OPM Unallowable Cost

What’s allowable and unallowable?

An allowable cost is a cost that can be charged or assigned to a sponsored program. The University of Texas at Dallas follows the following policy, https://atlas.utdallas.edu/TDClient/30/Portal/KB/ArticleDet?ID=1029 which outlines the allowable costs for grants, contracts, and sub‐awards. This policy follows cost accounting standards as prescribed in 2 CFR Part 220 (Uniform Guidance) and The University of Texas at Dallas Expenditure of Funds policy - UTDBP3097.

These policies are the basic criteria to determine direct costs on federally sponsored projects. Regardless of the funding agency, costs for sponsored programs are based on answering the following questions:

 Are costs allocable, allowable, consistent, and reasonable in like circumstances, allowed by UTD policy, sponsor policy, federal and state polices?

Reason for Policy/Purpose

The University must comply with the federal regulations within the OMB Uniform Guidance governed by the 2 CFR 200 Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Compliance with this policy is necessary to ensure continued federal funding for sponsored programs and activities.

Policy

Consistent with the OMB Uniform Guidance, 2 CFR 200, Subpart D – 200.300 Statutory and National Policy requirements and 200.309 Period of Performance, the University defines unallowable costs in the context of either a particular type of activity or a particular type of cost. Unallowable costs cannot be charged either directly or indirectly to the federal government.

  1. Costs incurred for the following types of activities are unallowable:
    • alumni activities and relations
    • commencement and convocation ceremonies
    • contingency provisions (reserves)
    • entertainment: amusement, diversion, and social activities and any costs directly associated with such costs such as tickets to shows or sports events, meals, lodging, rentals, transportation and gratuities
    • fund raising
    • goods and services for personal use such as automobiles
    • investment management
    • lobbying
    • public relations unrelated to the performance of a sponsored award
    • student activities: intramural activities, student publications, student clubs, and other student activities not specifically provided for in a sponsored award
  2.  The following types of costs are unallowable:
    • alcoholic beverages
    • bad debt losses
    • first class travel
    • fines and penalties
    • internal interest expense
    • memberships in social, dining or country clubs
    • The allowable compensation for certain employees working on federally-funded research is subject to a federal ceiling. Salary charges above the federal salary ceiling are unallowable on federal awards.
  3.  The University may identify other award costs as unallowable based on consideration of:
    • The sponsor’s policies;
    • The award’s terms and conditions;
    • University policies and procedures; and
    • Facts and circumstances associated with a particular award.

Expenses

  1. Expenses on sponsored awards require careful review of the terms and conditions, and any other supporting documentation (e.g., approved budget, sponsor guidance) in order to determine the appropriateness of charges. Documentation is required to justify any expense charged to a sponsored award. The backup for expenditures should be adequate to support and justify that:
    • The expense provides a direct benefit to the award;

The expense complies with any award restrictions and approval requirements outlined in the terms and conditions of the award.

Enforcement

  1. All costs payable or reimbursable under University policy must be charged to the appropriate cost center. For sponsored awards, it is the responsibility of the PI or PD to ensure that costs are charged to the appropriate cost center. In the event that unallowable costs are charged to a sponsor, as determined by the Office of Receivables and Sponsored Accounting/and or Office of Post Award Management, those costs will be transferred to a non-sponsored project cost center of the home department/school of the Principal Investigator (PI) or Project Director (PD). Administrative costs charged improperly to federal awards will result in unallowable costs, requiring reimbursement to the sponsor.
  2. An unallowable cost mistakenly charged to a sponsored award must be transferred to a non-sponsored unrestricted account via a Cost Transfer. (https://atlas.utdallas.edu/TDClient/30/Portal/KB/ArticleDet?ID=1013)

A cost transfer involves the recording of an expense in a sponsored project cost center that had previously been charged elsewhere. Cost transfers should be considered “the exception, rather than the rule,” and must be kept to a minimum. They must be allowable, timely, reasonable, consistent, of benefit to the sponsored project that is the recipient of the cost, and adequately documented.                                                                                                  

Related Policies and Guidance

https://research.utdallas.edu/grants-contracts/award-management

The University of Texas at Dallas Expenditure Policy (UTDBP3097)

OMB Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance)

OMB 2 CFR Part 220

The Cost Accounting Standards (CAS)

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