POLICY ON UNALLOWABLE COSTS
OF FEDERALLY SPONSORED AGREEMENTS

I. BACKGROUND AND PURPOSE

• Federal regulations identify specific categories of costs that cannot be charged, directly or indirectly, to federally sponsored agreements.

• Unallowable costs should be either properly segregated in the University's accounting system or identifiable from departmental records to ensure that they will not be charged to the government.

II. UNALLOWABLE COSTS

The following list covers unallowable costs specified in Section J of OMB Circular A-21. This is a quick reference. The specific wording in A-21 should be referred to for greater detail.

Advertising and public relations: Expenditures to promote the University are not allowable. Advertising for recruitment for employees or human subjects is allowable.

Alcoholic beverages

Alumni/ae activities

Bad debts

Commencement or convocation costs

Contingency provisions

Charitable contributions, donations, remembrances

Development/fundraising costs

Entertainment costs: Costs of entertainment, including amusement diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sporting events, meals, lodging, rentals, transportation, and gratuities) are not allowable.

Fines and penalties

Goods or services for personal use of employees (including gifts)

Housing and personal living expenses of University officers

Investment management costs

Lobbying

Losses on other sponsored agreements or contracts (cost overruns): Any excess of costs over income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to; the institutions contributed portion by reason of cost-sharing agreements or any under-recoveries through negotiation of flat amounts for indirect costs.

preagreement costs, unless approved by the sponsoring agency or permitted under expanded authorities

Selling and marketing costs of any products or services of the institution

Student activity costs incurred for intramural activities, student publications, student clubs, etc. are unallowable

Travel: Commercial air travel costs in excess of the lowest available commercial discount airfare, Federal government contract airfare (where authorized and available), or customary standard (coach or equivalent) airfare are unallowable.

Trustee travel

Interest expense: Interest paid to external parties that is associated with the acquisition of equipment or other capital assets is generally allowable.

III. UNALLOWABLE DIRECTLY ASSOCIATED COSTS

In addition to unallowable costs per se, charges to federally sponsored agreements must also exclude costs that are directly associated with the unallowable costs. A directly associated cost is defined in federal regulations as any cost which is generated solely as a result of the incidence of another cost, and which would not have been incurred had the other cost not been incurred. An example of a cost that is directly associated with an unallowable cost is the cost of airfare to go to another city for the purpose of entertaining business associates, or for fundraising. Since entertainment and fundraising costs are expressly unallowable under OMB Circular A-21, and the airfare would not have been incurred had the unallowable costs not been incurred, the airfare is an unallowable directly associated cost.

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