staffs together with the salaries and expenses of personnel engaged in supporting activities maintained by the department, such as stockrooms, stenographic pools, and the like provided such supporting services cannot be directly identified with a specific research project, with an instructional activity or with any other institutional activity. The salaries of other members of the professional staff whose appointments or assignments involve the performance of such administrative work may also be included to the extent that the portion so charged to departmental administration expenses is supported as required by § 1-15.309-7. The departmental administration expense category should also include the staff benefit and pension plan costs applicable to the salaries and wages included therein, an appropriate share of the costs of the operation and maintenance of the physical plant, and charges representing use allowances and/or depreciation applicable to the buildings and equipment utilized in performing the functions represented thereunder.

(b) The distribution of departmental administration expenses should be made through use of selected bases applied to cost groupings established within this category of expenses in accordance with the guides set forth in § 1-15.305-2(d). [38 FR 4755, Feb. 22, 1973] § 1-15.306-6

ex

Setoff for indirect penses otherwise provided for by the Government.

(a) The items to be accumulated under this heading are the reimbursements and other receipts from the Federal Government which are used by the institution to support directly, in whole or in part, any of the administrative or service (indirect) activities described in the foregoing §§ 1-15.306-1 through 1-15.306-5. They include any amounts thus applied to such activities which may have been received pursuant to an institutional base grant or any similar contractual arrangement with the Federal Government other than a research agreement as defined in § 1-15.302-3.

(b) The sum of the items in this group shall be treated as a credit to the total indirect cost pool before it is apportioned to organized research and to other activities. Such setoff shall be made prior to the determination of the indirect cost rate or rates as provided in § 1-15.307.

§ 1-15.307

Determination and applica. tion of indirect cost rate or rates.

§ 1-15.307-1 Indirect cost pools.

(a) Subject to paragraph (b) of this section, indirect costs allocated to organized research should be treated as a common pool, and the costs in such common pool should then be distributed to individual research agreements benefiting therefrom on a single rate basis.

common

(b) In some instances a single rate basis for use across the board on all Government research at an institution may not be appropriate, since it would not take into account those different environmental factors which may affect substantially the indirect costs applicable to a particular segment of Government research at the institution. For this purpose, a particular segment of Government research may be that performed under a single research agreement or it may consist of research under a group of research agreements performed in a environment. The environmental factors are not limited to the physical location of the work. Other important factors are the level of the administrative support required, the nature of the facilities or other resources employed, the scientific disciplines or technical skills involved, the organizational arrangements used, or any combination thereof. Where a particular segment of Government research is performed within an environment which appears to generate a significantly different level of indirect costs, provision should be made for a separate indirect cost pool applicable to such work. The separate indirect cost pool should be developed during the course of the regular distribution process, and the separate indirect cost rate resulting therefrom should be utilized provided it is determined that (1) such indirect cost rate differs significantly from that which would have obtained under paragraph (a) of this section, and (2) the volume of research work to which such rate would apply is material in relation to other Government research at the institution. § 1-15.307-2 The distribution base.

Indirect costs allocated to organized research should be distributed to applicable research agreements on the basis of direct salaries and wages. For this purpose an indirect cost rate should be determined for each of the separate in

direct cost pools developed pursuant to § 1-15.307-1. The rate in each case should be stated as the percentage which the amount of the particular indirect cost pool is of the total direct salaries and wages of all research agreements identified with such pool. For the purpose of establishing an indirect cost rate, direct salaries and wages may include that portion contributed to the research by the institution for cost sharing or other purposes. Bases other than salaries and wages may be used provided it can be demonstrated that they produce more equitable results. [38 FR 4755, Feb. 22, 1973]

§ 1-15.307-4

Predetermined fixed rates

for indirect costs. Public Law 87-638 (76 Stat. 437) authorizes the use of predetermined fixed rates in determining the indirect costs applicable under research agreements with educational institutions. The stated objectives of the law are to simplify the administration of cost-type research and development contracts (including grants) with educational institutions, to facilitate the preparation of their budgets, and to permit more expeditious closeout of such contracts when the work is completed. In view of the potential advantages offered by this procedure, consideration should be given to the negotiation of predetermined fixed rates for indirect costs in those situations where the cost experience and other pertinent facts available are deemed sufficient to enable the parties involved to reach an informed Judgment as to the probable level of

indirect costs during the ensuing accounting period.

[38 FR 4756, Feb. 22, 1973]

§ 1-15.307-5

Negotiated fixed rates and carry forward provisions.

When a fixed rate is negotiated in advance for a fiscal year (or other time period), the over- or under-recovery for that year may be included as an adjustment to the indirect cost for the next rate negotiation. When the rate is negotiated before the carry forward adjustment is determined due to the delay in audit, the carry forward may be applied to the next subsequent rate negotiation. When such adjustments are to be made each fixed rate negotiated in advance for a given period will be computed by applying the expected indirect costs allocable to Government research for the forecast period plus or minus the carry forward adjustment (over- or under-recovery) from the prior period, to the forecast distribution base. Unrecovered amounts under lump sum agreements or cost sharing provisions of prior years shall not be carried forward for consideration in the new rate negotiation. There must, however, be an advance understanding in each case between the institution and the cognizant Federal agency as to whether these differences will be considered in the rate negotiation rather than making the determination after the differences are known. Further, institutions electing to use this carry forward provision may not subsequently change without prior approval of the cognizant Federal agency. In the event that an institution returns to a postdetermined rate, any over- or under-recovery during the period in which negotiated fixed rates and carry forward provisions were followed will be included in the subsequent postdetermined rates. Where multiple rates are used the same procedure will be applicable for determining each rate. This procedure also applies to rates established for grants and contracts for training and other educational services, but does not apply to cost-type research agreements covering work performed in wholly or partially Government-owned facilities.

[38 FR 4756, Feb. 22, 1973]

§ 1-15.308 Simplified method for small institutions.

(a) Where the total direct cost of all federally supported work under research and educational service agreements at an institution does not exceed $1 million in a fiscal year (excluding direct payments by the institution to participants under educational service agreements for stipends, support, and similar costs requiring little, if any, indirect cost support), the use of the abbreviated procedure described in § 1-15.308-2 may be used in determining allowable indirect costs. Under this abbreviated procedure, the institution's most recent annual filnancial report and immediately available supporting information, with salaries and wages segregated from other costs, will be utilized as a basis for determining the indirect cost rate applicable both to federally supported research and educational service agreements.

(b) The rigid formula approach provided under this abbreviated procedure should not be used where it produces results which appear inequitable to the Government or the institution. In any such case indirect costs should be determined through use of the regular procedure.

[38 FR 4756, Feb. 22, 1973]

§ 1-15.308-2 Abbreviated procedure.

(a) Establish the total amount of salaries and wages paid to all employees of the institution.

(b) Establish an indirect cost pool consisting of the expenditures (exclusive of capital items and other costs specifically identified as unallowable) which customarily are classified under the following titles or their equivalents:

(1) General administration and general expense (exclusive of costs of student administration and services, student aid, student activities, and scholarships);

(2) Operation and maintenance of physical plant;

(3) Library; or

(4) Department administration expenses, which will be computed as 20 percent of the salaries and expenses of deans and heads of departments.

In those cases where expenditures classified under (b) (1) and (2) of this 1-15.308-2 have previously been allocated to "other institutional activities,"

they may be included in the indirect cost pool. The total amount of salaries and wages included in the indirect cost pool must be separately identified.

(c) Establish a salary and wage distribution base, determined by deducting from the total of salaries and wages as established under (a) of this § 1-15.308-2 the amount of salaries and wages included under (b) of this § 1-15.308-2.

(d) Establish the indirect cost rate determined by dividing the amount in the indirect cost pool (§ 1-15.308-2(b)) by the amount of the distribution base (§ 1-15.308-2(c)).

(e) Apply the indirect cost rate established to direct salaries and wages for individual agreements to determine the amount of indirect costs allocable to such agreements.

138 FR 4756, Feb. 22, 1973]

§ 1-15.309 General standards for selected items of cost.

Sections 1-15.309-1 through 1-15.309-46 provides standards to be applied In establishing the allowability of certain items involved in deterinining cost. These standards should apply irrespective of whether a particular item of cost Is properly treated as direct cost or indirect cost. Failure to mention a particular Item of cost in the standards is not intended to imply that it is either allowable or unallowable; rather, determination as to allowability in each case should be based on the treatment or standards provided for similar or related items of cost. In case of disprepancy between the provisions of a specific research agreement and the applicable standards provided, the provisions of the research agreement should govern. § 1-15.309-1 Advertising costs.

The term "advertising costs" means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers, radio and television programs, direct mail, exhibits, and the like. The only advertising costs allowable are those which are solely for (a) the recruitment of personnel required for the performance by the institution of obligations arising under the research agreement. when considered in conjunction with all other recruitment costs, as set forth in

The costs of equipment, buildings, and repairs which materially increase the value or useful life of buildings or equipment are unallowable except as provided for in the research agreement. Government funds shall not be used for the acquisition of land, or any interest therein, except with the specific prior approval of the sponsoring agency. (38 FR 4756, Feb. 22, 1973]

§ 1-15.309-4 Civil defense costs.

Civil defense costs are those incurred in planning for, and the protection of life and property against, the possible effects of enemy attacks. Reasonable costs of civil defense measures (includIng costs in excess of normal plant protection costs, first-aid training and supplies, fire-fighting training, posting of additional exit notices and directions, and other approved civil defense measures) undertaken on the institution's premises pursuant to suggestions or requirements of civil defense authorities are allowable when distributed to all activities of the institution. Capital expenditures for civil defense purposes will not be allowed, but a use allowance or depreciation may be permitted in accordance with provisions set forth in § 1-15.309-10. Costs of local civil defense projects not on the institution's premises are unallowable.

§ 1-15.309-5 Commencement and con. vocation costs.

Costs incurred for commencements and convocations apply only to instruction and therefore are not allocable to

research agreements, either as direct costs or indirect costs.

§ 1-15.309-6 Communication costs.

Costs incurred for telephone services, local and long distance telephone calls, telegrams, radiograms, postage and the like, are allowable.

§ 1-15.309-7 Compensation for personal services.

(a) General. Compensation for personal services covers all remuneration paid currently or accrued to employees of the institution for services rendered during the period of performance under Government research agreements. Such remuneration includes salaries, wages, staff benefits (see § 1-15.309-39) and pension plan costs (see § 1-15.309-23). The costs of such remuneration are allowable to the extent that the total compensation to individual employees is reasonable for the services rendered and conforms to the established policy of the institution consistently applied, and provided that the charges for work performed directly on Government research agreements and for other work allocable as indirect costs to organized research are determined and supported as hereinafter provided.

(b) Payroll distribution. Amounts charged to organized research for personal services, except stipulated salary support, regardless of whether treated as direct costs or allocated as indirect costs, will be based on institutional payrolls which have been approved and documented in accordance with generally accepted institutional practices. Support for direct and indirect allocations of personal service costs to (1) instruction, (2) organized research, (3) indirect activities as defined in § 1-15.305-1, or (4) other institutional activities as defined in § 1-15.302-4 will be provided as described in paragraphs (c), (d), (e), and (f) of this § 1-15.309-7.

(c) Stipulated salary support. As an alternative to payroll distribution, stipulated salary support amounts may be provided in the research agreement for professorial staff, any part of whose compensation is chargeable to Governmentsponsored research. Stipulated salary support may also be provided for any other professionals who are engaged part time in sponsored research and part time

In other work. The stipulated salary support for an individual will be determined by the Government and the educational institution during the proposal and award process on the basis of considered judgment as to the monetary value of the contribution which the individual is expected to make to the research project. This judgment will take into account any cost sharing by the institution and such other factors as the extent of the investigator's planned participation in the project and his ability to perform as planned in the light of his other commitments. It will be necessary for those who review research proposals to obtain information on the total academic year salary of the faculty members involved; the other research projects or proposals for which salary is allocated: and any other duties they may have, such as teaching assignments. administrative assignments, number of graduate students for which they are responsible, or other institutional activities. Stipulated amounts for an individual must not per se result in increasing his official salary from the institution.

(d) Direct charges for personal services under payroll distribution. The direct cost charged to organized research for the personal services of professorial and professional staff. exclusive of those whose salaries are stipulated in the research agreement, will be based on institutional payroll systems. Such institutional payroll systems must be supported by either (1) an adequate appointment and workload distribution system accompanied by monthly reviews performed by responsible officials and a reporting of any significant changes in workload distribution of each professor or professional staff member. or (2) a monthly after-the-fact certification system which will require the individual investigators. deans, departmental chairmen, or supervisors having firsthand knowledge of the services performed on each research agreement to report the distribution of effort. Reported changes will be incorporated during the accounting period into the payroll distribution system and into the accounting records. Direct charges for salaries and wages of nonprofessionals will be supported by time and attendance and payroll distribution records.

(e) Direct charges for personal services under stipulated salaries. The

amounts stipulated for salary support will be treated as direct costs. The stipulated salary for the academic year will be prorated equally over the duration of the grant or contract period during the academic year, unless other arrangements have been made in the grant or contract instrument. No time or effort reporting will be required to support these amounts. Special provision for summer salaries, or for a particular "off period" if other than summer, will be required. The research agreements will state that any research covered by summer salary support must be carried out during the summer, not during the academic year, and at locations approved in advance in writing by the granting agency. The certification required in § 1-15.310 will attest to this requirement as well as all others in a given research agreement. Stipulated salary support remains fixed during the funding period of the grant or contract and will be costed at the rate described in this § 1-15.309-7(e) unless there is a significant change in performance. For example, a significant change in performance would exist if the faculty member (1) were ill for an extended period. (2) took sabbatical leave to devote effort to duties unrelated to his research. or (3) were required to increase substantially his teaching assignments, administrative duties, or responsibility for more research projects. In the latter event it will be the responsibility of the educational institution to reduce the charges to the research agreement proportionately or seek an appropriate amendment. In the case of those covered by stipulated salary support, the auditors are no longer required to review the precise accuracy of time or effort devoted to research projects. Rather. their reviews should include steps to determine on a sample basis that an institution is not reimbursed for more than 100 percent of each faculty member's salary and that the portion of each faculty member's salary charged to Government-sponsored research is reasonable in view of his university workload and other commitments. The stipulated salary method may also be agreed upon for that portion of a professional's salary that represents cost sharing by the institution.

(f) Indirect personal services costs. Allowable indirect personal services costs will be supported by the educational institution's accounting system maintained