Office of Research Administration

Purpose
Applicability
Policy
Effective Date
Definitions
Contacts
Exhibit - Specific Unallowable and Allowable Costs
Return to CAS Policies

These costs and directly associated costs cannot:

• Be charged as a direct cost to federally sponsored projects or used to meet a cost sharing requirement;
• Be included in departmental recharge or service center rates; or
• Be included in the development of the Facilities and Administration rate (F & A), (formerly known as indirect costs).

OMB Circular A-21 requires segregation of unallowable costs. The University has established object codes to charge categories of costs which are unallowable. Costs charged directly or used to meet cost sharing requirements on federally sponsored agreements may not include unallowable charges. F & A costs must be given special attention because ledger 2 and 3 accounts effect the F & A cost rate. It is important that the correct object code be used for all unallowable costs to insure they are segregated and removed from the F & A cost calculation.

All charges, including unallowable costs, must meet applicable regulations, University policies and procedures, and be reasonable to be reimbursed.

The tests of allowability of costs under these principles are:

• They must be reasonable;
• They must be allocable to sponsored agreements under the principles and methods provided herein;
• They must be given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances; and
• They must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items.

A cost is allocable to a sponsored agreement if:

• It is incurred solely to advance the work under the sponsored agreement;
• It benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods; or
• It is necessary to the overall operation of the institution and, in light of the principles provided in OMB Circular A-21, is deemed to be assignable in part to sponsored projects

Major considerations involved in the determination of the reasonableness of a cost are:

• Whether or not the cost is of a type generally recognized as necessary for the operation of the institution or for the performance of the sponsored agreement;
• The restraints or requirements imposed by such factors as arm's-length bargaining, Federal and State laws and regulations, and sponsored agreement terms and conditions;
• Whether or not the individuals concerned acted with due prudence in the circumstances, considering their responsibilities to the institution, its employees, its students, the Federal Government, and the public at large; and

Directly Associated Costs
Any cost which is generated solely as a result of the incurrence of another cost, and which would not have been incurred had the other cost not been incurred (Cost Accounting Standard,505).

1. Advertising and Public Relations

Allowable Exceptions for Non-Sponsored Agreements
Personnel recruitment, procurement of goods and services, disposal of scrap or surplus material, communicating with the public and press about activities or accomplishments resulting from sponsored agreements and specifically allowed by sponsored agreement. Any advertising or public relations activities that are specifically required by a sponsored agreement. Most allowable advertising and public relations costs are treated as F.A. costs.

2. Alcoholic Beverages - (Unallowable Subcode #4990)

3. Alumni and Development Activities - (Charged to specific chargelines)

4. Bad Debts - (Unallowable Subcode #3990)

5. Commencement and Convocation - (Unallowable Subcode #3840)

All costs of commencement including convocations held by individual schools and colleges and receptions held in conjunction with these events.

7. Compensation for Personal Services

That portion of salaries exceeding annual salary rates of $125,000 are unallowable as direct costs on NIH awards.

9. Contingency Reserves - (General Accounting only)

Contributions to a reserve, or similar provision made for future events.

Circular A-21 outlines complex rules for these types of costs. Please consult with the General Counsel's offices and the offices noted below when costs of this nature are incurred.

12. Entertainment - (Unallowable Subcode #6511)

Cost of entertainment, amusement, diversion and social activities including tickets to shows or sports events, meals, lodging, parties, receptions, rentals, transportation and gratuities. Examples: football, basketball, theater, and concerts, etc. tickets for Advisory Councils, Boards, and other guests.

14. Goods or Services for Personal Use - (Unallowable Subcode #6511)

15. Housing and Personal living Expense of University Officers - (Unallowable Subcode #3560, #3570)

Cost of housing (depreciation, maintenance, utilities, furnishings, rent, etc.) Housing allowances and personal living expenses of the institution's officers.

Allowable
Costs related to physical custody and control of money and securities, and cost of interest on assets used in support of sponsored agreements. Interest associated with the acquisition of equipment costing $10,000 or more and certain other assets is allowable.

Unallowable
Costs of interest on borrowed capital or temporary use of endowment funds, costs of organized fund raising campaigns, and costs of investment counsel and staff used solely to enhance income.

Allowable
Technical and factual presentation on topics directly related to a grant or contract that are in response to a documented government request. Costs to give invited testimony at a congressional hearing.

Unallowable
Costs for actions influencing the outcome of a federal, state or local election, referendum or initiative. Costs to establish, administer or contribute to a political party, campaign, or political action committee whose purpose is to influence the outcome of elections.

Costs to influence the (a) introduction of federal or state legislation; (b) the enactment of modification of any pending federal or state legislation through communication with any member or employee of the Congress or state legislature; or (c) any government official or employee in connection with a decision to sign or veto enrolled legislation.

Costs for attempts to influence introduction, enactment or modification of federal or state legislation by lobbying the general public. Legislative liaison activities which engage in or result in the support of unallowable lobbying.

Costs to improperly influence an employee or officer of the Executive Branch of the Federal Government concerning sponsored agreements or regulatory matters.

(See Cost Sharing Policy)

Membership in any civic, community organization, country club, social or dining clubs. Examples: Chamber of Commerce, Women's Network.

Costs incurred prior to the effective date of the sponsored agreement, unless approved by the sponsoring agency. Unless restricted by the sponsoring agency, pre-agreement costs up to 90 days are permitted for research grants and cooperative agreements.

Candidate spouse expenses, group meals, receptions, etc. for recruiting purposes: advertising that includes color or material for other than recruitment purposes, fringe benefits and salary allowances that do not meet the test of reasonableness or do not conform to the established practices of the institution.Relocation costs incurred as either a direct or F & A costs, where the employee resigns within 12 months of hire, must be refunded to the federal government.

Allowable Exceptions: Scholarships and student aid is allowable on training grants to selected participants if the charge is approved by the sponsoring agency. Tuition remission paid as, or in lieu of, wage to students performing necessary work and other forms of compensation to students provided (1) there is a bona fide employer-employee relationship between the student and the institution for the work performed. (2) the tuition or other payments are reasonable compensation for work performed and are conditioned explicitly up on the performance of necessary work, (3) it is the institution's practice to similarly compensate students in non-sponsored as well as sponsored activities.

Intramurals, student publications, clubs unless specifically provided for in the sponsored agreement.

Costs of travel via institution-owned, leased or chartered aircraft in excess of the cost of allowable commercial air travel. First class or non-coach, air travel and lodging and subsidence costs in excess of our normal policy.