Grant Funding — Cost Principles Guidance

Fiscal Compliance
Why it matters…
University of
Multiple Guidelines
Fiscal Compliance
• Definition:
– Oversight/stewardship of financial aspect of
• Responsible party:
– Everyone is responsible to ensure proper
spending of sponsored project funds
– Principal Investigator has overall responsibility
– Purchaser has secondary responsibility
Cost Principles
Reasonable and necessary
Necessary for the
performance of the project
Prudent person test
Consistent with established
institutions practices
Allowable under regulations or award provisions
Reasonable & Necessary
Within Terms & Conditions
of Award
Allocable and verifiable
Benefits the project
Easily identified and
Proportional to the relative
benefit received by project
Consistently treated
Consistency in estimating, charging and reporting of direct costs and F&A
Cost may be considered reasonable if the
goods/services acquired and the cost involved
reflects the same action that a prudent person
would have taken.
• Is necessary for the performance of the
sponsored agreement
• Has been determined reasonable by the
individuals concerned acting with due diligence
• Has been determined through costing policy,
consistent with established institutional policies
and practices
All costs must be allowable by federal regulations,
sponsor terms and conditions, including
program-specific requirements and University
• Reasonable and necessary
• Allocable to sponsored agreements
• Given consistent treatment appropriate to the
specific circumstances at hand
• In conformity to any limitations or exclusions set
forth in the sponsored agreement
Sample Allowable Costs
• Compensation and related fringe benefits of
employees for performance of work under the
sponsored agreement
• Costs of materials consumed or expended in the
performance of the sponsored activity
• Travel (in accordance with University policy and in
compliance with sponsored agreement)
• Equipment
• Materials and Supplies
• Consultants
• Subawards
Sample Unallowable Costs
Alcoholic Beverages
Entertainment Costs
Goods/Services for Personal Use
Losses on Other Sponsored Agreements
Fines and Penalties
Memberships in Civic/Social Clubs
Costs with insufficient documentation
Non-travel related Meals and Refreshments
(generally not allowable direct costs)
Example Unallowable Cost
• Foreign travel – while travel is generally an
allowable expense on sponsored projects, many
sponsors both federal and non-federal do not
allow foreign travel to be charged to the award
even if the travel were related to the sponsored
• Every incurred cost must have a direct benefit to
the sponsored project being charged.
• Can be easily identified and assigned to a
particular sponsored project
• 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
Allocable Considerations
• Allocated costs may not be shifted to other
sponsored agreements in order to meet
deficiencies caused by overruns, to avoid
restrictions imposed by law or by terms of the
sponsored agreement, or for other reasons of
• Costs may not be allocated based on the
remaining balance in the budget of the
sponsored project
Reasonable Allocation Methods
Reasonable methods for allocating common use
scientific items and supplies may include:
• Specific anticipated use per sponsored project
• Full time equivalents on each sponsored project
• Lab square footage
• High correlation to another lab cost that is clearly
Example Unallocable Costs
• Travel to conference by PI (not related to current
sponsored activities) is not allocable as a direct
• Salary of administrative staff to schedule
meetings is not allocable as a direct cost to a
specific sponsored project
• Purchase of general use supplies for entire lab
group with no clear allocation method is not
allocable to individual sponsored projects
• Equipment purchased at end of sponsored
• Check with your department administrator.
• Remember the “Cost Principles.”
• Do not charge common items to a grant.
• Supporting the expense with proper invoicing and
receipts are critical to the audit process.

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