In this episode of Grants Management Experts, Jasmine Markanday breaks down one of the most critical concepts in federal grant compliance: direct costs. Guided by 2 CFR 200.413, Jasmine explains what qualifies as a direct cost, when certain costs can shift from indirect to direct, and why consistency is the cornerstone of compliance.
From administrative staff salaries to minor purchases, unallowable costs, and nonprofit-specific considerations, this episode equips you with the clarity to correctly classify expenses and avoid compliance pitfalls. Whether you’re writing a grant budget or managing one post-award, this deep dive will help you protect your organization’s resources and credibility.
What You’ll Learn:
The definition of direct costs under 2 CFR 200.413 and how they differ from indirect costs.
Key questions to ask when deciding if an expense is a direct cost.
Special conditions for charging administrative and clerical salaries directly.
How to handle minor items and apply consistent treatment.
The role of unallowable costs in calculating indirect cost rates.
Nonprofit-specific rules for member and client service activities.
Key Takeaways:
A cost is direct if it can be specifically tied to a grant’s objectives with accuracy.
Consistency is non-negotiable—similar costs must be treated the same way across funding sources.
Some typically indirect expenses (like cybersecurity upgrades) can be charged directly if they clearly support one grant.
Administrative salaries may only be charged directly if they meet all three CFR conditions.
Unallowable costs, while not chargeable, must still be included in the direct cost base for rate calculations.
Pro Tip:Train your staff on cost classification policies—misclassification can lead to audit findings, repayment of funds, and loss of credibility.
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Quote to Remember:
“Direct costs aren’t just about accuracy—they’re about fairness to your organization, your funders, and the federal government.” — Jasmine Markanday