A detailed budget, which is consistent with instructions in the funding opportunity announcement and application instructions, is required as part of the application process. Applicants will find this information helpful in understanding the types of costs that are allowable under the program award.

Applicants generally will be required to prepare a detailed budget as part of the application consistent with instructions in the funding opportunity announcement and application instructions.

Among other things, applicants need to understand the types of costs that are allowable under the program or award, the cost principles to which it will be subject, differences between direct and indirect costs, circumstances requiring establishment of an indirect cost rate or research patient care cost rate, and any requirement for non-Federal participation (in the form of matching or cost sharing).

In general, HHS discretionary grant awards provide for reimbursement of actual, allowable program/project costs incurred. Except for those types of awards for which HHS will not reimburse indirect costs as specified below, program/project costs consist of allowable direct costs plus the allocable portion of indirect costs of the organization, less applicable credits (as described in Part II 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. These costs are identified as “indirect costs” or “facilities and administrative costs.” They generally include facilities operation and maintenance costs, depreciation, and administrative expenses. Organizations must have or negotiate an indirect cost rate to support a request for reimbursement of indirect costs (with limited exceptions specified below).

The various sets of government-wide (or, in the case of hospitals, HHS) cost principles establish the general standards for the allowability and allocability of costs and provide detailed guidance on the cost accounting treatment of costs as direct or indirect costs.

Applicability of a particular set of cost principles depends on the type of organization making the expenditure. For example, if a State government recipient collaborates with a university as a contractor under the grant, the State would be subject to the cost principles for States, while the university would be subject to the cost principles for institutions of higher education.

The allowability of costs also is subject to any requirements or limits established in the governing statute, program regulations, or the terms and conditions of awards. Because these considerations apply throughout the grants process, they are addressed in detail in Part II of the GPS.

Last Updated: June 4, 2024