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.

Connect with Us:

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• LinkedIn: @markandayconsulting

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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