Allowable Cost Guide for Federal Projects*

The following summary is a "guide" only. Grantees should consult the complete set of applicable cost principles to determine allowability of costs prior to expending funds. All costs must be budgeted and approved in the applicable grant application prior to expenditure. Some costs require specific prior approval in the application, in which case the line item must be specifically budgeted and approved by a sponsor prior to expenditure.

If you are uncertain if a cost is allowed, please contact ORSP at 468-6606.

Costs that are NEVER Allowed

Certain costs are NEVER ALLOWED regardless of the activity they support.

* Advertising and Public Relations (J.1.f.4) - costs designed solely to promote the institution.

* Alcoholic beverages (J.2)

* Certain Recruitment Costs (J.37.b) e.g., color advertising

* Certain Travel Costs (J.48.c) e.g., first class travel

* Food and beverages for receptions or entertainment (J.15)

* Fines & Penalties (J.18)

* Donations and contributions (J.15)

* Goods and services for the personal use of employees (J.19)

* Lobbying (J.28)

* Losses on other sponsored agreements (J.25)

* Memberships in civic, community or social organizations or dining/country clubs (J.28.d/e)

* Memorabilia, promotional materials [T-shirts and other memorabilia, souvenirs or promotional items (key chains, tote bags, caps, etc.] (J.1.f3)

* Moving Costs if employee resigns within 12 months of employment (J.37.d)

ALLOWABILITY OF SELECTED ITEMS OF COSTS

Items of Cost	OMB Circular A-21
Accounting	Not Addressed.
Advertising	Allowable for recruitment of grant personnel; procurement of goods and services; and disposal of surplus materials as specified in OMB A-21. Also allowable for specific purposes necessary to meet the requirements of the sponsored agreement. Unallowable for advertising for meetings, conventions, or events related to other activities of the institution.
Advisory Councils	Allowable where authorized by the awarding agency.
Alcoholic Beverages	Unallowable.
Alumni/ae Activities	Unallowable.
Audit Services	Allowable for audits conducted under the Single Audit Act (OMB Circular A-133).
Automatic Electronic Data Processing	Not addressed.
Awards for Participation	Although not specifically addressed in OMB A-21, allowable when reasonable in cost and when necessary to accomplish program objectives. Acceptable awards include certificates, plaques, ribbons, and small trophies nominal in cost, or inexpensive instructionally related items such as pens/pencils to be used in the classroom.
Bad Debts	Unallowable.
Bonding Costs	Allowed pursuant to the terms of the award.
Budgeting	Not addressed, but allowable as in OMB A-87.
Civil Defense	Generally allowable (costs are distributed to all institutional activities)
Commencement & Convocation Costs	Unallowable except as specified in OMB A-21, Section F.9..
Communication (includes telephone, FAX, postage, messenger service, electronic communications, etc.)	Allowable.
Compensation for Personnel Services (includes salaries, wages, and fringe benefits)	Allowable if costs are reasonable and are supported with documentation that meets the criteria outlined in OMB A-21.
Conferences/meetings	Allowable when directly related to the grant program.
Construction, remodeling, or alterations	Generally not allowable. Allowable only when specifically provided for in the authorizing program statute.
Contingencies	Unallowable.
Contributions/Donations to Others	Unallowable.
Deans of Faculty and Graduate Schools	Salaries and expenses are allowable as they apply to the management/ administration of a grant program.
Defense, Prosecution, Claims and Appeals	Unallowable for prosecution of claims against federal/state government. Other costs allowable or unallowable as stipulated in OMB A-21.
Depreciation and Use Allowance	Allowable based on acquisition cost as stipulated in OMB A-21.
Disbursing Service	Not addressed.
Displays, Demonstrations, and Exhibits	Allowable when directly related to providing information about the grant program.
Donations/Contributions to Others	Unallowable.
Employee Morale, Health and Welfare	Allowable as stipulated in OMB A-21.
Entertainment (including amusement, diversion, social activities, ceremonials and any costs associated with such)	Unallowable.
Equipment and Other Capital Expenditures (includes shipping costs and ancillary charges)	Allowable for specific grant purposes. Items with unit acquisition cost of less than $5,000 usually do not require specific approval. Items with unit acquisition cost of $5,000 or more require specific prior approval. Improvements or repairs which materially increase the value or useful life of the equipment are allowable with specific approval. Items requiring specific approval must be specifically budgeted and approved in the applicable grant application prior to expending funds.
Executive Lobbying Costs	Unallowable.
Field Trips	Field trips are allowable if specified in the sponsored project.
Fines and Penalties	Unallowable except when incurred as a result of compliance with specific federal award provisions.
Food and Beverage Costs (State Auditor’s Office Ruling; not specifically addressed in federal cost principles.)	Unallowable for: 1. Refreshments or meals at an awards banquet/function. 2. Decorations. 3. Any food and beverage costs not necessary to accomplish the objectives of the grant program. 4. Any food and beverage costs not necessary to accomplish the objectives of the grant program. Allowable for: 1. Working meetings in which meals or refreshments are served.
Fringe benefits (employees)	Allowable.
Fundraising, including financial campaigns and solicitation of gifts, donations, contributions, etc.	Unallowable.
Gains and Losses on Disposition of Assets	Allowable as stipulated in OMB A-21.
General Government Expenses	Not addressed.
Gifts or items that appear to be gifts	Unallowable.
Goods and Services for Personal Use	Unallowable.
Hospitality Rooms	Unallowable.
Housing and Personal Living Expenses.	Unallowable.
Idle Facilities and Capacity	Unallowable except as specifically outlined in OMB A-21.
Insurance and Indemnity	Insurance is allowable when pursuant to the grant award and when in accordance with the institution's policy and sound business practice. Insurance for a reserve covering the risk of loss or damage to Federal property is allowable only to the extent that the organization is liable for such loss or damage. Actual losses which could have been covered by insurance are unallowable except as provided for in OMB A-21. Cost of insurance to a reserve for self-insurance programs are allowable as specified in OMB A-21.
Labor Relations	Allowable as specified in OMB A-21.
Legal Expenses	Allowable when required for the administration of a grant program. Legal expenses for claims against the federal or state government are unallowable.
Legislative Expenses and Expenses for Similar Governmental Bodies (such as boards)	Unallowable.
Lobbying	Unallowable.
Losses on other Awards	Unallowable.
Maintenance, Operations, and Repair	Maintenance and operation of building space used for grant activities is allowable as specified in OMB A-21. Costs which add to the permanent value of property or prolong its life shall be treated as capital expenditures.
Materials and Supplies (includes shipping costs)	Allowable.
Meetings/Conferences (includes rental of meeting space and equipment; supplies/materials; consultant fees, etc.) (Grant funds may not be used to pay for souvenirs, memorabilia, promotional items, or gifts.)	Allowable for dissemination of information related to the grant program. Meals and refreshments are generally unallowable. See Food and Beverage Costs.
Memberships	Allowable for membership with business, professional and technical organizations related to the grant program. Membership must be in the name of the grantee organization and not in the name of an individual. Memberships in civic or community organizations or social clubs are unallowable.
Memorabilia	Unallowable.
Participant Support Costs (such as stipends, travel, registration fees, etc.)	Not addressed in OMB Circular A-21.
Patents	Allowable if required by grant agreement and as specified in OMB A-21.
Plant Security Costs	Allowable where directly related to the conduct of grant activities.
Pre-Award (Pre-Agreement) Costs	Pre-award costs are allowable only to the extent that they would have been allowable if incurred after the effective date of the award.
Professional and Consultant Services	Allowable when provided by non-employees and when the grantee organization does not possess the expertise. Refer to OMB A-21 for additional specifications. ("Honorariums" are not allowable costs in Texas. The term "fee" must be used in lieu of honorarium.)
Promotional Items (such as T-shirts, caps, tote bags, key chains, etc.)	Unallowable.
Proposal Costs (i.e., preparing grant applications/proposals)	The cost of preparing grant applications for continuing formula entitlement grant programs is allowable as a pre-award cost. Costs for preparing applications/proposals to obtain other grant monies are not allowable.
Public Relations	Allowable only when specifically required by the grant award; for communicating with the public with regard to grant activities; or to keep the public informed on matters of public concern and as specified in OMB A-21, section J.1. Costs of public relations designed solely to promote the institution are unallowable.
Publication and Printing Costs (includes distribution and mailing of publications)	Not addressed.
Rearrangements and Alterations	Allowable for ordinary alterations unless prohibited in program requirements. Prior approval required if costs are incurred specifically for a grant. These costs must be specifically budgeted and approved in the applicable grant application prior to expending funds.
Reconversion Costs	Allowable to restore facility to condition existing immediately prior to the grant award (less costs related to normal wear and tear).
Recruiting and Relocation Costs	Allowable as specified in OMB A-21.
Reference Materials	Not specifically addressed, but allowable when related to the grant program.
Rental Costs	Allowable to the extent that the rates are comparable to that of other rental property in the locale and as specified in OMB A-21.
Royalties and Other Costs for Use of Patents	Allowable as specified in OMB A-21.
Sabbatical Leave Cost	Allowable provided Institution has uniform policy.
Scholarships and Student Aid Costs	Allowable only when the purpose of the grant is to provide training to selected participants and with specific approval as specified in OMB A-21.
Selling and Marketing	Unallowable.
Severance Pay	Allowable if required by law, employer-employee agreement, or agency policy as specified in OMB A-21.
Souvenirs	Unallowable.
Specialized Service Facilities	Allowable as specified in OMB A-21.
Student Activity Cost	Unallowable unless specifically approved as part of the grant agreement. These costs must be specifically budgeted and approved in the applicable application prior to expenditures.
Subscriptions	Allowable for business, professional, and technical periodicals when related to grant program. Subscriptions must be in the name of the grantee organization and not in the name of an individual.
Taxes	Allowable as specified in OMB A-21.
Termination of Grant Award	Allowable as specified in OMB A-21.
Training and Education	Although not specifically addressed in OMB A-21, training for employee development is allowable. College level courses are allowable only when the courses are relative to the field in which the employee is now working or may reasonably be expected to work.
Transportation of Goods	Allowable for transporting goods purchased with grant funds.
Travel Costs (for employees)	Allowable for employees traveling on official business incident to grant program. Costs may not exceed maximum allowable rates for in-state or out-of-state travel.
Trustees	Travel costs pertaining to the conduct of grant activities are allowable.

*Adapted from the Texas Education Agency, Standard Application System, 2005

Reference: OMB Circular A-21, Principles for Determining Costs Applicable to Grants, Contracts, and Other Agreements with Educational Institutions