Allowable Expenses on Sponsored Projects

The following information addresses allowableexpenses and the procedures for charging various types of expenditures to sponsored projects. These principles are intended to supplement, not supersede existing University policy. In most cases where general University and sponsored project costing policies differ, sponsored project policies will be more restrictive.

Federal regulation mandates universities establish consistent practices for defining and charging costs in accordance with the provisions of OMB Circular A-110(Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations)and the terms and conditions of the award document.

The University follows the guidance of OMB Circular A-21(Cost Principles for Educational Institutions). It is the responsibility of project directors, principal investigators, department heads, and administrators to understand and comply with this guidance in order to prevent cost disallowances by the federal government and other grant or contract sponsors.

DEFINITIONS

Allocable Costs: Costs of goods or services that are chargeable or assignable to a specific project, function, department, or unit based on the relative benefits received or other equitable relationship of the goods and services to the specific project, function, department or unit.

Direct Costs: Direct costs are costs that can be specifically identified and assigned with relative ease and with a high degree of accuracy to federally sponsored projects.

Facilities and Administrative Costs: Facilities and Administrative (F&A) (also called Indirect Costs) are general institutional expenditures that are incurred for multiple or shared projects, functions or activities and therefore cannot be specifically identified with relative ease and with a high degree of accuracy to a sponsored project, an instructional account, or any other institutional account.

Indirect costs are incurred in the following areas:

Depreciation, maintenance, and utilities for University buildings and equipment;

Academic colleges and departments for the administrative effort of clerical, faculty and other professional personnel involved in various missions of the unit;

Expenses for offices which serve the entire University, such as the President’s Office, Human Resources, Purchasing and Finance;

Central operations such as facilities management, telecommunications, sponsored projects administration and libraries

Indirect Cost Rate: A composite rate applied to sponsored projects as a percentage of the sponsored project’s direct costs. The federally negotiated indirect cost rates for organized research are developed by the University in accordance with OMB Circular A-21 and negotiated with the Department of Health and Human Services, the University’s federal cognizant audit agency.UNI's indirect cost rate can be found here.

Service Centers and Department Recharge Accounts: A University of Northern Iowa unit that sells goods and services predominately to colleges or departments within the institution. Service centers and department recharge accounts must be based on actual use of their services and use an approved rate schedule which does not differentiate between federally and non- federally supported activities of the university.

UNI's Center and Clinics website.

Sponsored Projects: Projects funded by federal and nonfederal agencies that are administered by the Office of Research and Sponsored Programs. Sponsored projects include grants, contracts and cooperative agreements for research, training and public service activities. Sponsored projects are assigned to Oracle account fund segment series 4000 - 6999.

CHARGING DIRECT COSTS

The major criterion for direct charging of costs to sponsored agreements is the identification of a given cost with the sponsored work rather than the nature of the goods and services involved. In order for expenditures to be direct costs to a sponsored project, they must beallowable costs.Allowable costs are specifically allowed under the terms and conditions of the sponsored projects and OMB Circular A-21. They also must be:

Reasonable:In general terms reasonable means a prudent person (someone acting with discretion and good sense) would pay this price for this item considering the prevailing circumstances at the time of the purchase. Other considerations to determine reasonableness:

(1) is the purchase necessary for the operation of the institution or the performance of the project?;
(2) does incurring the expense violate rules, regulations or laws imposed by the sponsor, the University or the state or federal government?;
(3) did the individual(s) incurring the expense do so with respect to his/her responsibility to the University, the sponsor and the state and federal government?; and
(4) were the actions taken when incurring the expense consistent with established policies and procedures?

The Office of Research and Sponsored Programs does not determine reasonable price nor disallows an expense based on its price. Office of Business Operations regulates/provides authority regarding the price of items. PI/PDs should explain and document any expenses which might appear to be unreasonable. This will help alleviate concerns regarding allowability.

Allocable and easily identifiable – The costs must have a direct benefit and be directly attributable to the project or activity being performed. Costs incurred for multiple projects/activities must be identified as follows:

If the cost is specific and benefits more than one project, the cost can only be assigned and allocated to the project(s) based on that portion of the expense that represents the direct benefit to the project. If an appropriate basis such as actual usage cannot be identified to allocate the costs with relative ease and with a high degree of accuracy, such costs must be considered indirect costs. As a rule of thumb, if these costs benefit multiple (e.g., four or five) projects/activities, the ability to accurately allocate the cost to the appropriate projects/activities diminishes and therefore becomes questionable as a direct cost.

If the benefit is spread over multiple projects to serve common shared activities and it is difficult to identify a direct benefit to each activity or project, the cost must be considered an indirect cost.

Consistent: All expenditures incurred for the same purpose must be treated the same in all situations, regardless of the source of the funds. For example, expenses such as travel reimbursement rates or salaries cannot be paid at different rates just because a sponsor is being charged for them.

Once you have determined an expense is allowable, you need to determine if the purchase will be made through a requisition, procurement card or request to pay. For more information, go to Office of Business Operation’s website at

The following are examples of expenses that could be disallowed:

  • Research equipment ordered in the last month of the terminal year of the award
  • Expenses made outside the award period (unless pre-award costs are approved)
  • Equipment purchases unallowable under the terms and conditions of the award
  • Maintenance and service agreements dates outside the award period

Unacceptable Direct Cost Charging Practices

The following examples are unacceptable practices of direct charging:

Rotating charges among projects without establishing that the charges accurately reflect the relative benefit to each project during that specified period of time;

Allocating costs normally treated as indirect expenses directly to a project;

Transferring expenses from other accounts at the end of a project period for the sole purpose of expending a residual balance.

Expense Allocation Policies and Procedures

In some situations, it may be difficult or unreasonable to determine at the time of purchase or vendor payment how much an allowable but shared direct cost expenditure benefits a particular sponsored project. The basis of an allocation or distribution (effort, square footage, headcount, or other measure of usage) must logically relate to the type of cost being allocated. The allocation methodology must produce a result that is allowable, allocable, and reasonable. Examples of such types of allocated costs include, but are not limited to: lease payments on buildings, vehicles, and other equipment; payments to providers of services utilized on multiple projects (insurance, internet services, etc.), and personnel salaries shared among multiple projects contributing varying periodic effort.

Hiring Personnel with Sponsored Funds

When hiring personnel using sponsored funds, the same basic spending principles of allowable, reasonable, allocable and consistency apply.

To hire a student,financial aid office is involved.

To hire a graduate student or faculty, contact the appropriate department head.

To hire Professional and Scientific (P &S) or Merit staff, contact Human Resources. Administrative and Clerical personnel are generally not allowed on grant funding unless the project is considered a major project. A project is considered major if it requires an extensive amount of administrative or clerical support, which is significantly greater than the routine level of such services provided by academic departments. OMB circular A-21 provides some examples of major projects.

To hire a faculty member, contact Virginia Arthur, Associate Provost for Faculty Affairs at 3-2519.

Travel Guidelines and Expenses

See Travel Guidelines.

Food and Beverages

Food and beverage purchases must be consistent with UNI’s and the sponsor’s policies. Guidance should be applied within the context of each individual situation. While food and/or beverages can be allowable, recipients are not required to provide them at training sessions, meetings or conferences.

Food and/or beverage expenses are allowable if the food/beverages are provided to participants at training sessions, meetings or conferences. Training sessions, meetings and conferences must be allowable activities under the sponsor program guidelines. In addition, food and beverage expenses provided at training sessions, meetings or conferences must be:

  • Considered Reasonable;
  • Incidental to a work-related event; and
  • Not related directly to amusement and/or social events

–if alcohol is involved, its social.

Direct Cost / OMB Circular A-21 Allowability
Advertising – cost of advertising media and corollary administrative costs; media includes magazines, newspapers, radio, television, direct mail, exhibits, electronic or computer transmittals, etc.
All costs can only be for the purpose of meeting the obligation of the sponsored project. / Advertising costs allowed for:
(1) the recruitment of personnel;
(2) procurement of goods and services;
(3) disposal of scrap or surplus materials except when non-Federal entities are reimbursed for disposal costs at a predetermined amount or
(4) other specific purposes necessary to meet the requirements of the sponsored agreement.
Public Relations – community relations and means those activities dedicated to maintaining the image of the institution or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. / Allowable public relations costs are:
(1) those required by the sponsored agreement;
(2) communication with the public and press pertaining to specific activities of a sponsored agreement (necessary outreach efforts)
(3) those necessary to keep public informed on matters of public concern
Meetings, conventions, convocations or other events related to other activities of the University / Unallowed and include costs of displays, demonstrations, and exhibits, salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations and providing briefings.
Promotional Items / Unallowed and include models, gifts and souvenirs
Advisory Councils / Allowed as a direct cost where authorized by the Federal awarding agency
Alcoholic Beverages / Unallowed
Communication Costs – telephone services, local and long distance telephone calls, telegrams, postage, messenger, internet or electronic transmittal services / Allowable as direct charges only when the charges can be identified as exclusive to a sponsored project such as long distance telephone calls, bulk mailing for a specific project, dedicated telephone line, etc.
Salaries, Wages, Fringe Benefits / Allowable as direct charges long as the compensation conforms to the established policies of the institution and are supported by actual effort performed on the project. Administrative and clerical costs are generally paid through F&A unless the effort can be specifically assigned to a sponsored project.
Donations and Contributions / Unallowed
Entertainment – amusement, diversion, and social activities / Unallowed including tickets to shows or sports events, meals, lodging, rentals, transportation and gratuities
Capital Expenditures for improvements to land, building, or equipment which materially increase their value or useful life / Unallowable as a direct cost except with the prior approval of the awarding agency.
Capital Expenditures for Special Purpose Equipment – to be used specifically for the sponsored project / Allowable as direct costs, provided items with a unit cost of $5000 or more have the prior approval of the awarding agency.
Capital Expenditures – purchases for general purpose equipment, buildings and land (includes office equipment, furnishings, telephone networks, etc) / Unallowed except when approved in advance by the awarding agency.
Maintenance/Repairs/Upkeep –necessary to keep buildings and equipment in efficient operating condition / Allowable as long as the purpose is not to extend the life or improve the permanent value of the building or equipment.
Materials/Supplies/Fabricated Parts - / Allowable if necessary to carry out a sponsored agreement and only materials and supplies actually used for the performance of a sponsored agreement may be direct charged
Meetings and Conferences – the primary purpose must be the dissemination of technical information. Any entertainment associated with the meeting or conference cannot be paid for with federal funds. / Allowable costs can include: conference or meeting arrangements, publicity, rental of staff offices, conference space, recording or translation services, telephone charges, registration, salaries, postage, lodging, travel expenses (this includes transportation and subsistence for speakers or participants)
Training – employee development / Allowable
Travel Costs – transportation, lodging, subsistence and related items incurred by employees who are in travel status on official business of the institution. / Allowable as long as the charges are consistent with established University policies.

1/20/2011