Allowable Costs

  1. The University is required to follow the directives of the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR §200) - for funding effective before December 26, 2014 - OMB Circular A-21, Cost Principles for Educational Institutions (2 CFR §220) and/or OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations (2 CFR §215), collectively referred to as Federal Guidance, in charging costs to Federal grants and contracts. While the federal government or non-federal sponsor will not reimburse for certain costs, they may be appropriate and permissible university costs. The GW policy on identification and treatment of unallowable costs (PDF) implements and makes the university community aware of the cost accounting standards established for educational institutions in the Federal Guidance.

  2. The Federal Guidance establishes principles for determining costs applicable to grants, contracts and other agreements. OMB's Uniform Guidance lists four general tests for allowability, which are:

    1. Costs must be reasonable.

      A cost may be considered reasonable if the nature of the goods or services acquired, and the amount 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.

    2. Costs must be allocable.

      A cost is allocable to a particular cost objective (i.e., a specific function, project, sponsored agreement, department, or the like) if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received. A cost is allocable to a sponsored agreement if:

      1. it is incurred specifically to advance the work under the agreement;

      2. it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through the use of reasonable methods, or

      3. it is necessary to the overall operation of the institution and, under the Federal Guidance, deemed to be assignable in part to sponsored projects.

    3. Costs must be given consistent treatment.

      For sponsored agreements, the institution must determine which types of costs it wishes to maintain as direct charges and which are indirect. All costs incurred for the same purpose, in like circumstances, are either direct cost or facility and administrative costs (indirect costs) only. If the cost principles are silent about the treatment of a particular type of cost, the institution will have to rely on generally accepted accounting principles in order to determine the allocability of costs.

    4. Costs must conform to any limitations or exclusions.

      In some cases, the cost principles or the terms and conditions of a specific sponsored agreement will establish limitations or exclusions as to types or amounts of cost items. If an authorization statute or an appropriation statue states that there is a specific limitation on the payment of a particular type of cost, and the Federal Guidance is silent on the subject or states something else, the statutory provision takes precedence.