Direct and Indirect Costs and Guidance for Applying Them

Citation
264 FW 1
Exhibit
2
Supersedes
Exhibit 2, 264 FW 1, 12/29/2020
Date
FWM
N/A
Originating Office
Branch of Financial Policy and Analytics

DIRECT COSTS are those costs that we can readily identify with producing a specific product or providing a specific service. Direct costs generally include direct labor, equipment, and other items that we purchase or consume related to a project.

DIRECT COSTS

Type

Guidance for Charging

(1) Regular Pay.

Charge the regular pay that employees earn while working on the project to the reimbursable Work Breakdown Structure (WBS).

(2) Fringe Benefits (retirement, health and life insurance).

Fringe benefits are allocated at the same rate applied to direct labor costs. (The Financial and Business Management System (FBMS) will automatically allocate the fringe benefit dollar amount against the WBS to which the employee’s regular pay is posted.)

(3) Overtime and Premium Pay.

Charge overtime and premium pay that employees earn while working on the project to the reimbursable WBS.

(4) Leave and Holidays (annual leave, sick leave, holidays, etc.).

As a general rule, do not charge leave and holidays to a reimbursable WBS unless the reimbursable agreement funds a duty station’s base operations or the payee has agreed to these types of charges. 

(5) Other Personnel Costs (allowances for offsite pay, location allowances, hardship pay, and hazardous duty pay).

Charge these costs in the same manner as regular pay.

(6) Equipment Costs (costs for equipment that we specifically purchase for use in an activity).

Equipment can be charged as a direct cost when the:

  • Value is $1,000 or less,
  • Reimbursable agreement calls for specialized equipment, or
  • Reimbursable agreement states that the Service must purchase equipment.

(7) Other Direct Costs (items that are consumed exclusively for completion of a specific activity).

Other direct costs may include:

  • Miscellaneous supplies and materials,
  • Equipment rentals,
  • Travel,
  • Purchased services, and
  • Contractual services.

INDIRECT COSTS are those costs that the Service incurs as part of providing a product or service, but that we cannot identify with producing a specific product or providing a specific service but which can show some relationship between, result from, or support to the product or service. Indirect costs include:

(1) Space rental;

(2) Utilities(including telephone services);

(3) Postage;

(4) Unemployment compensation benefits;

(5) Data processing, management, and control;

(6) Equipment costs and rentals (excluding those recovered as direct costs);

(7) Miscellaneous supplies and materials (excluding those recovered as direct costs);

(8) Training, employee development, and personnel transfers (including time in transit and per diem);

(9) Public information and inquiries (not reimbursed under the Freedom of Information Act);

(10) Safety management;

(11) Equal Employment Opportunity and other affirmative action programs; and

(12) Senior management reviews not directly attributable to a specific program.

Additional indirect costs include Headquarters office, Administrative Operations, Regional program management, and funds supplied to the Department of the Interior Working Capital Fund. 

CONSISTENT APPLICATION of costs means costs should be applied as either direct or indirect in similar situations in the same way. Avoid treating the same type of cost as direct in one instance and indirect in another (i.e., double counting).

Exception: Regional office staff may have substantial involvement in certain Natural Resource Damage Assessment and Restoration (NRDAR) projects. In such cases, their time may be considered a direct cost. We must use the Service’s Cost Documentation Tool (CDT) to obtain/apply indirect cost rates (see 264 FW 3).