THE NOTICE OF GRANT AWARD
During the review process, the applicant may be asked to submit
additional information or to undertake certain activities (such
as negotiation of a facilities and administrative (F&A) rate)
in anticipation of an award. However, such requests by NIH do
not guarantee that an award will be made.
The NGA is the legal document issued to notify the grantee that
an award has been made and that funds may be requested from the
HHS payment system. An NGA is issued for the initial budget period
and reflects future year commitments, if applicable. A revised
NGA may be issued to effect an action resulting in a change in
the period or amount of support or other change(s) in the terms
and conditions of award. NIH will not issue a revised NGA to reflect
a grantee's postaward rebudgeting. Until an IC has issued an NGA
for the initial award, any costs incurred by the applicant for
the project are incurred at its own risk (see "Allowability
Selected Items of Cost
(Preagreement) Costs" for NIH policy on allowability of preaward
The NGA sets forth pertinent information regarding the grant,
including, but not limited to, the following:
- Application/grant identification number ("grant number"),
- Name of grantee institution,
- Name of the PI,
- The approved project period and budget period start and end
- The amount of funds authorized for obligation by the grantee,
- The amount of anticipated future-year commitments (if applicable),
- The names of the cognizant IC Program Official and GMO, and
- Applicable terms and conditions of award either by reference
A grantee indicates acceptance of an NIH award and its associated
terms and conditions by drawing funds from the designated payment
system. If the grantee cannot accept the award, including the
legal obligation to perform in accordance with its provisions,
it should notify the GMO immediately upon receipt of the NGA.
If resolution cannot be reached, the GMO will void the grant or
take other appropriate action to terminate the award. NIH's determination
of applicable terms and conditions of award or a GMO's denial
of a request to change the terms and conditions is discretionary
and not subject to appeal (postaward appeal rights are discussed
in "Administrative Requirements
Grant Appeals Procedures").
Once the award is accepted by the grantee, the contents of the
NGA are binding on the grantee unless and until modified by a
revised NGA signed by the GMO.
For most grants, NIH uses the project period system of funding.
Under this system, projects are programmatically approved for
support in their entirety but funded in annual increments called
budget periods. The length of an initial project period (competitive
segment) or of any subsequent competitive segment is determined
by the NIH IC on the basis of any statutory or regulatory requirements,
the length of time requested by the applicant to complete the
project, any limitation on the length of the project period recommended
by the peer reviewers, the IC's programmatic determination of
the frequency of competitive review desirable for managing the
project, and the NIH funding principles. The total project period
consists of the initial competitive segment, any additional competitive
segment(s) authorized by a competing continuation award(s), and
any noncompeting extensions. NIH policy limits each competitive
segment to a maximum of 5 years (exclusive of noncompeting extensions).
A single award covering the entire period of support is generally
used only if the project is exclusively for construction or alteration
or renovation of real property, the total planned period of support
will be less than 18 months, or the project is awarded under a
special support mechanism.
The initial grant award provides funds for the conduct of the
project during the first budget period. Budget periods are usually
12 months long; however, shorter or longer budget periods may
be established for compelling programmatic or administrative reasons.
An NGA that documents approval of a project period that extends
beyond the budget period for which funds are provided (including
levels of future support) expresses NIH's intention to provide
continued financial support to the project. The amounts shown
for subsequent years represent projections of future funding levels
based on the information available at the time of the initial
award. Such projected levels of future support are contingent
on satisfactory progress, the availability of funds, and the continued
best interests of the Federal Government. They are not guarantees
by NIH that the project will be funded or will be funded at those
levels and create no legal obligation to provide funding beyond
the expiration date of the current budget period as shown in the
Grantees are required to submit a noncompeting continuation application
as a prerequisite to NIH approval and funding of each subsequent
budget period within an approved project period (see "Administrative
Awards"). A decision
to fund the next budget period will be formalized by the issuance
of an NGA indicating the new budget period and the amount of new
funding. The NGA will also reflect any remaining future-year commitments.
NIH may decide to withhold support for one or more of the reasons
cited in "Administrative Requirements
Termination, and Withholding of Support". A grantee may appeal
this decision only if the withholding was for the grantee's failure
to comply with the terms and conditions of a previous award (see
Each NGA will set forth the amount of funds awarded. The amount
may be shown either as a line item budget or as an amount for
total direct costs (not broken down by category) and an amount
for total F&A costs. The grantee has certain rebudgeting flexibility
within the overall amount awarded. See "Administrative
in Project and Budget". The grantee may be required to provide
matching funds under construction awards as specified in "
Grants" in Part III.
Additional Terms and
In addition to, or in lieu of, the standard terms and conditions
of award specified in this policy statement, NIH may use terms
and conditions for program-specific or award-specific reasons.
For example, if, on the basis of a grantee's application or other
available information, the GMO finds-at the time of award or at
any time subsequent to award-that the grantee's management systems
and practices are not adequate to ensure the appropriate stewardship
of NIH funds or to achieve the objectives of the award, the GMO
may impose special, more restrictive terms and conditions on the
award in accordance with 42 CFR 52.9 and 45 CFR 74.14 or 92.12.
NIH could require a grantee to obtain prior approval for expenditures
that ordinarily do not require such approval or to provide more
frequent reports. In addition to closer monitoring, NIH may assist
the grantee in taking any necessary corrective action.
HHS grant payments may be made by one of several advance payment
methods, including SMARTLINK II/Automated Clearinghouse (ACH),
CASHLINE/ACH, or by monthly cash request on an advance or reimbursement
basis, as specified in the NGA and as described below. Payments
under NIH grants are generally made as advance payments. Except
as indicated below, NIH grant payments are made by the Division
of Payment Management (PMS), HHS, in accordance with Department
of Treasury (Treasury) and OMB requirements, as implemented by
45 CFR 74.22 and 92.21. These requirements are intended to minimize
the time elapsing between the transfer of funds from the Federal
Government and disbursement by a grantee. Therefore, although
the grant may be financed by "advance payments," the
intent is that grantees draw funds on an as-needed basis only;
i.e., in advance of no more than 3 days' need.
All Federal funds deposited in a grantee's bank account from PMS
should be fully disbursed (checks written, signed, and issued
to the payees) by the close of business the next workday after
receipt of the funds. The potential for excessive Federal cash
on hand exists each time a grantee does not disburse Federal funds
in this manner. The grantee is responsible for determining when
the Federal funds have been deposited into its bank account for
each drawdown, ensuring that the funds are fully disbursed by
the close of business the next workday after they are received,
and immediately returning all undisbursed Federal funds to PMS.
The Treasury and OMB policies also establish accountability for
interest earned on advances of grant funds (see below)
for use of the reimbursement method if cash management requirements
are not met. Advances made by grantees to consortium participants
and contractors under grants must conform to substantially the
same standards of timing and amount that govern advances to the
Payments under grants to foreign or international organizations,
awards to individuals, and awards to agencies of the Federal Government
are made by the Office of Financial Management
(OFM), NIH (see
The SMARTLINK II/ACH method of advance payment makes direct deposit
of funds to a grantee's bank account and requires grantees to
have access to a computer terminal or other equipment able to
communicate a request for funds to PMS. SMARTLINK II/ACH provides
funds the day following the request with direct deposit using
the Federal Reserve Bank's (Richmond, Virginia) ACH process.
The CASHLINE/ACH method of advance payment provides for direct
deposit of funds to the recipient's bank account using a touch-tone
telephone to dial directly to a "voice response" computer
located at PMS. CASHLINE/ACH makes funds available the day following
the request with direct deposit using the Federal Reserve Bank's
(Richmond, Virginia) ACH process.
Monthly Cash Request
Grantees not eligible for an unrestricted advance of funds by
SMARTLINK II/ACH or CASHLINE/ACH are financed on a monthly cash
request basis. The monthly cash request may be on either an advance
or reimbursement basis, as specified by the NIH awarding office.
Monthly cash requests are used where closer monitoring of grantees'
cash management is required, including grantees whose financial
management systems do not meet the standards specified in 45 CFR
74.21 or 92.20, or under programs where reimbursement financing
is appropriate. A grantee may also be converted from an unrestricted
advance payment method to monthly cash request if, during postaward
administration, the GMO determines that a grantee is not complying
with the cash management requirements or other requirements of
the award, including the submission of complete and timely reports
(see "Administrative Requirements
and "Administrative Requirements Enforcement
of the Terms of Award").
If the cash request is for an advance payment, the grantee may
request grant funds monthly on the basis of expected disbursements
during the succeeding month and the amount of Federal funds already
on hand. A request for reimbursement may be submitted monthly
or more often, if authorized. For timely receipt of cash, a grantee
must submit the request through the awarding office early enough
for it to be forwarded to PMS at least 2 weeks before the cash
is needed. PMS makes payment to the grantee electronically through
the ACH process upon receipt of the approved payment request from
the awarding office.
Operational guidance for recipients is contained in the DHHS
Manual for Recipients Financed Under the Payment Management System.
Requests for this manual and inquiries regarding payments should
be directed to:
Division of Payment Management
Program Support Center
P. O. Box 6021
Rockville, MD 20852
Interest Earned on Advances
of Grant Funds
Except as provided in 45 CFR 74.22(k), any grantee included within
the applicability of those regulations (45 CFR 74.1) that receives
advance payments must maintain those advances in an interest-bearing
Interest earned on advances of Federal funds must be handled as
- Nongovernmental grantees: Any interest on Federal advances
of grant funds that exceeds $250 per year in the aggregate must
be remitted annually to PMS (as the government-wide agent for
collection) at the address indicated above. Recipients with electronic
funds transfer (EFT) capability should use an electronic medium
to remit interest.
- Governmental grantees other than States: Except as
provided in 45 CFR 92.21(i), any interest in excess of $100 per
year in the aggregate earned by local or Indian tribal governments
on Federal advances of grant funds must be remitted promptly,
and at least quarterly, to PMS at the address indicated above.
- State governments: State governments operating under
Treasury-State agreements are subject to the payment and receipt
of interest as specified in their agreements. All other State
grantees are expected to follow sound financial management practices
that minimize the potential for excessive Federal cash on hand
and to comply with the cash management requirements of 45 CFR
92.20 and 21.
Cost considerations are critical throughout the life cycle of
a grant. An applicant's requested budget is reviewed for compliance
with the governing cost principles and other requirements and
policies applicable to the type of funding, the type of recipient,
and the type of award. Any resulting award will include a budget
that is consistent with these requirements.
NIH anticipates that, because of the nature of research, the grantee
may need to modify its award budget during performance in order
to accomplish the award's programmatic objectives. Therefore,
NIH provides some flexibility for grantees to deviate from the
award budget, depending on the deviation's significance to the
project or activity. More significant postaward changes require
NIH prior approval. Prior approval requirements and authorities
are discussed in "Administrative Requirements
Project and Budget".
During postaward administration, the grantee and the GMO monitor
expenditures for conformance with cost policies. The GMO's monitoring
includes, among other things, responding to prior approval requests
and reviewing progress reports, audit reports, and other periodic
reports. The GMO may also use audit findings as the basis for
final cost adjustments (see "Administrative
This section addresses the general principles underlying the allowability
of costs, differentiates direct costs from F&A (indirect)
costs, and highlights a number of specific costs and categories
of cost for NIH applicants and grantees. It is not intended to
be all-inclusive and should be used as a supplement to the applicable
The Cost Principles
Most NIH grant awards provide for cost reimbursement (as contrasted
with fixed-price arrangements) and are subject to government-wide
or HHS-wide cost principles. The cost principles establish standards
for allowability of costs, provide detailed guidance on the cost
accounting treatment of costs as direct or F&A costs, and
set forth allowability principles for selected items of cost.
Applicability of a particular set of cost principles depends on
the type of organization making the expenditure. For example,
a for-profit organization collaborating with a university grantee
would be subject to the cost principles for commercial organizations,
while the university would be subject to the cost principles for
The cost principles are set forth in the following documents and
are incorporated by reference in 45 CFR 74.27 and 92.22. These
cost principles are not applicable to NIH fellowship awards. The
allowable use of funds under NIH fellowships is included in "
Research Service Awards" in Part III.
- OMB Circular A-21-Cost Principles for Educational Institutions
- OMB Circular A-87-Cost Principles for State and Local Governments
and Indian Tribal Governments
- OMB Circular A-122-Cost Principles for Non-Profit Institutions3
- 45 CFR Part 74, Appendix E-Cost Principles for Hospitals
- 48 CFR Subpart 31.2 (Federal Acquisition Regulation)-Cost
Principles for Commercial Organizations
Grantees are able to use their own previously developed accounting
systems, policies, and procedures to implement the cost principle
requirements as long as the standards prescribed in 45 CFR 74.21
or 92.20 for financial management systems are met.
The cost principles address four tests-reasonableness (including
necessity), allocability, consistency, and conformance with limitations
or exclusions as specified in the terms and conditions of the
award, including those in the cost principles themselves-that
NIH follows in determining the allowability of costs. These tests
apply regardless of whether the particular category of costs is
one specified in the cost principles or one governed by other
terms and conditions of an award. These tests also apply regardless
of treatment as a direct cost or an F&A cost. The fact
that a cost requested in a budget is awarded, as requested, does
not ensure a determination of allowability. The organization is
responsible for presenting costs consistently and must not include
costs associated with their F&A rate as direct costs.
The cost principle tests are highlighted here to indicate their
importance to the judgments NIH and other Federal staff will make
before, during, and after performance concerning the costs that
NIH will fund, and to indicate the variety of factors that will
be taken into account in determining the allowability of costs.
A cost may be considered reasonable if the nature of the
goods or services acquired or applied and the associated dollar
amount 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. The cost principles elaborate on this
concept and address considerations such as whether the cost is
of a type generally necessary for the organization's operations
or the grant's performance; whether the recipient complied with
its established institutional policies in incurring the cost;
and whether the individuals responsible for the expenditure acted
with due prudence in carrying out their responsibilities to the
Federal Government and the public at large as well as to the organization.
A cost is allocable to a specific grant, function, department,
etc., known as a cost objective, if the goods or services involved
are chargeable or assignable to that cost objective in accordance
with the relative benefits received or other equitable relationship.
A cost is allocable to a grant if it is incurred solely in order
to advance work under the grant; it benefits both the grant and
other work of the institution, including other grant-supported
projects; or it is necessary to the overall operation of the organization
and is deemed to be assignable, at least in part, to the grant.
Grantees must be consistent in assigning costs to cost
objectives. Therefore, under NIH grants, although costs may be
charged as either direct costs or F&A costs, depending on
their identifiable benefit to a particular project or program,
they must be treated consistently for all work of the organization
under similar circumstances, regardless of the source of funding,
so as to avoid duplicate charges.
The fourth aspect of allowability-conformance with limitations
and exclusions as contained in the terms and conditions of award-varies
by the type of activity, the type of recipient, and other variables
of individual awards. The section titled "
Costs/Activities" provides information common to most NIH
grants and, where appropriate, specifies some of the applicable
distinctions if there is a different treatment based on the type
of grant or grantee. Part III contains additional information
on allowability of costs for particular types of grants/grantees/activities.
Direct Costs and Facilities and Administrative
Project costs consist of the allowable direct costs incident to
the performance of the grant activities plus the allocable portion
of the allowable F&A costs of the organization, less applicable
credits (as described below and in the cost principles). A "direct
cost" is any cost that can be specifically identified with
a particular project, program, or activity or that can be directly
assigned to such activities relatively easily and with a high
degree of accuracy. Direct costs include, but are not limited
to, salaries, travel, equipment, and supplies directly benefiting
the grant-supported project or activity. Most organizations also
incur costs for common or joint objectives that, therefore, cannot
be readily identified with an individual project, program, or
organizational activity. Facilities operation and maintenance
costs, depreciation, and administrative expenses are examples
of costs that are usually treated as F&A costs.
The amount NIH awards for each budget period will reflect the
total approved budget for the grant, including direct costs and,
if applicable, F&A costs. If a grantee waives reimbursement
of full F&A costs, NIH will either not award F&A costs
or will award only partial F&A costs, as appropriate. The
NIH award amount shown in the NGA constitutes NIH's maximum
financial obligation to the grantee under that award.
Except as provided below, NIH will not reimburse F&A costs
unless the grantee has established an F&A (indirect cost)
rate covering the applicable activities and period of time. These
rates are negotiated on behalf of NIH by the Division of Cost
Allocation (DCA), HHS, the Office of Contracts Management (OCM),
NIH (responsible for negotiating F&A rates for for-profit
entities receiving awards from HHS), or other agency with cognizance
for F&A cost rate (and other special rate) negotiation. If
an applicant is advised by the GMO of the need to establish a
rate, the GMO will indicate the responsible office to be contacted.
F&A cost proposals must be prepared in accordance with the
applicable cost principles and guidance provided by the cognizant
agency, and must conform to other cost policies in this policy
statement. The following informational brochures5, which may be
obtained from DCA, provide guidance on preparing F&A cost6
- A Guide for Colleges and Universities (OASC-1, Revised)
- A Guide for Hospitals (OASC-3, Revised)
- A Guide for Non-profit Institutions (OASC-5, Revised)
- A Guide for State, Local, and Indian Tribal Governments
Further information concerning the establishment of F&A rates
and the reimbursement of F&A costs may be obtained from
or OCM (see Part IV). DCA should be consulted to determine the
need to submit a Disclosure Statement (DS-2) pursuant to the requirements
of OMB Circular A-21.
In accordance with NIH's cost management plan, regardless of the
type of recipient, the negotiated rate(s) in effect at the beginning
of the competitive segment will be used to determine the amount
budgeted for F&A costs for each year of the competitive segment.
Those grantees subject to OMB Circular A-21 may not rebudget from
direct costs to accommodate a rate increase unless the rate in
effect at the time of award was provisional. However, NIH will
not generally award additional F&A costs beyond those calculated
in the approved budget.
For grantees other than those subject to OMB Circular A-21, F&A
costs awarded may be subject to upward or downward adjustment,
depending on the type of rate negotiated, and these grantees may
rebudget between direct and F&A costs (in either direction)
without NIH prior approval, provided there is no change in the
scope of the approved project.
For all grantees, F&A costs are subject to downward adjustment
if the proposal that served as the basis for the negotiation included
Once NIH awards a grant, it is not obligated to make any supplemental
or other award for additional F&A costs or for any other purpose.
There are limited circumstances under which the GMO may award
F&A costs where none were previously awarded or may increase
the amount previously awarded. If an award does not include an
amount for F&A costs because the applicant or grantee did
not submit a timely F&A cost proposal, and the grantee subsequently
establishes a rate, the GMO may amend the award to provide an
appropriate amount for F&A costs if the amendment can be made
using funds from the same Federal fiscal year in which the award
was made. However, the amount will be limited to the F&A costs
applicable to the period after the date of the grantee's F&A
cost proposal submission. This provision does not affect local
government agencies that are not required to submit their F&A
(indirect) cost proposals to the Federal Government. They may
charge F&A costs to NIH grants based on the rate computations
they prepare and keep on file for subsequent Federal review.
If funds are available, a GMO may amend an award to provide additional
funds for F&A costs, but only under the following circumstances:
- NIH made an error in computing the award. This includes situations
in which a higher rate(s) than the rate(s) used in the grant award
is negotiated and the resulting rate agreement becomes effective
more than 1 calendar month before the beginning date of the grant
- NIH restores funds previously recaptured as part of a grantee's
- The grantee is eligible for additional F&A costs associated
with additional direct costs awarded for the supplementation or
extension of a project.
Grantees that use microcomputer-based automatic data processing
systems to prepare F&A cost proposals, supporting schedules,
etc. must be prepared to loan to HHS copies of the electronic
media on which the proposal data are stored (e.g., computer disks)
in addition to the operating application software and associated
user documentation for analyzing and manipulating the data. Materials
on loan to HHS will be used solely for review and analysis of
the proposal and will be returned to the grantee after the rates
are negotiated. When grantees obtain proprietary software packages
designed or intended to be used for preparing F&A cost proposals,
they must make sure that the terms of the acquisition (or other
arrangement with the software vendor) permit loaning the software
F&A costs are not provided if the type of award does not allow
reimbursement of such costs. This includes the following classes
- Fellowships: F&A costs will not be provided on
fellowships or similar awards where NIH funding is in the
form of fixed amounts or is determined by the normal published
tuition rates of an institution, and for which the recipient is
not required to account on an actual cost basis.
- Construction: F&A costs will not be provided on
- Grants to individuals, grants to foreign and international
organizations, and grants to Federal institutions: F&A
costs will not be provided on grants to these entities except
as specified in "Grants to Foreign
Organizations, and Domestic Grants with Substantial Foreign Components"
in Part III.
- Grants in support of scientific meetings (conference grants):
F&A costs will not be provided under grants in support of
Other circumstances under which it is not necessary for a grantee
to establish an F&A rate include:
- Research training grants and career development awards:
F&A costs under research training grants and career development
awards will be reimbursed at a rate of 8 percent of total allowable
direct costs, exclusive of tuition and related fees, health insurance,
expenditures for equipment, and contracts in excess of $25,000,
regardless of actual F&A costs, unless the grantee is a State
government, local government, or Indian tribal government. Such
grants to these governmental organizations will be reimbursed
on the basis of their negotiated F&A rates.
- Where the organization's total operations consist of a
single grant-supported project or where the organization appropriately
and consistently treats all costs as direct costs to projects
and accounts for them as such: In the latter case, the GMO
must be satisfied that the organization's accounting system can
adequately identify and support all costs as direct costs to the
project. This includes being able to identify and segregate costs
on the basis of a process that assigns costs commensurate with
the benefits provided to individual projects (see "Administrative
Management Systems and Procedures
Management System Standards").
Cost Transfers, Overruns, and Accelerated and Delayed
Cost transfers to NIH grants by grantees, or by consortium participants
or contractors under grants, that represent corrections of clerical
or bookkeeping errors must be accomplished within 90 days of when
the error is discovered. The transfers must be supported by documentation
that fully explains how the error occurred and a certification
of the correctness of the new charge by a responsible institutional
official of the grantee, consortium participant, or contractor.
An explanation merely stating that the transfer was made "to
correct error" or "to transfer to correct project"
is not sufficient. Transfers of costs from one budget period to
the next solely to cover cost overruns are not allowable.
Grantees must maintain documentation of cost transfers, pursuant
to 45 CFR 74.53 or 92.42, and must make it available for audit
or other review (see "Administrative
Retention and Access"). Frequent errors in recording costs
may indicate the need for accounting system improvements and/or
enhanced internal controls. If such errors occur, grantees are
encouraged to evaluate the need for improvements and to make whatever
improvements are deemed necessary to prevent reoccurrence. NIH
may also require a grantee to take corrective action by imposing
additional terms and conditions on an award(s).
The GMO monitors grantee expenditure rates within and between
budget periods of individual grants. The funding that NIH provides
for each budget period is based on an assessment of the effort
to be performed during that period and the grantee's associated
budget. Although NIH allows its grantees certain flexibilities
with respect to rebudgeting, carryover balances, and preaward
costs (see "Administrative Requirements
Changes in Project
and Budget"), NIH expects the rate and types of expenditures
to be consistent with the approved project and budget and may
question or restrict expenditures that appear inconsistent with
The GMO may review grantee cash drawdowns to determine whether
they indicate any pattern of accelerated or delayed expenditures.
Expenditure patterns are of particular concern because they may
indicate a deficiency in the grantee's financial management system
and/or internal controls. Accelerated or delayed expenditures
may result in a grantee's inability to complete the approved project
within the approved budget and period of performance. In these
situations, the GMO may seek additional information from the grantee
and may make any necessary and appropriate adjustments.
Allocation of Costs and Closely Related
When salaries and/or other activities are supported by two or
more sources, issues arise as to how the direct costs should be
allocated among the sources of support. In general, if a cost
benefits two or more projects or activities in proportions that
can be determined without undue effort or cost, it should be allocated
to the projects on the basis of 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, it may be allocated or transferred to the benefited
projects on any reasonable basis. If the grantee wants to allocate
costs normally assignable to multiple projects to one of those
projects or else to treat multiple projects as a single cost objective,
it must obtain NIH prior approval for this "closely related
work" in accordance with the following:
- The grants must have the same PI and be funded by a single
- The grants must be scientifically and technically related,
- There must be no change in the scope of the individual grants
- The arrangement must not be detrimental to the effort approved
under each individual award, and
- The relatedness must not be used to circumvent the terms and
conditions of an individual award.
Awards under the Federal Demonstration Partnership (FDP) are permitted,
with funding agency approval, to use the "program of related
projects" provision of the FDP terms and conditions to treat
multiple projects under the same or different PIs and/or different
funding agencies as a single cost objective for purposes of OMB
The term "applicable credits" refers to those receipt
or negative expenditure types of transactions that operate to
offset or reduce direct or F&A cost items. Typical examples
are purchase discounts, rebates or allowances, recoveries or indemnities
on losses, and adjustments for overpayments or erroneous charges.
Additional information concerning applicable credits is included
in the cost principles and in the HHS guides available from DCA.
Applicable credits to direct charges made to NIH grants must be
treated as an adjustment on the grantee's Financial Status Report
(FSR), whether those credits accrue during or after the period
of grant support. (See "Administrative
and "Administrative Requirements Closeout
Reports".). The awarding office will notify the grantee of
any additional actions that may be necessary.
Services Provided by Affiliated Organizations
A number of universities and other organizations have established
closely affiliated, but separately incorporated, institutions
to facilitate the administration of research and other programs
supported by Federal funds. Such legally independent institutions
are often referred to as "foundations," although this
term does not necessarily appear in the name of the institution.
Typically, the parent organization provides considerable support
services, in the form of administration, facilities, equipment,
accounting, and other services, to its foundation, and the latter,
acting in its own right as an NIH grantee, includes the cost of
these services in its F&A proposal.
Costs incurred by an affiliated but separate legal entity in support
of a grantee foundation are allowable for reimbursement under
NIH grants only if at least one of the following conditions is
- The grantee foundation is charged for, and is legally obligated
to pay for, the services provided by the parent organization.
- The affiliated organizations are subject to a State or local
law that prescribes how Federal reimbursement for the costs of
the parent organization's services will be expended and requires
that a State or local official acting in his or her official capacity
approves such expenditures.
- There is a valid written agreement between the affiliated
organizations whereby the parent organization agrees that the
grantee foundation may retain Federal reimbursement of parent
organization costs. The parent organization may either direct
how the funds will be used or permit the grantee foundation that
- The affiliated organizations submit joint applications for
an NIH grant award, and the grant award is made to them jointly.
If none of the above conditions is met, the costs of the services
provided by the parent organization to the grantee foundation
are not allowable for reimbursement. However, the services may
be acceptable for cost-sharing purposes.
Allowability of Costs/Activities
The governing cost principles address selected items of cost,
some of which are mentioned in this section for emphasis. The
cost principles themselves should be consulted for the complete
explanation of allowability or unallowability for those items
or types of cost. This subsection also includes NIH-specific requirements
concerning costs and activities.
This subsection is not intended to be all-inclusive. The allowability
of costs under NIH grants may be subject to additional or alternative
requirements specified in the program legislation, regulations,
or the specific terms and conditions of an award, which will take
precedence over the general discussion provided here. Applicants
or grantees that have questions concerning the allowability of
particular costs should contact the IC GMO.
If a cost is allowable, it is allocable as either a direct cost
or an F&A cost, depending on the grantee's accounting system.
For some costs addressed in this section, the text specifies whether
the cost is usually a direct cost or an F&A cost, but it does
not address that aspect of allocability for every category of
Unless otherwise indicated in the NGA, an award based on an application
that includes specific information concerning any costs and/or
activities requiring prior approval constitutes the prior approval
for those costs/activities. The grantee is not required to obtain
any additional approval for those costs/activities. Postaward
requests to incur costs or undertake activities requiring prior
approval that are not described in the approved application are
subject to the requirements in "Administrative
in Project and Budget".
Contractors under grants are subject to the requirements of the
cost principles otherwise applicable to their organization and
to any requirements placed on the contractor by the grantee in
order to comply with the terms and conditions of the NIH grant.
The cost principles do not address profit or fee. NIH policy allows
the payment of fee on SBIR/STTR grants (see "
Grants to For-Profit
Organizations" in Part III) but NIH will not provide profit
or fee under any other grant program or support mechanism to any
type of recipient. A fee may not be paid by a grantee to a consortium
participant, including a for-profit organization, under a consortium