guidance clarifies that in order to be allowable as a direct charge, salaries must be for services specifically identified with the project or activity, meaning the work is assignable to the project in accordance with relative benefits received – the very definition of allocable. The onus has been, and remains with, the institution to be able to allocate a specific portion of an administrator’s time to a given project via reasonable methods and support the charges accordingly. Presumably, the supporting documentation for direct-charged clerical salaries would be consistent with the requirements for supporting other direct charged salaries (Ahem…payroll verification!). But this is nothing new in the Uniform Guidance.
Further, the Guidance clarifies that direct charged administrative or clerical services must be integral to a project or activity – as opposed to necessary to the overall operation of the institution and assignable in part to sponsored projects (the A-21 definition of “allocable”). For example, the clarification in the Uniform Guidance highlights that salary for an administrative assistant completing financial reconciliations should not be divided and charged directly to all sponsored awards under a PI or department. Although financial reconciliations are necessary to the overall execution of the project, this is true of all sponsored and non-sponsored activities and these types of services cannot be considered “integral” to the project’s goals and objectives. Appendix C of OMB A-21 provides solid examples of the types of services that can be deemed “integral,” and as noted within A-21, this list is not exhaustive. The removal of the Major Project reference and examples in the Uniform Guidance emphasizes this, but it does not change the fundamental requirement.
Significant New Requirement: Sponsor Approved
One significant requirement that is new under the Uniform Guidance is the necessity to have administrative and clerical salaries “explicitly included in the budget or have the prior written approval of the Federal awarding agency.” Under the old circulars, re-budgeting authority allowed by the Research Terms and Conditions meant that if institutions could identify administrative support as allowable, allocable, reasonable and consistently treated, they then had the authority to charge these costs directly to sponsored project accounts without prior approval. Now, institutions must verify that these costs are included in the sponsor-approved budget before they are charged as a direct cost on an award – a potential hit to minimizing institutions’ administrative burden.
Institutional Response and Next Steps
As always, charges much be treated consistently. Administrative and clerical support cannot be incorporated into F&A rate calculations as an indirect charge and then also recovered as a direct cost. Again, this is not a change under the Uniform Guidance, but a statement placing emphasis on the need for institutional policies and procedures, including the Disclosure Statement (DS-2), guiding the consistent charging of administrative and clerical support. Review and, if necessary, update your policies, procedures and DS-2 to ensure they establish the framework for consistent treatment of costs (especially if they reference Appendix C and Major Projects!).
The revised Uniform Guidance language recognizes that administrative support services may be necessary for the successful execution of a project that does not fit the narrow definitions of circumstances outlined in A-21 Appendix C. As federal agencies update their policies to be in line with the Uniform Guidance, they may provide more specific guidance to be considered. Institutional policies and procedures should outline the requirements for all sponsored project costs to be in line with the cost principles, including administrative and clerical salaries.
Educate your research administrators on the new requirement for prior approval as well as your institutional policies and procedures, but emphasize that the general requirements for allowable clerical and administrative salaries as a direct cost have not changed: the flood gates for direct administrative costs have not been opened – Sorry!
Subscribe to Huron Insights
Sign Up to get all of the great Huron insights.Newsletter Subscriptions