Sponsored Programs Accounting for Unallowable Costs Policy

Responsible Unit: OSA | Executive lead: CRO
Created: 10/20/21 | Reviewed/Revised: N/A | Effective: 06/2024
Compliance: 2 CFR 200.430(a)1, 2 CFR 200.430(h)i, 2 CFR 200.430(h)4.ii, 2 CFR 200.431(c),  2 CFR 200.431(g)6, 2 CFR 200.431 (h), 2 CFR 200.468, 2 CFR 200.474(a), COCA 8.2 
Approving Body: PAC | Classification: Institution-wide

Policy:   
All costs proposed or incurred on a sponsored project must comply with the terms and conditions of the sponsored awards in determining costs that are allowable or unallowable. At no time should unallowable costs be charged to the sponsored project. The purpose of this policy is to establish guidelines for defining and identifying costs that are unallowable for reimbursement from the Federal government and other external sponsors. PNWU adheres to applicable Cost Accounting Standards and applicable government regulations, including the Federal Office of Management and Budget Uniform Guidance (OMB Uniform Guidance) as well as sponsor terms and conditions in accounting for unallowable costs. 

Definitions:         
Unallowable Costs: Direct or indirect expenses that are not reimbursable under either Federal regulations or the terms and conditions of a sponsored award.  

Procedure:            

Procedures for Implementation 
In addition to applicable Cost Accounting Standards, PNWU must adhere to the requirements of the OMB Uniform Guidance, in determining the allowable costs of work performed for sponsored programs. This policy summarizes the requirements of the OMB Uniform Guidance.  

Activities and expenses which are unallowable for reimbursement on a Federally funded award may still be appropriate, necessary and allowable on a non-Federally funded award.  

It is the responsibility of the Principal Investigators (PI’s) to monitor award expenditures to ensure that unallowable costs are identified and separately coded. Schools and Departments may still incur these activities/expenses, within the limits of their appropriate budget lines, but they must be coded as unallowable so they can be readily identified and excluded from sponsored programs accounts.  

Appendix A provides the rules prescribed by the OMB Uniform Guidance and recommended procedures for selected items of cost. Some of these items are unallowable as direct or indirect costs for sponsored programs (e.g., alumni activities). Others require special treatment (e.g., student administration and services). 

Related Documents:
Charging Administrative Expenses to Federal Awards Policy  
Costing Policy  
Appendix 1: Identifying Unallowable Costs under the OMB Uniform Guidance 

 Type of Cost Rules Method of identifying in PNWU Accounting System 
1 Advertising and public relation costs [200.421] Specific guidelines for allowability are identified in Section 200.421. The term “advertising costs” means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like. The term “public relations” includes 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. Budget Code in PNWU accounting system “To be Determined” (TBD); After a grant is awarded, PNWU Finance develops a budget code specific to that grant that will be used for all grant purchases for the life of the grant.  
2 Alcoholic beverages [200.423]  Costs of alcoholic beverages are unallowable.  TBD 
3 Alumni(ae) activities [200.424]    Costs incurred for, or in support of, alumni activities and similar services are unallowable.  TBD 
4 Bad debt [200.426] Any losses, whether actual or estimated, arising from uncollectible accounts and other claims, related collections costs, and related legal costs, are unallowable. TBD 
5 Commencement & convocations [200.429, Appendix III] Costs incurred for commencements and convocations are unallowable, except for those expenses incurred for the administration of student affairs and for services to students, including commencements and convocations. TBD 
6 Late-funded pension costs [200.431] Increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 days after each quarter of the year to which such costs are assignable are unallowable TBD 
7 Employee auto allowances [200.431] Employee auto allowances are unallowable where personal use applies. TBD 
8 Contingency provisions [200.433] Amounts for major project scope changes, unforeseen risks, or extraordinary events may not be included. There are certain conditions in which contingencies may be allowed. Please see Section 200.433 in the Uniform Guidance for more information TBD 
9  Fraud defense [200.435]  Fraud defense as well as, prosecuting claims against the government, patent infringement and costs associated with legal convictions are all unallowable TBD 
10 Legal Services [200.435]  Regulations generally permit recovery of 80% of legal expenses where the institution successfully defends itself against misconduct claims. Please refer to Section 200.435 for specific guidelines. TBD 
11 Legal Settlements [200.435]  Costs incurred by the institution in connection with defense of suits brought by its employees or ex-employees under section 2 of Major Fraud Act of 1988, including costs of all relief necessary to make such employee whole, where the institution was found liable or settled, are unallowable TBD 
12 Donations & gifts [200.434]    Donations or contributions made by the University, regardless of the recipient, are unallowable. TBD 
13 Entertainment [200.438] Costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the Federal awarding agency. TBD 
14 Lobbying [200.450] Costs incurred in attempting to improperly influence, either directly or indirectly, an employee or officer to the executive branch of the Federal Government to give consideration or to act regarding a sponsored project or a regulatory matter are unallowable. Improper influence means any influence that induces or tends to induce a Federal government employee or officer to give consideration or to act regarding a Federal government sponsored project or regulatory matter on any basis there than the merits of the matter TBD 
15 Fines and penalties [200.441] Costs resulting from non-Federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compliance with specific provisions of the Federal award, or with prior written approval of the Federal awarding agency.  TBD 
16 Personal use expenses [200.445] Costs of goods or services for personal use of the institution’s employees are unallowable regardless of whether the cost is reported as taxable income to the employee TBD 
17 Employee housing allowances [200.445] Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a Federal awarding agency.  TBD 
18 Insurance against defects [200.447] Costs of insurance with respect to any costs incurred to correct defects in the non-Federal entity’s materials or workmanship are unallowable.  TBD 
19 Medical malpractice insurance [200.447]. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs must be treated as a direct cost and must be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance.  TBD 
20 Fundraising/investing [200.442]   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 TBD 
21 Interest [200.449]  Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-Federal entity’s own funds, however represented, are unallowable. Financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions and requirements identified in Section 200.449.  TBD 
22 Covering overruns and losses on other sponsored projects [200.451] These costs are unallowable.   TBD 
23 Meetings & conferences [200.432] Allowable conference costs paid by the non-Federal entity as a sponsor or host of the conference may include rental of facilities, speakers’ fees, costs of meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions of the Federal award. As needed, the costs of identifying, but not providing, locally available dependent-care resources are allowable TBD 
24 Memberships in social & civic clubs [200.454] These costs are unallowable.   TBD 
25 Private patent development [200.448] Patent-related costs where the Federal government holds an interest are allowable. Where only private patent rights apply, related costs are unallowable. TBD 
26 Pre-award costs [200.458] Pre-award costs are those incurred prior to the effective date of the Federal award directly pursuant to the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency.  TBD 
27 Recruiting costs [200.463]  Most recruiting costs are allowable. However, “Special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel that do not meet the test of reasonableness or do not conform with the established practices of the non-Federal entity, are unallowable. TBD 
28 Selling & marketing [200.467] Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under Section 200.421 Advertising and public relations.) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. TBD 
29 Student activity costs [200.469]  Student activity costs are unallowable, except where permitted by the sponsored agreement. TBD 
30 Excess airfare and related travel [200.474] Except for medical necessity, first class airfare (and related costs beyond discount rates), are generally unallowable.  TBD 
31 Termination costs applicable to sponsored agreements [200.471] Section 200.471 provides guidelines and restrictions on allowable termination costs applicable to sponsored programs. TBD 
31a  Certain Telecommunications and Video Equipment  2 CFR 200.471 Telecommunication and video surveillance costs to provide clarity that the telecommunications and video surveillance costs associated with 2 CFR 200.216 are unallowable. A new definition for telecommunication and video surveillance costs, which is described in 2 CFR 200.471, has also been added to 2 CFR for clarity.   TBD 
32 Late/unsupported cost transfers  Cost transfers must meet the criteria specified in the OMB Uniform Guidance. TBD 
33 Student administration and services [Appendix III] The expenses under this heading are those that have been incurred for the administration of student affairs and for services to students, including expenses of such activities as deans of students, admissions, registrar, counseling and placement services, student advisers, student health and infirmary services, catalogs and commencements and convocations. The expenses in this category must be identified and allocated solely to the instruction function TBD 

Policy Resources

For assistance with policies and procedures contact:

Lori Fulton
lfulton@pnwu.edu