Allowable and Unallowable Costs Reference Guide Description Allowable Unallowable

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1 1 Advertizing and Public Relations Advertizing and Public relations costs for: Advertizing and Public relations costs for: The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like. The term public relations includes community relations and means those activities dedicated to maintaining the image of the non-federal entity or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public 1) The recruitment of personnel required by the non-federal entity for performance of a Federal award. The procurement of goods and services for the performance of a Federal award. 2) The Procurement of goods and services for the performance of a Federal award. 3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except when non-federal entities are reimbursed for disposal costs at a predetermined amount. 1) Costs of meetings, conventions, convocations, or other events related to other activities of the entity including: (i) Costs of displays, demonstrations, and exhibits. (ii) Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events. (iii) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings. 4) Program outreach and other specific purposes necessary to meet the requirements of the Federal award. 5) Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of the Federal award (these costs are considered necessary as part of the outreach effort for the Federal award) 2) Costs of promotional items and memorabilia, including models, gifts, souvenirs and T. Shirts. 6) Costs of conducting general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of funding opportunities, financial matters, etc. 3) Costs of advertising and public relations designed solely to promote the non-federal entity. 2 Advisory councils Costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal awarding agency or as an indirect cost where allocable to Federal awards. 3 Alcoholic beverages Costs of alcoholic beverages. 4 Alumni/ae activities Costs incurred by IHEs for, or in support of, alumni/ae activities. Page 1 12/10/2014

2 A reasonably proportionate share of the costs of audits required by, and performed in accordance with, the Single Audit Act Amendments of 1996 (31 U.S.C ), as implemented by requirements of this part. Any costs when audits required by the Single Audit Act and Subpart F Audit Requirements of this part have not been conducted or have been conducted but not in accordance therewith. 5 Audit services Pass-through entities may charge Federal awards for the cost of agreed-upon-procedures engagements to monitor subrecipients (in accordance with Subpart D Post Federal Award Requirements of this part, Subrecipient and contractor determinations through Fixed Amount Subawards) who are exempted from the requirements of the Single Audit Act and Subpart F Audit Requirements of this part. This cost is allowable only if the agreed-upon-procedures engagements are: (1) Conducted in accordance with GAGAS attestation standards; (2) Paid for and arranged by the pass-through entity; and (3) Limited in scope to one or more of the following types of compliance requirements: activities allowed or unallowed; allowable costs/cost principles; eligibility; and reporting. Any costs of auditing a non-federal entity that is exempted from having an audit conducted under the Single Audit Act and Subpart F Audit Requirements of this part because its expenditures under Federal awards are less than $750,000 during the non-federal entity's fiscal year. 6 Bad debts Bad debts (debts which have been determined to be uncollectable), including losses (whether actual or estimated) arising from uncollectable accounts and other claims. Related collection costs, and related legal costs, arising from such debts after they have been determined to be uncollectable. 7 Bonding costs Bonding costs arise when the Federal awarding agency requires assurance against financial loss to itself or others by reason of the act or default of the non-federal entity. They arise also in instances where the non-federal entity requires similar assurance, including: bonds as bid, performance, payment, advance payment, infringement, and fidelity bonds for employees and officials. 8 Collections of improper payments Costs of bonding required pursuant to the terms and conditions of the Federal award. The costs incurred by a non-federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate. Costs of bonding required by the non-federal entity in the general conduct of its operations are allowable as an indirect cost to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances. Page 2 12/10/2014

3 9 Commencement and convocation costs For IHEs, costs incurred for commencements and convocations are unallowable, except as provided for in Appendix III to Part 200 Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs), paragraph (B)(9) Student Administration and Services, as student activity costs. 10 Compensation personal services General. Compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered during the period of performance under the Federal award, including but not necessarily limited to wages and salaries. Compensation for personal services may also include fringe benefits. Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conform to the established written policy of the non-federal entity consistently applied to both federal and non-federal entities. (2) Follows an appointment made in accordance with a non-federal entity laws and /or rules or written policies and meets the requirements of Federal statute, where applicable. (3) Is determined and supported as provided in the Standards for Documentation of Personnel Expenses when applicable. Reasonable amounts of charges for activities contributing and directly related to work under an agreement, such as delivering special lectures about specific aspects of the ongoing activity, writing reports and articles, developing and maintaining protocols (human, animals, etc.), managing substances/chemicals, managing and securing project-specific data, coordinating research subjects, participating in appropriate seminars, consulting with colleagues and graduate students, and attending meetings and conferences. Charges for work performed on Federal awards by faculty members during the academic year are allowable at the IBS rate. Except as noted in paragraph (h)(1)(ii) of this section, in no event will charges to Federal awards, irrespective of the basis of computation, exceed the proportionate share of the IBS for that period. This principle applies to all members of faculty at an institution. IBS is defined as the annual compensation paid by an IHE for an individual's appointment, whether that individual's time is spent on research, instruction, administration, or other activities. IBS excludes any income that an individual earns outside of duties performed for the IHE. Unless there is prior approval by the Federal awarding agency, charges of a faculty member's salary to a Federal award must not exceed the proportionate share of the IBS for the period during which the faculty member worked on the award. Page 3 12/10/2014

4 11 Compensation fringe benefits Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave (vacation, family-related, sick or military), employee insurance, pensions, and unemployment benefit plans. Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under established written leave policies. (2) The costs are equitably allocated to all related activities, including Federal awards. (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-federal entity or specified grouping of employees. Automobiles. That portion of automobile costs furnished by the entity that relates to personal use by employees (including transportation to and from work) is unallowable as fringe benefit or indirect (F&A) costs regardless of whether the cost is reported as taxable income to the employees. The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in Insurance and indemnification); pension plan costs and other similar benefits are allowable, provided such benefits are granted under established written policies. Increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 calendar days after each quarter of the year to which such costs are assignable are unallowable. Non- Federal entity may elect to follow the Cost Accounting Standard for Composition and Measurement of Pension Costs (48 CFR ). 12 Conferences A conference is defined as a meeting, retreat, seminar, symposium, workshop or event whose primary purpose is the dissemination of technical information beyond the non- Federal entity and is necessary and reasonable for successful performance under the Federal award. Allowable conference costs paid by the non-federal entity as a sponsor or host of the conference may include rental of facilities, speakers' fees, costs of meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions of the Federal award. As needed, the costs of identifying, but not providing, locally available dependent-care resources are allowable. Conference costs restricted by the terms and conditions of the Federal Award. Page 4 12/10/2014

5 13 Entertainment costs Costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the Federal awarding agency. 14 Equipment and other capital expenditures Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Cost increases for fluctuations in exchange rates are allowable costs subject to the availability of funding, and prior approval by the Federal awarding agency. 15 Exchange rates The non-federal entity is required to make reviews of local currency gains to determine the need for additional federal funding before the expiration date of the Federal award. Subsequent adjustments for currency increases may be allowable only when the non-federal entity provides the Federal awarding agency with adequate source documentation from a commonly used source in effect at the time the expense was made, and to the extent that sufficient Federal funds are available. 16 Fines, penalties, damages and other settlements Costs resulting from non-federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compliance with specific provisions of the Federal award, or with prior written approval of the Federal awarding agency. Page 5 12/10/2014

6 17 Goods or services for personal use Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a Federal awarding agency. Costs of goods or services for personal use of the non- Federal entity's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal award are allowable. 18 Materials and supplies costs, including costs of computing devices Materials and supplies used for the performance of a Federal award may be charged as direct costs. 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. Costs of the non-federal entity's membership in business, technical, and professional organizations are allowable. Costs of membership in any country club or social or dining club or organization are unallowable. 19 Memberships, subscriptions, and professional activity costs Costs of the non-federal entity's subscriptions to business, professional, and technical periodicals are allowable. Costs of membership in organizations whose primary purpose is lobbying are unallowable. Costs of membership in any civic or community organization are allowable with prior approval by the Federal awarding agency or pass-through entity. 20 Participant support costs Participant support costs are allowable with the prior approval of the Federal awarding agency. 21 Taxes (including Value Added Tax) Taxes that a governmental unit is legally required to pay are allowable. Self-assessed taxes that disproportionately affect Federal programs or changes in tax policies that disproportionately affect Federal programs. Page 6 12/10/2014

7 22 Student activity costs Costs incurred for intramural activities, student publications, student clubs, and other student activities, are unallowable, unless specifically provided for in the Federal award. Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements and alterations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the Federal awarding agency or pass-through entity. 23 Rearrangement and reconversion costs Costs incurred in the restoration or rehabilitation of the non-federal entity's facilities to approximately the same condition existing immediately prior to commencement of Federal awards, less costs related to normal wear and tear, are allowable. 24 Interest Financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this section. Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-federal entity's own funds, however represented, are unallowable. 25 Training and education costs The cost of training and education provided for employee development is allowable. Page 7 12/10/2014

8 Fund raising costs for the purposes of meeting the Federal program objectives are allowable with prior written approval from the Federal awarding agency. Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable. 26 Fund raising and investment management costs Costs of investment counsel and staff and similar expenses incurred to enhance income from investments associated with investments covering pension, self-insurance, or other funds which include Federal participation allowed by this part. Costs of investment counsel and staff and similar expenses incurred to enhance income from investments NOT associated with investments covering pension, self-insurance, or other funds which include Federal participation allowed by this part. Cost must be allocated as an appropriate share of indirect costs under conditions described in Direct costs Cost must be allocated as an appropriate share of indirect costs under conditions described in Direct costs Costs related to the physical custody and control of monies and securities are allowable. 27 Gains and losses on disposition of depreciable assets Gains and losses on the sale, retirement, or other disposition of depreciable property must be included in the year in which they occur as credits or charges to the asset cost grouping(s) in which the property was included. The amount of the gain or loss to be included as a credit or charge to the appropriate asset cost grouping(s) is the difference between the amount realized on the property and the undepreciated basis of the property. Gains and losses from the disposition of depreciable property must not be recognized as a separate credit or charge under the following conditions: (1) The gain or loss is processed through a depreciation account and is reflected in the depreciation allowable under Depreciation and Equipment and other capital expenditures. (2) The property is given in exchange as part of the purchase price of a similar item and the gain or loss is taken into account in determining the depreciation cost basis of the new item. (3) A loss results from the failure to maintain permissible insurance, except as otherwise provided in 46* Insurance and indemnification. (4) Compensation for the use of the property was provided through use allowances in lieu of depreciation. Gains or losses of any nature arising from the sale or exchange of property other than the property covered in paragraph (a) of this section, e.g., land, must be excluded in computing Federal award costs. Page 8 12/10/2014