GIM 22
Attachment A
A Primer on Facilities and Administrative Costs
7. What expenses are not allowable in cost pools
according to revised Circular A-21?
Much of the public discussion of F&A costs in the early 90's focused on the four
cost pools categorized as "Administration," in part because the guidelines in
Circular A-21 were often ambiguous with respect to expenditures allowed in
this category. Whereas a number of administrative expenditures had been allowed
before the intense scrutiny in 1991, new allowability standards were applied
retroactively.
In the climate of the mid 90's, it was no longer a question of whether an
expenditure has been allowed by Circular A-21, but whether it is considered
reasonable by current "standards." In the turbulent atmosphere generated by
congressional investigations, previous "unallowables" were made more explicit and
new ones were added. Many universities had always acted conservatively and had
routinely excluded borderline costs. Nevertheless, the redefined lists, applied
retroactively, made some institutions appear to have been in violation of
Circular A-21. The new and improved list of "unallowables" is presented below
for ready reference.
Representative Unallowables
-
Alcoholic beverages
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Alumni activities
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Institution-furnished automobiles for personal use
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Legal costs of criminal and civil proceedings, appeals and patent information
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Donations and contributions made by an institution
-
Fund-raising activities
-
Entertainment
-
Executive and legislative lobbying
-
Insurance against defects
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Fines and penalties
-
Goods and services for personal use of employees
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Housing and personal living expenses of an institution's officers
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Memberships in any civic, community or social organization or country club
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Selling or marketing of goods or services
Under the current Circular A-21, none of these "unallowables" can be
allocated through F&A cost pools to research, and the University must certify that
they have indeed been excluded. The difficulty in identifying these unallowable
costs can best be illustrated by the following example. Although the University
rigorously excludes all costs associated with centralized fund-raising by
eliminating all expenditures included in budget numbers established for this
activity, similar costs in departments, schools and colleges are commingled in
operating budgets and were not identified readily and specifically as fund raising.
The University now relies on careful identification of fund raising costs by
administrative staff in academic units for exclusion from the Departmental
Administration cost pool. As a result of these diligent efforts,
"unallowables" were not an issue in recent F&A cost rate negotiations.
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