Understanding which costs are allowable is essential for developing accurate proposal budgets and managing project finances.
All expenses charged to a sponsored project must meet sponsor, federal, and University requirements. If a cost is not allowable on an award, it must be charged to an unrestricted funding source.
Criteria for Allowable Costs
A cost is generally allowable if it meets all of the following criteria:
- Reasonable: Reflects what a prudent person would have done under similar circumstances.
- Allocable to the project:
- The cost is incurred specifically to advance the sponsored project, or
- It benefits both the sponsored project and other institutional work, with a reasonable method to allocate the cost.
- Necessary for the project: Supports the objectives and scope of work.
- Consistent treatment: Applied the same way for all UMB activities under similar circumstances, regardless of funding source.
- Compliant with sponsor and award restrictions: Follows limitations, exclusions, and specific terms in the award or sponsor policy.
- Incurred during the project period: Only costs that occur within the approved start and end dates may be charged.
- Adequately documented: Supported by receipts, invoices, or other verifiable records.
- No double-charging: Costs are not claimed on any other award or funding source.
- Consistent with UMB policies and procedures: Adheres to University guidelines for financial management.
Compliance References
Federal guidance: 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart E: Cost Principles
NIH guidance: NIH Grants Policy on allowability of costs/activities
Tip: Always review the specific sponsor’s guidelines in addition to federal and UMB policies. Some sponsors have unique restrictions on certain cost types.