The Federal Office of Management and Budget has established guidelines for administering grants and contracts between institutions and federal agencies. A-21 is designed to identify direct and indirect costs associated with activities supported by federal grants and contracts and to facilitate reimbursement of those costs to institutions. Those who wish a more thorough understanding of principles for determining costs applicable to federal grants, contracts and other agreements with educational institutions should consult A-21 itself.
All projects incur both direct and indirect costs.
Administering an activity supported by a federal grant or contract involves identifying all associated 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. Indirect costs for more than one function are allocated to individual functions performed in each building on the basis of usable square feet. Interest on debt associated with certain buildings, equipment and capital improvements. These costs are allocated in the same manner as the depreciation or use allowances on the buildings, equipment and capital improvements to which the interest relates.