Unallowable Cost Definitions
Definition
Costs that cannot be charged to the Federal Government or included
in the Facilities and Administrative (indirect) cost rate.
Overview
The Office of Management and Budget (OMB) Circular A-21 prohibits the
University from charging federally funded agreements or requesting federal
reimbursement for certain costs. A-21 refers to these costs as "unallowable
costs." However, for some of these costs, specific circumstances
or cost attributes, which are described below, are allowable.
Since recharge and cost center rates are often charged to federally funded
budgets or programs, these unallowable costs cannot be included in recharge
rates charged to internal users or charged to the recharge center operating
account.
If a facilities and administrative (indirect) cost proposal is being prepared,
unallowable costs must be identified when they occur in UW budgets to ensure
they are not included in the University's F&A or indirect cost rates
- (MAA
Web Application).
Unallowable Cost Categories (in alphabetical order)
The only
allowable advertising costs are:
- Recruitment of personnel.
- Procurement of goods and services.
- Disposal of scrap or surplus materials.
- Those advertising costs specifically required by a sponsored agreement.
Alcoholic beverages are unallowable, including beer, wine, and mixed alcoholic
drinks.
However, alcohol can be directly charged to a few sponsored
projects if the nature of the research specifically requires the purchase
and use of alcohol in the research,
and the sponsor explicitly approves
the cost.
Costs incurred for, or in support of, alumni/alumnae activities and similar
services are unallowable.
Any losses, whether actual or estimated, arising from uncollectible accounts
and other claims, and any related collection and legal costs are unallowable.
Costs incurred for commencement and convocations are unallowable.
Any contingency reserve or similar provision made for events, the occurrence
of which cannot be foretold with certainty is unallowable.
Generally, these costs are unallowable. The only exception is when the Federal
government specifically authorizes the condition causing the action. For
more information, contact
MAA.
All donations and contributions made by the University, regardless of the
recipient, are unallowable.
Costs of activities where the primary purpose is amusement, diversion (such
as tickets to shows or sports events), or social activities, and any associated
costs, such as transportation, meals, etc. are unallowable.
Costs resulting from violations of, or failure of the institution to comply
with Federal, State, and local or foreign laws and regulations are unallowable.
The
only exception is when the Federal government authorizes, in advance,
such payments.
Costs of organized fund raising, including financial campaigns, endowment
drives, solicitation of gifts and bequests, and similar expenses incurred
solely to raise capital or obtain contributions are unallowable. This includes
salary, printing, room charge, travel, meal, and supply costs of fund raising.
All costs for goods or services for personal use by the University's employees,
including housing expenses (e.g. depreciation, rent, maintenance, utilities,
furnishings, etc.), housing allowances, and personal living expenses for
University officers, are unallowable.
- Costs for insurance against defects, including the costs of insurance
or any other costs incurred to correct defects in the University's materials
or workmanship, are unallowable.
- If research involves human subjects, medical liability or malpractice
insurance costs can only be directly charged to sponsored projects
according to the risk of the population covered. Therefore, if
medical liability or malpractice insurance costs occur on a budget classified
as general or departmental administration for the purposes of the F&A
proposal, they must be identified and reported to MAA when an F&A
or indirect cost proposal is prepared.
- If required by sponsored project, allowable general conduct of activities
or other insurance costs are allowable.
The only
allowable interest costs are those paid to an external party
if associated with the following assets:
- Buildings acquired or completed on or after July 1, 1982.
- Major reconstruction and remodeling of existing buildings completed
on or after July 1, 1982.
- Capital assets acquired or replaced after May 8, 1996; subject to certain
conditions.
The only
allowable investment management expenses are those incurred
for the physical custody and control of monies and securities. Costs of investment
counsel and staff and similar expenses incurred solely to enhance income
from investments are unallowable.
In general, lobbying costs are unallowable, including activity that:
- Improperly influences (influences on any basis other than the merits
of the matter) an employee or officer of the Executive branch of the
Federal government to give consideration or to act regarding a sponsored
agreement or regulatory matter.
- Attempts to influence the outcomes of any Federal, State, or local
election, referendum, initiative, or similar procedure, through in kind
or cash contributions, endorsements, publicity, or similar activity.
- Establishes, administers, contributes to, or pays the expenses of a
political party, campaign, political action committee, or other organization
established for the purpose of influencing the outcomes of elections.
- Attempts to influence the:
- Introduction of Federal or State legislation.
- Enactment or modification of any pending Federal or State legislation
by preparing, distributing, or using publicity or propaganda, or
by urging members of the general public, or any segment thereof,
to contribute to or participate in any mass demonstration, march,
rally, fund raising drive, lobbying campaign or letter writing or
telephone campaign.
- Legislative liaison activities, including attendance at legislative
sessions or committee hearings, gathering information regarding legislation,
and analyzing the effect of legislation, when such activities are carried
on in support of or in knowing preparation for an effort to engage in
unallowable lobbying. Legislative liaison activities include:
- Attendance at legislative sessions or committee hearings.
- Gathering information regarding legislation.
- Analyzing the effect of legislation.
A few lobbying costs are allowable if specifically related to the
performance of a sponsored agreement.
- Technical and factual presentations on topics directly related to the
performance of a grant, contract, or other agreement.
- Activities to influence State legislation in order to directly reduce
the cost, or to avoid material impairment of the institution's authority
to perform a grant, contract, or other agreement.
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 University's
contributed portion by reason of cost-sharing agreements or any under-recoveries
through negotiation of flat amounts for F&A costs.
Note: Membership and subscription costs must not be directly charged to
sponsored agreements, unless unlike circumstances exist. For more information,
see the University's Costing
Policy.
- Membership in any civic or community organization, or in any country,
social or dining club is unallowable. The only allowable membership costs
are for a membership in business, technical, or professional organizations.
- The only allowable subscription costs are for subscriptions
to business, professional, and technical periodicals.
- Costs of meetings and conferences are only allowable when the
primary purpose is the dissemination of technical information. This includes
the costs of meals, transportation, rental of facilities, etc.
Unless approved by the sponsoring agency, preaward costs incurred
prior to the effective date of the sponsored agreement, whether or not they
would have been allowable there under if incurred after such a date, are
unallowable.
The only
allowable public relations costs are those for the cost of:
- Public relations specifically required by a sponsored agreement.
- Conducting general liaison with news media to keep the public informed
on matters of public concern, such as notices of financial matters, contract/grant
awards, etc.
- Communicating with public and press pertaining to specific activities
or accomplishments resulting from the performance of sponsored agreements.
Costs of selling and marketing any services or products of the institution
are unallowable, unless included in allowable advertising costs above (J.1.).
Expenditures for the publication and distribution of student admissions information
are included in this category (not allowable).
However, recharge centers
can create and distribute materials to inform internal or University
users about the services and/or products they provide.
Unless specifically allowed for in the sponsored agreement, costs
incurred for intramural activities, student publications, student clubs,
and other student activities are unallowable.
Airfare 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 except
when such accommodations would: require circuitous routing; require travel
during unreasonable hours; excessively prolong travel; greatly increase the
duration of the flight; result in increased costs that would offset transportation
savings; or offer accommodations not reasonably adequate for the medical
needs of the traveler.
