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What Are Typical Allowable and Unallowable Expenses on Sponsored Research Awards?

Allowable and Unallowable costs on federally funded sponsored research awards are defined in OMB Circular A-21. According to OMB Circular A-21, the cost of a sponsored agreement is comprised of the allowable direct costs incident to its performance, plus the allocable portion of the allowable facility and administrative costs of the institution, less applicable credits. The tests of allowability of costs under these principles are:

  1. They must be reasonable.
  2. They must be allocable to sponsored agreements under the principles and methods provided herein.
  3. They must be given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances.
  4. They must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items.

The following items of cost are Unallowable according to Section J of OMB Circular A-21:

  • Advertising, Public Relations
  • Alcoholic Beverages
  • Alumni Activities
  • Bad Debts
  • Certain Legal Costs
  • Charitable Contributions
  • Contingencies
  • Entertainment
  • Fines and Penalties
  • First Class Air Travel
  • Fund Raising, Investment Management
  • Goods and Services for Personal Use
  • Housing of Officers
  • Interest Expense for Operating Purposes
  • Lobbying Costs
  • Losses on Sponsored Research Agreements
  • Memberships in Civil, Community and Social Organizations
  • Selling and Marketing Costs
  • Telephone Line Costs

Other items of cost may be Unallowable depending on the circumstances; in these instances, the Department Grant Administrator should discuss with their OSP Grant Manager.

If an Unallowable cost is charged to a sponsored research award account, the Department Grant Administrator for that particular award needs to fill out a Cost Transfer Form (if moving non-payroll charges) or Labor Account Distribution Change & Wage Transfer Form (if moving payroll charges) to move that charge off the sponsored research award account. After the form has been filled out to move the unallowable charge off the sponsored research award account, the form needs to be reviewed and signed by the Principal Investigator or Designee, Fiscal Office and OSP before processing.

Last Updated: 9/14/09