The Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Final Rule, 2 CFR 200, Dec. 26, 2014, ("Uniform Guidance") sets forth standards for determining allowable costs by the sponsoring agency.  It is the policy of Davidson College to ensure that all costs proposed or incurred on a sponsored project comply with federal and state regulations and with the terms and conditions of the sponsoring agency in determining whether costs are allowable or unallowable. 


The purpose of this policy is to establish guidelines for defining and identifying costs that are allowable as Direct or Indirect Costs verses unallowable for reimbursement from the Federal government and other external sponsors as well as the proper accounting treatment for each  costs category. Unallowable costs will not be covered by the Federal government and may negatively impact the financial status of Davidson College. 


Allowable Costs

Uniform Guidance 2 CFR 200, Subpart E establishes principles for determining costs applicable to grants, contracts and other agreements with Institutions of Higher Education (IHE). Davidson College will maintain appropriate procedures for ensuring that the allowable costs charged to a sponsored award are supported with adequate justification and within the specified project period of performance.  

An allowable cost is an expense which can be charged against a sponsored project as well as placed in the indirect cost rate proposal based on the following factors. The cost is:

  • Reasonable – Must be necessary for the performance of the project and a prudent person would have purchased the item and paid the specified price.
  • Allocable – Expenses are at least partially applicable to a sponsored agreement.
  • Consistently Treated – Expenses for similar purposes must be treated the same way (throughout the college) under like circumstances.
  • Allowable – The expense must be allowable or not specifically excluded as specified by government regulations or by the contract/grant/cooperative agreement requirements.

Per 2 CFR 200.403, costs must meet the following general criteria in order to be allowable under Federal awards:

  1. Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
  2. Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amounts of costs.
  3. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
  4. Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
  5. Be determined in accordance with generally accepted accounting principles (GAAP).
  6. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or prior period.
  7. Be adequately documented.
  8. Costs must be incurred during the approved budget period. The awarding agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. 

Unallowable Costs

An unallowable cost is an expense that the federal government deems inappropriate and will not reimburse.  These categories are identified by the Office of Management and Budget in 2 CFR 200 (Uniform Guidance) and it is the college’s responsibility to maintain an accounting system that clearly identifies and segregates unallowable cost categories so that they will be excluded from the college’s proposals for cost reimbursement.

Please note that the term “unallowable” is defined by the federal government and is for the purpose of complying with federal costing regulations only. Certain types of expenditures, though not reimbursable by the federal government, are necessary for conducting college business and will continue to be reimbursed by Davidson College.

Unallowable costs cannot be budgeted, charged (directly or indirectly) or reported to federally-funded sponsored projects and must be excluded from the college’s indirect cost rate proposal calculation.  Listed below are unallowable costs that have been specifically identified in Uniform Guidance. However, this is not an exhaustive list and all expenses shall be subject to the same cost accounting principles governing cost allocability as allowable costs.

  1. Advertising and Public Relations - Some types of advertising, such as recruitment of research participants, may be allowable.
  2. Alcoholic Beverages
  3. Bad Debt
  4. Charitable Contributions
  5. Commencement and Convocation
  6. Contingency Provision
  7. Entertainment
  8. Fines and Penalties
  9. Fund Raising
  10. Goods or Services for Personal Use
  11. Housing and Personal Living Expenses for Institutional Officers
  12. Lobbying
  13. Membership in any civic or community organization, country club, social or dining club
  14. Selling and Marketing
  15. Student Activity Costs

At no time should unallowable costs be charged to a sponsored project. Proper accounting for unallowable costs is required to maintain the integrity of the College’s Facilities and Administrative (F&A) Cost Proposal and compliance with Federal regulations.

Device Purchase

Since computers and electronic devices (including, but not limited to, cell phones, iPads, GPS, software, and other related applications) are generally used for many different activities (such as instruction, research, administration, email, personal use), they usually are not considered direct costs to a federally funded project. Under federal regulations, they should normally be treated as an indirect cost and should be recovered through the indirect cost rate. If a request to acquire an electronic device for the performance for a federal award is necessary, the following items must be considered: 

  • Fully described and justified in the proposed narrative and budget 
  • Specifically identified with, and used exclusively on, the project
  • Approved by the sponsor  

Documentation supporting computer and electronic device purchases must:

  • Describe how the computer or electronic device directly benefits the project
  • Describe how it is unlike a general‐purpose item
  • Be retained for audit purposes

Questions regarding the allowability and treatment of costs charged to sponsored projects should be directed to the Office of Sponsored Programs.


It is the responsibility of each Principal Investigator (PI) to:

  1. Review sponsored research projects on a regular basis (e.g. monthly) to ensure that all expenditures charged are correct and appropriate.
  2. Identify and segregate unallowable costs when they are incurred and recorded.

It is the responsibility of the OSP Post-Award Manager to:

  1. Provide assistance in interpretation and implementation of this Policy.
  2. Provide training to PIs on this Policy.
  3. Periodically review ledgers to verify that charges are allowable and make necessary changes.

Unallowable cost items charged to sponsored funds that are subsequently identified during a review or audit of the project must be removed by the PI/department as soon as possible. The PI/department is responsible for absorbing these cost(s).


 A “direct cost” is an expense that can be identified specifically with a particular project, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Examples include: 

  • Salaries and related benefits of faculty, research associates, graduate students and technical personnel 
  • Laboratory supplies (e.g. chemicals) 
  • Telephone toll charges 
  • Animals and animal care costs 
  • Travel required for the project

An “indirect (F&A) cost” is an expense that is incurred for common or joint purposes benefitting more than one cost objective, and not readily assignable to a specific project. These costs can be classified into two categories of facilities and administration. Facilities include depreciation and use allowances, interest on debt, equipment and capital improvements, operation and maintenance expenses, and library expenses. Administration includes general administration and general expenses, departmental administration, sponsored projects administration, student administration and services, and all other types of expenditures not listed specifically under one of the subcategories of "Facilities". Examples include”

  • Salaries of administrative and clerical staff 
  • Office supplies
  • Postage and photocopying
  • Local telephone costs 
  • Memberships and subscriptions

Administration of Policy

The Assistant Dean for Research Development / Director of Sponsored Programs shall oversee this policy and review it at least once every two years.  Changes to this policy shall be made in accordance with the college’s Policy on Policies.

Adopted: November 30, 2015
Last Updated:  December 21, 2022
Last Reviewed:  June 28, 2024