Expense Policy

The Office of Management and Budget developed the Uniform Guidance (2 CFR, Part 200 Subpart E) to describe the treatment of costs on sponsored project activities (direct and indirect) that can be billed to the federal government. The Uniform Guidance applies to all federally funded projects including federal funding through a non-federal agency. The cost principles also identify those charges that typically cannot be charged to sponsored awards and are considered Unallowable expenses.

The OMB Uniform Guidance (§200.420 through §200.475) lists costs that are Allowable and not Allowable as an expense on a Federal award:

Allowable Costs

A cost that is Allowable must also be:

• Necessary and Reasonable for the performance of the award and be Allocable.
• Conform to any award limitations or exclusions.
• Consistent with policies and procedures that apply to both Federal and other non-Federal activities.
• Consistently treated.
• Determined in accordance with generally accepted accounting principles (GAAP).
• Not included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period.
• Adequately documented.

Reasonable Costs

Typical tests to determine if a cost is Reasonable:

• Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award.
• The restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state and other laws and regulations; and terms and conditions of the Federal award.
• Market prices for comparable goods or services for the geographic area.
• Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal government.