Allowable vs. Unallowable Direct Costs

Direct costs are those which are charged directly to the sponsored project account. The basic considerations for determining the allowability of costs are:

  • Costs must be reasonable. This is defined as the action a prudent person would have taken under the circumstances.
  • Costs must be allocable to sponsored agreements under the principles and methods described in the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards issued by the Office of Management and Budget (Uniform Guidance).
    • Costs are incurred to benefit the specific sponsored project and able to be assigned to the project with a high degree of accuracy.
  • Costs must be given consistent treatment through the application of generally accepted accounting principles appropriate to the circumstances.
    • Similar costs are normally treated as either Direct or Indirect across the University.

This is a quick reference guide for federally sponsored projects. The specific wording in the Uniform Guidance should be referred to for greater detail. Refer to Subpart E for specific cost principles: http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title02/2cfr200_main_02.tpl. It is important to review each award’s terms and conditions as individual sponsors and awards may be more restrictive.

For questions regarding specific purchases, please contact your Research Officer.

Type of Cost Table

Type of Cost

CFR Reference

Allowed as a Direct Cost

Advertising/Public Relations

§200.421

Allowable only if related to and necessary for performance of the sponsored project.

Unallowable for advertising related to the image of the University, or events related to instruction or institutional activities, promotional items.

Alcoholic Beverages

§200.423

Unallowable

Alumni/ea Activities

§200.424

Unallowable

Bad Debt

§200.426

Unallowable

Compensation for Personal Services

§200.430 and §200.431

Salaries, wages, and fringe benefits of personnel who directly contribute to the project (faculty, post doc, research associate, graduate and undergraduate student) are allowable.

Administrative and clerical staff may be allowable only if they are integral to the project or activity. “Integral” means essential to the project’s goals and objectives, rather than necessary for the overall operation of the institution. The individuals involved must be specifically identified with the project or activity. Prior written approval of the awarding agency must be obtained. The budget justification must include a narrative that explains how these services are integral to the project.

Computers and Computing Devices

§200.453 and §200.439

For computers with a unit cost less than $5,000, see Materials and Supplies below.

For computers with a unit cost of $5,000 or greater, see Equipment below.

Donations and Contributions

§200.434

Unallowable

Entertainment Costs

§200.438

Unallowable -includes amusement, diversion, and social activities

Equipment

§200.439

Allowable only for special purpose equipment used exclusively for research, medical, scientific, or other technical activities. (Prior approval from awarding agency required for items with a unit cost of $5,000 or more).

Unallowable for general purpose equipment not used exclusively for research (i.e., office equipment and furnishings, modular offices, telephone networks, AC equipment, printing equipment, etc)

Fines and Penalties

§200.441

Allowable only when incurred as a result of compliance with specific provisions of the sponsored agreement, or instructions in writing from the authorized official of the sponsoring agency

Fund Raising

§200.442

Unallowable

Goods or Services for Personal Use

§200.445

Unallowable

Human Subject Payments

 

Human Subject Payments include cash, checks, gift cards, gift giveaways, food, drawings, etc. given to incentivize participation in research and are consistent with the approved IRB protocol. These payments/incentives must be directly related to research activities and pre-approved by the sponsor.

Human Subject Payments do not include costs that would fall under Participant Support Costs (see below).

Lobbying

§200.450

Unallowable

Losses on Other Sponsored Agreements or Contracts

§200.451

Unallowable

Maintenance & Repair Costs

§200.452

Allowable as necessary to keep property in an efficient operating condition necessary for the performance of the sponsored project. Must be approved by funding agency.

Unallowable for costs incurred for necessary maintenance, repair, or upkeep of buildings & equipment, which neither add to the permanent value of the property not appreciably prolong its intended life.

Materials and Supplies Costs, including Computing Devices

§200.453

Allowable as a direct cost when necessary for the performance of the sponsored project. In the specific case of computing devices, charging as direct costs is allowable for devices that are essential and allocable, but not solely dedicated, to the performance of a Federal award. University-funded activities such as instruction and administration should bear at least their fair share of the acquisition expense.

Unallowable for routine office supplies (pens, paper, disks, folders, copy charges, fax, postage, etc.) used by the department.

Meetings & Conferences

§200.432

Allowable when the primary purpose is the dissemination of technical information directly related to the sponsored project. This includes meals, transportation, rental of facilities, speakers’ fees and other items incidental to such meetings or conferences. Must be budgeted in sponsored project.

Unallowable for “Entertainment Costs”

Memberships, Subscriptions & Professional Activity Costs

§200.454

Allowable for the institution’s (not the individual's) membership in business, technical, professional organizations, and subscriptions to business, professional, and technical periodicals. However, this should normally be treated as an F&A cost.

Unallowable to membership in any civic or community organization, country club, social or dining club.

Participant Support Costs

§200.456

Allowable with the prior approval of the Federal awarding agency. Participant support costs means direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences, or training projects.

This does not include incentive payments for research participants (see Human Subject Payments above).

Patent Costs

§200.448

Allowable if required by the sponsored project.

Unallowable for foreign patents

Pre-Award Costs

§200.458

Allowable to the extent that they are necessary, would have been allowable if incurred after the award date, and with prior written approval from the awarding agency.

Professional Services Costs

§200.459

Allowable when necessary for the performance of the sponsored project.

Proposal Costs

§200.460

Costs of preparing bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the development of data necessary to support the bids or proposals are unallowable.

Publication and Printing Costs

§200.461

Allowable if the costs can be identified with the sponsored project. For page charges, they are allowable if the work is supported by the Federal Government and the charges are levied impartially on all research papers published, not just those funded by federally sponsored authors.

Unallowable for routine copy and printing costs.

Rearrangement and Alteration Costs

§200.462

Allowable with prior approval of the awarding agency and incurred specifically for the sponsored project.

Unallowable for ordinary or normal rearrangement or alteration of facilities.

Recruiting

§200.463

Allowable when recruiting personnel required for the performance of the award.

Rental Costs of Buildings and Equipment

§200.465

Allowable when specifically for the sponsored project

Royalties and Other Costs for Use of Patents

§200.448

Allowable when necessary for the performance of the sponsored project.

Unallowable when the Federal Government has a license or the right to free use of the patent or copyright; or when the patent or copyright has been adjudicated to be invalid, has been administratively determined to be invalid, is considered to be unenforceable, or has expired.

Scholarships and Student Aid Costs

§200.466

Allowable only when the purpose of the sponsored agreement is to provide training to selected participants and the charge is approved by the sponsoring agency.

In order to pay tuition, a stipend must be paid, and the student must be enrolled in an advanced degree program.  The activities of the student in relation to the project must be related to the degree program and compensation must be conditioned explicitly on their performance of the work.  Must be a bona fide employer-employee relationship.

Student Activity Costs

§200.469

Allowable unless specifically provided by the sponsored project.

Telephone Costs

Appendix IV

Long distance phone calls allowable only if related to and necessary for the performance of the sponsored project and can be directly identified and allocated.

Unallowable for line charges, network charges, local phone costs.

Termination Costs Applicable to Sponsored Agreements

§200.471

Allowable for costs which would not have arisen had the sponsored agreement not been terminated, provided they meet the requirements of the Uniform Guidance.

Training Costs

§200.472

Allowable for training provided for employee development for a specific sponsored project.

Transportation (Freight or Postage Costs)

§200.473

Allowable when related to goods purchased specifically for the sponsored project. Postage or express mailing expenses are generally treated as indirect costs.

Travel Costs

§200.474

Allowable for transportation, lodging, subsistence and related items for employees who are in travel status on project-specific business, subject to University policy.

Unreasonable travel costs are unallowable (including airfare costs in excess of the lowest available commercial discount airfare except when justified and documented)