500.00 Cost Accounting Principles of Sponsored Project Support

The majority of externally sponsored funding at MSU is provided by the U.S. Federal government. Cost accounting principles for higher education grantees are established by the Federal Office of Management and Budget (OMB) and MSU is expected to adhere to these principles. Budget support is available through OSP’s fiscal managers.

510.00 OMB Circulars

(for awards made prior to December 26, 2014)

For awards made prior to December 26, 2014, the OMB circulars that are most relevant are as follows: 

OMB Circular A-21: Cost principles for Educational Institutions. This circular established principles for determining the direct and indirect costs applicable to grants, contracts, and other agreements with educational institutions.

OMB Circular A-110: Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations. This circular sets forth the administrative requirements that educational institutions must adhere to. Generally, individual Federal agencies implement OMB Circular A-110 as individual agency regulations.

OMB Circular A-133: Audits of Institutions of Higher Education and Other Non-Profit Institutions. This circular established audit requirements and defines Federal responsibilities for implementation and monitoring such requirements for institutions of higher education receiving Federal awards. In addition, the ethical standards expected of faculty participating in Federally sponsored programs are dictated by other Federal funding agency policies such as financial conflict of interest regulations and misconduct policies.

Under the OMB Circular guidelines, costs may be charged if expenses meet the following criteria:

  • Reasonableness: The nature of the expenditure and the amount must reflect an action that a prudent person would take under the circumstances;
  • Allocability: The expenditure must provide a direct benefit to the project (i.e. the cost of a piece of equipment that is required to accomplish the work of two projects may be proportionately shared by those projects);
  • Consistency: Costs incurred for the same purpose in like circumstances must be treated consistently as direct or indirect (F&A) costs across the institution;
  • Allowability: Costs must conform to any limitations or exclusions as set forth in OMB Circular A-21 (Cost Principles for Educational Institutions). Examples of unallowable  costs under Federal sponsorship include alcoholic beverages, entertainment costs, and memberships;

Costs that do not meet all of the above criteria may not be charged to Federal grants. Non-governmental sponsors may apply different cost principles. Investigators should read the sponsor instructions carefully and consult with OSP, in particular, their departmental fiscal manager for further clarification and/or assistance with developing a budget proposal.

520.00 OMB  Uniform Guidance (effective December 26, 2014)

Effective December 26, 2014, a new set of Federal grant requirements became effective. Depending on the date of the award, the following OMB Uniform Guidance (“Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Final Rule”) may apply. PI’s are required to conform to circulars that are relevant to their awards. According to OMB, this guidance “will supersede requirements from OMB Circulars A-21, A-87, A-110, and A-122; Circulars A-89, A-102, and A-133; and the guidance in Circular A-50 on Single Audit Act follow-up.” OMB also developed a helpful crosswalk from existing guidance to final guidance for PI’s and research staff to reference. The Uniform Guidance, Composition of Costs requires that PI’s consider the reasonableness, allocability, and allowability of costs when developing a budget proposal.