Certified Government Financial Manager (CGFM) 2025 – 400 Free Practice Questions to Pass the Exam

OMB A-87 is primarily focused on both direct and indirect costs in the context of federal funding and grant management for state and local governments. This guidance provides a framework for determining which costs are allowable for reimbursement under federal programs.

Direct costs are expenses that can be directly attributed to a specific program or project, such as salaries for personnel working directly on a project, materials, and equipment. Indirect costs, on the other hand, are expenses that benefit multiple programs or activities and cannot be directly traced to a specific one, such as utilities, administrative salaries, and facility maintenance. OMB A-87 outlines how to appropriately allocate these costs to ensure that funding received aligns with the requirements and purposes of the federal programs.

This comprehensive approach is essential for maintaining accountability and transparency in the use of federal funds, ensuring that both types of costs are treated properly when charged to federal programs. By addressing both direct and indirect costs, OMB A-87 helps organizations establish a clear and fair accounting system that complies with federal regulations.

The other options focus on only one aspect of cost classification, which does not capture the full scope of OMB A-87’s applicability to cost management in the context of federal financing.