Expenditure and Award Management
Circular A-21 defines the factors affecting allowability of costs. Under these principlescosts must be:
- REASONABLE: A cost may be considered reasonable if the nature of the goods or services and the amount of cost involved reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.
- ALLOCABLE to the particular sponsored agreement and in compliance with the federal cost principles and methods.
A cost is allocable to a sponsored project if (1) it is incurred solely to advance the work under the sponsored agreement; and (2) it benefits both the sponsored project and other work of the institution, in proportions that can be approximated through use of reasonable methods.
Any costs allocable to activities sponsored by industry, foreign governments or other sponsors may not be shifted to federally-sponsored agreements.
- GIVEN CONSISTENT TREATMENT throughout the institution.
- COMPLIANT with any limitations or exclusions set forth in applicable federal regulations and the particular sponsored agreements terms and conditions.
- NIH Grants Policy on Allowability of Costs/Activities
- Clerical/Administrative Salaries on Sponsored Projects
Transfer of costs (expenses) to a Federal grant or contract should be the exception, not the rule. Expenses should normally be applied to the appropriate project account at the time the expense is incurred. However, when errors do occur, they must be corrected in a timely manner and with justification and documentation sufficient for audit review.
The NIH Grants Policy has well-written guidelines for cost transfers that may be more generally applied to other Federal grants. Cost transfers to Federal grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error is discovered. For audit purposes, the documentation for the transfer must include an explanation of why the error occurred and a certification that the cost has now been correctly charged.
UMB policies and procedures for various types of transfers are located at the Financial Services Policies page.