Healthcare Finance

Assignment 1-2

M. Isaac Ripple

Summary of Federal Cost Principles for NIH Grant Awards

https://grants.nih.gov/grants/policy/nihgps/HTML5/
section_7/7.2_the_cost_principles.htm

Based upon the information provided on the National Institute of Health’s

online policy statement, the cost principles are standards set regarding the
types of costs which are allowable and reimbursable under a grant from the
NIH. In each case, the cost principles are specific to the type of organization
being awarded the grant. This means that the cost principles for a grant based
on educational work through an educational organization would be unique to
that case and organization. While cost principles apply to all organizations
awarded a grant by the NIH, they do not apply to Kirschstein-NRSA individual
fellowship awards (these awards have their own cost principles).

In order to validate and account for the costs associated for

reimbursement under an NIH grant, there is a four-pronged test to determine if
the costs can be covered by the grant monies. First, the costs must be
considered reasonable. This means that the amount of money being spent on a
service or for a product related to the scope of study is equivalent to the cost
of the service or product purchased without financial assistance from the grant.
Second, the cost must be allocable, meaning that the money spent for services
or work on the grant must show a continuation of progress to both the grant
and the associated progress of the research to the parent organization.
Furthermore, direct costs can be allocable to the grant directly if the money
spent is only a result of advancing the work of the grant. Third, the costs must
be consistent. This means that grant awardees need to demonstrate
consistency in accounting and associating costs with their cost objectives. There
are two type of costs, direct or F&A (overhead or indirect costs); regardless of
the type or number of costs, they must be consistently filed and categorized.
Finally, costs need to be conformant to the boundaries and stipulations set
forth in the grant award itself. Again, each grant award is unique and has
award specific qualifiers regarding costs and cost principles. These qualifiers are
linked to the type of grant applied for, the type of organization or individual
applying for the grant, and the specific minutia of the awards themselves.