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Charging Expenses to a Sponsor: Allowable and Unallowable Costs

One primary responsibility of a Principal Investigator (PI) or Project Director (PI) on a sponsored project is to ensure that all costs charged to a sponsored project meet the definitions of allowable, allocable and reasonable. This determination is based on both federal rules and on the specific guidelines of the sponsoring agency and must conform to any related guidelines and policies specific to St. John Fisher College. The process is guided and overseen by the Office of Sponsored Programs and the Business Office.

Important Definitions

Definitions

A cost must be necessary to carry out the project AND must follow all applicable policies and guidelines. It must also be adequately documented, be accorded consistent treatment across like circumstances, and be deemed reasonable and allocable to the specific project. For further information, see 2 CFR 200.403.

Reasonable

The nature and the amount of the cost does not exceed what would be incurred by a prudent person under similar circumstances. For further information, see 2 CFR 200.404.

Allocable

The cost must have a demonstrable and specific benefit to the sponsored project. For further information, see 2 CFR 200.405.

Consistent

The cost must be treated in the same manner (i.e., charged as either a direct or indirect cost) when used in like circumstances. This applies to any work done at the College, regardless of the funding source.

Direct Costs

Expenses that can be identified specifically with a sponsored project or can be assigned to that sponsored project with a high degree of accuracy.

Indirect Costs (also referred to as Facilities and Administrative or F&A costs)

Costs incurred for common or joint objectives that cannot be identified readily or specifically with a particular sponsored project or any other institutional activity.

F&A costs may allowable as direct costs if specific conditions are met. These conditions include:

  1. The item or service is absolutely required to carry out the project;
  2. The cost can be specifically identified; and
  3. The costs and appropriately justified for the project.

Quotes

Auditable documentation; required for purchases under certain conditions:

  • For purchases up to $3,000, no quotes are required.
  • For purchases above $3,000, every effort should be made to obtain at least two competitive quotes.

Select Allowable and Unallowable Expenses

In general, an expense for a non-federal grant is allowable if the following two conditions are met:

  1. It is consistent with the terms of the non-federal award, AND
  2. It would be allowable with Fisher funds.

2 CFR 200.400 details the types of costs that cannot be charged to federal awards, either as direct or indirect costs. A few examples of these costs are alcoholic beverages, certain types of advertising, entertainment/amusement, bad debts, contributions and donations, fines, and penalties.

The chart below is intended as a quick reference for common types of costs. This section is not exhaustive, and the Business Office should be contacted for specific questions concerning a cost, preferably in advance of the incurrence of a cost.

Select Allowable and Unallowable Expenses
Budget ItemType: Allowable or Unallowable Expense
Alcoholic Beverages Unallowable

Capital Equipment

(items costing more than $3,000 and having a useful life of more than one year)

Depends: In general, to purchase capital equipment with sponsored funds, a line item for the equipment must be in the categorical budget as awarded by the sponsor; otherwise, Fisher must seek specific approval from the funding agency.

Allowable: Shipping charges, upgrades, regular upkeep, and costs incurred to make an item of capital equipment useable (see §200.452). If Fisher is instructed by the federal awarding agency to dispose of the equipment, that cost is allowable as well (see §200.439).

Unallowable: Warranty costs or training.

Conference Fees (including meals, transportation, and lodging)

Allowable: The purpose of the conference or of participation at the conference must be “the dissemination of technical information” related to the project (this can include informal discussion of “work in progress”). For all conference travel, the traveler must provide justification details within the approved budget.
Computer/Computing Devices

Depends: May be considered as a supply if under $5,000.

May be allowable if the computers are essential for the performance of the specific project and their use is beyond the normal use and application of computers in the day-to-day operations of the College. Their use must be directly related and specifically identifiable to the project.
Entertainment Unallowable: This includes meals that are not eligible for reimbursement (see Food).
Food (including catering, meals and snacks) Unallowable: In general, federal funds may not be used to purchase food.
Maintenance Unallowable as a direct cost
Memberships: Civic, Community and Social Organizations

Unallowable

Memberships: Institutional Memberships Unallowable as a direct cost
Memberships: Professional Organizations

Depends: Membership in professional organizations may be allowable if the expense meets both of the following criteria:

  • The membership is required in order to present “technical information” related to the project at the conference
  • The total cost for membership and discounted conference registration does not exceed the regular cost of conference registration

In some circumstances, membership may be allowable if the PI/PD can document that the PI needs to be a member of the professional organization in order to conduct the project AND the PI would not otherwise be a member.

Office Supplies

Allowable: Supplies purchased for technical or scientific use on a project may be an allowable expense if appropriately justified; they must be consumed during the life of the project.

Unallowable: General purpose office supplies, which are already built into the F&A rate.
Postage/Shipping Costs Unallowable as a direct cost: May be allowable if PI/PD can document that the expense can be allocated to a specific award and is justified as being a direct cost of the project, rather than part of Fisher’s indirect costs.
Professional Services

Allowable: Approved contracts for individual professional services who are not employees of Fisher

Unallowable: Professional and consulting services rendered by Fisher employees
Subscriptions Unallowable as a direct cost: If the PI/PD can document that 1) access to the journal is required in order to carry out the project; 2) Fisher does not already provide the journal; AND 3) the PI/PD would not otherwise subscribe, it may be allowable.
Supplies Allowable: Materials, supplies, and parts necessary to carry out the project. Shipping costs for supplies are a proper part of supplies costs.
Telephone Depends: Local telephone costs are unallowable as a direct cost on federal awards. In some circumstances, long-distance telephone costs may be allowable it is specified in the grant guidelines and the PI can: a) document that the expense can be allocated to a specific award and b) is justified as being a direct cost of the project, rather than part of Fisher’s indirect costs.
Travel

Allowable: The purpose of the trip must be related to the performance of the project, and either domestic or foreign travel respectively must have been included as a line item in the categorical budget as awarded by the sponsor or in an approved revised budget as approved. For all travel using sponsored funds, the traveler must provide justification details.

Reimbursement for travel expenses using federal funds follows the same policies as reimbursement with Fisher funds for similar purposes—i.e., travelers must choose the least expensive method of travel or provide justification for using a more expensive method.

Lodging Federal per diem rates may be used to develop budget during the pre-award stage, but itemized receipts for actual expenses are required.

Meals & Incidentals Federal per diem rates may be used to develop budget during the pre-award stage, but itemized receipts for actual expenses are required. Federal funds cannot be used for alcoholic beverages even if part of a meal.

Mileage has the most current rates.

Please note the following additional requirements for travel using federal funds:

Airfare Choose the least expensive coach class flight on a U.S. carrier.

Foreign travel Many federal funding agencies require prior approval for or may not allow foreign travel. If foreign travel is not specified in the awarded budget, check with the Business Office.

Administrative and clerical salaries included in the F&A rate

Unallowable: Administrative salaries that are built into the indirect cost (F&A) rate may not be included in the grant budget.