Allowable Expenses on Sponsored Projects
The following information addresses allowable expenses and the procedures for charging
various types of expenditures to sponsored projects. These principles are intended to
supplement, not supersede existing University policy. In most cases where general
University and sponsored project costing policies differ, sponsored project policies will
be more restrictive.
Federal regulation mandates universities establish consistent practices for defining and
charging costs in accordance with the provisions of OMB Circular A-110 (Uniform
Administrative Requirements for Grants and Agreements With Institutions of Higher
Education, Hospitals, and Other Non-Profit Organizations) and the terms and conditions
of the award document.
The University follows the guidance of OMB Circular A-21 (Cost Principles for
Educational Institutions). It is the responsibility of project directors, principal
investigators, department heads, and administrators to understand and comply with this
guidance in order to prevent cost disallowances by the federal government and other
grant or contract sponsors.
DEFINITIONS
Allocable Costs: Costs of goods or services that are chargeable or assignable to a specific
project, function, department, or unit based on the relative benefits received or other
equitable relationship of the goods and services to the specific project, function,
department or unit.

Direct Costs: Direct costs are costs that can be specifically identified and assigned with
relative ease and with a high degree of accuracy to federally sponsored projects.

Facilities and Administrative Costs: Facilities and Administrative (F&A) (also called
Indirect Costs) are general institutional expenditures that are incurred for multiple or
shared projects, functions or activities and therefore cannot be specifically identified with
relative ease and with a high degree of accuracy to a sponsored project, an instructional
account, or any other institutional account.
Indirect costs are incurred in the following areas:
Depreciation, maintenance, and utilities for University buildings and equipment;
Academic colleges and departments for the administrative effort of clerical,
faculty and other professional personnel involved in various missions of the unit;
Expenses for offices which serve the entire University, such as the President’s
Office, Human Resources, Purchasing and Finance;
Central operations such as facilities management, telecommunications,
sponsored projects administration and libraries

Indirect Cost Rate: A composite rate applied to sponsored projects as a percentage of
the sponsored project’s direct costs. The federally negotiated indirect cost rates for
1/20/2011
organized research are developed by the University in accordance with OMB Circular A21 and negotiated with the Department of Health and Human Services, the University’s
federal cognizant audit agency. UNI's indirect cost rate can be found here.
Service Centers and Department Recharge Accounts: A University of Northern Iowa
unit that sells goods and services predominately to colleges or departments within the
institution. Service centers and department recharge accounts must be based on actual use
of their services and use an approved rate schedule which does not differentiate between
federally and non- federally supported activities of the university.
UNI's Center and Clinics website.
Sponsored Projects: Projects funded by federal and nonfederal agencies that are
administered by the Office of Research and Sponsored Programs. Sponsored projects
include grants, contracts and cooperative agreements for research, training and public
service activities. Sponsored projects are assigned to Oracle account fund segment series
4000 - 6999.
CHARGING DIRECT COSTS
The major criterion for direct charging of costs to sponsored agreements is the
identification of a given cost with the sponsored work rather than the nature of the goods
and services involved. In order for expenditures to be direct costs to a sponsored project,
they must be allowable costs. Allowable costs are specifically allowed under the terms
and conditions of the sponsored projects and OMB Circular A-21. They also must be:

Reasonable: In general terms reasonable means a prudent person (someone acting with
discretion and good sense) would pay this price for this item considering the prevailing
circumstances at the time of the purchase. Other considerations to determine
reasonableness:
(1) is the purchase necessary for the operation of the institution or the performance of the
project?;
(2) does incurring the expense violate rules, regulations or laws imposed by the sponsor,
the University or the state or federal government?;
(3) did the individual(s) incurring the expense do so with respect to his/her responsibility
to the University, the sponsor and the state and federal government?; and
(4) were the actions taken when incurring the expense consistent with established policies
and procedures?
The Office of Research and Sponsored Programs does not determine reasonable price nor
disallows an expense based on its price. Office of Business Operations regulates/provides
authority regarding the price of items. PI/PDs should explain and document any expenses
which might appear to be unreasonable. This will help alleviate concerns regarding
allowability.

Allocable and easily identifiable – The costs must have a direct benefit and be
directly attributable to the project or activity being performed. Costs incurred for multiple
projects/activities must be identified as follows:
1/20/2011

If the cost is specific and benefits more than one project, the cost can only be assigned
and allocated to the project(s) based on that portion of the expense that represents the
direct benefit to the project. If an appropriate basis such as actual usage cannot be
identified to allocate the costs with relative ease and with a high degree of accuracy,
such costs must be considered indirect costs. As a rule of thumb, if these costs benefit
multiple (e.g., four or five) projects/activities, the ability to accurately allocate the cost to
the appropriate projects/activities diminishes and therefore becomes questionable as a
direct cost.
If the benefit is spread over multiple projects to serve common shared activities and it is
difficult to identify a direct benefit to each activity or project, the cost must be considered
an indirect cost.
Consistent: All expenditures incurred for the same purpose must be treated the same in
all situations, regardless of the source of the funds. For example, expenses such as travel
reimbursement rates or salaries cannot be paid at different rates just because a sponsor is
being charged for them.
Once you have determined an expense is allowable, you need to determine if the
purchase will be made through a requisition, procurement card or request to pay. For
more information, go to Office of Business Operation’s website at
http://www.vpaf.uni.edu/obo/index.shtml.
The following are examples of expenses that could be disallowed:




Research equipment ordered in the last month of the terminal year of the award
Expenses made outside the award period (unless pre-award costs are approved)
Equipment purchases unallowable under the terms and conditions of the award
Maintenance and service agreements dates outside the award period
Unacceptable Direct Cost Charging Practices
The following examples are unacceptable practices of direct charging:
Rotating charges among projects without establishing that the charges accurately
reflect the relative benefit to each project during that specified period of time;
Allocating costs normally treated as indirect expenses directly to a project;
Transferring expenses from other accounts at the end of a project period for the sole
purpose of expending a residual balance.
Expense Allocation Policies and Procedures
In some situations, it may be difficult or unreasonable to determine at the time of
purchase or vendor payment how much an allowable but shared direct cost expenditure
benefits a particular sponsored project. The basis of an allocation or distribution (effort,
square footage, headcount, or other measure of usage) must logically relate to the type of
cost being allocated. The allocation methodology must produce a result that is allowable,
1/20/2011
allocable, and reasonable. Examples of such types of allocated costs include, but are not
limited to: lease payments on buildings, vehicles, and other equipment; payments to
providers of services utilized on multiple projects (insurance, internet services, etc.), and
personnel salaries shared among multiple projects contributing varying periodic effort.
Hiring Personnel with Sponsored Funds
When hiring personnel using sponsored funds, the same basic spending principles of
allowable, reasonable, allocable and consistency apply.
 To hire a student, financial aid office is involved.
 To hire a graduate student or faculty, contact the appropriate department head.
 To hire Professional and Scientific (P &S) or Merit staff, contact Human
Resources. Administrative and Clerical personnel are generally not allowed on
grant funding unless the project is considered a major project. A project is
considered major if it requires an extensive amount of administrative or clerical
support, which is significantly greater than the routine level of such services
provided by academic departments. OMB circular A-21 provides some examples
of major projects.
 To hire a faculty member, contact Virginia Arthur, Associate Provost for Faculty
Affairs at 3-2519.
Travel Guidelines and Expenses
See Travel Guidelines.
Food and Beverages
Food and beverage purchases must be consistent with UNI’s and the sponsor’s policies.
Guidance should be applied within the context of each individual situation. While food
and/or beverages can be allowable, recipients are not required to provide them at training
sessions, meetings or conferences.
Food and/or beverage expenses are allowable if the food/beverages are provided to
participants at training sessions, meetings or conferences. Training sessions, meetings
and conferences must be allowable activities under the sponsor program guidelines. In
addition, food and beverage expenses provided at training sessions, meetings or
conferences must be:



Considered Reasonable;
Incidental to a work-related event; and
Not related directly to amusement and/or social events
– if alcohol is involved, its social.
Direct Cost
1/20/2011
OMB Circular A-21 Allowability
Advertising – cost of advertising
media and corollary administrative
costs; media includes magazines,
newspapers, radio, television, direct
mail, exhibits, electronic or
computer transmittals, etc.
All costs can only be for the purpose
of meeting the obligation of the
sponsored project.
Public Relations – 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.
Meetings, conventions, convocations
or other events related to other
activities of the University
Promotional Items
Advisory Councils
Alcoholic Beverages
Communication Costs – telephone
services, local and long distance
telephone calls, telegrams, postage,
messenger, internet or electronic
transmittal services
Salaries, Wages, Fringe Benefits
Donations and Contributions
Entertainment – amusement,
diversion, and social activities
Capital Expenditures for
improvements to land, building, or
1/20/2011
Advertising costs allowed for:
(1) the recruitment of personnel;
(2) procurement of goods and services;
(3) disposal of scrap or surplus materials except
when non-Federal entities are reimbursed for
disposal costs at a predetermined amount or
(4) other specific purposes necessary to meet the
requirements of the sponsored agreement.
Allowable public relations costs are:
(1) those required by the sponsored agreement;
(2) communication with the public and press
pertaining to specific activities of a sponsored
agreement (necessary outreach efforts)
(3) those necessary to keep public informed on
matters of public concern
Unallowed and include costs of displays,
demonstrations, and exhibits, salaries and wages
of employees engaged in setting up and
displaying exhibits, making demonstrations and
providing briefings.
Unallowed and include models, gifts and
souvenirs
Allowed as a direct cost where authorized by the
Federal awarding agency
Unallowed
Allowable as direct charges only when the
charges can be identified as exclusive to a
sponsored project such as long distance telephone
calls, bulk mailing for a specific project,
dedicated telephone line, etc.
Allowable as direct charges long as the
compensation conforms to the established
policies of the institution and are supported by
actual effort performed on the project.
Administrative and clerical costs are generally
paid through F&A unless the effort can be
specifically assigned to a sponsored project.
Unallowed
Unallowed including tickets to shows or sports
events, meals, lodging, rentals, transportation and
gratuities
Unallowable as a direct cost except with the prior
approval of the awarding agency.
equipment which materially increase
their value or useful life
Capital Expenditures for Special
Purpose Equipment – to be used
specifically for the sponsored project
Capital Expenditures – purchases for
general purpose equipment,
buildings and land (includes office
equipment, furnishings, telephone
networks, etc)
Maintenance/Repairs/Upkeep –
necessary to keep buildings and
equipment in efficient operating
condition
Materials/Supplies/Fabricated Parts -
Meetings and Conferences – the
primary purpose must be the
dissemination of technical
information. Any entertainment
associated with the meeting or
conference cannot be paid for with
federal funds.
Training – employee development
Travel Costs – transportation,
lodging, subsistence and related
items incurred by employees who are
in travel status on official business of
the institution.
1/20/2011
Allowable as direct costs, provided items with a
unit cost of $5000 or more have the prior
approval of the awarding agency.
Unallowed except when approved in advance by
the awarding agency.
Allowable as long as the purpose is not to extend
the life or improve the permanent value of the
building or equipment.
Allowable if necessary to carry out a sponsored
agreement and only materials and supplies
actually used for the performance of a sponsored
agreement may be direct charged
Allowable costs can include: conference or
meeting arrangements, publicity, rental of staff
offices, conference space, recording or translation
services, telephone charges, registration, salaries,
postage, lodging, travel expenses (this includes
transportation and subsistence for speakers or
participants)
Allowable
Allowable as long as the charges are consistent
with established University policies.