UNIVERSITY OF MASSACHUSETTS
Policy for the Exclusion of Equipment Fabrication Costs from
the Modified Total Direct Cost Base
OMB Circular A-21 defines modified total direct costs (MTDC) as
consisting of salaries and wages, fringe benefits and materials,
and supplies, services, travel, and subgrants and subcontracts
up to $25,000 each. Equipment expenditures required to carry out
the research activity are excluded from the MTDC base.
From time to time for reasons of cost efficiency, timeliness of
delivery, nonavailability of uniqueness of a particular piece
of equipment, it may be necessary or advantageous for a research
project to fabricate a piece of equipment rather than purchase
the item.
In order to provide a solution for those projects where the indirect
costs associated with the fabrication of capital equipment would
present a financial disincentive and the total cost of fabrication
(labor, fringe benefits and material costs), is greater than $5,000
the following procedure may be utilized:
- The principal investigator will indicate on the internal processing
form the salaries, related fringe benefits and material costs
which are expected to be incurred in the fabrication of equipment.
- In finalizing the budget proposal for submission to the funding
agency, the costs identified in l above will be excluded from
the modified total direct cost base.
- Upon funding of the proposal, the budget will be established
in two separate accounts within the University's Financial Accounting
System. One account will be used for funding equipment fabrication
costs and the other account for the remaining expenditures of
the project.
- As individual pieces of equipment are completed, or no later
than the conclusion of the project, the principal investigator
must report the item(s) to the Property and Inventory Control
Office so that the item(s) may be properly tagged and incorporated
in the inventory records of the campus.
- The cost of fabricated equipment must be reasonable and supported
by adequate documentation which is subject to review by the Property
and Inventory Control Office or other responsible officials.
- In cases where the principal investigator fails to account
for equipment by the termination of the project for inclusion
in the inventory system, the amount of indirect cost recovery
foregone by excluding fabrication costs from the MTDC base will
be recovered from the departmental RTF return. In cases where
the balance available in the departmental RTF return is insufficient
to recover the full amount of foregone indirect costs, recovery
will be made from the RTF return of the appropriate dean.
These guidelines apply only to the fabrication of equipment which
is intended to become part of the of the University's equipment
inventory.
Costs of fabrication which exceed the initial amount budgeted
are not subject to indirect cost exclusion.
