Common use of Classification of Costs Clause in Contracts

Classification of Costs. There is no uni- versal rule for classifying certain costs as ei- ther direct or indirect under every account- ing system. A cost may be direct with re- spect to some specific service or function, but indirect with respect to the grant or other ultimate cost objective. It is essential, therefore, that each item of cost be treated consistently either as a direct or an indirect cost. Specific guides for determining direct and indirect costs allocable under grant pro- grams are provided in the sections which fol- low.