Policy 2109: Approval of Direct Cost Expenditures
Subject Area: Sponsored Awards
Responsible Office: Financial Services
Sponsor: Chief Financial Officer
Originally Issued: October 1992
Revised: August 2007, February 2010
Refer Questions To: Christine Sorensen, 773-702-2398
Purpose: To establish responsibility for approval of sponsored project direct cost expenditures.
1. The principal investigator is responsible for the management and administration of his or her award within the requirements imposed by the sponsor and in accordance with University policy. The principal investigator, or designee, must authorize all expenditures of project funds.
2. Certain direct costs must be approved by the sponsor or in some cases by the University prior to the commitment of funds. Some sponsors have delegated this responsibility to the University. The Office of Research Administration shall be the approving office in all cases where the University has been delegated such approval authority.
3. Direct costs may be allocated (charged) entirely or partially to a sponsored project if the cost solely benefits the sponsored project or if the cost benefits the project and some other activity or activities.
1. If a cost solely benefits the sponsored project, it should be allocated entirely to the project.
Example: An employee works full-time on activities that primarily or solely benefit Project A.100% of the employee’s salary should be charged to Project A.
2. If a cost benefits two or more projects or activities in proportions that can be determined, the cost should be allocated to the projects based on the proportional benefit.
Example: An employee works 60% of his or her time on activities that primarily or solely benefit Project A, and 40% on activities that primarily or solely benefit Project B. The employee’s salary should be allocated 60%-40% between the two projects.
3. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, the costs may be allocated to benefited projects on any reasonable basis.
Example: All of the work performed by an employee provides a common benefit to Project A and Project B, and it is not possible to measure the proportional benefit to either project. The employee’s salary may be allocated on some reasonable basis between the two projects (which could include assigning the cost entirely to one of the projects).
Example: An employee works 30% of his or her time on activities that primarily or solely benefit Project A, 30% on activities that primarily or solely benefit Project B, and 40% on activities that are common to both projects. The employee’s salary should be allocated 30% to Project A and 30% to Project B; the remaining 40% may be allocated on some reasonable basis between the projects (which could include assigning the cost entirely to one of the projects).
4. Once a cost is initially allocated to benefited projects, any adjustment of that allocation must conform to the Cost Transfer Policy. (See Financial Policy No. 2111.)
4. Sponsored project accounts cannot be used as “clearing” accounts. Departments should create “clearing” accounts to record costs whose correct cost allocation is not known at the time it is incurred. Once a cost’s correct cost allocation is known, it should be transferred from the clearing account.