Types of Costs

This section is intended to provide broad definitions for the types of costs that can be appropriately charged to sponsored projects. These costs can be categorized in two ways: direct costs or indirect costs. Indirect costs are often referred to as “facilities and administrative” (F&A) costs, or “overhead.” It is important to recognize that indirect costs are real costs to the University. Cost sharing may be required on certain sponsored projects and can appear as both direct and indirect costs.

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Direct Costs and Indirect Costs (F&A) Defined

Direct Costs

Direct costs are those which can be identified specifically with a particular sponsored project and which can be directly assigned to such activities, relatively easily and with a high degree of accuracy. For example, the supplies needed for a research project are easy to identify, as are the salaries of the individuals who will work on the project and travel expenses for those individuals.

Indirect Costs (Facilities and Administrative Costs, F&A)

The OMB defines Indirect costs as “costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives.” Such costs are not directly allocable to one specific project because the indirect costs support multiple projects. For instance maintenance on a HVAC system may improve the air quality in many laboratories and offices in one building. Conversely, direct costs can be allocated to a specific cost objective with a high degree of accuracy. Employees who are working on the project or activity clearly meet the direct cost definition.

How are Indirect Rates Determined?

Every five years or so Duke submits and Indirect Cost Rate Proposal (ICRP) to the Department of Health and Human Services (DHHS) and then negotiates with DHHS the final rates. Though the government caps the Administrative costs at 26%, Duke’s calculation of its administrative costs is always a couple of points higher. The Facilities cost is not capped, but that also gets negotiated.

In general, a cost can either be direct or indirect but not both. If the cost is used as part of the ICRP, then it should not be charged directly to any grants. However, several types of costs live in both worlds and these deserve special consideration when building the proposal budget or charging expenses to an award.


Allowable and Unallowable Costs


Allowable Costs

The primary source for identifying costs which may be charged to grants, contracts, and other agreements is the Uniform Guidance (link is external) prepared by the Office of Management and Budget (OMB). The document identifies costs that may be charged to these agreements and further clarifies which of those costs may be charged as direct costs and which may be charged as indirect costs. While not all of the projects sponsored at Duke are federally funded, and while not all sponsors allow the inclusion of indirect costs in a project budget, the distinction between direct and indirect costs must be maintained throughout the University.

Not every cost associated with a project may be included in the budget. For example, entertainment costs are not allowable either as direct or F&A costs.

Unallowable Costs

A sponsor's program announcement may identify costs which cannot be included in the budget, although they would qualify as direct costs according to Uniform Guidance.

Sponsors may also limit the dollar amount in certain budget categories. For example, salary caps may be set in place as part of appropriation legislation or agency policy. Many federal agencies also limit payment to individual consultants.

For either Indirect (F&A) costs or direct costs, the federal government identifies specific activities or transactions that are not allowed to be charged to sponsored research, either as a direct cost or an F&A cost. The following costs have been specifically identified by the government as unallowable on government grants and contracts.

The list below is not all-inclusive. Individual agency and program requirements may list other "unallowable" costs. When in doubt, adhere to the federal government's Uniform Guidance (link is external).

  1. Advertising for general promotion of the University, including printed materials, promotional items, memorabilia, gifts, and souvenirs
  2. Advertising for recruitment purposes that includes color or is excessive in size
  3. Alcoholic beverages
  4. Alumni or fundraising activities
  5. Antiques
  6. Bad debt write-offs
  7. Charitable Contributions
  8. Commencement expenses
  9. Decorative objects for private offices
  10. Entertainment
  11. Fine/original art
  12. Fines and penalties
  13. First-class/business-class air travel differentials
  14. Flowers
  15. Gifts, prizes, and awards
  16. Goods or services for personal use
  17. Lobbying
  18. Memberships in airline travel clubs
  19. Memberships in civic, social, community organizations or country clubs
  20. Faculty and exempt staff salary in excess of base rates paid by the institution.
  21. Selling or marketing products or services of the University.
  22. Social events

Cost Sharing and Matching

Cost-sharing is that portion of a project's costs, direct or F&A, not borne by the sponsor. These costs may be contributed by the University or by third parties. The University will only commit to cost-sharing on a project if it is required by the sponsor and, generally only in the amount required.

While the terms matching and cost-sharing are often used interchangeably, matching has a specific meaning. Some agencies have programs which will "match" funds raised by Duke from third parties. The match is given in addition to the basic award. ORS is required to certify the award of the third party funds before the agency will provide the matching award.

SPS can prepare budgets with full cost-sharing details and, if not provided by the sponsor, can create an appropriate budget form to show the cost-sharing.

Four Types of Cost-sharing

  • faculty effort

  • other Duke resources such as non-faculty salaries, equipment, supplies and materials necessary for the project
  • reductions/waivers of indirect costs, considered only when an agency or program has a formal indirect cost rate lower than the University's current rate or disallows indirect cost recovery
  • third party contributions, either in-kind or cash, for example, the donated use of an off-campus meeting space or auditorium for which a fee is usually charged.

Required Documentation for Commitments


      Documentation Required

      Form Required

      Faculty effort



      Other resources*

      Letter of commitment


      Waiver of F&A

      Policy statement from sponsor


      3rd Party commitment

      Letter of commitment


      * Other Duke resources include staff salaries, equipment, copying, etc.

      NOTE: The University requires that F&A costs be calculated on faculty effort and other contributed resources, and included in the cost-sharing totals unless this is unallowable by the sponsor. The rationale is as follows: If instead of contributing these resources, Duke had asked the sponsor to provide them, Duke would also have asked the sponsor to pay the associated F&A costs. The F&A costs which the University will not collect are considered part of the cost to Duke of supporting the project.

      Filling out the Request for Cost-sharing Form

      If the sponsor requires cost-sharing, the proposal must be accompanied by a completed Request for Cost-sharing form when it is submitted to ORS for review. For each type of cost-sharing, for each year of the project, the PI should complete the worksheet section of the form and attach letters of commitment as described in the table above.

      Required Endorsements

      • School of Arts and Sciences: Department chair only (except for NIH salary above the cap which requires the Dean's approval)
      • School of Engineering: Department chair and dean
      • Schools of Law and Divinity: Dean only
      • Fuqua School of Business and the Nicholas School of the Environment (NSOE): Business Manager
      • If more than one unit will be contributing faculty salary or other resources, the appropriate chairs and deans from each unit must sign the form. If a School of Medicine Department is included, their approval of the SPS entry serves as approval.

      Agencies which routinely require cost-sharing will provide budget forms with two columns, one for the request and one for Duke's contribution. If a form is not provided, the PI should create a double-column budget clearly describing Duke's commitment by cost category. Such a budget can easily be created in SPS.

      Federal funds cannot be used to match other federal funds. Also, one source of funds, whether internal or third party, may not be used as a match more than once, nor used to meet more than one cost-sharing requirement.