Audit 378030

Federal award expenditures consist of direct and indirect costs, which are commonly referred to as facilities and administrative (F&A) costs. Direct costs are those that can be easily identified with an individual federally sponsored project. The salary of a principal investigator of a sponsored research project and the materials consumed by the project are examples of direct costs. Unlike direct costs, indirect costs cannot be easily identified with an individual federally sponsored project. Indirect costs are the costs of services and resources that benefit both sponsored and nonsponsored projects and activities. Indirect costs consist of expenses incurred for administration, library, plant maintenance, and building and equipment depreciation. The RF and federal agencies use an indirect cost rate to charge indirect costs to individual federally sponsored projects. The rate is a result of a number of complex cost allocation procedures that the RF uses to allocate its indirect costs to both sponsored and nonsponsored activities. Rates are negotiated with and approved by the RF's cognizant audit agency, the U.S. Department of Health and Human Services.