OMB CIRCULAR A-21
     
     
     
Principles for Determining Costs Applicable to Grants, 
Contracts, and Other Agreements with Educational Institutions      
A. PURPOSE AND SCOPE
     
     * A 1. Objectives.
     * A 2. Policy guides.
     * A 3. Application.
     
B. DEFINITION OF TERMS
     
     * B 1. Major functions of an institution 
     * B 2. Sponsored agreement
     * B 3. Allocation
     
C. BASIC CONSIDERATIONS
     
     * C 1. Composition of total costs.
     * C 2. Factors affecting allowability of costs. 
     * C 3. Reasonable costs.
     * C 4. Allocable costs.
     * C 5. Applicable credits.
     * C 6. Costs incurred by State and local governments.
     * C 7. Limitations on allowance of costs.
     * C 8. Collection of unallowable costs.
     * C 9. Adjustment of previously negotiated indirect cost rates containing unallowable
       costs.
     
D. DIRECT COSTS
     
     * D 1. General.
     * D 2. Application to sponsored agreements.
     
E. INDIRECT COSTS
     
     * E 1. General.
     * E 2. Criteria for distribution.
          + E 2a. Base period.
          + E 2b. Need for cost groupings.
          + E 2c. General considerations on cost groupings.
          + E 2d. Selection of distribution method.
          + E 2e. Order of Distribution.
     
F. IDENTIFICATION AND ASSIGNMENT OF INDIRECT COSTS
     
     * F 1. Definition of Facilities and Administration. 
     * F 2. Depreciation and use allowances.
     * F 3. Interest
     * F 4. Operation and maintenance expenses.
     * F 5. General administration and general expenses. 
     * F 6. Departmental administration expenses.
     * F 7. Sponsored projects administration. 
     * F 8. Library expenses.
     * F 9. Student administration and services.
     * F 10. Offset for indirect expenses otherwise provided for by the Government.
     
G. DETERMINATION AND APPLICATION OF INDIRECT COST RATE OR RATES      
     * G 1. Indirect cost pools.
     * G 2. The distribution basis.
     * G 3. Negotiated lump sum for indirect costs.
     * G 4. Predetermined fixed rates for indirect costs.
     * G 5. Negotiated fixed rates and carry-forward provisions.
     * G 6. Provisional and final rates for indirect costs.
     * G 7. Limitation on reimbursement of administrative costs.
     * G 8. Alternative method for administrative costs.
     * G 9. Individual rate components. 
     
H. SIMPLIFIED METHOD FOR SMALL INSTITUTIONS
     
     * H 1. General.
     * H 2. Simplified procedure.
     
J. GENERAL PROVISIONS FOR SELECTED ITEMS OF COST
     
     * J 1. Advertising and public relations costs. 
     * J 2. Alcoholic beverages. 
     * J 3. Alumni activities.
     * J 4. Bad debts.
     * J 5. Civil defense costs.
     * J 6. Commencement and convocation costs. 
     * J 7. Communication costs.
     * J 8. Compensation for personal services.
          + J 8a. General. 
          + J 8b. Payroll distribution.
               o J 8b(1) General principles.
               o J 8b(2) Criteria for acceptable methods.
          + J 8c. Examples of acceptable methods for payroll distribution:
               o J 8c(1) Plan--Confirmation: 
               o J 8c(2) After-the-fact Activity Records:
               o J 8c(3) Multiple Confirmation Records: 
          + J 8d. Salary rates for faculty members.
          + J 8e. Non-institutional professional activities.
          + J 8f. Fringe benefits. 
          + J 8g. Institution-furnished automobiles.
     * J 9. Contingency provisions.
     * J 10. Deans of faculty and graduate schools.
     * J 11. Defense and prosecution of criminal and civil proceedings, claims, appeals
       and patent infringement.
          + J 11a. Definitions.
     * J 12. Depreciation and use allowances. 
     * J 13. Donation and contributions.
     * J 14. Employee morale, health, and welfare costs and credits.
     * J 15. Entertainment costs. 
     * J 16. Equipment and other capital expenditures. 
     * J 17. Executive lobbying costs. 
     * J 18. Fines and penalties.
     * J 19. Goods or services for personal use.
     * J 20. Housing and personal living expenses. 
     * J 21. Insurance and indemnification.
     * J 22. Interest, fund raising, and investment management costs.
     * J 23. Labor relations costs.
     * J 24. Lobbying:
     * J 25. Losses on other sponsored agreements or contracts.
     * J 26. Maintenance and repair costs. 
     * J 27. Material costs. 
     * J 28. Memberships, subscriptions and professional activity costs.
     * J 29. Patent costs.
     * J 30. Plant security costs.
     * J 31. Preagreement costs. 
     * J 32. Professional services costs.
     * J 33. Profits and losses on disposition of plant equipment or other capital assets.
     * J 34. Proposal costs.
     * J 35. Rearrangement and alteration costs. 
     * J 36. Reconversion costs. 
     * J 37. Recruiting costs. 
     * J 38. Rental cost of buildings and equipment.
     * J 39. Royalties and other costs for use of patents.
     * J 40. Sabbatical leave costs.
     * J 41. Scholarships and student aid costs. 
     * J 42. Selling and marketing.
     * J 43. Severance pay.
     * J 44. Specialized service facilitie 
     * J 45. Student activity costs.
     * J 46. Taxes. 
     * J 47. Transportation costs. 
     * J 48. Travel costs. 
          + J 48a. General.
          + J 48b. Lodging and subsistence. 
          + J 48c. Commercial Air Travel. 
          + J 48d. Air travel by other than commercial carrier.
     * J 49. Termination costs applicable to sponsored agreements.
     * J 50. Trustees. 
     
K. CERTIFICATION OF CHARGES
     
     * K 1. Payment.
     * K 2. Certification of Indirect costs.
          + K 2a. Policy.
          + K 2b. Certificate. 
     
   List of Colleges and Universities Subject to Section J12f of Circular A-21  

                                       OMB CIRCULAR A-21
     
     
Principles for Determining Costs Applicable to Grants, 
Contracts, and Other Agreements with Educational Institutions      
     
     
A. PURPOSE AND SCOPE
     
  A 1. OBJECTIVES.
     
   This Circular provides principles for determining the costs applicable to research and
   development, training, and other sponsored work performed by colleges and universities
   under grants, contracts, and other agreements with the Federal Government. These
   agreements are referred to as sponsored agreements.
     
  A 2. POLICY GUIDES
     
   . The successful application of these cost accounting principles requires development
   of mutual understanding between representatives of universities and of the Federal
   Government as to their scope, implementation, and interpretation. It is recognized
   that--
          + A 2a. The arrangements for Federal agency and institutional participation in
            the financing of a research, training, or other project are properly subject
            to negotiation between the agency and the institution concerned, in accordance
            with such Government-wide criteria or legal requirements as may be applicable.
          + A 2b. Each institution, possessing its own unique combination of staff,
            facilities, and experience, should be encouraged to conduct research and
            educational activities in a manner consonant with its own academic 
            philosophies and institutional objectives.
          + A 2c. The dual role of students engaged in research and the resulting benefits
            to sponsored agreements are fundamental to the research effort and shall be
            recognized in the application of these principles. 
          + A 2d. Each institution, in the fulfillment of its obligations, should employ
            sound management practices.
          + A 2e. The application of these cost accounting principles should require no
            significant changes in the generally accepted accounting practices of colleges
            and universities. However, the accounting practices of individual colleges and
            universities must support the accumulation of costs as required by the
            principles, and must provide for adequate documentation to support costs
            charged to sponsored agreements.
          + A 2f. Cognizant Federal agencies involved in negotiating indirect cost rates
            and auditing should assure that institutions are generally applying these cost
            accounting principles on a consistent basis. Where wide variations exist in
            the treatment of a given cost item among institutions, the reasonableness and
            equitableness of such treatments should be fully considered during the rate
            negotiations and audit.
     
  A 3. APPLICATION.
     
   These principles shall be used in determining the allowable costs of work performed by
   colleges and universities under sponsored agreements. The principles shall also be used
   in determining the costs of work performed by such institutions under subgrants,
   cost-reimbursement subcontracts, and other awards made to them under sponsored
   agreements. They also shall be used as a guide in the pricing of fixed-price contracts
   and subcontracts where costs are used in determining the appropriate price. The
   principles do not apply to:
          + A 3a. Arrangements under which Federal financing is in the form of loans,
            scholarships, fellowships, traineeships, or other fixed amounts based on such
            items as education allowance or published tuition rates and fees of an
            institution.
          + A 3b. Capitation awards.
          + A 3c. Other awards under which the institution is not required to account to
            the Government for actual costs incurred.
     
B. DEFINITION OF TERMS
     
          + B 1. Major functions of an institution refers to instruction, organized
            research, other sponsored activities, and other institutional activities as
            defined below:
               o B 1a. Instruction means the teaching and training activities of an
                 institution. Except for research training as provided in B1b(1) below,
                 this term includes all teaching and training activities, whether they are
                 offered for credits toward a degree or certificate or on a non-credit
                 basis, and whether they are offered through regular academic departments
                 or separate divisions, such as a summer school division or an extension
                 division. Also considered part of this major function are departmental
                 research, and, where agreed to, university research. 
                    # B 1a(1) Sponsored instruction and training means specific                       
                      instructional or training activity established by grant, contract,
                      or cooperative agreement. For purposes of the cost principles, this
                      activity may be considered a major function even though an                        
                      institution's accounting treatment may include it in the instruction
                      function.
                    # B 1a(2) Departmental research means research development and
                      scholarly activities that are not organized research and, 
                      consequently, are not separately budgeted and accounted for.
                      Departmental research, for purposes of this document, is not
                      considered as a major function, but as a part of the instruction
                      function of the institution.
               o B 1b. Organized research means all research and development activities of
                 an institution that are separately budgeted and accounted for. It
                 includes:
                    # B 1b(1) Sponsored research means all research and development
                      activities that are sponsored by Federal and non-Federal agencies
                      and organizations. This term includes activities involving the
                      training of individuals in research techniques (commonly called
                      research training) where such activities utilize the same facilities
                      as other research and development activities and where such
                      activities are not included in the instruction function. 
                    # B 1b(2) University research means all research and development
                      activities that are separately budgeted by the institution under an
                      internal application of institutional funds. University research,
                      for purposes of this document, shall be combined with sponsored
                      research under the function of organized research. 
               o B 1c. Other sponsored activities means programs and projects sponsored by
                 Federal and non-Federal agencies and organizations which involve the
                 performance of work other than instruction and organized research.
                 Examples of such programs and projects are health service projects, and
                 community service programs. However, when any of these activities are
                 undertaken by the institution without outside support, they may be
                 classified as other institutional activities. 
               o B 1d. Other institutional activities means all activities of an 
                  institution except:
                    # (1) instruction, departmental research, organized research, and
                      other sponsored activities, as defined above; 
                    # (2) indirect cost activities identified in Section F; and 
                    # (3) specialized service facilities described in Section J44. Other
                      institutional activities include operation of residence halls,
                      dining halls, hospitals and clinics, student unions, intercollegiate
                      athletics, bookstores, faculty housing, student apartments, guest
                      houses, chapels, theaters, public museums, and other similar
                      auxiliary enterprises. This definition also includes any other
                      categories of activities, costs of which are "unallowable" to
                      sponsored agreements, unless otherwise indicated in the agreements.
          + B 2. Sponsored agreement, for purposes of this Circular, means any grant,
            contract, or other agreement between the institution and the Federal 
            Government.
          + B 3. Allocation means the process of assigning a cost, or a group of costs, to
            one or more cost objectives, in reasonable and realistic proportion to the
            benefit provided or other equitable relationship. A cost objective may be a
            major function of the institution, a particular service or project, a
            sponsored agreement, or an indirect cost activity, as described in Section F.
            The process may entail assigning a cost(s) directly to a final cost objective
            or through one or more intermediate cost objectives.     
 
C. BASIC CONSIDERATIONS
     
  C 1. COMPOSITION OF TOTAL COSTS.
     
   The cost of a sponsored agreement is comprised of the allowable direct costs incident
   to its performance, plus the allocable portion of the allowable indirect costs of the
   institution, less applicable credits as described in C5 below.      
  C 2. FACTORS AFFECTING ALLOWABILITY OF COSTS.
     
   The tests of allowability of costs under these principles are: (a) they must be
   reasonable; (b) they must be allocable to sponsored agreements under the principles and
   methods provided herein; (c) they must be given consistent treatment through
   application of those generally accepted accounting principles appropriate to the
   circumstances; and (d) they must conform to any limitations or exclusions set forth in
   these principles or in the sponsored agreement as to types or amounts of cost items.
     
  C 3. REASONABLE COSTS.
     
   A cost may be considered reasonable if the nature of the goods or services acquired or
   applied, and the amount involved therefore, reflect the action that a prudent person
   would have taken under the circumstances prevailing at the time the decision to incur
   the cost was made. Major considerations involved in the determination of the
     reasonableness of a cost are:
          + (a) whether or not the cost is of a type generally recognized as necessary for
            the operation of the institution or the performance of the sponsored 
            agreement;
          + (b) the restraints or requirements imposed by such factors as arm's-length
            bargaining, Federal and State laws and regulations, and sponsored agreement
            terms and conditions;
          + (c) whether or not the individuals concerned acted with due prudence in the
            circumstances, considering their responsibilities to the institution, its
            employees, its students, the Government, and the public at large;
          + (d) the extent to which the actions taken with respect to the incurrence of
            the cost are consistent with established institutional policies and practices
            applicable to the work of the institution generally, including sponsored
            agreements.
     
  C 4. ALLOCABLE COSTS.
          + C 4a. A cost is allocable to a particular cost objective (i.e., a specific
            function, project, sponsored agreement, department, or the like) if the goods
            or services involved are chargeable or assignable to such cost objective in
            accordance with relative benefits received or other equitable relationship.
            Subject to the foregoing, a cost is allocable to a sponsored agreement if
               o (1) it is incurred solely to advance the work under the sponsored
                 agreement;
               o (2) it benefits both the sponsored agreement and other work of the
                 institution, in proportions that can be approximated through use of
                 reasonable methods; or
               o (3) it is necessary to the overall operation of the institution and, in
                 light of the principles provided in this Circular, is deemed to be
                 assignable in part to sponsored projects.
          + Where the purchase of equipment or other capital items is specifically
            authorized under a sponsored agreement, the amounts thus authorized for such
            purchases are assignable to the sponsored agreement regardless of the use that
            may subsequently be made of the equipment or other capital items involved.
          + C 4b. Any costs allocable to a particular sponsored agreement under the
            standards provided in this Circular may not be shifted to other sponsored
            agreements in order to meet deficiencies caused by overruns or other fund
            considerations, to avoid restrictions imposed by law or by terms of the
            sponsored agreement, or for other reasons of convenience.
          + C 4c. Any costs allocable to activities sponsored by industry, foreign
            governments or other sponsors may not be shifted to federally-sponsored
            agreements.
          + C 4d. Allocation and documentation standard.
               o C 4d(1) Cost principles. The recipient institution is responsible for
                 ensuring that costs charged to a sponsored agreement are allowable,
                 allocable, and reasonable under these cost principles. 
               o C 4d(2) Internal controls. The institution's financial management system
                 shall ensure that no one person has complete control over all aspects of
                 a financial transaction.
               o C 4d(3) Direct cost allocation principles. If a cost benefits two or more
                 projects or activities in proportions that can be determined without
                 undue effort or cost, the cost should be allocated to the projects based
                 on the proportional benefit. If a cost benefits two or more projects or
                 activities in proportions that cannot be determined because of the
                 interrelationship of the work involved, then, notwithstanding subsection
                 C.4.b., the costs may be allocated or transferred to benefited projects
                 on any reasonable basis, consistent with d.(1) and (2).      
  C 5. APPLICABLE CREDITS.
          + C 5a. The term applicable credits refers to those receipts or negative
            expenditures that operate to offset or reduce direct or indirect cost items.
            Typical examples of such transactions are: purchase discounts, rebates, or
            allowances; recoveries or indemnities on losses; and adjustments of              
            overpayments or erroneous charges. This term also includes "educational
            discounts" on products or services provided specifically to educational
            institutions, such as discounts on computer equipment, except where the
            arrangement is clearly and explicitly identified as a gift by the vendor.
          + C 5b. In some instances, the amounts received from the Federal Government to
            finance institutional activities or service operations should be treated as
            applicable credits. Specifically, the concept of netting such credit items
            against related expenditures should be applied by the institution in 
            determining the rates or amounts to be charged to sponsored agreements for
            services rendered whenever the facilities or other resources used in providing
            such services have been financed directly, in whole or in part, by Federal
            funds. (See Sections F10 and F44 for areas of potential application in the
            matter of direct Federal financing.)
     
  C 6. COSTS INCURRED BY STATE AND LOCAL GOVERNMENTS.
     
   Costs incurred or paid by State or local governments on behalf of their colleges and
   universities for fringe benefit programs such as pension costs and FICA and any other
   costs specifically incurred on behalf of, and in direct benefit to, the institutions
   are allowable costs of such institutions whether or not these costs are recorded in the
   accounting records of the institutions, subject to the following: 
          + C 6a. The costs meet the requirements of C1 through 5 above. 
          + C 6b. The costs are properly supported by cost allocation plans in accordance
            with applicable Federal cost accounting principles. 
          + C 6c. The costs are not otherwise borne directly or indirectly by the Federal
            Government.
     
  C 7. LIMITATIONS ON ALLOWANCE OF COSTS.
     
   Sponsored agreements may be subject to statutory requirements that limit the allowance
   of costs. When the maximum amount allowable under a limitation is less than the total
   amount determined in accordance with the principles in this Circular, the amount not
   recoverable under a sponsored agreement may not be charged to other sponsored     
   agreements.
     
  C 8. COLLECTION OF UNALLOWABLE COSTS.
     
   Costs specifically identified as unallowable in Section J and charged to the 
   government, either directly or indirectly, will be refunded (including interest
   chargeable in accordance with applicable Federal agency regulations).      
  C 9. ADJUSTMENT OF PREVIOUSLY NEGOTIATED INDIRECT COST RATES
CONTAINING UNALLOWABLE COSTS.
     
   Negotiated indirect cost rates based on a proposal later found to have included costs
   that (a) are unallowable as specified by (i) law or regulation, (ii) section J of this
   Circular, (iii) terms and conditions of sponsored agreements or (b) are unallowable
   because they are clearly not allocable to sponsored agreements, shall be adjusted, or a
   refund shall be made, in accordance with the requirements of this section. These
   adjustments or refunds are designed to correct the proposals used to establish the
   rates and do not constitute a reopening of the rate negotiation. The adjustments or
   refunds will be made regardless of the type of rate negotiated (predetermined, final,
   fixed, or provisional).
          + C 9a. For rates covering a future fiscal year of the institution, the
            unallowable costs will be removed from the indirect cost pools and the rates
            appropriately adjusted.
          + C 9b. For rates covering a past period, the Federal share of the unallowable
            costs will be computed for each year involved and a cash refund (including
            interest chargeable in accordance with applicable regulations) will be made to
            the Federal Government. If cash refunds are made for past periods covered by
            provisional or fixed rates, appropriate adjustments will be made when the
            rates are finalized to avoid duplicate recovery of the unallowable costs by
            the Federal Government.
          + C 9c. For rates covering the current period, either a rate adjustment or a
            refund, as described in subsections a and b, shall be required by the
            cognizant agency. The choice of method shall be at the discretion of the
            cognizant agency, based on its judgement as to which method would be not
            practical.
          + C 9d. The amount or proportion of unallowable costs included in each year's
            rate will be assumed to be the same as the amount or proportion of unallowable
            costs included in the base year proposal used to establish the rate. 

D. DIRECT COSTS

  D 1. GENERAL.
  
   Direct costs are those costs that can be identified specifically with a particular
   sponsored project, an instructional activity, or any other institutional activity; or
   that can be directly assigned to such activities relatively easily with a high degree
   of accuracy. Costs incurred for the same purpose in like circumstances must be treated
   consistently as either direct or indirect costs. Where an institution treats a
   particular type of cost as a direct cost of sponsored agreements, all costs incurred
   for the same purpose in like circumstances shall be treated as direct costs of all
   activities of the institution.
   
  D 2. APPLICATION TO SPONSORED AGREEMENTS.
  
   Identification with the sponsored work rather than the nature of the goods and services
   involved is the determining factor in distinguishing direct from indirect costs of
   sponsored agreements. Typical costs charged directly to a sponsored agreement are the
   compensation of employees for performance of work under the sponsored agreement,
   including related fringe benefit costs to the extent they are consistently treated, in
   like circumstances, by the institution as direct rather than indirect costs; the costs
   of materials consumed or expended in the performance the work; and other items of
   expense incurred for the sponsored agreement, including extraordinary utility
   consumption. The cost of materials supplied from stock or services rendered by
   specialized facilities or other institutional service operations may be included as
   direct costs of sponsored agreements, provided such items are consistently treated, in
   like circumstances, by the institution as direct rather than indirect costs, and are
   charged under recognized method of computing actual costs, and conform to generally
   accepted cost accounting practices consistently followed by the institution.
   
E. INDIRECT COSTS

  E 1. GENERAL.
  
   Indirect costs are those that are incurred for common or joint objectives and therefore
   cannot be identified readily and specifically with a particular sponsored project, an
   instructional activity, or any other institutional activity. At educational
   institutions such costs normally are classified under the following indirect cost
   categories: depreciation and use allowances, general administration and general
   expenses, sponsored projects administration expenses, operation and maintenance
   expenses, library expenses, departmental administration expenses, and student
   administration and services.
   
  E 2. CRITERIA FOR DISTRIBUTION.
          + E 2a. Base period. A base period for distribution of indirect costs is the
            period during which the costs are incurred. The base period normally should
            coincide with the fiscal year established by the institution, but in any event
            the base period should be so selected as to avoid inequities in the
            distribution of costs.
          + E 2b. Need for cost groupings. The overall objective of the indirect cost
            allocation process is to distribute the indirect costs described in Section F
            to the major functions of the institution in proportions reasonably consistent
            with the nature and extent of their use of the institution's resources. In
            order to achieve this objective, it may be necessary to provide for selective
            distribution by establishing separate groupings of cost within one or more of
            the indirect cost categories referred to in E1 above. In general, the cost
            groupings established within a category should constitute, in each case, a
            pool of those items of expense that are considered to be of like nature in
            terms of their relative contribution to (or degree of remoteness from) the
            particular cost objectives to which distribution is appropriate. Cost
            groupings should be established considering the general guides provided in c
            below. Each such pool or cost grouping should then be distributed individually
            to the related cost objectives, using the distribution base or method most
            appropriate in the light of the guides set forth in d below.
          + E 2c. General considerations on cost groupings. The extent to which separate
            cost groupings and selective distribution would be appropriate at an
            institution is a matter of judgement to be determined on a case-by-case basis.
            Typical situations which may warrant the establishment of two or more separate
            cost groupings (based on account classification or analysis) within an
            indirect cost category include but are not limited to the following:
               o E 2c(1) Where certain items or categories of expense relate solely to one
                 of the major functions of the institution or to less than all functions,
                 such expenses should be set aside as a separate cost grouping for direct
                 assignment or selective allocation in accordance with the guides provided
                 in E2b and d.
               o E 2c(2) Where any types of expense ordinarily treated as general
                 administration or departmental administration are charged to sponsored
                 agreements as direct costs, expenses applicable to other activities of
                 the institution when incurred for the same purposes in like circumstances
                 must, through separate cost groupings, be excluded from the indirect
                 costs allocable to those sponsored agreements and included in the direct
                 cost of other activities for cost allocation purposes.
               o E 2c(3) Where it is determined that certain expenses are for the support
                 of a service unit or facility whose output is susceptible of measurement
                 on a workload or other quantitative basis, such expenses should be set
                 aside as a separate cost grouping for distribution on such basis to
                 organized research, instructional, and other activities at the
                 institution or within the department.
               o E 2c(4) Where activities provide their own purchasing, personnel
                 administration, building maintenance or similar service, the distribution
                 of general administration and general expenses, or operation and
                 maintenance expenses to such activities should be accomplished through
                 cost groupings which include only that portion of central indirect costs
                 (such as for overall management) which are properly allocable to such
                 activities.
               o E 2c(5) Where the institution elects to treat fringe benefits as indirect
                 charges, such costs should be set aside as a separate cost grouping for
                 selective distribution to related cost objectives.
               o E 2c(6) The number of separate cost groupings within a category should be
                 held within practical limits, after taking into consideration the
                 materiality of the amounts involved and the degree of precision
                 attainable through less selective methods of distribution.
        
        E 2d. Selection of distribution method. 
               o E 2d(1) Actual conditions must be taken into account in selecting the
                 method or base to be used in distributing individual cost groupings. The
                 essential consideration in selecting a base is that it be the one best
                 suited for assigning the pool of costs to cost objectives in accordance
                 with benefits derived; a traceable cause and effect relationship; or
                 logic and reason, where neither benefit nor cause and effect relationship
                 is determinable.
               o E 2d(2) Where a cost grouping can be identified directly with the cost
                 objective benefited, it should be assigned to that cost objective.
               o E 2d(3) Where the expenses in a cost grouping are more general in nature,
                 the distribution may be based on a cost analysis study which results in
                 an equitable distribution of the costs. Such cost analysis studies may
                 take into consideration weighting factors, population, or space occupied
                 if appropriate. Cost analysis studies, however, must(a) be appropriately
                 documented in sufficient detail for subsequent review by the cognizant
                 Federal agency, (b) distribute the costs to the related cost objectives
                 in accordance with the relative benefits derived, (c) be statistically
                 sound, (d) be performed specifically at the institution at which the
                 results are to be used and (e) be reviewed periodically, but not less
                 frequently than every two years, updated if necessary, and used
                 consistently. Any assumptions made in the study must be stated and
                 explained. The use of cost analysis studies and periodic changes in the
                 method of cost distribution must be fully justified.
               o E 2d(4) If a cost analysis study is not performed, or if the study does
                 not result in an equitable distribution of the costs, the distribution
                 shall be made in accordance with the appropriate base cited in Section F,
                 unless one of the following conditions is met: (a) it can be demonstrated
                 that the use of a different base would result in a more equitable
                 allocation of the costs, or that a more readily available base would not
                 increase the costs charged to sponsored agreements, or(b) the institution
                 qualifies for, and elects to use, the simplified method for computing
                 indirect cost rates described in Section H.
          + E 2e. Order of Distribution.
               o E 2e(1) Indirect cost categories consist of depreciation and use
                 allowance, operation and maintenance, general administration and general
                 expenses, departmental administration, sponsored projects administration,
                 library, and student administration and services, as described in Section
                 F.
               o E 2e(2) Depreciation and use allowances, operation and maintenance
                 expenses, and general administrative and general expenses should be
                 allocated in that order to the remaining indirect cost categories as well
                 as to the major functions and specialized service facilities of the
                 institution. Other cost categories may be allocated in the order
                 determined to be most appropriate by the institutions. When cross
                 allocation of costs is made as provided in (3) below, this order of
                 allocation does not apply.
               o E 2e(3) Normally an indirect cost category will be considered closed
                 once) it has been allocated to other cost objectives, and costs may not
                 be subsequently allocated to it. However, a cross allocation of costs
                 between two or more indirect cost categories may be used if such
                 allocation will result in a more equitable allocation of costs. If a
                 cross allocation is used, an appropriate modification to the composition
                 of the indirect cost categories described in Section F is required.
                 
F. IDENTIFICATION AND ASSIGNMENT OF INDIRECT COSTS

  F 1. DEFINITION OF FACILITIES AND ADMINISTRATION.
  
   Indirect costs are classified within two broad categories: "Facilities" and
   "Administration." "Facilities" is defined as depreciation and use allowances, interest
   on debt associated with certain buildings, equipment and capital improvements,
   operations and maintenance expenses, and library expenses. "Administration: is defined
   as general administration and general expenses; departmental administration; sponsored
   projects administration; student administration and services, and all other types of
   expenditures not listed specifically under one of the subcategories of Facilities
   (including cross allocations from other pools).
   
  F 2. DEPRECIATION AND USE ALLOWANCES.
          + F 2a. The expenses under this heading are the portion of the costs of the
            institution's buildings, capital improvements to land and buildings, and
            equipment which are computed in accordance with Section J12.
          + F 2b. In the absence of the alternatives provided for in Section E2d , the
            expenses included in this category shall be allocated in the following manner:
               o F 2b(1) Depreciation or use allowances on buildings used exclusively in
                 the conduct of a single function, and on capital improvements and
                 equipment used in such buildings, shall be assigned to that function.
               o F 2b(2) Depreciation or use allowances on buildings used for more than
                 one function, and on capital improvements and equipment used in such
                 buildings, shall be allocated to the individual functions performed in
                 each building on the basis of usable square feet of space, excluding
                 common areas such as hallways, stairwells, and restrooms.
               o F 2b(3) Depreciation or use allowances on buildings, capital improvements
                 and equipment related to space (e.g., individual rooms, laboratories)
                 used jointly by more than one function (as determined by the users of the
                 space) shall be treated as follows. The cost of each jointly used unit of
                 space shall be allocated to the benefiting functions on the basis of:
                    # F 2b(3)(a) The employee FTEs or salaries and wages of those
                      individual functions benefiting from the use of that space; or
                    # F 2b(3)(b) Institution-wide employee FTEs or salaries and wages
                      applicable to the benefiting Major Functions (see B1) of the
                      institution.
               o F 2b(4) Depreciation or use allowances on certain capital improvements to
                 land, such as paved parking areas, fences, sidewalks, and the like, not
                 included in the cost of buildings, shall be allocated to user categories
                 of students and employees on a full-time equivalent basis. The amount
                 allocated to the student category shall be assigned to the instruction
                 function of the institution. The amount allocated to the employee
                 category shall be further allocated to the major functions of the
                 institution in proportion to the salaries and wages of all employees
                 applicable to those functions.
                 
  F 3. INTEREST
  
   Interest on debt associated with certain buildings, equipment and capital improvements,
   as defined in Section J22e., shall be classified as an expenditure under the category
   Facilities. These costs shall be allocated in the same manner as the depreciation or
   use allowances on the buildings, equipment and capital improvements to which the
   interest relates.
   
  F 4. OPERATION AND MAINTENANCE EXPENSES.
          + F 4a. The expenses under this heading are those that have been incurred for
            the administration, supervision, operation, maintenance, preservation, and
            protection of the institution's physical plant. They include expenses normally
            incurred for such items as janitorial and utility services; repairs and
            ordinary or normal alterations of buildings, furniture and equipment; care of
            grounds; maintenance and operation of buildings and other plant facilities;
            security; earthquake and disaster preparedness; environmental safety;
            hazardous waste disposal; property, liability and all other insurance relating
            to property; space and capital leasing; facility planning and management; and
            central receiving. The operation and maintenance expense category should also
            include its allocable share of fringe benefit costs, depreciation and use
            allowances, and interest costs.
          + F 4b. In the absence of the alternatives provided for in Section E2d, the
            expenses included in this category shall be allocated in the same manner as
            described in Section F2b for depreciation and use allowances.
            
  F 5. GENERAL ADMINISTRATION AND GENERAL EXPENSES. 
          + F 5a. The expenses under this heading are those that have been incurred for
            the general executive and administrative offices of educational institutions
            and other expenses of a general character which do not relate solely to (1)
            instruction, (2) organized research, (3) other sponsored activities, or (4)
            other institutional activities. The general administration and general expense
            category should also include its allocable share of fringe benefit costs,
            operation and maintenance expense, depreciation and use allowances, and
            interest costs. Examples of general administration and general expenses
            include: those expenses incurred by administrative offices that serve the
            entire university system of which the institution is a part; central offices
            of the institution such as the President's or Chancellor's office, the offices
            for institution-wide financial management, business services, budget and
            planning, personnel management, and safety and risk management; the office of
            the General Counsel; and, the operations of the central administrative
            management information systems. General administration and general expenses
            shall not include expenses incurred within non-university-wide deans' offices,
            academic departments, organized research units, or similar organizational
            units (See Section F6, Departmental administration expenses).
          + F 5b. In the absence of the alternatives provided for in Section E2d., the
            expenses included in this category shall be grouped first according to common
            major functions of the institution to which they render services or provide
            benefits. The aggregate expenses of each group shall then be allocated to
            serviced or benefited functions on the modified total cost basis. Modified
            total costs consist of the same cost elements as those in Section G2. When an
            activity included in this indirect cost category provides a service or product
            to another institution or organization, an appropriate adjustment must be made
            to either the expenses or the basis of allocation or both, to assure a proper
            allocation of costs.
            
  F 6. DEPARTMENTAL ADMINISTRATION EXPENSES.
          + F 6a. The expenses under this heading are those that have been incurred for
            administrative and supporting services that benefit common or joint
            departmental activities or objectives in academic deans' offices, academic
            departments and divisions, and organized research institutes, study centers
            and research centers. Departmental administration expenses are subject to the
            following limitations.
               o F 6a(1) Academic deans' offices, salaries and operating expenses are
                 limited to those attributable to administrative functions.
               o F 6a(2) Academic departments:
                    # F 6a(2)(a) Salaries and fringe benefits attributable to the
                      administrative work (including bid and proposal preparation) of
                      faculty (including department heads) and other professional
                      personnel conducting research and/or instruction shall be allowed at
                      a rate of 3.6 percent of modified total direct costs. This category
                      does not include professional business or professional
                      administrative officers. This allowance shall be added to the
                      computation of the indirect cost rate for major functions in section
                      G; the expenses covered by the allowance shall be excluded from the
                      departmental administration cost pool. No documentation is required
                      to support this allowance.
                    # F 6a(2)(b) Other administrative and supporting expenses incurred
                      within academic departments are allowable provided they are treated
                      consistently in like circumstances. This would include expenses such
                      as the salaries of secretarial and clerical staffs, the salaries of
                      administrative officers and assistants, travel, office, supplies,
                      stockrooms, and the like.
                    # F 6a(3) Other fringe benefit costs applicable to the salaries and
                      wages included in F4a(1) and F4a(2) above are allowable, as well as
                      an appropriate share of general administration and general expenses,
                      operation and maintenance expenses, and depreciation and/or use
                      allowances.
          + F 6b. In developing the departmental administration cost pool, special care
            should be exercised to ensure that costs incurred for the same purpose in like
            circumstances are treated consistently as either direct or indirect costs. For
            example, salaries of technical staff, laboratory supplies (e.g., chemicals),
            telephone toll charges, animals, animal care costs, computer costs, travel
            costs, and specialized shop costs shall be treated as direct cost wherever
            identifiable to a particular cost objective. Direct charging of these costs
            may be accomplished through specific identification of individual costs to
            benefiting cost objectives, or through recharge centers or specialized service
            facilities, as appropriate under the circumstances. The 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. Items such as office supplies, postage, local telephone costs, and
            memberships shall normally be treated as indirect costs.
          + F 6c. In the absence of the alternatives provided for in Section E2d, the
            expenses included in this category shall be allocated as follows:
               o F 6c(1) The administrative expenses of the dean's office of each college
                 and school shall be allocated to the academic departments within that
                 college or school on the modified total cost basis.
               o F 6c(2) The administrative expenses of each academic department, and the
                 department's share of the expenses allocated in F4a(1) shall be allocated
                 to the appropriate functions of the departments on the modified total
                 cost basis.
                 
  F 7. SPONSORED PROJECTS ADMINISTRATION.
          + F 7a. The expenses under this heading are limited to those incurred by a
            separate organization(s) established primarily to administer sponsored
            projects, including such functions as grant and contract administration
            (Federal and non-Federal), special security, purchasing, personnel
            administration, and editing and publishing of research and other reports. They
            include the salaries and expenses of the head of such organization,
            assistants, and immediate staff, together with the salaries and expenses of
            personnel engaged in supporting activities maintained by the organization,
            such as stock rooms, stenographic pools and the like. This category also
            includes an allocable share of fringe benefit costs, general administration
            and general expenses, operation and maintenance expenses, and depreciation/use
            allowances. Appropriate adjustments will be made for services provided to
            other functions or organizations.
          + Federal agencies may authorize reimbursement of additional costs for
            department heads and faculty only in exceptional cases where an institution
            can demonstrate undue hardship of detriment to project performance.
          + Federal agencies are authorized to implement these changes earlier if they
            choose.
          + F 7b. In the absence of the alternatives provided for in Section E2d, the
            expenses included in this category shall be allocated to the major functions
            of the institution under which the sponsored projects are conducted on the
            basis of the modified total cost of sponsored projects.
          + F 7c. An appropriate adjustment shall be made to eliminate any duplicate
            charges to sponsored agreements when this category includes similar or
            identical activities as those included in the general administration and
            general expense category or other indirect cost items, such as accounting,
            procurement, or personnel administration.
            
  F 8. LIBRARY EXPENSES.
          + F 8a. The expenses under this heading are those that have been incurred for
            the operation of the library, including the cost of books and library
            materials purchased for the library, less any items of library income that
            qualify as applicable credits under Section C5. The library expense category
            should also include the fringe benefits applicable to the salaries and wages
            included therein, an appropriate share of general administration and general
            expense, operation and maintenance expense and depreciation and use
            allowances. Costs incurred in the purchases of rare books (museum-type books)
            with no value to sponsored agreements should not be allocated to them.
          + F 8b. In the absence of the alternatives provided for in Section E2d, the
            expenses included in this category shall be allocated first on the basis of
            primary categories of users, including students, professional employees, and
            other users.
               o F 8b(1) The student category shall consist of full-time equivalent
                 students enrolled at the institution, regardless of whether they earn
                 credits towards a degree or certificate.
               o F 8b(2) The professional employee category shall consist of all faculty
                 members and other professional employees of the institution, on a
                 full-time equivalent basis.
               o F 8b(3) The other users category shall consist of all other users of
                 library facilities.
          + F 8c. Amounts allocated in b above shall be assigned further as follows:
               o F 8c(1) The amount in the student category shall be assigned to the
                 instruction function of the institution.
               o F 8c(2) The amount in the professional employee category shall be
                 assigned to the major functions of the institution in proportion to the
                 salaries and wages of all faculty members and other professional
                 employees applicable to those functions.
               o F 8c(3) The amount in the other users category shall be assigned to the
                 other institutional activities function of the institution.
                 
  F 9. STUDENT ADMINISTRATION AND SERVICES.
          + F 9a. The expenses under this heading are those that have been incurred for
            the administration of student affairs and for services to students, including
            expenses of such activities as deans of students, admissions, registrar,
            counseling and placement services, student advisers, student health and
            infirmary services, catalogs, and commencements and convocations. The salaries
            of members of the academic staff whose responsibilities to the institution
            require administrative work that benefits sponsored projects may also be
            included to the extent that the portion changed to Student Administration is
            determined in accordance with Section J8. This expense category also includes
            the fringe benefit costs applicable to the salaries and wages included
            therein, an appropriate share of general administration and general expenses,
            operation and maintenance, and use allowances and/or depreciation.
          + F 9b. In the absence of the alternatives provided for in Section E2d, the
            expenses in this category shall be allocated to the instruction function and
            subsequently to sponsored agreements in that function.
            
  F 10. OFFSET FOR INDIRECT EXPENSES OTHERWISE PROVIDED FOR BY THE
GOVERNMENT.
          + F 10a. The items to be accumulated under this heading are the reimbursements
            and other payments from the Federal Government which are made to the
            institution to support solely, specifically, and directly, in whole or in
            part, any of the administrative or service activities described in F1 through
            F7 above.
          + F 10b. These items in this group shall be treated as credit to the affected
            individual indirect cost category before that category is allocated to
            benefiting functions.

    

G. DETERMINATION AND APPLICATION OF INDIRECT COST RATE OR RATES      
  G 1. INDIRECT COST POOLS. 
               o G 1a(1) Subject to subsection b, the separate categories of indirect
                 costs allocated to each major function of the institution as described in
                 Section F shall be aggregated and treated as a common pool for that
                 function. The amount in each pool shall be divided by the distribution
                 base described in G2 to arrive at a single indirect cost rate for each
                 function.
               o G 1a(2) The rate for each function issued to distribute costs to
                 individual sponsored agreements of that function. Since a common pool is
                 established for each major function of the institution, a separate
                 indirect cost rate would be established for each of the major functions
                 described in Section B1 under which sponsored agreements are carried out.
               o G 1a(3) Each institution's indirect cost rate process must be  
                 appropriately designed to ensure that Federal sponsors do not in anyway
                 subsidize the indirect costs of other sponsors, specifically activities
                 sponsored by industry and foreign governments. Accordingly, each
                 allocation method used to identify and allocate the indirect cost pools,
                 as described in sections E2 and F1 through F9, must contain the full
                 amount of the institution's modified total costs or other appropriate
                 units of measurement used to make the computations. In addition, the
                 final rate distribution base (as defined in section G2) for each major
                 function (organized research, instruction, etc., as described in section
                 B1) shall contain all the programs or activities which utilize the
                 indirect costs allocated to that major function. At the time an indirect
                 cost proposal is submitted to a Federal cognizant agency, each institution
                 must describe the process it uses to ensure that Federal funds are not 
                 used to subsidize industry and foreign government funded programs.
          + G 1b. In some instances a single rate basis for use across the board on all
            work within a major function at an institution may not be appropriate. A
            single rate for research, for example, might not take into account those
            different environmental factors and other conditions which may affect
            substantially the indirect costs applicable to a particular segment of
            research at the institution. A particular segment of research may be that
            performed under a single sponsored agreement or may consist of research under
            a group of sponsored agreements performed in a common 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 a sponsored
            agreement is performed within an environment which appears to generate a
            significantly different level of indirect costs, provisions should be made for
            a separate indirect cost pool applicable to such work. The separate indirect
            cost pool should be developed during the regular course of the rate  
            determination 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 been obtained under a above,
            and (2) the volume of work to which such rate would apply is material in
            relation to other sponsored agreements at the institution.      
  G 2. THE DISTRIBUTION BASIS.
     
   Indirect costs shall be distributed to applicable sponsored agreements and other
   benefiting activities within each Major Function (see B1) on the basis of modified
   total direct costs, consisting of all salaries and wages, fringe benefits, materials
   and supplies, services, travel, and subgrants and subcontracts up to the first $25,000
   of each subgrant or subcontract (regardless of the period covered by the subgrant or
   subcontract). Equipment, capital expenditures, charges for patient care and tuition
   remission, rental costs, scholarships, and fellowships as well as the portion of each
   subgrant and subcontract in excess of $25,000 shall be excluded from modified total
   direct costs. Other items may only be excluded where necessary to avoid a serious
   inequity in the distribution of indirect costs. For this purpose, an indirect cost rate
   should be determined for each of the separate indirect cost pools developed pursuant to
   G1. The rate in each case should be stated as the percentage which the amount of the
   particular indirect cost pool is of the modified total direct costs identified with
   such pool.
     
  G 3. NEGOTIATED LUMP SUM FOR INDIRECT COSTS.
     
   A negotiated fixed amount in lieu of indirect cost may be appropriate for 
    self-contained, off-campus, or primarily subcontracted activities where the benefits
   derived from an institution's indirect services cannot be readily determined. Such
   negotiated indirect costs will be treated as an offset before allocation to 
   instruction, organized research, other sponsored activities, and other institutional
   activities. The base on which such remaining expenses are allocated should be
   appropriately adjusted.
     
  G 4. PREDETERMINED FIXED RATES FOR INDIRECT COSTS.
     
   Public Law 87-638(76 Stat. 437) authorizes the use of predetermined 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, negotiation of predetermined 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
   judgement as to the probable level of indirect costs during the ensuing accounting
   periods.
     
  G 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, the carry-forward amount 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 sponsored agreements 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 post determined
   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 post
   determined rates. Where multiple rates are used, the same procedure will be applicable
   for determining each rate.
     
  G 6. PROVISIONAL AND FINAL RATES FOR INDIRECT COSTS.
     
   Where the cognizant agency determines that cost experience and other pertinent facts do
   not justify the use of predetermined rates, or a fixed rate with a carry-forward, or if
   the parties cannot agree on an equitable rate, a provisional rate shall be established.
   To prevent substantial overpayment or underpayment, the provisional rate may be
   adjusted by the cognizant agency during the institution's fiscal year. Predetermined or
   fixed rates may replace provisional rates at any time prior to the close of the
   institution's fiscal year. If a provisional rate is not replaced by a predetermined or
   fixed rate prior to the end of the institution's fiscal year, a final rate will be
   established and upward or downward adjustments will be made based on he actual
   allowable costs incurred for the period involved.
     
  G 7. LIMITATION ON REIMBURSEMENT OF ADMINISTRATIVE COSTS.  
       + G 7a. Notwithstanding the provisions of G1a, the administrative costs charged
            to sponsor agreements awarded or amended (including continuation and renewal
            awards) with effective dates beginning on or after the start of the
            institution's first fiscal year which begins on or after October 1, 1991,
            shall be limited to 26% of modified total direct costs (as defined in Section
            G2) for the total of General Administration and General Expenses, Departmental
            Administration and Sponsored Projects Administration (including their
            allocable share of depreciation and/or use allowances, interest costs,
            operation and maintenance expenses, and fringe benefits (sic) costs as
            provided by Sections F5, F6, F7, and F9) and all other types of expenditures
            not listed specifically under one of the subcategories of facilities in
            Sections F.
          + G 7b. Existing indirect cost rates that affect institution's fiscal years
            which begin on or after October 1, 1991, shall be unilaterally amended by the
            cognizant Federal agency to reflect the cost limitation in subsection a above.
          + G 7c. Permanent rates established prior to this revision which have been
            amended in accordance with subsection b may be renegotiated. However, no such
            renegotiated rate may exceed the rate which would have been in effect if the
            agreement had remained in effect; nor may the administrative portion of any
            renegotiated rate exceed the limitation in subsection a.  
         + G 7d. Institutions should not change their accounting or cost allocation
            methods which were in effect on May 1, 1991, if the effect is to: (i) change
            the charging of a particular type of cost from indirect to direct, or (ii)
            reclassify costs, or increase allocations, from the administrative pools
            identified in subsection a above to the other indirect cost pools or fringe
            benefits. Cognizant Federal agencies are authorized to permit changes where an
            institution's charging practices are at variance with acceptable practices
            followed by a substantial majority of other institutions.      
  G 8. ALTERNATIVE METHOD FOR ADMINISTRATIVE COSTS.
          + G 8a. Notwithstanding the provisions of Section G1a., an institution may elect
            to claim a fixed allowance for the "Administration" portion of indirect costs.
            The allowance could be either 24% of modified total direct costs or a
            percentage equal to 95% of the most recently negotiated fixed or predeterimed
            rate for the cost pools included under "Administration" as defined in Section
            F1, whichever is less, provided that no accounting or cost allocation changes
            with the effects described in Section G7d have occurred. Under this 
            alternative, no cost proposal need be prepared for the "Administration"
            portion of the indirect cost rate nor is further identification or 
            documentation of these costs required (but see subsection c.). Where a
            negotiated indirect cost agreement includes this alternative, an institution
            shall make no further charges for the expenditure categories described in
            Sections F5, F.6, F7, and F9.
          + G 8b. In negotiations of rates for subsequent periods, an institution that has
            elected the option of Section G8a may continue to exercise it at the same rate
            without further identification or documentation of costs, provided that no
            accounting or cost allocation changes with the effects described in Section
            G7d have occurred.
          + G 8c. If an institution elects to accept a threshold rate, it is not required
            to perform a detailed analysis of its administrative costs. However, in order
            to compute the facilities components of its indirect cost rate, the 
             institution must reconcile its indirect cost proposal to its financial
            statements and make appropriate adjustments and reclassifications to identify
            the costs of each major function as defined in B1., as well as to identify and
            allocate the facilities components. Administrative costs that are not
            identified as such by the institution's accounting system (such as those
            incurred in academic department) will be classified as instructional costs for
            purposes of reconciling indirect cost proposals to financial statements and
            allocating facilities costs.
     
  G 9. INDIVIDUAL RATE COMPONENTS.
     
   In order to satisfy the requirements of Section J12f and to provide mutually agreed
   upon information for management purposes, each indirect cost rate negotiation or
   determination shall include development of a rate for each indirect cost pool as well
   as the overall indirect cost rate.
     
H. SIMPLIFIED METHOD FOR SMALL INSTITUTIONS
     
  H 1. GENERAL.
          + H 1a. Where the total direct cost of work covered by this Circular at an
            institution does not exceed $10 million in a fiscal year, the use of the
            simplified procedure described in subsection 2., may be used in determining
            allowable indirect costs. Under this simplified procedure, the institution's
            most recent annual financial 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 to all
            sponsored agreements.
          + H 1b. The simplified 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.
     
  H 2. SIMPLIFIED PROCEDURE.
          + H 2a. Establish the total amount of salaries and wages paid to all employees
            of the institution.
          + H 2b. 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:
               o H 2b(1) General administration and general expenses (exclusive of costs
                 of student administration and services, student activities, student aid,
                 and scholarships).
               o H 2b(2) Operation and maintenance of physical plant; and depreciation and
                 use allowances; after appropriate adjustment for cost applicable to other
                 institutional activities.
               o H 2b(3) Library.
               o H 2b(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 (1) above 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.
          + H 2c. Establish a salary and wage distribution base, determined by deducting
            from the total of salaries and wages as established in a above the amount of
            salaries and wages included under b above.
          + H 2d. Establish the indirect cost rate, determined by dividing the amount in
            the indirect cost pool, b above, by the amount of the distribution base, c
            above.
          + H 2e. Apply the indirect cost rate to direct salaries and wages for individual
            agreements to determine the amount of indirect costs allocable to such
            agreements.

J. GENERAL PROVISIONS FOR SELECTED ITEMS OF COST

   Sections 1 through 50 below provide principles to be applied in establishing the
   allowability of certain items involved in determining cost. These principles 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 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 provided for similar or
   related items of cost. In case of a discrepancy between the provisions of a specific
   sponsored agreement and the provisions below, the agreement should govern.
   
  J 1. ADVERTISING AND PUBLIC RELATIONS COSTS.
          + J 1a. 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.
          + J 1b. The term public relations includes community relations and means those
            activities dedicated to maintaining the image of the institution or
            maintaining or promoting understanding and favorable relations with the
            community or public at large or any segment of the public.
          + J 1c. The only allowable advertising costs are those which are solely for:
               o J 1c(1) The recruitment of personnel required for the performance by the
                 institution of obligations arising under the sponsored agreement, when
                 considered in conjunction with all other recruitment costs, as set forth
                 in Section J37;
               o J 1c(2) The procurement of goods and services for the performance of the
                 sponsored agreement;
               o J 1c(3) The disposal of scrap or surplus materials acquired in the
                 performance of the sponsored agreement except when institutions are
                 reimbursed for disposal costs at a predetermined amount in accordance
                 with Attachment N, OMB Circular No. A-110; or
               o J 1c(4) Other specific purposes necessary to meet the requirements of the
                 sponsored agreement.
          + J 1d. The only allowable public relations costs are:
               o J 1d(1) Costs specifically required by sponsored agreements;
               o J 1d(2) Costs of communicating with the public and press pertaining to
                 specific activities or accomplishments which result from performance of
                 sponsored agreements; or
               o J 1d(3) Costs of conducting general liaison with news media and
                 government public relations officers, to the extent that such activities
                 are limited to communication and liaison necessary to keep the public
                 informed on matters of public concern such as notices of contract/grant
                 award, financial matters, etc.
          + J 1e. Costs identified in c through d, if incurred for more than one sponsored
            agreement or for both sponsored work and other work of the institution, are
            allowable to the extent that the principles in section D and E are observed.
          + J 1f. Unallowable advertising and public relations costs include the
            following:
               o J 1f(1) All advertising and public relations costs other than as
                 specified in subsections c, d, and e above;
               o J 1f(2) Costs of convocations or other events related to instruction or
                 other institutional activities including:
                    # J 1f(2)(i) Costs of displays, demonstrations, and exhibits;
                    # J 1f(2)(ii) Costs of meeting rooms, hospitality suites, and other
                      special facilities used in conjunction with shows and other special
                      events; and
                    # J 1f(2)(iii) Salaries and wages of employees engaged in setting up
                      and displaying exhibits, making demonstrations, and providing
                      briefings;
               o J 1f(3) Costs of promotional items and memorabilia, including models,
                 gifts, and souvenirs;
               o J 1f(4) Costs of advertising and public relations designed solely to
                 promote the institution.
                 
  J 2. ALCOHOLIC BEVERAGES.
  
   Costs of alcoholic beverages are unallowable.
   
  J 3. ALUMNI ACTIVITIES.
  
   Costs incurred for, or in support of, alumni activities and similar activities and
   similar services are unallowable.
   
  J 4. BAD DEBTS.
  
   Any losses, whether actual or estimated, arising from uncollectible accounts and other
   claims, related collection costs, and related legal costs, are unallowable.
   
  J 5. 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 attack. Reasonable costs of civil
   defense measures (including costs in excess of normal plant protection costs, first-aid
   training and supplies, firefighting 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 provision or depreciation may be permitted in
   accordance with provisions set forth in Section J12. Costs of local civil defense
   projects not on the institution's premises are unallowable.
   
  J 6. COMMENCEMENT AND CONVOCATION COSTS.
  
   Costs incurred for commencements and convocations are unallowable, except as provided
   in Section F7.
   
  J 7. COMMUNICATION COSTS.
  
   Costs incurred for telephone services, local and long distance telephone calls,
   telegrams, radiograms, postable and the like, are allowable.
   
  J 8. COMPENSATION FOR PERSONAL SERVICES.
          +
            
    J 8a. General.
        Compensation for personal services covers all amounts paid currently or accrued by
            the institution for services of employees rendered during the period of
            performance under sponsored agreements. Such amounts include salaries, wages,
            and fringe benefits (See Section J8f]). These costs are allowable to the
            extent that the total compensation to individual employees conforms to the
            established policies of the institution, consistently applied, and provided
            that the charges for work performed directly on sponsored agreements and for
            other work allocable as indirect costs are determined and supported as
            provided below. Charges to sponsored agreements may include reasonable amounts
            for activities contributing and intimately related to work under the
            agreements, such as delivering special lectures about specific aspects of the
            ongoing activity, writing reports and articles, participating in the
            appropriate seminars, consulting with colleagues and graduate students, and
            attending meetings and conferences. Incidental work (that in excess of normal
            for the individual), for which supplemental compensation is paid by an
            institution under institutional policy, need not be included in the payroll
            distribution systems described below, provided such work and compensation are
            separately identified and documented in the financial management system of the
            institution.
          +
            
    J 8b. Payroll distribution.
               o
                 
      J 8b(1) General principles.
                    # J 8b(1)(a) The distribution of salaries and wages whether treated as
                      direct or indirect costs, will be based on payrolls documented in
                      accordance with the general accepted practices of colleges and
                      universities. Institutions may include in a residual category all
                      activities that are not directly charged to sponsored agreements and
                      that need not be distributed to more than one activity for purposes
                      of identifying indirect costs and the functions to which they are
                      allocable. The components of the residual category are not required
                      to be separately documented.
                    # J 8b(1)(b) The apportionment of employees' salaries and wages which
                      are chargeable to more than one sponsored agreement or other cost
                      objective will be accomplished by methods which will (1) be in
                      accordance with Section A2 and C above, (2) produce an equitable
                      distribution of charges for employees' activities, and (3)
                      distinguish the employee's direct activities from their indirect
                      activities.
                    # J 8b(1)(c) In the use of any methods for apportioning salaries, it
                      is recognized that, in an academic setting, teaching, research,
                      service, and administration are often inextricably intermingled. A
                      precise assessment of factors that contribute to costs is not always
                      feasible, nor is it expected. Reliance, therefore, is placed on
                      estimates in which a degree of tolerance is appropriate.
                    # J 8b(1)(d) There is no single best method for documenting the
                      distribution of charges for personal services. Methods for
                      apportioning salaries and wages, however, must meet the criteria
                      specified in J8b(2) below. Examples of acceptable methods are
                      contained in c below. Other methods which meet the criteria
                      specified in J8b(2) below also shall be deemed acceptable, if a
                      mutually satisfactory alternative agreement is reached.
               o
                 
      J 8b(2) Criteria for acceptable methods.
                    # J 8b(2)(a) The payroll distribution system will (i) be incorporated
                      into the official records of the institution, (ii) reasonably
                      reflect the activity for which the employee is compensated by the
                      institution, and (iii) encompass both sponsored and all other
                      activities on an integrated basis, but may include the use of
                      subsidiary records. (Compensation for incidental work described in
                      J8a need not be included.)
                    # J 8b(2)(b) The method must recognize the principle of after-the-
                      fact confirmation or determination so that costs distributed
                      represent actual costs, unless a mutually satisfactory alternative
                      agreement is reached. Direct cost activities and indirect cost
                      activities may be confirmed by responsible persons with suitable
                      means of verification that the work was performed. Confirmation by
                      the employee is not a requirement for either direct or indirect cost
                      activities if other responsible persons make appropriate
                      confirmations.
                    # J 8b(2)(c) The payroll distribution system will allow confirmation
                      of activity allocable to each sponsored agreement and each of the
                      categories of activity needed to identify indirect costs and the
                      functions to which they are allocable. The activities chargeable to
                      indirect cost categories or the major functions of the institution
                      for employees whose salaries must be apportioned (see J8b(1)(b)
                      above), if not initially identified as separate categories, may be
                      subsequently distributed by any reasonable method mutually agreed
                      to, including, but not limited to, suitably conducted surveys,
                      statistical sampling procedures, or the application of negotiated
                      fixed rates.
                    # J 8b(2)(d) Practices vary among institutions and within institutions
                      as to the activity constituting a full workload. Therefore, the
                      payroll distribution system may reflect categories of activities
                      expressed as a percentage distribution of total activities.
                    # J 8b(2)(e) Direct and indirect charges may be made initially to
                      sponsored agreements on the basis of estimates made before services
                      are performed. When such estimates are used, significant changes in
                      the corresponding work activity must be identified and entered into
                      the payroll distribution system. Short-term (such as one or two
                      months) fluctuation between workload categories need not be
                      considered as long as the distribution of salaries and wages is
                      reasonable over the longer term, such as an academic period.
                    # J 8b(2)(f) The system will provide for independent internal
                      evaluations to ensure the system's effectiveness and compliance with
                      the above standards.
                    # J 8b(2)(g) For systems which meet these standards, the institution
                      will not be required to provide additional support or documentation
                      for the effort actually performed.
          +
            
    J 8c. Examples of acceptable methods for payroll distribution:
               o
                 
      J 8c(1) Plan--Confirmation:
             Under this method, the distribution of salaries and wages of professional or
                 professional staff applicable to sponsored agreements is based on
                 budgeted, planned, or assigned work activity, updated to reflect any
                 significant changes in work distribution. A plan-confirmation system used
                 for salaries and wages charged directly or indirectly to sponsored
                 agreements will meet the following standards:
                    # J 8c(1)(a) A system of budgeted, planned, or assigned work activity
                      will be incorporated into the official records of the institution
                      and encompass both sponsored and all other activities on an
                      integrated basis. The system may include the use of subsidiary
                      records.
                    # J 8c(1)(b) The system will reasonably reflect only the activity for
                      which the employee is compensated by the institution (compensation
                      for incidental work described in J8a need not be included).
                      Practices vary among institutions and within institutions as to the
                      activity constituting full workload. Hence, the system will reflect
                      categories of activities expressed as a percentage distribution of
                      total activities. (But see Section H for treatment of indirect costs
                      under the simplified method for small institutions.)
                    # J 8c(1)(c) The system will reflect activity applicable to each
                      sponsored agreement and to each category needed to identify indirect
                      costs and the functions to which they are allocable. The system may
                      treat indirect cost activities initially within a residual category
                      and subsequently determine them by alternate methods as discussed in
                      J8b(2)(c).
                    # J 8c(1)(d) The system will provide for modification of an
                      individual's salary or salary distribution commensurate with a
                      significant change in the employee's work activity. Short term (such
                      as one or two months) fluctuation between workload categories need
                      not be considered as long as the distribution of salaries and wages
                      is reasonable over the longer term such as an academic period.
                      Whenever it is apparent that a significant change in work activity
                      which is directly or indirectly charged to sponsored agreements will
                      occur or has occurred, the change will be documented over the
                      signature of a responsible official and entered into the system.
                    # J 8c(1)(e) At least annually a statement will be signed by the
                      employee, principal investigator, or responsible official(s) using
                      suitable means of verification that the work was performed, stating
                      that salaries and wages charged to sponsored agreements as direct
                      charges, and to residual, indirect cost or other categories are
                      reasonable in relation to work performed.
                    # J 8c(1)(f) The system will provide for independent internal
                      evaluation to ensure the system's integrity and compliance with the
                      above standards.
                    # J 8c(1)(g) In the use of this method, an institution shall not be
                      required to provide additional support or documentation for the
                      effort actually performed.
               o
                 
      J 8c(2) After-the-fact Activity Records:
             Under this system the distribution of salaries and wages by the institution
                 will be supported by activity reports as prescribed below.
                    # J 8c(2)(a) Activity reports will reflect the distribution of
                      activity expended by employees covered by the system (compensation
                      for incidental work as described in J8a need not be included).
                    # J 8c(2)(b) These reports will reflect an after-the-fact reporting of
                      the percentage distribution of activity of employees. Charges may be
                      made initially on the basis of estimates made before the services
                      are performed, provided that such charges are promptly adjusted if
                      significant differences are indicated by activity records.
                    # J 8c(2)(c) Reports will reasonably reflect the activities for which
                      employees are compensated by the institution. To confirm that the
                      distribution of activity represents a reasonable estimate of the
                      work performed by the employees during the period, the reports will
                      be signed by the employee, principal investigator, or responsible
                      official(s) using suitable means of verification that the work was
                      performed.
                    # J 8c(2)(d) The system will reflect activity applicable to each
                      sponsored agreement and to each category needed to identify indirect
                      costs and the functions to which they are allocable. The system may
                      treat indirect cost activities initially within a residual category
                      and subsequently determine them by alternate methods as discussed in
                      J8b(2)(c).
                    # J 8c(2)(e) For the professorial and professional staff, the reports
                      will be prepared each academic term, but no less frequently than
                      every six months. For other employees, unless alternate arrangements
                      are agreed to, the reports will be prepared no less frequently than
                      monthly and will coincide with one or more pay periods.
                    # J 8c(2)(f) Where the institution uses time cards or other forms of
                      after-the-fact payroll documents as original documentation for
                      payroll and payroll charges, such documents shall qualify as records
                      for this purpose provided that they meet the requirements in (a)
                      through (e) above.
               o
                 
      J 8c(3) Multiple Confirmation Records:
             Under this system the distribution of salaries and wages of professorial and
                 professional staff will be supported by records which certify separately
                 for direct and indirect cost activities as prescribed below.
                    # J 8c(3)(a) For employees covered by this system, there will be
                      direct cost records to reflect the distribution of that activity
                      expended which is to be allocable as direct cost to each sponsored
                      agreement. There will also be indirect cost records to reflect the
                      distribution of that activity to indirect costs. These records may
                      be kept jointly or separately (but are to be certified separately,
                      see below).
                    # J 8c(3)(b) Salary and wage charges may be made initially on the
                      basis of estimates made before the services are performed provided
                      that such charges are promptly adjusted if significant differences
                      occur.
                    # J 8c(3)(c) Institutional records will reasonably reflect only the
                      activity for which employees are compensated by the institution
                      (compensation for incidental work as described in J8a need not be
                      included).
                    # J 8c(3)(d) The system will reflect activity applicable to each
                      sponsored agreement and to each category needed to identify indirect
                      costs and the functions to which they are allocable.
                    # J 8c(3)(e) To confirm that distribution of activity represents a
                      reasonable estimate of the work performed by the employee during the
                      period, the record for each employee will include:
                         @ J 8c(3)(e)(1) The signature of the employee or of a person
                           having direct knowledge of the work, confirming that the record
                           of activities allocable as direct costs of each sponsored
                           agreement is appropriate.
                         @ J 8c(3)(e)(2) The record of indirect costs will include the
                           signature of responsible person(s) who use suitable means of
                           verification that the work was performed and is consistent with
                           the overall distribution of the employee's compensated
                           activities. These signatures may all be on the same document.
                    # J 8c(3)(f) The reports will be prepared each academic term, but no
                      less frequently than every six months.
                    # J 8c(3)(g) Where the institution uses time cards or other forms of
                      after-the-fact payroll documents as original documentation for
                      payroll and payroll charges, such documents shall qualify as records
                      for this purpose provided they meet the requirements in J8b(2)(a)
                      through J8b(2)(f) above.
          +
            
    J 8d. Salary rates for faculty members.
               o
                 
      J 8d(1) Salary rates for academic year.
             Charges for work performed on sponsored agreements by faculty members during
                 the academic year will be based on the individual faculty member's
                 regular compensation for the continuous period which, under the policy of
                 the institution concerned, constitutes the basis of his salary. Charges
                 for work performed on sponsored agreements during all or any portion of
                 such period are allowable at the base salary rate. In no event will
                 charges to sponsored agreements, irrespective of the basis of
                 computation, exceed the proportionate share of the base salary for that
                 period. This principle applies to all members of the faculty at an
                 institution. Since intra-university consulting is assumed to be
                 undertaken as a university obligation requiring no compensation in
                 addition to full-time base salary, the principle also applies to faculty
                 members who function as consultants or otherwise contribute to a
                 sponsored agreement conducted by another faculty member of the same
                 institution. However, in unusual cases where consultation is across
                 departmental lines or involves a separate or remote operation, and the
                 work performed by the consultant is in addition to his regular
                 departmental load, any charges for such work representing representing
                 extra compensation above the base salary are allowable provided that such
                 consulting arrangements are specifically provided for in the agreement or
                 approved in writing by the sponsoring agency.
               o
                 
      J 8d(2) Periods outside the academic year.
                    # J 8d(2)(a) Except as otherwise specified for teaching activity in
                      (b) below, charges for work performed by faculty members on
                      sponsored agreements during the summer months or other period not
                      included in the base salary period will be determined for each
                      faculty member at a rate not in excess of the base salary divided by
                      the period to which the base salary relates, and will be limited to
                      charges made in accordance with other parts of this section. The
                      base salary period used in computing charges for work performed
                      during the summer months will be the number of months covered by the
                      faculty member's official academic year appointment.
                    # J 8d(2)(b) Charges for teaching activities performed by faculty
                      members on sponsored agreements during the summer months or other
                      periods not included in the base salary period will be based on the
                      normal policy of the institution governing compensation to faculty
                      members for teaching assignments during such periods.
               o
                 
      J 8d(3) Part-time faculty.
             Charges for work performed on sponsored agreements by faculty members having
                 only part-time appointments will be determined at a rate not in excess of
                 that regularly paid for the part-time assignments; e.g., an institution
                 pays $5,000 to a faculty member for half-time teaching during the
                 academic year. He devoted one-half of his remaining time to a sponsored
                 agreement. Thus, his additional compensation, chargeable by the
                 institution to the agreement, would be one-half of $5,000, or $2,500.
          +
            
      J 8e. Non-institutional professional activities.
        Unless an arrangement is specifically authorized by a Federal sponsoring agency,
            an institution must follow its institution-wide policies and practices
            concerning the permissible extent of professional services that can be
            provided outside the institution for non-institutional compensation. Where
            such institution-wide policies do not exist or do not adequately define the
            permissible extent of consulting or other non-institutional activities
            undertaken for extra outside pay, the Government may require that the effort
            of professional staff working on sponsored agreements be allocated between (1)
            institutional activities, and (2) non-institutional professional activities.
            If the sponsoring agency considers the extent of non-institutional
            professional effort excessive, appropriate arrangements governing compensation
            will be negotiated on a case-by case basis.
          +
            
    J 8f. Fringe benefits.
               o J 8f(1) Fringe benefits in the form of regular compensation paid to
                 employees during periods of authorized absences from the job, such as
                 annual leave, sick leave, military leave, and the like, are allowable,
                 provided such costs are distributed to all institutional activities in
                 proportion to the relative amount of time or effort actually devoted by
                 the employees. See Section J40 for treatment of sabbatical leave.
               o J 8f(2) Fringe benefits in the form of employer contributions or expenses
                 for social security, employee insurance, workmen's compensation
                 insurance, tuition or remission of tuition for individual employees or
                 their families and the like are allowable, provided such benefits are
                 granted in accordance with established institutional policies, and are
                 distributed to all institutional activities on an equitable basis. See
                 Section J41b for treatment of tuition remission provided to students.
               o J 8f(3) Rules for pension plan costs are as follows:
                    # J 8f(3)(a) Costs of the institution's pension plan which are
                      incurred in accordance with the established policies of the
                      institution are allowable, provided:
                         @ (i) Such policies meet the test of reasonableness,
                         @ (ii) the methods of cost allocation are equitable for all
                           activities,
                         @ (iii) the amount of pension cost assigned to each fiscal year
                           is determined in accordance with J8f(3)(b) below, and
                         @ (iv) the cost assigned to a given fiscal year is paid or funded
                           for all plan participants within six months after the end of
                           that year.
                    # However, increases to normal and past service pension costs caused
                      by a delay in funding the actuarial liability beyond 30 days after
                      each quarter of the year to which such costs are assignable are
                      unallowable.
                    # J 8f(3)(b) The amount of pension cost assigned to each fiscal year
                      shall be determined in accordance with generally accepted accounting
                      principles. Institutions may elect to follow the "Cost Accounting
                      Standard for Composition and Measurement of Pension Cost" (4 CFR
                      Part 412).
                    # J 8f(3)(c) Premiums paid for pension plan termination insurance
                      pursuant to the Employee Retirement Income Security Act of 1974
                      (Public Law 93-046) are allowable. Late payment charges on such
                      premiums are unallowable. Excise taxes on accumulated funding
                      deficiencies and prohibited transactions of pension plan fiduciaries
                      imposed under the Employee Retirement Income Security Act are also
                      unallowable.
                    # J 8f(4) Fringe benefits may be assigned to cost objectives by
                      identifying specific benefits to specific individual employees or by
                      allocating on the basis of institution-wide salaries and wages of
                      the employees receiving the benefits. When the allocation method is
                      used, separate allocations must be made to selective groupings of
                      employees, unless the institution demonstrates that costs in
                      relationship to salaries and wages do not differ significantly for
                      different groups of employees. Fringe benefits shall be treated in
                      the same manner as the salaries and wages of the employees receiving
                      the benefits. The benefits related to salaries and wages treated as
                      direct costs shall also be treated as direct costs; the benefits
                      related to salaries and wages treated as indirect costs shall be
                      treated as indirect costs.
               o
                 
    J 8g. Institution-furnished automobiles.
             That portion of the cost of institution-furnished automobiles that relates to
                 personal use by employees (including transportation to and from work) is
                 unallowable regardless of whether the cost is reported as taxable income
                 to the employees.
                 
  J 9. CONTINGENCY PROVISIONS.
        Contributions to a contingency reserve or any similar provision made for events,
            the occurrence of which cannot be foretold with certainty as to time,
            intensity, or with an assurance of their happening, are unallowable. (But see
            also Section J21c).
            
  J 10. DEANS OF FACULTY AND GRADUATE SCHOOLS.
        The salaries and expenses of deans of faculty and graduate schools, or their
            equivalents, and their staffs, are allowable.

  J 11. DEFENSE AND PROSECUTION OF CRIMINAL AND CIVIL PROCEEDINGS,
CLAIMS, APPEALS AND PATENT
  INFRINGEMENT.
          +
            
    J 11a. Definitions.
               o J 11a(1) "Conviction," as used herein, means a judgement or conviction of
                 a criminal offense by any court of competent jurisdiction, whether
                 entered upon verdict or a plea, including a conviction due to a plea of
                 nolo contendere.
               o J 11a(2) "Costs," include, but are not limited to, administrative and
                 clerical expenses; the cost of legal services, whether performed by
                 in-house or private counsel; the costs of the services of accountants,
                 consultants, or others retained by the institution to assist it; costs of
                 employees, officers and trustees, and any similar costs incurred before,
                 during, and after commencement of a judicial or administrative proceeding
                 that bears a direct relationship to the proceedings.
               o J 11a(3) "Fraud," as used herein, means (i) acts of fraud or corruption
                 or attempts to defraud the Government or to corrupt its agents, (ii) acts
                 that constitute a cause for debarment or suspension (as specified in
                 agency regulations), and (iii) acts which violate the False Claims Act,
                 31 U.S.C., sections 3729-3731, or the Anti-kickback Act, 41 U.S.C.,
                 Sections 51 and 54.
               o J 11a(4) "Penalty," does not include restitution, reimbursement, or
                 compensatory damages.
               o J 11a(5) "Proceeding," includes an investigation.
          + J 11b.
               o J 11b(1) Except as otherwise described herein, costs incurred in
                 connection with any criminal, civil or administrative proceeding
                 (including filing of a false certification) commenced by the Federal
                 Government, or a State, local or foreign government, are not allowable if
                 the proceeding (1) relates to a violation of, or failure to comply with,
                 a Federal, State, local or foreign statue or regulation, by the
                 institution (including its agents and employees); and (2) results in any
                 of the following dispositions:
                    # J 11b(1)(a) In a criminal proceeding, a conviction.
                    # J 11b(1)(b) In a civil or administrative proceeding involving an
                      allegation or fraud or similar misconduct, a determination of
                      institutional liability.
                    # J 11b(1)(c) In the case of any civil or administrative proceeding,
                      the imposition of a monetary penalty.
                    # J 11b(1)(d) A final decision by an appropriate Federal official to
                      debar or suspend the institution, to rescind or void an award, or to
                      terminate an award for default by reason of a violation of failure
                      to comply with a law or regulation.
                    # J 11b(1)(e) A disposition by consent or compromise, if the action
                      could have resulted in any of the dispositions described in (a),
                      (b), (c), or (d) of b(1) above.
               o J 11b(2) If more than one proceeding involves the same alleged
                 misconduct, the costs of all such proceedings shall be unallowable if any
                 one of them results in one of the dispositions shown in b(1) above.
          + J 11c. If a proceeding referred to in paragraph b is commenced by the Federal
            Government and is resolved by consent or compromise pursuant to an agreement
            entered into by the institution and the Federal Government, then the costs
            incurred by the institution in connection with such proceedings that are
            otherwise unallowable under paragraph b may be allowed to the extent
            specifically provided in such agreement.
          + J 11d. If a proceeding referred to in paragraph b is commenced by a State,
            local or foreign government, the authorized Federal official may allow the
            costs incurred by the institution for such proceedings, if such authorized
            official determines that the costs were incurred as a result of: (1) a
            specific term or condition of a Federally sponsored agreement, or (2) specific
            written direction of an authorized official of the sponsoring agency.
          + J 11e. Costs incurred in connection with proceedings described in paragraph b,
            but which are not made unallowable by that paragraph, may be allowed by the
            Government but only to the extent that:
               o J 11e(1) The costs are reasonable in relation to the activities required
                 to deal with the proceeding and the underlying cause of action;
               o J 11e(2) Payment of the costs incurred, as allowable and allocable costs,
                 is not prohibited by any other provision(s) of the sponsored agreement;
               o J 11e(3) The costs are not otherwise recovered from the Federal
                 Government or a third party, either directly as a result of the
                 proceeding or otherwise; and
               o J 11e(4) The percentage of costs allowed does not exceed the percentage
                 determined by an authorized Federal official to be appropriate
                 considering the complexity of procurement litigation, generally accepted
                 principles governing the award of legal fees in civil actions involving
                 the United States as a party, and such other factors as may be
                 appropriate. Such percentage shall not exceed 80%. However, if an
                 agreement reached under paragraph c has explicitly considered this 80
                 percent limitation and permitted a higher percentage, then the full
                 amount of costs resulting from that agreement shall be allowable.
          + J 11f. Costs incurred by the institution in connection with the defense of
            suits brought by its employees or ex-employees under section 2 of the Major
            Fraud Act of 1988 (Pub. L. 100-700), including the cost of all relief
            necessary to make such employee whole, where the institution was found liable
            or settled, are unallowable.
          + J 11g. Costs of legal, accounting, and consultant services, and related costs,
            incurred in connection with defense against Government claims or appeals, or
            the prosecution of claims or appeals against the Government, are unallowable.
          + J 11h. Costs of legal, accounting, and consulting services, and related costs,
            incurred in connection with patent infringement litigation, are unallowable
            unless otherwise provided for in the sponsored agreements.
          + J 11i. Costs which may be unallowable under this section, including directly
            associated costs, shall be segregated and accounted for by the institution
            separately. During the pendency of any proceeding covered by paragraph b and f
            of this section, the Government shall generally withhold payment of such
            costs. However, if in the best interests of the Government, the Government may
            provide for conditional payment upon provision of adequate security, or other
            adequate assurance, and agreement by the institution to repay all unallowable
            costs, plus interest, if the costs are subsequently determined to be
            unallowable.
            
  J 12. DEPRECIATION AND USE ALLOWANCES.
  
   Institutions may be compensated for the use of their buildings, capital improvements,
   and equipment; provided that they are used, needed in the institution's activities, and
   properly allocable to sponsored agreements. Such compensation shall be made by
   computing either depreciation or use allowance. Use allowances are the means of
   providing such compensation when depreciation or other equivalent costs are not
   computed. The allocation for depreciation or use allowance shall be made in accordance
   with Section F1. Depreciation and use allowances are computed applying the following
   rules:
          + J 12a. The computation of depreciation or use allowances; shall be based on
            the acquisition cost of the assets involved. For this purpose, the acquisition
            cost will exclude (1) the cost of the land; (2) any portion of the cost of
            building and equipment borne by or donated by the Government, irrespective of
            where title was originally vested or where it is presently located; and (3)
            any portion of the cost of buildings and equipment contributed by or for the
            institution where law or agreement prohibit recovery. For an asset donated to
            the institution by a third party, its fair market value at the time of the
            donation shall be considered as the acquisition cost.
          + J 12b. In the use of the depreciation method, the following shall be observed:
               o J 12b(1) The period of useful service or useful life established in each
                 case for usable capital assets must take into consideration such factors
                 as the type of construction, nature of the equipment, technological
                 developments in the particular area, and the renewal and replacement
                 policies followed for the individual items or classes of assets involved.
               o J 12b(2) The depreciation method used to charge the cost of an asset(or
                 group of assets) to accounting periods shall reflect the pattern of
                 consumption of the asset during its useful life. In the absence of clear
                 evidence indicating that the expected consumption of the asset will be
                 significantly greater in the early portions than in the later portions of
                 its useful life, the straight-line method shall be presumed to be the
                 appropriate method. Depreciation methods once used shall not be changed
                 unless approved in advance by the cognizant Federal agency.
               o J 12b(3) Where the depreciation method is introduced for application to
                 assets for which use allowance was previously charged, the aggregate
                 amount of use allowances and depreciation applicable to such assets must
                 not exceed the total acquisition cost of the assets.
               o J 12b(4) When the depreciation method is used for buildings, a building
                 "shell" may be treated separately from other building components, such as
                 plumbing system and heating and air conditioning system. Each component
                 item may then be depreciated over its estimated useful life. On the other
                 hand, the entire building, including the shell and all components, may be
                 treated as a single asset and depreciated over a single useful life.
               o J 12b(5) Where the depreciation method is used for a particular class of
                 assets, no depreciation may be allowed on any such assets that have
                 outlived their depreciable lives. (But see also c(3), below.)
          + J 12c. Under the use allowance method, the following shall be observed:
               o J 12c(1) The use allowance for buildings and improvements (including
                 improvements such as paved parking areas, fences, and sidewalks) will be
                 computed at an annual rate not exceeding two percent of acquisition cost.
                 The use allowance for equipment will be computed at an annual rate not
                 exceeding six and two-thirds percent of acquisition cost.
               o J 12c(2) In contrast to the depreciation method, the entire building must
                 be treated as a single asset without separating its "shell" from other
                 building components under the use allowance method. The entire building
                 must be treated as a single asset, and the two-percent use allowance
                 limitation must be applied to all parts of the building. The two-percent
                 limitation, however, need not be applied to equipment or other assets
                 that are merely attached or fastened to the building but not permanently
                 fixed and are used as furnishings, decorations or for specialized
                 purposes (e.g., dentist chairs and dental treatment units, counters,
                 laboratory benches bolted to the floor, dishwashers, and carpeting). Such
                 equipment and assets will be considered as not being permanently fixed to
                 the building if they can be removed without the need for costly or
                 extensive alterations or repairs to the building to make the space usable
                 for other purposes. Equipment and assets which meet these criteria will
                 be subject to the six and two-thirds percent equipment use allowance.
               o J 12c(3) A reasonable use allowance may be negotiated for any assets that
                 are considered to be fully depreciated, after taking into consideration
                 the amount of depreciation previously charged to the Government, the
                 estimated useful life remaining at the time of negotiation, the effect of
                 any increased maintenance charges, decreased efficiency due to age, and
                 any other factors pertinent to the utilization of the asset for the
                 purpose contemplated.
          + J 12d. Except as otherwise provided in b and c above, a combination of the
            depreciation and use allowance methods may not be used, in like circumstances,
            for a single class of assets (e.g., buildings, office equipment, and computer
            equipment.)
          + J 12e. Charges for use allowances or depreciation must be supported by
            adequate property records and physical inventories must be taken at least once
            every two years to ensure that the assets exist and are usable, used, and
            needed. Statistical sampling techniques may be used in taking these
            inventories. In addition, when the depreciation method is used, adequate
            depreciation records showing the amount of depreciation taken each period must
            also be maintained.
          + J 12f. This section applies to the largest college and university recipients
            of Federal research and development funds as displayed in Exhibit A.
               o J 12f(1) Institutions shall expend currently, or reserve for expenditure
                 within the next five years, the portion of indirect cost payments made
                 for depreciation or use allowances under sponsored research agreements,
                 consistent with Section G7, to acquire or improve research facilities.
                 This provision applies only to federal agreements which reimburse
                 indirect costs at a full negotiated rate. These funds may only be used
                 for: (a) liquidation of the principal of debts incurred to acquire assets
                 that are used directly for organized research activities, or (b) payments
                 to acquire, repair, renovate, or improve buildings or equipment directly
                 used for organized research. For buildings or equipment not exclusively
                 used for organized research activity, only appropriately proportionate
                 amounts will be considered to have been expended for research facilities.
               o J 12f(2) An assurance that an amount equal to the Federal reimbursements
                 has been appropriately expended or reserved to acquire or improve
                 research facilities shall be submitted as part of each indirect cost
                 proposal submitted to the cognizant federal agency which is based on
                 costs incurred on or after October 1, 1991. This assurance will cover the
                 cumulative amounts of funds received and expended during the period after
                 the period covered by the previous assurance and ending with the fiscal
                 year on which the proposal is based. The assurance shall also cover any
                 amounts reserved from a prior period in which the funds received exceeded
                 the amount expended.
                 
  J 13. DONATION AND CONTRIBUTIONS.
          + J 13a. The value of donated services and property are not allowable either as
            a direct or indirect cost, except that depreciation or use allowances on
            donated assets are permitted in accordance with Section J12a. The value of
            donated services and property may be used to meet cost sharing or matching
            requirements, in accordance with OMB Circular No. A-110.
          + J 13b. Donations or contributions made by the institution, regardless of the
            recipient, are unallowable.
            
  J 14. EMPLOYEE MORALE, HEALTH, AND WELFARE COSTS AND CREDITS.
  
   The costs of house publications, health or first-aid clinics and/or infirmaries,
   recreational activities, food services, employees' counseling services, and other
   expenses incurred in accordance with the institution's established practice or custom
   for the improvement of working conditions, employer-employee relations, employee
   morale, and employee performance, are allowable. Such costs will be equitably
   apportioned to all activities of the institution. Income generated from any of these
   activities will be credited to the cost thereof unless such income has been irrevocably
   set over to the employee welfare organizations. Losses resulting from operating food
   services are allowable only if the institution's objective is to operate such services
   on a break-even basis. Losses sustained because of operating objectives other than the
   above are allowable only (a)where the institution can demonstrate unusual
   circumstances, and (b) with the approval of the cognizant Federal agency.
   
  J 15. ENTERTAINMENT COSTS.
  
   Costs of entertainment, including amusement, diversion, and social activities and any
   costs directly associated with such costs (such as tickets to shows or sports events,
   meals, lodging, rentals, transportation, and gratuities) are unallowable.
   
  J 16. EQUIPMENT AND OTHER CAPITAL EXPENDITURES.
          + J 16a. For purposes of this paragraph, the following definitions apply:
               o J 16a(1) Equipment means an article of non-expendable tangible personal
                 property having a useful life of more than two years, and an acquisition
                 cost of $500 or more per unit. However, consistent with institutional
                 policy, lower limits may be established.
               o J 16a(2) Capital expenditure means the cost of the asset including the
                 cost to put it in place. Capital expenditure for equipment, for example,
                 means the net invoice price of the equipment, including the cost of any
                 modifications, attachments, accessories, or auxiliary apparatus necessary
                 to make it usable for the purpose for which it is acquired. Ancillary
                 charges, such as taxes, duty, protective intransit insurance, freight,
                 and installation may be included in, or excluded from, capital
                 expenditure cost in accordance with the institution's regular accounting
                 practices.
               o J 16a(3) Special purpose equipment means equipment which is used only for
                 research, medical, scientific, or other technical activities.
               o J 16a(4) General purpose equipment means equipment, the use of which is
                 not limited only to research, medical, scientific or other technical
                 activities. Examples of general purpose equipment include office
                 equipment and furnishings, air conditioning equipment, reproduction and
                 printing equipment, motor vehicles, and automatic data processing
                 equipment.
          + J 16b. The following rules of allowability shall apply to equipment and other
            capital expenditures:
               o J 16b(1) Capital expenditures for general purpose equipment, buildings,
                 and land are unallowable as direct charges, except where approved in
                 advance by the sponsoring agency.
               o J 16b(2) Capital expenditures for special purpose equipment are allowable
                 as direct charges, provided that the acquisition of items having a unit
                 cost of $1,000 or more is approved in advance by the sponsoring agency.
               o J 16b(3) Capital expenditures for improvements to land, buildings, or
                 equipment which materially increase their value or useful life are
                 unallowable as direct charges, except where approved in advance by the
                 sponsoring agency.
               o J 16b(4) Capital expenditures are unallowable as indirect costs. But see
                 Section J12 for allowability of depreciation or use allowance on
                 buildings, capital improvements, and equipment. Also see Section J38 for
                 allowability of rental costs on land, buildings, and equipment.
                 
  J 17. EXECUTIVE LOBBYING COSTS.
  
   Costs incurred in attempting to improperly influence either directly or indirectly, an
   employee or officer of the executive branch of the Federal Government to give
   consideration or to act regarding a sponsored agreement or a regulatory matter are
   unallowable. Improper influence means any influence that induces or tends to induce a
   Government employee or officer to give consideration or to act regarding a
   Government-sponsored agreement or regulatory matter on any basis other than the merits
   of the matter.
   
  J 18. FINES AND PENALTIES.
  
   Costs resulting from violations of, or failure of the institution to comply with,
   Federal, State, local or foreign laws and regulations are unallowable, except when
   incurred as a result of compliance with specific provisions of the sponsored agreement,
   or instructions in writing from the authorized official of the sponsoring agency
   authorizing in advance such payments.
   
  J 19. GOODS OR SERVICES FOR PERSONAL USE.
  
   Costs of goods or services for personal use of the institution's employees are
   unallowable regardless of whether the cost is reported as taxable income to the
   employees.
   
  J 20. HOUSING AND PERSONAL LIVING EXPENSES.
          + J 20a. Costs of housing (e.g., depreciation, maintenance, utilities,
            furnishings, rent, etc.), housing allowances and personal living expenses
            for/of the institution's officers are unallowable regardless of whether the
            cost is reported as taxable income to the employees.
          + J 20b. The term officers includes current and past officers.
            
  J 21. INSURANCE AND INDEMNIFICATION.
          + J 21a. Costs of insurance required or approved, and maintained, pursuant to
            the sponsored agreement, are allowable.
          + J 21b. Costs of other insurance maintained by the institution in connection
            with the general conduct of its activities, are allowable subject to the
            following limitations: (1) types and extent and cost of coverage must be in
            accordance with sound institutional practice; (2) costs of insurance or of any
            contributions to any reserve covering the risk of loss of or damage to
            Government-owned property are unallowable, except to the extent that the
            Government has specifically required or approved such costs; and (3) costs of
            insurance on the lives of officers or trustees are unallowable except where
            such insurance is part of an employee plan which is not unduly restricted.
          + J 21c. Contributions to a reserve for a self-insurance program are allowable,
            to the extent that the types of coverage, extent of coverage, and the rates
            and premiums would have been allowed had insurance been purchased to cover the
            risks.
          + J 21d. Actual losses which could have been covered by permissible insurance
            (whether through purchased insurance or self-insurance) are unallowable,
            unless expressly provided for in the sponsored agreement, except that costs
            incurred because of losses not covered under existing deductible clauses for
            insurance coverage provided in keeping with sound management practice as well
            as minor losses not covered by insurance, such as spoilage, breakage and
            disappearance of small hand tools, which occur in the ordinary course of
            operations, are allowable.
          + J 21e. Indemnification includes securing the institution against liabilities
            to third persons and other losses not compensated by insurance or otherwise.
            The Government is obligated to indemnify the institution only to the extent
            expressly provided for the sponsored agreement, except as provided in d above.
          + J 21f. Insurance against defects. Costs of insurance with respect to any costs
            incurred to correct defects in the institution's materials or workmanship are
            unallowable.
          + J 21g. Medical liability (malpractice) insurance is an allowable cost of
            research programs only to the extent that the research involves human
            subjects. Medical liability insurance costs shall be treated as a direct cost
            and shall be assigned to individual projects based on the manner in which the
            insurer allocates the risk to the population covered by the insurance.
            
  J 22. INTEREST, FUND RAISING, AND INVESTMENT MANAGEMENT COSTS.
          + J 22a. Costs incurred for interest on borrowed capital or temporary use of
            endowment funds, however represented, are unallowable, "except as indicated in
            e below."
          + J 22b. Costs of organized fund raising, including financial campaigns,
            endowment drives, solicitation of gifts and bequests, and similar expenses
            incurred solely to raise capital or obtain contributions, are unallowable.
          + J 22c. Costs of investment counsel and staff and similar expenses incurred
            solely to enhance income from investments are unallowable.
          + J 22d. Costs related to the physical custody and control of monies and
            securities are allowable.
          + J 22e. The cost of interest paid to an external party is allowable where
            associated with the following assets, provided the assets are used in support
            of sponsored agreements, and the total cost (including depreciation or use
            allowance, operation and maintenance costs, interest, etc.,) does not exceed
            the rental cost of comparable assets in the same locality.
               o J 22e(1) Buildings acquired or completed on or after July 1, 1982.
               o J 22e(2) Major reconstruction and remodeling of existing buildings
                 completed on or after July 1, 1982.
               o J 22e(3) Acquisition or fabrication of capital equipment (as defined in
                 paragraph J16 "Equipment and other capital expenditures"), completed on
                 or after July 1, 1982, costing $10,000 or more, if agreed to by the
                 Government.
                 
  J 23. LABOR RELATIONS COSTS.
  
   Costs incurred in maintaining satisfactory relations between the institution and its
   employees, including costs of labor management committees, employees' publications, and
   other related activities, are allowable.

  J 24. LOBBYING:
  
   Reference is made to the common rule published ar 55 FR 6736 (2/26/90) and the Office
   of Management and Budget government wide guidance and notice published at 54 FR 52306
   (12/20/89) and 55 FR 24540 (6/15/90), respectively. In addition, the following
   restrictions shall apply:
          + J 24a. Notwithstanding other provisions of this Circular, costs associated
            with the following activities are unallowable:
               o J 24a(1) Attempts to influence the outcomes of any Federal, State, or
                 local election, referendum, initiative, or similar procedure, through in
                 kind or cash contributions, endorsements, publicity or similar activity;
               o J 24a(2) Establishing, administering, contributing to, or paying the
                 expenses of a political party, campaign, political action committee, or
                 other organization established for the purpose of influencing the
                 outcomes of elections;
               o J 24a(3) Any attempt to influence (i) the introduction of Federal or
                 State legislation (ii) the enactment or modification of any pending
                 Federal or State legislation through communication with any member or
                 employee of the Congress or State legislature (including efforts to
                 influence State or local officials to engage in similar lobbying
                 activity) or (iii) any government official or employee in connection with
                 a decision to sign or veto enrolled legislation;
               o J 24a(4) Any attempt to influence (i) the introduction of Federal or
                 State legislation; or (ii) the enactment or modification of any pending
                 Federal or State legislation by preparing, distributing or using
                 publicity or propaganda, or by urging members of the general public, or
                 any segment thereof, to contribute to or participate in any mass
                 demonstration, march, rally, fund raising drive, lobbying campaign or
                 letter writing or telephone campaign; or
               o J 24a(5) Legislative liaison activities including attendance at
                 legislative sessions or committee hearings, gathering information
                 regarding legislation, and analyzing the effect of legislation, when such
                 activities are carried on in support of or in knowing preparation for an
                 effort to engage in unallowable lobbying.
          + J 24b. The following activities are excepted from the coverage of subsection
            a:
               o J 24b(1) Technical and factual presentations on topics directly related
                 to the performance of a grant, contract or other agreement (through
                 hearing testimony, statements or letters to the Congress or a State
                 legislature, or subdivision, member, or cognizant staff member thereof),
                 in response to a documented request (including a Congressional Record
                 notice requesting testimony or statements for the record at a regularly
                 scheduled hearing) made by the recipient member, legislative body or
                 subdivision, or a cognizant staff member thereof; provided such
                 information is readily obtainable and can be readily put in deliverable
                 form; and further provided that costs under this section for travel,
                 lodging or meals are unallowable unless incurred to offer testimony at a
                 regularly scheduled Congressional hearing pursuant to a written request
                 for such presentation made by the Chairman or Ranking Minority Member of
                 the Committee or Subcommittee conducting such hearing;
               o J 24b(2) Any lobbying made unallowable by section a(3) to influence State
                 legislation in order to directly reduce the cost, or to avoid material
                 impairment of the institution's authority to perform the grant, contract,
                 or other agreement; or
               o J 24b(3) Any activity specifically authorized by statue to be undertaken
                 with funds from the grant, contract, or other agreement.
          + J 24c. When an institution seeks reimbursement for indirect costs, total
            lobbying costs shall be separately identified in the indirect cost rate
            proposal, and thereafter treated as other unallowable activity cost in
            accordance with the procedures of subsection B1e.
          + J 24d. Institutions shall submit as part of their annual indirect cost rate
            proposal a certification that the requirements and standards of this section
            have been complied with.
          + J 24e. Institutions shall maintain adequate records to demonstrate that the
            determination of costs as being allowable or unallowable pursuant to this
            section J24 complies with the requirements of this Circular.
          + J 24f. Time logs, calendars, or similar records shall not be required to be
            created for purposes of complying with this section during any particular
            calendar month when: (1) the employee engages in lobbying (as defined in
            subsections a and b above) 25 percent or less of the employee's compensated
            hours of employment during that calendar month, and (2) within the preceding
            five-year period, the institution has not materially misstated allowable or
            unallowable costs of any nature, including legislative lobbying costs. When
            conditions (1) and (2) are met, institutions are not required to establish
            records to support the allowability of claimed costs in addition to records
            already required or maintained. Also, when conditions (1) and (2) are met, the
            absence of time logs, calendars, or similar records will not serve as a basis
            for disallowing costs by contesting estimates of lobbying time spent by
            employees during a calendar month.
          + J 24g. Agencies shall establish procedures for resolving in advance, in
            consultation with OMB, any significant questions or disagreements concerning
            the interpretation or application of this section J24. Any such advance
            resolutions shall be binding in any subsequent settlements, audits, or
            investigations with respect to that grant or contract for purposes of
            interpretation of this Circular; provided, however, that this shall not be
            construed to prevent a contractor or grantee from contesting the lawfulness of
            such a determination.
            
  J 25. LOSSES ON OTHER SPONSORED AGREEMENTS OR CONTRACTS.
  
   Any excess of costs over income under any other sponsored agreement or contract of any
   nature is unallowable. This includes, but is not limited to, the institution's
   contributed portion by reason of cost-sharing agreement or any under-recoveries through
   negotiation of flat amounts for indirect costs.
   
  J 26. MAINTENANCE AND REPAIR COSTS.
  
   Costs incurred for necessary maintenance, repair or upkeep of property (including
   Government property unless otherwise provided for) which neither add to the permanent
   value of the property nor appreciably prolong its intended life but keep it in an
   efficient operating condition, are allowable.
   
  J 27. MATERIAL COSTS.
  
   Costs incurred for purchased materials, supplies, and fabricated parts directly or
   indirectly related to the sponsored agreement, are allowable. Purchases made
   specifically for the sponsored agreement should be charged thereto at their actual
   prices after deducting all cash discounts, trade discounts, rebates, and allowances
   received by the institution. Withdrawals from general stores or stockrooms should be
   charged at their cost under any recognized method of pricing stores withdrawals
   conforming to sound accounting practices consistently followed by the institution.
   Incoming transportation charges are a proper part of material cost. Direct material
   cost should include only the materials and supplies actually used for the performance
   of the sponsored agreement, and due credit should be given for any excess materials
   retained, or returned to vendors. Due credit should be given for all proceeds or value
   received for any scrap resulting from work under the sponsored agreement. Where
   Government-donated or furnished materials is used in performing the sponsored
   agreement, such material will be used without charge.
   
  J 28. MEMBERSHIPS, SUBSCRIPTIONS AND PROFESSIONAL ACTIVITY COSTS.
          + J 28a. Costs of the institution's membership in business, technical, and
            professional organizations are allowable.
          + J 28b. Costs of the institution's subscriptions to business, professional, and
            technical periodicals are allowable.
          + J 28c. Costs of meetings and conferences, when the primary purpose is the
            dissemination of technical information, are allowable. This includes costs of
            meals, transportation, rental of facilities, and other items incidental to
            such meetings or conferences.
          + J 28d. Costs of membership in any civic or community organization are
            unallowable.
          + J 28e. Costs of membership in any country club or social or dining club or
            organization are unallowable.
            
  J 29. PATENT COSTS.
  
   Costs of preparing disclosures, reports, and other documents required by the sponsored
   agreement, and of searching the art to the extent necessary to make such invention
   disclosures, are allowable. In accordance with the clauses of the sponsored agreement
   relating to patents, costs of preparing documents and any other patent costs, in
   connection with the filing of a patent application where title is conveyed to the
   Government, are allowable. (See also Section J39)
   
  J 30. PLANT SECURITY COSTS.
  
   Necessary expenses incurred to comply with security requirements, including wages,
   uniforms and equipment of personnel engaged in plant protection, are allowable.
   
  J 31. PREAGREEMENT COSTS.
  
   Costs incurred prior to the effective date of the sponsored agreement, whether or not
   they would have been allowable thereunder if incurred after such date, are unallowable
   unless approved by the sponsoring agency.
   
  J 32. PROFESSIONAL SERVICES COSTS.
  
   J 32a. Costs of professional and consulting services, including legal services rendered
   by the members of a particular profession who are not employees of the institution, are
   allowable, subject to J32b and J11, when reasonable in relation to the services
   rendered and when not contingent upon recovery of the costs from the Federal
   Government. Retainer fees, to be allowable, must be reasonably supported by evidence of
   services rendered. J 32b. Factors to be considered in determining the allowability of
   costs in a particular case include (1) the past pattern of such costs, particularly in
   the years prior to the award of sponsored agreements; (2) the impact of sponsored
   agreements on the institution's total activity; (3) the nature and scope of managerial
   services expected of the institution's own organizations; and (4) whether the
   proportion of Government work to the institution's total activity is such as to
   influence the institution in favor of incurring the cost, particularly where the
   services rendered are not of a continuing nature and have little relationship to work
   under sponsored agreements.
   
  J 33. PROFITS AND LOSSES ON DISPOSITION OF PLANT EQUIPMENT OR OTHER
CAPITAL ASSETS.
  
   Profits or losses arising from the sale or exchange of plant, facilities, equipment or
   other capital assets, including sale or exchange of either short-term or long-term
   investments, shall not be considered in computing costs of sponsored agreements, except
   for pension plans as provided in Section J8f. When assets acquired with Federal funds,
   in part or wholly, are disposed of, the distribution of the proceeds shall be made in
   accordance with Attachment N, OMB Circular No. A-110.
   
  J 34. PROPOSAL COSTS.
  
   Proposal costs are the costs of preparing bids or proposals on potential Government and
   non-government sponsored agreements or projects, including the development of data
   necessary to support the institution's bids or proposals. Proposal costs of the current
   accounting period of both successful and unsuccessful bids and proposals normally
   should be treated as indirect costs and allocated currently to all activities of the
   institution, and no proposal costs of past accounting periods will be allocable to the
   current period. However, the institution's established practices may be to treat
   proposal costs by some other recognized method. Regardless of the method used, the
   results obtained may be accepted only if found to reasonable and equitable.
   
  J 35. REARRANGEMENT AND ALTERATION COSTS.
  
   Cost incurred for ordinary or normal rearrangement and alteration of facilities are
   allowable. Special arrangement and alteration costs incurred specifically for the
   project are allowable when such work has been approved in advance by the sponsoring
   agency.
   
  J 36. RECONVERSION COSTS.
  
   Costs incurred in the restoration or rehabilitation of the institution's facilities to
   approximately the same condition existing immediately prior to commencement of a
   sponsored agreement, fair wear and tear excepted, are allowable.
   
  J 37. RECRUITING COSTS.
          + J 37a. Subject to b, c, and d below, and provided that the size of the staff
            recruited and maintained is in keeping with workload requirements, costs of
            "help wanted" advertising, operating costs of an employment office necessary
            to secure and maintain an adequate staff, costs of operating an aptitude and
            educational testing program, travel costs of employees while engaged in
            recruiting personnel, travel costs of applicants for interviews for
            prospective employment, and relocation costs incurred incident to recruitment
            of new employees, are allowable to the extent that such costs are incurred
            pursuant to a well managed recruitment program. Where the institution uses
            employment agencies, costs not in excess of standard commercial rates for such
            services are allowable.
          + J 37b. In publications, costs of help wanted advertising that includes color,
            includes advertising material for other than recruitment purposes, or is
            excessive in size (taking into consideration recruitment purposes for which
            intended and normal institutional practices in this respect), are unallowable.
          + J 37c. Costs of help wanted advertising, special emoluments, fringe benefits,
            and salary allowances incurred to attract professional personnel from other
            institutions that do not meet the test of reasonableness or do not conform
            with the established practices of the institution, are unallowable.
          + J 37d. Where relocation costs incurred incident to recruitment of a new
            employee have been allowed either as an allocable direct or indirect cost, and
            the newly hired employee resigns for reasons within his control within twelve
            months after hire, the institution will be required to refund or credit such
            relocation costs to the Government.
            
  J 38. RENTAL COST OF BUILDINGS AND EQUIPMENT.
          + J 38a. Rental costs of buildings or equipment are allowable to the extent that
            the decision to rent or lease is in accord with Section C3. Rental
            arrangements should be reviewed periodically to determine if circumstances
            have changed and other options are available.
          + J 38b. Rental costs under "sale and lease back" arrangements are allowable
            only up to the amount that would be allowed if the institution continued to
            own the property.
          + J 38c. Rental costs under "less-than-arm's length" leases are allowable only
            up to the amount that would be allowed if the institution owned the property.
            For this purpose, a "less-than-arm's-length" lease is one under which one
            party to the lease agreement is able to control or substantially influence the
            actions of the other.
          + J 38d. Where significant rental costs are incurred under leases which create a
            material equity in the leased property, they are allowable only up to the
            amount that would be allowed if the institution purchased the property on the
            date the lease agreement was executed. For this purpose, a material equity in
            the property exists when the lease:
               o J 38d(1) Is non-cancelable or is cancelable only upon the occurrence of
                 some remote contingency, and
               o J 38d(2) Has one or more of the following characteristics:
                    # J 38d(2)(a) Title to the property passes to the institution at some
                      time during or after the lease period.
                    # J 38d(2)(b) The term of the lease corresponds substantially to the
                      estimated useful life of the property (i.e., the period of economic
                      usefulness to the legal owner of the property).
                    # J 38d(2)(c) The initial term is less than the useful life of the
                      property and the institution has the option to renew the lease for
                      the remaining useful life at substantially less than fair rental
                      value.
                    # J 38d(2)(d) The property was acquired by the lessor to meet the
                      special needs of the institution and will probably be usable only
                      for that purpose and only by the institution.
                    # J 38d(2)(e) The institution has the right, during or at the
                      expiration of the lease, to purchase the property at a price which
                      at the inception of the lease appears to be substantially less than
                      the probable fair market value at the time it is permitted to
                      purchase the property (commonly called a lease with a bargain
                      purchase option), except for any discount normally given to
                      educational institutions.
                      
  J 39. ROYALTIES AND OTHER COSTS FOR USE OF PATENTS.
  
   Royalties on a patent or amortization of the cost of acquiring a patent or invention or
   rights thereto, necessary for the proper performance of the sponsored agreement and
   applicable to tasks or processes thereunder, are allowable unless the Government has a
   license or the right to free use of the patent, the patent has been adjudicated to be
   invalid or has been administratively determined to be invalid, the patent is considered
   to be unenforceable, or the patent has expired.
   
  J 40. SABBATICAL LEAVE COSTS.
  
   Costs of leave of absence by employees for performance of graduate work or sabbatical
   study, travel or research are allowable provided the institution has a uniform policy
   on sabbatical leave for persons engaged in instruction and persons engaged in research.
   Such costs will be allocated on an equitable basis among all related activities of the
   institution. Where sabbatical leave is included in fringe benefits for which a cost is
   determined for assessment as a direct charge, the aggregate amount of such assessments
   applicable to all work of the institution during the base period must be reasonable in
   relation to the institution's actual experience under its sabbatical leave policy.
   
  J 41. SCHOLARSHIPS AND STUDENT AID COSTS.
          + J 41a. Costs of scholarships, fellowships, and other programs of student aid
            are allowable only when the purpose of the sponsored agreement is to provide
            training to selected participants and the charge is approved by the sponsoring
            agency. However, tuition remission and other forms of compensation paid as, or
            in lieu of, wages to students performing necessary work are allowable provided
            that (1) there is a bonafide employer- employee relationship between the
            student and the institution for the work performed, and (2) the tuition or
            other payments are reasonable compensation for the work performed and are
            conditioned explicitly upon the performance of necessary work, and (3) it is
            the institution's practice to similarly compensate students in non-sponsored
            as well as sponsored activities.
          + J 41b. Charges for tuition remission and other forms of compensation paid to
            students as, or in lieu of, salaries and wages shall be subject to the
            reporting requirements stipulated in Section J8, and shall be treated as
            direct or indirect cost in accordance with the actual work being performed.
            Tuition remission may be charged on an average rate basis.
            
  J 42. SELLING AND MARKETING.
  
   Costs of selling and marketing any products or services of the institution (unless
   allowed under J1c or section J34) are unallowable.
   
  J 43. SEVERANCE PAY.
          + J 43a. Severance pay is compensation in addition to regular salary and wages
            which is paid by an institution to employees whose services are being
            terminated. Costs of severance pay are allowable only to the extent that such
            payments are required by law, by employer-employee agreement, by established
            policy that constitutes in effect an implied agreement on the institution's
            part, or by circumstances of the particular employment.
          + J 43b. Severance payments that are due to normal recurring turnover and which
            otherwise meet the conditions of a above may be allowed provided the actual
            costs of such severance payments are regarded as expenses applicable to the
            current fiscal year and are equitably distributed among the institution's
            activities during that period.
          + J 43c. Severance payments that are due to abnormal or mass terminations are of
            such conjectural nature that allowability must be determined on a case-by-case
            basis. However, the Government recognizes its obligation to participate, to
            the extent of its fair share, in any specific payment.
          + J 43d. Costs incurred in excess of the institution's normal severance pay
            policy applicable to all persons employed by the Institution upon termination
            of employment are unallowable.
            
  J 44. SPECIALIZED SERVICE FACILITIES.
          + J 44a. The costs of institutional services involving the use of highly complex
            or specialized facilities such as electronic computers, wind tunnels, and
            reactors are allowable, provided the charge for the service meets the
            conditions of b through d below.
          + J 44b. The cost of each service normally shall consist of both its direct
            costs and its allocable share of indirect costs with deductions for
            appropriate income or Federal financing as described in Section C5.
          + J 44c. The cost of such institutional services when material in amount will be
            charged directly to users, including sponsored agreements based on actual use
            of the services and a schedule of rates that does not discriminate between
            federally and non-federally supported activities of the institution, including
            use by the institution for internal purposes. Charges for the use of
            specialized facilities should be designed to recover not more than the
            aggregate cost of the services over a long-term period agreed to by the
            institution and the cognizant Federal agency. Accordingly, it is not necessary
            that the rates charged for services be equal to the cost of providing those
            services during any one fiscal year as long as rates are reviewed periodically
            for consistency with the long-term plan and adjusted if necessary.
          + J 44d. Where the costs incurred for such institutional services are not
            material, they may be allocated as indirect costs. Such arrangements must be
            agreed to by the institution and the cognizant Federal agency.
          + J 44e. Where it is in the best interest of the Government and the institution
            to establish alternative costing arrangements, such arrangements may be worked
            out with the cognizant Federal agency.

  J 45. STUDENT ACTIVITY COSTS.
     
   Costs incurred for intramural activities, student publications, student clubs, and
   other student activities, are unallowable, unless specifically provided for in the
   sponsored agreements.
     
  J 46. TAXES.
          + J 46a. In general, taxes which the institution is required to pay and which
            are paid or accrued in accordance with generally accepted accounting
            principles are allowable. Payments made to local governments in lieu of taxes
            which are commensurate with the local government services received are
            allowable, except for (1) taxes from which exemptions are available to the
            institution directly or which are available to the institution based on an
            exemption afforded the Government, and in the latter case when the sponsoring
            agency makes available the necessary exemption certificates; and (2) special
            assessments on land which represent capital improvements.  
         + J 46b. Any refund of taxes, interest, or penalties, and any payment to the
            institution of interest thereon, attributable to taxes, interest, or penalties
            which were allowed as sponsored agreement costs, will be credited or paid to
            the Government in the manner directed by the Government. However, any interest
            actually paid or credited to an institution incident to a refund of tax,
            interest, and penalty will be paid or credited to the Government only to the
            extent that such interest accrued over the period during which the institution
            had been reimbursed by the Government for the taxes, interest, and penalties.
     
  J 47. TRANSPORTATION COSTS.
     
   Costs incurred for freight, express, cartage, postage, and other transportation
   services relating either to goods purchased, in process, or delivered, are allowable.
   When such costs can readily be identified with the items involved, they may be charged
   directly as transportation costs or added to the cost of such items. Where
    identification with the materials received cannot readily be made, inbound
    transportation costs may be charged to the appropriate indirect cost accounts if the
   institution follows a consistent, equitable procedure in this respect. Outbound
   freight, if reimbursable under the terms of the sponsored agreement, should be treated
   as a direct cost.
     
  J 48. TRAVEL COSTS.
          +
     
    J 48a. General.
        Travel costs are the expenses for transportation, lodging, subsistence and related
            items incurred by employees who are in travel status on official business of
            the institution. Such costs may be charged on an actual basis, on a per diem
            or mileage basis in lieu of actual costs incurred, or on a combination of the
            two, provided the method used is applied to an entire trip and not to selected
            days of the trip, results in reasonable charges, and is in accordance with the
            institution's travel policy and practices consistently applied to all
            institutional travel activities.
          +
     
    J 48b. Lodging and subsistence.
        Costs incurred by employees and officers for travel, including costs of lodging,
            other subsistence, and incidental expenses, shall be considered reasonable and
            allowable only to the extent such costs do not exceed charges normally allowed
            by the institution in its regular operations as a result of an institutional
            policy and the amounts claimed under sponsored agreements represent reasonable
            and allocable costs. In the absence of an acceptable institutional policy
            regarding travel costs, the rates and amounts established under subchapter I
            of Chapter 57 of Title 5, United States Code, or by the Administrator of
            General Services, or the President (or his designee) pursuant to any  
            provisions of such subchapter shall apply to sponsored agreements (41 U.S.C.
            420).
          +
     
    J 48c. Commercial Air Travel.
        Airfare costs in excess of the lowest available commercial discount airfare,
            Federal Government contract airfare (where authorized and available), or
            customary standard (coach or equivalent) airfare, are unallowable except when
            such accommodations would: require circuitous routing; require travel during
            unreasonable hours; excessively prolong travel; greatly increase the duration
            of the flight; result in increased cost that would offset the transportation
            savings; or offer accommodations not reasonably adequate for the medical needs
            of the traveler. Where an institution can reasonably demonstrate to the
            sponsoring agency either the non-availability of discount airfare or 
             Government contract airfare for individual trips or, on an overall basis, that
            it is the institution's practice to make routine use of such airfare, specific
            determinations of non-availability will generally not be questioned by the
            Government, unless a pattern of avoidance is detected. However in order for
            airfare costs in excess of the customary standard commercial airfare to be
            allowable, e.g., use of first-class airfare, the institution must justify and
            document on a case-by-case basis the applicable conditions(s) set forth above.
          +
     
    J 48d. Air travel by other than commercial carrier.
        "Cost of travel by institution-owned, -leased, or -chartered aircraft," as used in
            this paragraph, includes the cost of lease, charter, operation (including
            personnel costs), maintenance, depreciation, insurance, and other related
            costs. Costs of travel via institution-owned, -leased, or -chartered aircraft
            shall not exceed the cost of allowable commercial air travel, as provided for
            in section c above.
     
  J 49. TERMINATION COSTS APPLICABLE TO SPONSORED AGREEMENTS. 
          + J 49a. Termination of sponsored agreements generally gives rise to the
            incurrence of costs or to the need for special treatment of costs, which would
            not have arisen had the agreement not been terminated. Items peculiar to
            termination are set forth below. They are to be used in conjunction with all
            other provisions of this Circular in the case of termination.
           + J 49b. The cost of common items of material reasonably usable on the       
           tution's other work will not be allowable unless the institution submits
            evidence that it could not retain such items at cost without sustaining a
            loss. In deciding whether such items are reasonably usable on other work of
            the institution, consideration should be given to the institution's plans and
            orders for current and scheduled work. Contemporaneous purchases of common
            items by the institution will be regarded as evidence that such items are
            reasonably usable on the institution's other work. Any acceptance of common
            items as allowable to the terminated portion of the agreement should be
            limited to the extent that the quantities of such items on hand, in transit,
            and on order are in excess of the reasonable quantitative requirements of
            other work.
          + J 49c. If in particular case, despite all reasonable efforts by the
             institution, certain costs cannot be discontinued immediately after the
            effective date of termination, such costs are generally allowable within the
            limitations set forth in this Circular, except that any such costs continuing
            after termination due to the negligent or willful failure of the institution
            to discontinue such costs will be considered unacceptable.
           + J 49d. Loss of useful value of special tooling, and special machinery and
            equipment is generally allowable, provided (1) such special tooling,
              machinery, or equipment is not reasonably capable of use in the other work of
            the institution; (2) the interest of the Government is protected by transfer
            of title or by other means deemed appropriate by the contracting officer or
            equivalent; and (3) the loss of useful value as to any one terminated
            agreement is limited to that portion of the acquisition cost which bears the
            same ratio to the total acquisition cost as the terminated portion of the
            agreement bears to the entire terminated agreement and other Government
            agreements for which the special tooling, special machinery, or equipment was
            acquired.
          + J 49e. Rental costs under unexpired leases are generally allowable where
            clearly shown to have been reasonably necessary for the performance of the
            terminated agreement, less the residual value of such leases, if (1) the
            amount of such rental claimed does not exceed the reasonable use value of the
            property leased for the period of the agreement and such further period as may
            be reasonable; and (2) the institution makes all reasonable efforts to
            terminate, assign, settle, or otherwise reduce the cost of such lease. There
            also may be included the cost of alterations of such leased property, provided
            such alterations were necessary for the performance of the agreement, and of
            reasonable restoration required by the provisions of the lease.
           + J 49f. Settlement expenses including the following are generally allowable:
            (1) accounting, legal, clerical, and similar costs reasonably necessary for
            the preparation and presentation to contracting officers or equivalent of
            settlement claims and supporting data with respect to the terminated portion
            of the agreement, and the termination and settlement of subagreements; and (2)
            reasonable costs for the storage, transportation, protection, and disposition
            of property provided by the Government or acquired or produced by the
            institution for the agreement, except when the institution is reimbursed for
            disposals at a predetermined amount in accordance with the provisions of
            Circular No. A-110.
          + J 49g. Claims under subagreements, including the allocable portion of claims
            which are common to the agreement and to other work of the institution, are
            generally allowable.
     
  >J 50. TRUSTEES.
     
   Travel and subsistence costs of trustees, regardless of the purpose of the trip, are
   unallowable.
     
K. CERTIFICATION OF CHARGES
     
  K 1. PAYMENT.
     
   To assure that expenditures for sponsored agreements are proper and in accordance with
   the agreement documents and approved project budgets, the annual and/or final fiscal
   reports or vouchers requesting payment under the agreements, will include a
     certification, signed by an authorized official of the university which reads
     essentially as follows: "I certify that all expenditures reported (or payment
     requested) are for appropriate purposes and in accordance with the provisions of the
   application and award documents."
     
  K 2. CERTIFICATION OF INDIRECT COSTS.
          + K 2a. Policy.
               o K 2a(1) No proposal to establish indirect cost rates shall be acceptable
                 unless such costs have been certified by the educational institution
                 using the Certificate of Indirect Costs set forth in paragraph b below.
                 The certificate must be signed on behalf of the institution by an
                 individual at a level no lower than vice president or chief financial
                 officer of the institution that submits the proposal. 
               o K 2a(2) No indirect cost rate shall be binding upon the Federal                 
Government if the most recent required proposal from the institution has
                 not been certified. Where it is necessary to establish indirect cost
                 rates, and the institution has not submitted a certified proposal for
                 establishing such rates in accordance with the requirements of this
                 section, the Federal Government shall unilaterally establish such rates.
                 Such rates may be based upon audited historical data or such other data
                 that have been furnished to the cognizant Federal agency and for which it
                 can be demonstrated that all unallowable costs have been excluded. When
                 indirect cost rates are unilaterally established by the Federal 
                  Government because of failure of the institution to submit a certified
                 proposal for establishing such rates in accordance with this section, the
                 rates established will be set at a level low enough to ensure that
                 potentially unallowable costs will not be reimbursed.      
    K 2b. Certificate.
     
   The certificate required by this section shall be in the following form:      
     
Certificate of Indirect costs
     
This is to certify that to the best of my knowledge and belief:      
(1) I have reviewed the indirect cost proposal submitted herewith;      
(2) All costs included in this proposal to establish billing or final  indirect costs rate for are
allowable in accordance with the requirements of the Federal agreement(s) to which they apply
and with the cost principles  applicable to those agreements.
     
(3) This proposal does not include any costs which are unallowable under  applicable cost
principles such as (without limitation):  advertising and  public relations costs, contributions and
donations, entertainment costs,  fines and penalties, lobbying costs, and defense of fraud
proceedings; and      
(4) All costs included in this proposal are properly allocable to Federal  agreements on the basis
of a beneficial or causal relationship between the  expenses incurred and the agreements to which
they are allocated in accordance  with the applicable requirements.
     
I declare under penalty of perjury that the foregoing is true and correct.      
     
     
Institution:
     
Signature:
     
Name of Official:
     
Title:
     
Date of Execution:
     
Exhibit A
     
     
  LIST OF COLLEGES AND UNIVERSITIES SUBJECT TO SECTION J12F OF CIRCULAR
A-21           + 1. Johns Hopkins University
          + 2. Stanford University
          + 3. Massachusetts Institute of Technology 
          + 4. University of Washington
          + 5. University of California - Los Angeles 
          + 6. University of Michigan
          + 7. University of California - San Diego
          + 8. University of California - San Francisco 
          + 9. University of Wisconsin - Madison
          + 10. Columbia University
          + 11. Yale University
          + 12. Harvard University
          + 13. Cornell University
          + 14. University of Pennsylvania
          + 15. University of California - Berkeley 
          + 16. University of Minnesota
          + 17. Pennsylvania State University
          + 18. University of Southern California 
          + 19. Duke University
          + 20. Washington University
          + 21. University of Colorado
          + 22. University of Illinois - Urbana 
          + 23. University of Rochester
          + 24. University of North Carolina - Chapel Hill  
          + 25. University of Pittsburgh
          + 26. University of Chicago
          + 27. University of Texas - Austin
          + 28. University of Arizona
          + 29. New York University
          + 30. University of Iowa
          + 31. Ohio State University
          + 32. University of Alabama - Birmingham 
          + 33. Case Western Reserve
          + 34. Baylor College of Medicine
          + 35. California Institute of Technology 
          + 36. Yeshiva University
          + 37. University of Massachusetts
          + 38. Vanderbilt University
          + 39. Purdue University
          + 40. University of Utah
          + 41. Georgia Institute of Technology
          + 42. University of Maryland - College Park 
          + 43. University of Miami
          + 44. University of California - Davis 
          + 45. Boston University
          + 46. University of Florida
          + 47. Carnegie-Mellon University
          + 48. Northwestern University
          + 49. Indiana University
          + 50. Michigan State University
          + 51. University of Virginia
          + 52. University of Texas-SW Medical Center Dallas  
          + 53. University of California - Irvine
          + 54. Princeton University
          + 55. Tulane University of Louisiana 
          + 56. Emory University
          + 57. University of Georgia
          + 58. Texas A & M University - all campuses 
          + 59. New Mexico State University
          + 60. North Carolina State University - Raleigh 
          + 61. University of Illinois - Chicago
          + 62. Utah State University
          + 63. Virginia Commonwealth University 
          + 64. Oregon State University
          + 65. SUNY - Stony Brook
          + 66. University of Cincinnati
          + 67. CUNY - Mount Sinai School of Medicine 
          + 68. University of Connecticut
          + 69. Louisiana State University
          + 70. Tufts University
          + 71. University of California - Santa Barbara 
          + 72. University of Hawaii - Manoa
          + 73. Rutgers State University of New Jersey 
          + 74. Colorado State University
          + 75. Rockefeller University
          + 76. University of Maryland - Baltimore
          + 77. Virginia Polytechnic Institute & State University  
          + 78. SUNY - Buffalo
          + 79. Brown University
          + 80. University of Medicine & Dentistry of New Jersey   
          + 81. University of Texas - Health Science Center San Antonio    
          + 82. University of Vermont
          + 83. University of Texas - Health Science Center Houston 
          + 84. Florida State University
          + 85. University of Texas - MD Anderson Cancer Center   
          + 86. University of Kentucky
          + 87. Wake Forest University
          + 88. Wayne State University
          + 89. Iowa State University of Science & Technology
          + 90. University of New Mexico
          + 91. Georgetown University
          + 92. Dartmouth College
          + 93. University of Kansas
          + 94. Oregon Health Sciences University
          + 95. University of Texas - Medical Branch - Galveston   
          + 96. University of Missouri - Columbia
          + 97. Temple University
          + 98. George Washington University
          + 99. University of Dayton