Direct Administrative Costs (DAC) and Indirect Costs are similar and can sometimes be confused for one another. Both terms refer to Administrative Costs (i.e. Management Costs) that a subrecipient (an LEA) incurs during the administration of a grant. However, the forms of these administrative costs are different. Direct Administrative Costs are normally easily identifiable and Indirect Costs are not identifiable without undue burden.
Indirect costs are costs incurred that are not directly tied to the grant; however, they are indirectly related to the grant. These costs are difficult to associate with a specific project or program. Depreciation, general administrative costs, information technology, and facility and maintenance costs are a few examples of costs that are frequently classified as indirect costs. These costs are difficult to identify without undue burden. As a result, an indirect cost rate(s) is issued for the recovery of these costs on a grant.
Direct administrative costs (DAC) are the costs incurred to manage the grant directly. Any expense that can be simply and accurately assigned directly to a single project, program, or activity is considered a direct cost. Salary, travel, equipment, and supplies that directly benefit the grant-supported project or activity are examples of direct expenditures, but they are not the only ones. The costs are associated with the grant’s administrative functions such as staff time spent on specific grant projects or requirements such as expense reporting, grant management, meetings with the grantor, team meetings, etc. The costs are usually not difficult to identify and can be controlled from within the grant document or by a grant manager.
Title I, Part A Comparability reporting is due. The Federal Programs Director spent 20 hours total preparing and submitting the report. During the time spent, the LEA’s PEIMS Clerk and Business Manager provided the Director with the information needed to conduct the required testing. In addition, the Director’s Executive Assistant provided administrative support for the testing and by completing portions of the Comparability Computation form and uploading the information into the reporting system. Both the Federal Programs Director and Executive Assistant positions are federally funded, and the PEIMS Clerk and the Business Manager positions are not federally funded.
Examples of the direct costs in the above scenario applicable to the Federal Programs Director and Executive Assistant:
Examples of the indirect costs in the above scenario applicable to the Federal Programs Director and Executive Assistant:
Depending upon how the LEA classified the PEIMS clerk and the Business manager’s salary, etc., on past grants and in the establishment of the LEA’s indirect cost rates, the costs may be considered indirect or direct administrative costs. Certain costs that would often be handled as indirect costs may alternatively be deemed direct costs if they can be tied to a specific award. For most LEAs, the PEIMS clerk and the Business Manager are considered Indirect Costs in the establishment of the indirect cost rate and should be treated as indirect costs. When in doubt, refer to your indirect cost rate agreement.
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