My agency received a grant application from a small non-profit organization (NPO). The attached budget showed no indirect costs, but did show the costs of a secretary as a direct cost. As far as I can tell, the costs of a secretary are considered indirect costs (administrative) and OMB Circular A-87 (Cost Principles for NPO's) specifically requires all indirect costs be paid through an indirect cost rate (ICR). Is there any way for costs of a secretary to be paid as direct costs?

By Anon on Thursday, June 06, 2002 - 12:47 pm:

What if your requested grant would be the only cost objective they could assign the indirect expenses to? I had this problem when with the DoE where our grant was all the income the small NPO received.

By Alexreb on Thursday, June 06, 2002 - 03:39 pm:

They are only requesting about $1K for the secretarial costs. I know they have other indirect costs, i.e., rent, telephone, utilities, etc. The secretary is a full-time salaried employee.

I am being asked to pay them for their secretary's time and don't worry about an indirect cost rate. I don't have a lot of grant and cooperative agreement experience or knowledge, but feel this may be wrong. Is it?

By Anon on Thursday, June 06, 2002 - 04:10 pm:

If the secretary's effort is for the direct benefit of the proposed grant, I don't see anything wrong with that portion of time applied to the grant effort being treated as a direct labor cost provided it is consistent with the accounting practices of that NPO. Also make sure the secretary's salary isn't being carried in an indirect expense pool so that you're not getting double charged for the secretary's time.

True, normally clerical is treated as O/H or G&A, but if one individual is dedicating a lot of direct time (preparing documents required as part of the grant effort) then why couldn't that time be treated as direct labor?

By Alexreb on Thursday, June 13, 2002 - 12:30 pm:

Anon--

I agree with what you're saying, but I found something in my agency grants manual that states "Any category of personnel which is included in the applicant's indirect cost pool cannot be charged directly to an agreement even if the employee will be used full-time on the project." The manual continues by saying that the applicant should hire an individual to perform work usually classified as indirect, and bill for it as direct costs. It then states "The applicant cannot, however, transfer someone from its indirect cost pool and bill that person as direct. This person must be hired specifically for the agreement."

Due to the above reference I have to believe that clerical costs should be considered as indirect costs.

Do you think the language from the grants manual makes sense?

By Anon on Thursday, June 13, 2002 - 01:16 pm:

If your agency manual states that, well, there you are. I think this is a case where the policy makers are trying to address every possible contigency and not recognizing unique situations. I'm basically acquisition oriented since I haven't done assitance since the mid to late 80s, but I try to look at the nature of the cost incurred and its treatment as far as the contractor's (or grantee's) acccounting practices are concerned. For example, mucho years ago I was involved in a T4C settlement negotiation (a rather large one that got DCAA audit scrutiny). The company was treating the vice president's time as a direct labor cost, DCAA had no problem with this however (and after talking to the auditor to see if I could pull this off) I rejected the VP's direct labor costs, put his annual salary back into the indirect expense pool and recalculated the O/H. It worked in negotiations and saved me (or the gov't) about 30k in the settlement amount. Treat the secretary's salary as part of the O/H if you can but if the grantee's practice is to allocate direct involvement as direct labor costs be prepared to really scrutinize the makeup of the indirect expense pool. I suspect your manual is trying to save you the effort of such scrutiny.

I know I've rambled but I hope I've nade at least a modicvum of sense since I pretty much post extemporaneously.

By Anon on Thursday, June 13, 2002 - 01:29 pm:

Durn typos! Back to my T4C case, the company had always included the VP's salary as part of its indirect expense pool, during the T4C, the VP became much more involved in the settlement. My tack in negotiations was consistent treatment of cost elements. His salary had always been treated as an indirect why was the company now trying to direct cost his work (and they couldn't answer that question!).

By joel hoffman on Friday, June 14, 2002 - 10:44 am:

Alexreb - the rule you referred to looks like the rule against inconsistent accounting practices. If the admin/secretarial costs in the NPO are part of the indirect cost pool, then they aren't supposed to charge directly for the same type of support. If the NPO charges all such cost directly and excludes those type costs from the overhead or other indirect cost pools, there shouldn't be a problem. That's a simplified view, but its the way I deal with it.

I'm on vacation on a friend's computer. You can look up the cost principles in FAR Part 31.2, but that's basically the principle. Does that anser your question? happy sails! joel hoffman