Revision Date: January 3, 2019
Responsible Office: URA
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Key Cost Principals for Federal Funds:
This guidance is based on the interpretation of Federal regulations, and adherence is required for all
Federal awards.
For any costs charged directly to a Federal award, the expense must be:
- Allowable under both the provisions of Federal guidance AND the terms of the specific award
- Allocable: is used for a specific purpose to accomplish work on the project which is charged
- Reasonable: the costs reflects what a “prudent person” would pay in a similar circumstance
- Charged consistently as a direct expense (versus an indirect cost
2 CFR 200.405 Allocable Costs –
“(a) A cost is allocable to a particular Federal award if the goods or services involved are chargeable to that Federal award in accordance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the Federal award
(2) Benefits both the Federal award and other work of the University and can be distributed in proportions that may be approximated using reasonable methods
(c) Any cost allocable to a particular Federal award may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations or terms and conditions of the Federal awards, or for other reasons.
(d) If a cost benefits two or more projects in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects in proportions that cannot be determined because of the interrelationship of the work involved, then the cost may be allocated or transferred to benefitted projects on any reasonable documented basis.”
Allocation Methodology Considerations:
- DO ensure that the basis for allocating costs across different projects is documented at the time the expense is incurred.
- DO document how the allocation is appropriate based on the benefit received by the award(s).
- DO retain supporting documentation in the department so it is available for review and audit.
- DO review allocation methodologies periodically to ensure they are reasonable.
- DO identify the allocation method that will be used in advance of purchasing or at the time of ordering the goods/services whenever possible to avoid the need for cost transfers.
- DON’T use any allocation methodology that is based on the funds available on sponsored awards.
- DON’T allocate costs after‐the‐fact by use of cost transfers.
Expenditures for supplies and equipment:
- Whenever possible, supplies and equipment that will be utilized on the sponsored project should be listed within the proposal budget and budget justification. If your project has direct expenses that are usually unallowable per federal guidelines (i.e., business meals, general printing and office supplies, etc.) please ensure they are listed in the proposal budget and budget justification.
- Ensure the purchase is essential to the project.
Verify that the cost is properly allocated. For example, if supplies will be used across multiple projects, the expense should be split across those projects accordingly.
Timeliness of purchases on Federal funds:
Any purchase made in the last 60‐90 days of a sponsored project will undergo increased scrutiny regarding the direct benefit of the award. Departmental administrators should ensure that the item is received prior to the end of the award period, the expense is essential to complete the remaining work for the project, and the cost is allocated according to the direct benefit to the sponsored award.