Allowability of Costs


This  final  guidance supersedes and streamlines requirements from OMB circulars a–21,  a–87,  a–110,  and  a–122 (which have  been  placed in OMB guidances); circulars a–89,  a–102,  and a–133;  and  the guidance in circular a–50 on single audit act follow-up. future reform efforts  may eventually seek to incorporate the cost principles for hospitals in department of health and human services regulations. copies of the OMB circulars that  are superseded by this  guidance are available on omb’s web site at the final  guidance consolidates the guidance previously contained in the aforementioned citations into  a streamlined form that aims  to improve both  the clarity and accessibility. this  final  guidance is located in title  2 of the code of federal regulations.

Applicability Date: This  guidance is applicable for Federal agencies December 26, 2013 and  applicable for non-Federal entities as described in this guidance

§ 200.110   Effective/applicability date.

(a) The standards set forth  in this  Part which affect administration of Federal awards issued by Federal agencies become effective once  implemented by Federal agencies or when any future amendment to this  Part becomes final. Federal agencies must implement the policies and  procedures applicable to Federal awards by promulgating a regulation to be effective by December 26, 2014 unless different provisions are required by statute or approved by OMB.

(b) The standards set forth  in Subpart F—Audit Requirements of this  Part and any other standards which apply directly to Federal agencies will  be effective December 26, 2013 and  will apply to audits of fiscal  years  beginning on or after December 26, 2014

§ 200.413   Direct costs.

(a) General. Direct  costs  are those costs that  can be identified specifically with a particular final  cost objective, 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. Costs incurred for the same  purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs.  See also § 200.405 Allocable costs.

(b) Application to Federal awards.  Identification with the Federal award rather than the nature of the goods and services involved is the determining factor  in distinguishing direct from indirect (F&A) costs  of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work  on that  award, their related fringe  benefit costs,  the costs of materials and  other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs  may also include extraordinary utility consumption, the cost of materials supplied from stock  or services rendered by specialized facilities or other institutional service operations.

(c) The salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs.  Direct  charging of these costs  may be appropriate only if all of the following conditions are met:

(1) Administrative or clerical services are integral to a project or activity;

(2) Individuals involved can be specifically identified with the project or activity;

 (3) Such costs  are explicitly included in the budget or have  the prior written approval of the Federal awarding agency; and

(4) The costs  are not also recovered as indirect costs.

(d) Minor items. Any direct cost of minor amount may be treated as an indirect (F&A) cost for reasons of practicality where such accounting treatment for that  item  of cost is consistently applied to all Federal and non-Federal cost objectives.

§ 200.414   Indirect (F&A) costs.

(a) Facilities and  Administration Classification. For major Institutions of Higher Education (IHEs) and  major nonprofit organizations, indirect (F&A) costs  must be classified within two broad categories: ‘‘Facilities’’  and ‘‘Administration.’’ ‘‘Facilities’’  is defined as depreciation on buildings, equipment and  capital improvement, interest on debt  associated with certain buildings, equipment and  capital improvements, and  operations and maintenance expenses.‘‘Administration’’ is defined as general administration and  general expenses such as the director’s office,  accounting, personnel and  all other types of expenditures not listed specifically under one of the subcategories of ‘‘Facilities’’  (including cross  allocations from other pools, where applicable). For nonprofit organizations, library expenses are included in the ‘‘Administration’’ category; for institutions of higher education, they are included in the ‘‘Facilities’’ category. Major IHEs are defined as those required to use the Standard Format for Submission as noted in Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and  Rate Determination for Institutions of Higher Education (IHEs) paragraph C. 11. Major nonprofit organizations are those which receive more  than $10 million dollars in direct Federal funding.

General  Provisions for Selected Items of Cost

§ 200.420   Considerations for selected items of cost.

This section provides principles to be applied in establishing the allowability of certain items involved in determining cost,  in addition to the requirements of Subtitle II. Basic Considerations of this subpart. These principles apply whether or not a particular item  of cost is properly treated as direct cost or indirect (F&A) cost.  Failure to mention a particular item  of cost is not intended to imply that  it is either allowable or unallowable; rather, determination as to allowability in each  case should be based on the treatment provided for similar or related items of cost,  and based on the principles described in § 200.402 Composition of costs  through 200.411 Adjustment of previously negotiated indirect (F&A) cost rates containing unallowable costs. In case of a discrepancy between the provisions of a specific Federal award and  the provisions below, the Federal award governs. Criteria outlined in § 200.403 Factors affecting allowability of cost must be applied in determining allowability. See also § 200.102 Exceptions.

§ 200.453   Materials and supplies costs, including costs of computing devices.

(a) Costs incurred for materials, supplies, and  fabricated parts necessary to carry  out a Federal award are allowable.

(b) Purchased materials and  supplies must be charged at their actual prices, net of applicable credits. Withdrawals from general stores or stockrooms should be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consistently applied. Incoming transportation charges are a proper part of materials and  supplies costs.

(c) Materials and supplies used for the performance of a Federal award may be charged as direct costs.  In the specific case of computing devices, charging as direct costs is allowable for devices that are essential and  allocable, but not solely dedicated, to the performance of a Federal award.

(d) Where federally-donated or furnished materials are used in performing the Federal award, such materials will  be used without charge