Pratt Institute complies with Uniform Administrative Requirements, Cost Principles, and Audit Requirements for federal grant awards and cooperative agreements. Unless otherwise indicated in the Notice of Award or approved by the sponsoring agency, the costs allowed against federal awards are governed by 2 CFR Part 200 Subpart E.
Definition of an Allowable Cost
To be considered an allowable cost, an expense must meet all of the following criteria:
- Necessary and Reasonable: The cost must be necessary for the performance of the federal award and the amount must be what a prudent person would pay in a similar circumstance. Costs are considered reasonable if they are consistent with market prices, established organizational policies, and arm’s-length bargaining.
- Allocable: The cost must be able to be assigned to the federal award with a high degree of confidence. This means the expense benefits the award directly. For example, the salary of an employee working exclusively on a grant-funded project is directly allocable to that grant.
- Consistent Treatment: The expense must be treated consistently across all federal and non-federal activities. An organization’s cost accounting practices should not arbitrarily change for the purpose of a federal award. For instance, a cost treated as a direct cost on one project should be treated as a direct cost on all similar projects.
- Conform to Limitations: The cost must align with any limitations or exclusions set forth in the federal award’s terms and conditions, as well as with federal, state, and local laws.
- Adequately Documented: All costs must be supported by sufficient documentation. This includes invoices, receipts, time records, and other records that can clearly demonstrate that the cost was incurred for the purpose of the federal award and meets the above criteria.
Unallowable Costs
Unallowable costs are not eligible for reimbursement by the sponsor. While the allowability of a cost is determined by the specific circumstances, certain costs are typically unallowable under federal awards. These often include, but are not limited to:
- Alcoholic beverages
- Entertainment costs
- Fines and penalties
- Fundraising expenses
- Costs of goods or services for personal use
This list is not exhaustive. The Principal Investigator and the Office of Research and Strategic Partnerships (ORSP) must review specific federal agency guidelines and the terms of their individual awards to determine the allowability of all costs.
Treatment of Unallowable Costs
Unallowable costs must be identified and segregated from allowable costs. They cannot be charged directly or indirectly to any federal award, including as part of the indirect cost code. ORSP reviews grants expenditures on a quarterly basis. Identified unallowable costs will be removed from the award cost center and placed on the departmental cost center, unless a different cost center is provided by the department.