Direct Costs

Direct costs are those costs that can be identified specifically with a particular sponsored project. They can be identified relatively easily with a high degree of accuracy. Examples are PI effort/payroll and research supplies specific to the project. Direct costs should be treated consistently, meaning like costs must be treated the same in like circumstances. Direct costs must also conform to any limitations or exclusions set forth in regulations or in the award agreement as to types or amounts of cost items. A general guideline is to consider if the cost is allowable, reasonable and allocable.

Allowable

A direct cost on an award fund must be allowable. To be allowable, it must be necessary and reasonable for the performance of the award. It is a cost or activity specifically permitted or not specifically prohibited by the terms and conditions of the award and institutional policy. It must be adequately documented and not be included as a cost or used to meet cost sharing or matching requirements on any other project. For a few common unallowable examples, please see the Common Unallowable Grant Expenses FAQ.

Reasonable

A direct cost on an award fund must also be reasonable. A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved, reflect the action that a prudent person would have taken under similar circumstances. Reasonable costs are generally recognized as necessary for the performance of the project.

Allocable

A direct cost on an award fund must also be allocable. A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received. The cost must have a direct benefit to the project being charged. If the cost benefits multiple projects, a distribution method should be used, which must be reasonable and documented. The basis of such an allocation method should relate to the work being performed.

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