The NGA is the legal document issued to notify the grantee that an award has been made and that funds may be requested from the HHS payment system. An NGA is issued for the initial budget period and reflects future-year commitments, if applicable. A revised NGA may be issued to effect an action resulting in a change in the period or amount of support or other change(s) in the terms and conditions of award. NIH will not issue a revised NGA to reflect a grantee's postaward rebudgeting. Until an IC has issued an NGA for the initial award, any costs incurred by the applicant for the project are incurred at its own risk (see "Allowability of Costs/Activities—Selected Items of Cost—Preaward (Preagreement) Costs" for NIH policy on the allowability of preaward costs).

The NGA sets forth pertinent information regarding the grant, including, but not limited to, the following:

• Application/grant identification number ("grant number"),
• Name of grantee institution,
• Name of the PI,
• The approved project period and budget period start and end dates,
• The amount of funds authorized for obligation by the grantee,
• The amount of anticipated future-year commitments (if applicable),
• The names of the cognizant IC Program Official and GMO, and
• Applicable terms and conditions of award, either by reference or inclusion.

A grantee indicates acceptance of an NIH award and its associated terms and conditions by drawing funds from the designated payment system. If the grantee cannot accept the award, including the legal obligation to perform in accordance with its provisions, it should notify the GMO immediately upon receipt of the NGA. If resolution cannot be reached, the GMO will void the grant or take other appropriate action to terminate the award. NIH's determination of applicable terms and conditions of award or a GMO's denial of a request to change the terms and conditions is discretionary and not subject to appeal (postaward appeal rights are discussed in "Administrative Requirements—Grant Appeals Procedures"). Once the award is accepted by the grantee, the contents of the NGA are binding on the grantee unless and until modified by a revised NGA signed by the GMO.

Funding

For most grants, NIH uses the project period system of funding. Under this system, projects are programmatically approved for support in their entirety but are funded in annual increments called budget periods. The length of an initial project period (competitive segment) or of any subsequent competitive segment is determined by the NIH IC on the basis of any statutory or regulatory requirements, the length of time requested by the applicant to complete the project, any limitation on the length of the project period recommended by the peer reviewers, the IC's programmatic determination of the frequency of competitive review desirable for managing the project, and the NIH funding principles. The total project period consists of the initial competitive segment, any additional competitive segment(s) authorized by a competing continuation award(s), and any noncompeting extensions. NIH policy limits each competitive segment to a maximum of 5 years (exclusive of noncompeting extensions). A single award covering the entire period of support is generally used only if the project is solely for construction or alteration or renovation of real property, the total planned period of support will be less than 18 months, or the project is awarded under a special support mechanism.

The initial grant award provides funds for the conduct of the project during the first budget period. Budget periods are usually 12 months long; however, shorter or longer budget periods may be established for compelling programmatic or administrative reasons. An NGA that documents approval of a project period that extends beyond the budget period for which funds are provided (including levels of future support) expresses NIH's intention to provide continued financial support to the project. The amounts shown for subsequent years represent projections of future funding levels based on the information available at the time of the initial award. Such projected levels of future support are contingent on satisfactory progress, the availability of funds, and the continued best interests of the Federal Government. They are not guarantees by NIH that the project will be funded or will be funded at those levels and create no legal obligation to provide funding beyond the expiration date of the current budget period as shown in the NGA.

Grantees are required to submit a noncompeting continuation application as a prerequisite to NIH approval and funding of each subsequent budget period within an approved project period (see "Administrative Requirements—Noncompeting Continuation Awards"). A decision to fund the next budget period will be formalized by the issuance of an NGA indicating the new budget period and the amount of new funding. The NGA also will reflect any remaining future-year commitments. NIH may decide to withhold support for one or more of the reasons cited in "Administrative Requirements—Enforcement Actions—Suspension, Termination, and Withholding of Support." A grantee may appeal this decision only if the withholding was for the grantee's failure to comply with the terms and conditions of a previous award (see "Administrative Requirements—Grant Appeals Procedures").

Budget

Each NGA sets forth the amount of funds awarded. The amount may be shown either as a line item budget or as an amount for total direct costs (not broken down by category) and an amount for F&A costs, if applicable. Modular awards represent a type of award made without a categorical budget (see "Modular Applications and Awards"). The grantee has certain rebudgeting flexibility within the overall amount awarded (see "Administrative Requirements—Changes in Project and Budget"). The grantee may be required to provide matching funds under construction awards as specified in "Construction Grants—Matching" as well as under other NIH programs or awards as specified in applicable program announcements.

Additional Terms and Conditions

In addition to, or in lieu of, the standard terms and conditions of award specified in this policy statement, NIH may use terms and conditions for program-specific or award-specific reasons. For example, if, on the basis of a grantee's application or other available information, the GMO finds—at the time of award or at any time subsequent to award—that the grantee's management systems and practices are not adequate to ensure the appropriate stewardship of NIH funds or to achieve the objectives of the award, the GMO may impose special, more restrictive terms and conditions on the award in accordance with 42 CFR 52.9 and 45 CFR 74.14 or 92.12. NIH could require a grantee to obtain prior approval for expenditures that ordinarily do not require such approval or to provide more frequent reports. In addition to closer monitoring, NIH may assist the grantee in taking any necessary corrective action.

HHS grant payments may be made by one of several advance payment methods, including SMARTLINK II/Automated Clearinghouse (ACH), CASHLINE/ACH, or by cash request on an advance or reimbursement basis, as specified in the NGA and as described in this section. Payments under NIH grants are generally made as advance payments. Except as indicated in this section, NIH grant payments are made by the Division of Payment Management (PMS), HHS, in accordance with Department of Treasury (Treasury) and OMB requirements, as implemented by 45 CFR 74.22 and 92.21. These requirements are intended to minimize the time elapsing between the transfer of funds from the Federal Government and disbursement by a grantee. Therefore, although the grant may be financed by "advance payments," the intent is that grantees draw funds on an as-needed basis only, i.e., in advance of no more than 3 days' need.

All Federal funds deposited in a grantee's bank account from PMS should be fully disbursed (checks written, signed, and issued to the payees) by the close of business the next work day after receipt of the funds. The potential for excessive Federal cash on hand exists each time a grantee does not disburse Federal funds in this manner. The grantee is responsible for determining when the Federal funds have been deposited into its bank account for each drawdown, ensuring that the funds are fully disbursed by the close of business the next work day after they are received, and immediately returning all undisbursed Federal funds to PMS.

The Treasury and OMB policies also establish accountability for interest earned on advances of grant funds and provide for use of the reimbursement method if cash management requirements are not met. Advances made by grantees to consortium participants and contractors under grants must conform to substantially the same standards of timing and amount that govern advances to the grantee.

Payments under grants to foreign or international organizations, awards to individuals, and awards to agencies of the Federal Government are made by the Office of Financial Management (OFM), NIH (see Part III).

SMARTLINK II/ACH

The SMARTLINK II/ACH method of advance payment makes direct deposit of funds to a grantee's bank account and requires grantees to have access to a computer terminal or other equipment able to communicate a request for funds to PMS. SMARTLINK II/ACH provides funds the day following the request with direct deposit using the Federal Reserve Bank's (Richmond, Virginia) ACH process.

CASHLINE/ACH

The CASHLINE/ACH method of advance payment provides for direct deposit of funds to the recipient's bank account using a touch-tone telephone to dial directly to a "voice response" computer located at PMS. CASHLINE/ACH makes funds available the day following the request with direct deposit using the Federal Reserve Bank's (Richmond, Virginia) ACH process.

Cash Request

Grantees not eligible for an unrestricted advance of funds by SMARTLINK II/ACH or CASHLINE/ACH are financed on the basis of submission of a cash request, usually monthly. The cash request may be on either an advance or reimbursement basis, as specified by the NIH awarding office. Cash requests are used where closer monitoring of grantees' cash management is required, including grantees whose financial management systems do not meet the standards specified in 45 CFR 74.21 or 92.20, or under programs where reimbursement financing is appropriate. A grantee also may be converted from an unrestricted advance payment method to a cash request basis if, during postaward administration, the GMO determines that a grantee is not complying with the cash management requirements or other requirements of the award(s), including the submission of complete and timely reports (see "Administrative Requirements—Monitoring—Reporting" and "Administrative Requirements—Enforcement Actions—Modification of the Terms of Award").

If the cash request is for an advance payment, the grantee may request grant funds monthly on the basis of expected disbursements during the succeeding month and the amount of Federal funds already on hand. A request for reimbursement may be submitted monthly or more often, if authorized. For timely receipt of cash, a grantee must submit the request through the awarding office early enough for it to be forwarded to PMS at least 2 weeks before the cash is needed. PMS makes payment to the grantee electronically through the ACH process upon receipt of the approved payment request from the awarding office.

Operational guidance for recipients is contained in the DHHS Manual for Recipients Financed Under the Payment Management System. Requests for this manual and inquiries regarding payments should be directed to:

Division of Payment Management
Program Support Center
P. O. Box 6021
Rockville, MD 20852
Telephone: 1-877-614-5533

Interest Earned on Advances of Grant Funds

Except as provided in 45 CFR 74.22(k), any grantee included within the applicability of those regulations (45 CFR 74.1) that receives advance payments must maintain those advances in an interest-bearing account.

Interest earned on advances of Federal funds must be handled as follows:

• Nongovernmental grantees: Any interest on Federal advances of grant funds that exceeds $250 per year in the aggregate must be remitted annually to PMS (as the government-wide agent for collection) at the address indicated above. Recipients with electronic funds transfer (EFT) capability should use an electronic medium to remit interest.

• Governmental grantees other than States: Except as provided in 45 CFR 92.21(i), any interest in excess of $100 per year in the aggregate earned by local governments or Indian tribal governments on Federal advances of grant funds must be remitted promptly, and at least quarterly, to PMS at the address indicated above.

• State governments: State governments operating under Treasury-State agreements are subject to the payment and receipt of interest as specified in their agreements. All other State grantees are expected to follow sound financial management practices that minimize the potential for excessive Federal cash on hand and to comply with the cash management requirements of 45 CFR 92.20 and 21.

Cost considerations are critical throughout the life cycle of a grant. An applicant's budget request is reviewed for compliance with the governing cost principles and other requirements and policies applicable to the type of recipient and the type of award. Any resulting award will include a budget that is consistent with these requirements.

NIH anticipates that, because of the nature of research, the grantee may need to modify its award budget during performance in order to accomplish the award's programmatic objectives. Therefore, NIH provides some flexibility for grantees to deviate from the award budget, depending on the deviation's significance to the project or activity. More significant postaward changes require NIH prior approval. Prior approval requirements and authorities are discussed in "Administrative Requirements—Changes in Project and Budget."

During postaward administration, the GMO monitors expenditures for conformance with cost policies. The GMO's monitoring includes, among other things, responding to prior approval requests and reviewing progress reports, audit reports, and other periodic reports. The GMO also may use audit findings as the basis for final cost adjustments (see "Administrative Requirements—Closeout").

This section addresses the general principles underlying the allowability of costs, differentiates direct costs from F&A (indirect) costs, and highlights a number of specific costs and categories of cost for NIH applicants and grantees. It is not intended to be all-inclusive and should be used as a supplement to the applicable cost principles.

The Cost Principles

Most NIH grant awards provide for cost reimbursement (as contrasted with fixed-price arrangements) and are subject to government-wide or HHS-wide cost principles. The cost principles establish standards for the allowability of costs, provide detailed guidance on the cost accounting treatment of costs as direct or F&A costs, and set forth allowability principles for selected items of cost. Applicability of a particular set of cost principles depends on the type of organization making the expenditure. For example, a for-profit organization collaborating with a university grantee would be subject to the cost principles for commercial organizations, while the university would be subject to the cost principles for educational institutions.

The cost principles are set forth in the following documents and are incorporated by reference in 45 CFR 74.27 and 92.22. The cost principles apply to all NIH grants, award mechanisms, and special programs and authorities, including modular awards and awards under SNAP with one exception: they are not applicable to NIH fellowship awards. The allowable use of funds under NIH fellowships is included in "National Research Service Awards."

• OMB Circular A-21—Cost Principles for Educational Institutions
• OMB Circular A-87—Cost Principles for State and Local Governments and Indian Tribal Governments
• OMB Circular A-122—Cost Principles for Non-Profit Institutions^[12]
• 45 CFR Part 74, Appendix E—Cost Principles for Hospitals
• 48 CFR Subpart 31.2 (Federal Acquisition Regulation)—Cost Principles for Commercial Organizations

Grantees are able to use their own previously developed accounting systems, policies, and procedures to implement the cost principle requirements as long as the standards prescribed in 45 CFR 74.21 or 92.20 for financial management systems are met.

The cost principles address four tests—reasonableness (including necessity), allocability, consistency, and conformance with limitations or exclusions as specified in the terms and conditions of the award, including those in the cost principles themselves—that NIH follows in determining the allowability of costs. These tests apply regardless of whether the particular category of costs is one specified in the cost principles or one governed by other terms and conditions of an award. These tests also apply regardless of treatment as a direct cost or an F&A cost. The fact that a cost requested in a budget is awarded, as requested, does not ensure a determination of allowability. The organization is responsible for presenting costs consistently and must not include costs associated with their F&A rate as direct costs.

The cost principle tests are highlighted here to indicate their importance to the judgments NIH and other Federal staff will make before, during, and after performance concerning the costs that NIH will fund, and to indicate the variety of factors that will be taken into account in determining the allowability of costs.

Reasonableness

A cost may be considered reasonable if the nature of the goods or services acquired or applied and the associated dollar amount reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made. The cost principles elaborate on this concept and address considerations such as whether the cost is of a type generally necessary for the organization's operations or the grant's performance; whether the recipient complied with its established organizational policies in incurring the cost; and whether the individuals responsible for the expenditure acted with due prudence in carrying out their responsibilities to the Federal Government and the public at large as well as to the organization.

Allocability

A cost is allocable to a specific grant, function, department, etc., known as a cost objective, if the goods or services involved are chargeable or assignable to that cost objective in accordance with the relative benefits received or other equitable relationship. A cost is allocable to a grant if it is incurred solely in order to advance work under the grant; it benefits both the grant and other work of the institution, including other grant-supported projects; or it is necessary to the overall operation of the organization and is deemed to be assignable, at least in part, to the grant.

Consistency

Grantees must be consistent in assigning costs to cost objectives. Therefore, under NIH grants, although costs may be charged as either direct costs or F&A costs, depending on their identifiable benefit to a particular project or program, they must be treated consistently for all work of the organization under similar circumstances, regardless of the source of funding, so as to avoid duplicate charges.

Conformance

The fourth aspect of allowability—conformance with limitations and exclusions as contained in the terms and conditions of award—varies by the type of activity, the type of recipient, and other variables of individual awards. The section titled "Allowability of Costs/Activities" provides information common to most NIH grants and, where appropriate, specifies some of the applicable distinctions if there is a different treatment based on the type of grant or grantee. Subpart B of this part contains additional information on allowability of costs for particular types of grants/grantees/activities.

Direct Costs and Facilities and Administrative (Indirect) Costs ^[13]

Project costs consist of the allowable direct costs incident to the performance of the grant activities plus the allocable portion of the allowable F&A costs of the organization, less applicable credits (as described below 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. Facilities operation and maintenance costs, depreciation, and administrative expenses are examples of costs that are usually treated as F&A costs.

The amount NIH awards for each budget period will reflect the total approved budget for the grant, including direct costs and, if applicable, F&A costs. If a grantee waives reimbursement of full F&A costs, NIH will either not award F&A costs or will award only partial F&A costs, as appropriate. The NIH award amount shown in the NGA constitutes NIH's maximum financial obligation to the grantee under that award.

Except as provided in this subsection, NIH will not reimburse F&A costs unless the grantee has established an F&A cost (indirect cost) rate covering the applicable activities and period of time. These rates are negotiated by the Division of Cost Allocation (DCA), HHS, the Office of Acquisition Management and Policy (OAMP), NIH (responsible for negotiating F&A cost rates for for-profit entities receiving awards from HHS), or other agency with cognizance for F&A cost rate (and other special rate) negotiation. If an applicant is advised by the GMO of the need to establish a rate, the GMO will indicate the responsible office to be contacted.

F&A cost proposals must be prepared in accordance with the applicable cost principles and guidance provided by the cognizant agency, and must conform to other cost policies in this policy statement. The following informational brochures^[14], which may be obtained from DCA, provide guidance on preparing F&A cost^[15] proposals.

• A Guide for Colleges and Universities (OASC-1, Revised)
• A Guide for Hospitals (OASC-3, Revised)
• A Guide for Non-profit Institutions (OASC-5, Revised)
• A Guide for State, Local, and Indian Tribal Governments (ASMB C-10)

Further information concerning the establishment of F&A rates and the reimbursement of F&A costs may be obtained from DCA or OAMP (see Part III). DCA should be consulted to determine the need to submit a Disclosure Statement (DS-2) pursuant to the requirements of OMB Circular A-21.

In accordance with NIH's cost management plan, regardless of the type of recipient, the negotiated rate(s) in effect at the beginning of the competitive segment will be used to determine the amount budgeted for F&A costs for each year of the competitive segment. If the rate agreement does not extend to the end of the project period, the last rate in effect will be used to establish the total cost commitment for any remaining future years. NIH will not generally award additional F&A costs beyond those calculated in the approved budget.

F&A costs awarded may be subject to upward or downward adjustment, depending on the type of rate negotiated, and grantees may rebudget between direct and F&A costs (in either direction) without NIH prior approval, provided there is no change in the scope of the approved project. F&A costs are subject to downward adjustment if the proposal that served as the basis for the negotiation included unallowable costs.

There are awards that require negotiation of project costs annually, e.g., General Research Clinical Centers (GCRCs), clinical trials, and Primate Research Center Grants (P51s). For these awards, these policies pertain to each year of support rather than to a multi-year competitive segment.

Once NIH awards a grant, it is not obligated to make any supplemental or other award for additional F&A costs or for any other purpose. There are limited circumstances under which the GMO may award F&A costs where none were previously awarded or may increase the amount previously awarded. If an award does not include an amount for F&A costs because the applicant or grantee did not submit a timely F&A cost proposal and the grantee subsequently establishes a rate, the GMO may amend the award to provide an appropriate amount for F&A costs if the amendment can be made using funds from the same Federal fiscal year in which the award was made. However, the amount will be limited to the F&A costs applicable to the period after the date of the grantee's F&A cost proposal submission. This provision does not affect local government agencies that are not required to submit their F&A (indirect) cost proposals to the Federal Government. They may charge F&A costs to NIH grants based on the rate computations they prepare and keep on file for subsequent Federal review.

If funds are available, a GMO may amend an award to provide additional funds for F&A costs, but only under the following circumstances:

• NIH made an error in computing the award. This includes situations in which a higher rate(s) than the rate(s) used in the grant award is negotiated and the resulting rate agreement becomes effective more than 1 calendar month before the beginning date of the grant budget period.
• NIH restores funds previously recaptured as part of a grantee's unobligated balance.
• The grantee is eligible for additional F&A costs associated with additional direct costs awarded for the supplementation or extension of a project.

Grantees that use microcomputer-based automatic data processing systems to prepare F&A cost proposals, supporting schedules, etc. must be prepared to loan to HHS copies of the electronic media on which the proposal data are stored (e.g., computer disks) in addition to the operating application software and associated user documentation for analyzing and manipulating the data. Materials on loan to HHS will be used solely for review and analysis of the proposal and will be returned to the grantee after the rates are negotiated. When grantees obtain proprietary software packages designed or intended to be used for preparing F&A cost proposals, they must make sure that the terms of the acquisition (or other arrangement with the software vendor) permit loaning the software to HHS.

F&A costs are not provided if the type of award does not allow reimbursement of such costs. This includes the following classes of awards:

• Fellowships: F&A costs will not be provided on fellowships or similar awards where NIH funding is in the form of fixed amounts or is determined by the normal published tuition rates of an institution, and for which the recipient is not required to account on an actual cost basis.

• Construction: F&A costs will not be provided on construction grants.

• Grants to individuals, grants to foreign and international organizations, and grants to Federal institutions: F&A costs will not be provided on grants to these entities except as specified in "Awards to Foreign Institutions, International Organizations, and Domestic Grants with Foreign Components."

• Grants in support of scientific meetings (conference grants): F&A costs will not be provided under grants in support of scientific meetings.

Other circumstances under which it is not necessary for a grantee to establish an F&A cost rate include:

• Research training grants and career awards: F&A costs under research training grants and career awards will be funded at a rate of 8 percent of total direct costs, exclusive of tuition and fees and expenditures for equipment. State and local government agencies, except State universities or hospitals, may receive full F&A cost reimbursement under NIH research training grants and career awards.

• Where the organization's total operations consist of a single grant-supported project or where the organization appropriately and consistently treats all costs as direct costs to projects and accounts for them as such: In the latter case, the GMO must be satisfied that the organization's accounting system can adequately identify and support all costs as direct costs to the project. This includes being able to identify and segregate costs on the basis of a process that assigns costs commensurate with the benefits provided to individual projects (see "Administrative Requirements—Management Systems and Procedures—Financial Management System Standards").

Cost Transfers, Overruns, and Accelerated and Delayed Expenditures

Cost transfers to NIH grants by grantees, or by consortium participants or contractors under grants, that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error is discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official of the grantee, consortium participant, or contractor. An explanation merely stating that the transfer was made "to correct error" or "to transfer to correct project" is not sufficient. Transfers of costs from one budget period to the next solely to cover cost overruns are not allowable.

Grantees must maintain documentation of cost transfers, pursuant to 45 CFR 74.53 or 92.42, and must make it available for audit or other review (see "Administrative Requirements—Monitoring—Record Retention and Access"). Frequent errors in recording costs may indicate the need for accounting system improvements and/or enhanced internal controls. If such errors occur, grantees are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. NIH also may require a grantee to take corrective action by imposing additional terms and conditions on an award(s).

The GMO monitors grantee expenditure rates within each budget period and within the overall project period of individual grants. The funding that NIH provides for each budget period is based on an assessment of the effort to be performed during that period and the grantee's associated budget. Although NIH allows its grantees certain flexibilities with respect to rebudgeting, unobligated balances, and preaward costs (see "Administrative Requirements—Changes in Project and Budget"), NIH expects the rate and types of expenditures to be consistent with the approved project and budget and may question or restrict expenditures that appear inconsistent with these expectations.

The GMO may review grantee cash drawdowns to determine whether they indicate any pattern of accelerated or delayed expenditures. Expenditure patterns are of particular concern because they may indicate a deficiency in the grantee's financial management system and/or internal controls. Accelerated or delayed expenditures may result in a grantee's inability to complete the approved project within the approved budget and period of performance. In these situations, the GMO may seek additional information from the grantee and may make any necessary and appropriate adjustments.

Allocation of Costs and Closely Related Work

When salaries and/or other activities are supported by two or more sources, issues arise as to how the direct costs should be allocated among the sources of support. In general, if a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, it should be allocated to the projects on the basis of the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, it may be allocated or transferred to the benefited projects on any reasonable basis.

A grantee may allocate costs normally assignable to multiple projects to one of those projects or else to treat multiple projects as a single cost objective regardless of the funding IC or whether the awards involve the same or different PIs, if it obtains NIH prior approval for this "closely related work." When multiple ICs are involved, the request for approval should be submitted to the designated GMO of each of the affected ICs. NIH will use the following criteria in reviewing such requests:

• The grants must be scientifically and technically related,
• There must be no change in the scope of the individual grants involved,
• The arrangement must not be detrimental to the effort approved under each individual award, and
• The relatedness must not be used to circumvent the terms and conditions of an individual award.

In addition, recipients of NIH awards under the Federal Demonstration Partnership (FDP) may be permitted, with the approval of NIH and the other funding agency(ies), to treat related projects funded by NIH and another agency(ies) as a single cost objective for purposes of OMB Circular A-21.

Applicable Credits

The term "applicable credits" refers to those receipt or negative expenditure types of transactions that operate to offset or reduce direct or F&A cost items. Typical examples are purchase discounts, rebates or allowances, recoveries or indemnities on losses, and adjustments for overpayments or erroneous charges. Additional information concerning applicable credits is included in the cost principles and in the HHS guides available from DCA.

Applicable credits to direct charges made to NIH grants must be treated as an adjustment on the grantee's Financial Status Report (FSR), whether those credits accrue during or after the period of grant support. (See "Administrative Requirements—Monitoring—Reporting" and "Administrative Requirements—Closeout—Final Reports.") The NIH awarding office will notify the grantee of any additional actions that may be necessary.