Direct Cost Consistent Treatment

Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all activities of the institution (see "Vanderbilt University's Treatment of Direct Costs" below).

Identification with the sponsored work rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect costs of sponsored agreements. Typical costs charged directly to a sponsored agreement are the compensation of employees for performance of work under the sponsored agreement, including related fringe benefit costs to the extent they are consistently treated, in like circumstances, by the institution as direct rather than indirect costs; the costs of materials consumed or expended in the performance of the work; and other items of expense incurred for the sponsored agreement, including extraordinary utility consumption. The cost of materials supplied from stock or services rendered by specialized facilities or other institutional service operations may be included as direct costs of sponsored agreements, provided such items are consistently treated, in like circumstances, by the institution as direct rather than indirect costs (see "Vanderbilt University's Treatment of Direct Costs" below), and are charged under a recognized method of computing actual costs, and conform to generally accepted cost accounting practices consistently followed by the institution. [Office of Management and Budget Circular A-21, Section D.]

The government requires that the major research colleges and universities disclose in writing their general practices regarding classification of costs as direct costs as practices may vary between universities (e.g., University X may routinely budget and charge as direct costs long distance telephone expenses, while University Y does not).

At Vanderbilt University, there are certain "like circumstances" where costs are consistently treated as direct costs of sponsored projects. Conversely, there are certain "like circumstances" where costs are not considered direct costs, and should NOT be budgeted or charged as direct costs on sponsored projects. However, in all cases, the following standard applies:

Identification with the sponsored work (i.e., the scope of work) rather than the nature of the goods or services is the determining factor in determining direct costs. [Office of Management and Budget Circular A-21, Section D.]

At Vanderbilt University, the following costs are NOT normally budgeted and charged as direct costs of sponsored projects:

Examples of Costs that ARE Normally Considered as Direct Costs at Vanderbilt University

At Vanderbilt University, the following costs ARE normally budgeted and charged as direct costs. The common element is that the cost is necessary to perform the project's stated scope of work.

Clerical salaries CAN be budgeted and charged as direct costs under certain circumstances. Simply knowing the "nature of the good or serivce", e.g., clerical salary, is not sufficient to determine whether the cost is an appropriate direct charge to a sponsored project. In order to make the determination, one must know the cost's relationship to the sponsored work. For example:

Following are other examples of costs and the circumstances under which they may be incurred. For each cost/circumstance, it is indicated whether the cost would be budgeted and charged as a direct cost under Vanderbilt direct charge guidelines.

Direct Cost?		YES	NO
Salaries expense incurred under the following circumstances......
1.	Processing purchase orders on a research grant (such as an "R01")
2.	Processing purchase orders on a center/program project grant (admin effort documented in proposal as part of scope of work)
3.	Proposal development (writing, editing, copying and mailing proposals)
4.	Principal investigator effort to write annual project report (may include next budget year's proposal)
5.	Data entry (data collected under project scope of work)
6.	Data entry--financial transactions for a research grant are entered into financial shadow system (Note: may be considered a direct cost if part of the administrative budget on a program/project or center grant AND approved by the sponsor.)
Supplies and/or services expense incurred under the following circumstances......
1.	Copying costs for copying purchase orders, monthly ledgers
2.	Copying costs for annual progress reports
3.	Mailing costs for shipment of research materials and deliverables if necessary to perform the project's scope of work
4.	Copying costs for copying forms to mail out to survey recipients (survey is part of project scope of work)
5.	Manilla folders for general office use
6.	Manilla folders for filing survey responses, lab results

Justification required in proposals that budget certain costs as direct costs:

For the following cost items (and for any others that a layperson may consider routine and administrative in nature), specific written justification as to the relationship between the cost and the proposed project's scope of work should be completed and submitted to the Division of Sponsored Research (for University Central) or to the Office of Biomedical Sciences (for Medical Center grants) or to the Contracts Administration Office (for Medical Center contracts) as a part of the proposal to the sponsoring agency. The documentation should explain the direct benefit relationship between these cost items and the proposed scope of work.

Vanderbilt University

Guidelines for Budgeting and Charging Direct Costs on Sponsored Projects (11/15/96)

Direct Costs: Consistency

C. Consistency