Subject:  OMB Circular A-21 Update No.        99-1
Date:    January 12, 1999

(Note: This Important Notice is being sent to Account Managers, Chairpersons, Deans and Chancellors. Please forward to others who have a need to know.)

The Federal OMB Circular A-21 was revised on May 19, 1998. A complete copy of A-21 may be found at the Web location http://www.whitehouse.gov/omb/circulars/a021/a021.html.  This Important Notice provides additional information to Important Notice 94-4 regarding the administration of grants and contracts from federal or federal pass-through sources. Charges to awards must pass these basic considerations as stated in Section C of A-21.

Allocable Costs Is the expense incurred solely to advance the work under the sponsored agreement? Does it benefit both the sponsored agreement and other work of the institution and is it charged in accordance with relative benefits received?

                    Allowable Costs Is the expense allowable under agency guidelines and A-21?

Reasonable Costs Are the charges reasonable? An example of this test would be purchases made within the last few days of the award. Can one justify the use of goods prior to the award expiration?

Some areas of continued concern at Indiana University are:

Administrative and Clerical Salaries Circular A-21 states that "salaries of administrative and clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly budgets for administrative or clerical services and individuals involved can be specifically identified with the project or activity." Salaries of a technical nature are allowable as direct costs as well as salaries which involve extensive data accumulation, analysis, cataloging or the preparation of large manuals and reports. The budget justification should clearly identify the activities to be performed and give the agency a precise explanation for charges significantly greater than that required for ongoing institutional work.

If the funding agency approves the administrative or clerical services as a direct cost in the award document, charges will be allowed as a cost to the project up to the amount approved. Any charges in addition to those approved in the budget will require written approval of the funding agency. This includes all personnel performing administrative or clerical functions whether they are paid monthly, biweekly, or hourly.

Supplies We now have the following object code choices available on all campuses for supply items that have passed the allocable, allowable, and reasonable test. These object codes should, in most cases, replace the use of 4100, 5000 and 5055.

4035 Lab Supplies ---Should be used for supply items necessary for lab research. Generally applies to projects in the Medical School, Biology, Chemistry, etc where there is an actual laboratory.

4938 Research Supplies ---Should be used for allowable supply items on C&G accounts, which are coded "Research". An example might be paper to be used for printing survey letters.

4690 Project Supplies ---This new object code should only be used on projects that are not coded "Research" but which have supplies listed in the approved agency budget.

If you are allocating a general supply item to a federal or federal pass-through account, please be sure to provide justification that the item directly benefits the project. If the cost benefits two or more projects, please add the additional assurance that the department has allocated the cost according to the proportional benefit received by each project. By providing these justifications, Contract and Grant Administration will be able to readily determine that the department is in compliance with A-21 in regards to determining cost allocation.

Postage charges are normally treated as indirect costs per A-21. Postage therefore, should not be charged to federal or federal pass-through awards unless two conditions are met 1) the project is one requiring large amounts of mailing such as questionnaires AND 2) postage is specifically listed in the approved agency budget.

Telephone rental and membership costs are also considered indirect costs and may not be direct charged.

General purpose equipment costs are unallowable as direct charges, except where approved in advance by the sponsoring agency. A-21 examples of general purpose equipment include office equipment and furnishings, air conditioning equipment, reproduction and printing equipment, motor vehicles and automatic data processing equipment. Justification for such expenditures, including personal computers, must be included in the proposal budget.

Federal Cost Accounting Standards (CAS), which have been incorporated into Circular A-21, specifically address the accounting requirement for identifying and tracking unallowable costs. CAS, Section 501, requires consistency in estimating, accumulating and reporting costs for educational institutions and CAS, Section 502, requires consistency in allocating costs incurred for the same purpose.

As always, please feel free to contact your sponsored programs office or Contract and Grant Administration for any further clarification of Circular A-21.


Financial Management Services Phone:  (812) 855-4884 Email:  cgadmin@indiana.edu
Research and Sponsored Programs - Indianapolis Phone:  (317) 274-8285 Email:  rspinfo@iupui.edu
Sponsored Research Services - Bloomington Phone:  (812) 855-0516 Email:  rugs@indiana.edu
Research and University Graduate School Phone:  (812) 855-3963 Email:  stemarti@indiana.edu