10.1 - Allowable Use of Funds

It is the policy of the University that only costs that are reasonable, allowable, and allocable to a Federal award shall be charged to that award directly or indirectly. All unallowable costs shall be appropriately segregated from allowable costs in the general ledger in order to assure that unallowable costs are not charged to Federal awards.

Segregating Unallowable From Allowable Costs

The following steps shall be taken to identify and segregate costs that are allowable and unallowable with respect to each federal award:

The budget and grant or contract for each award shall be reviewed for costs specifically allowable or unallowable.
The University shall be familiar with the allowability of costs provisions of 2 CFR Part 200 Subpart E—Cost Principles particularly:
a. The list of specifically unallowable costs, such as alcoholic beverages, bad debts, contributions, fines, and penalties, lobbying, etc.

b. Those costs requiring advance approval from Federal agencies in order to be allowable in accordance with §200.407 Prior written approval.
No costs shall be charged directly to any Federal award until the cost has been determined to be allowable under the terms of the award and/or 2 CFR Part 200 Subpart E—Cost Principles.
For each Federal award, an appropriate set of general ledger accounts / cost center / or project code, etc. shall be established in the chart of accounts to reflect the categories of allowable costs identified in the award or the award budget.
All items of miscellaneous income or credits, including the subsequent write-offs of uncashed checks, rebates, refunds, and similar items, shall be reflected for grant accounting purposes as reductions in allowable expenditures if the credit relates to charges that were originally charged to a Federal award or to activity associated with a Federal award. The reduction in expenditures shall be reflected in the year in which the credit is received (i.e., if the purchase that results in the credit took place in a prior period, the prior period shall not be amended for the credit.)
Any significant variances between actual and budgeted expenditures noted will be discussed and resolved prior to requesting payment.

Criteria for Allowability

It is the policy of the University that all costs must meet the following criteria in order to be treated as allowable direct or indirect costs under a Federal award:

The cost must be “necessary” to the overall operation of the University and is assignable in part to the Federal award in accordance with the principles of 2 CFR Part 200 and any other applicable awarding agency regulations.
The cost must be "reasonable" for the performance of the award, considering the following factors:
1. Whether the cost is of a type that is generally considered as being necessary for the operation of the organization or the performance of the award.
2. Restraints or requirements imposed by such factors as sound business practices, arm's length bargaining, Federal, state, local tribal, and other laws and regulations, and the terms and conditions of the award.
3. Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to The University, its employees, where applicable its students or membership, the public at large, and the Federal Government.
4. Consistency with established policies and procedures of the University, deviations from which could unjustifiably increase the costs of the Federal award,
The cost must be "allocable" to an award by meeting one of the following criteria:
1. The cost is incurred specifically for a Federal award or
2. The cost benefits both the Federal award and other work of the University, and can be distributed in proportions that may be approximated using reasonable methods; and
The cost must conform to any limitations or exclusions of 2 CFR Part 200 or the Federal award as to the types or amount of cost items,
Treatment of costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the University,
Costs must 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),
The cost must be determined in accordance with generally accepted accounting principles (GAAP),
Costs may 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 a prior period,
The cost must be adequately documented,
The cost must be incurred during the approved budget period.

Direct Costs

Direct costs include those costs that are incurred specifically for one award or non-Federal function. The University identifies and charges these cost exclusively to each award or program.

Salaries and Wages

Charges to Federal awards for salaries and wages will be based on records that accurately reflect the work performed. These records:

Are supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.
Are incorporated into the official records of the University.
Reasonably reflect the total activity for which the employee is compensated, not exceeding 100% of compensated activities.
Encompass both federally assisted, and all other activities compensated by the University.
Comply with other established accounting policies and practices of the University.
Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
May reflect categories of activities expressed as a percentage distribution of total activities

Time sheets or personnel activity reports are submitted on a regular basis reflecting employees' work and which programs directly benefited from their effort. For those grants that support all activities of the employee, an applicable percentage will be charged to each funding source, to ensure that the salary is only getting reimbursed by one granting agency.

Timesheets are signed by the employee and are reviewed and approved by the employee’s supervisor.

Alternatively, budget estimates for time spent on Federal Awards may be used for interim accounting purposes. These estimates produce reasonable approximations of the activity actually performed. Any significant changes in the corresponding work activity are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories will not be considered as long as the distribution of salaries and wages is reasonable over the longer term.

After-the-fact interim charges made to a Federal award based on budget estimates will be reviewed. All necessary adjustment will be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. At the end of the estimated time period, the employees will certify that the estimates were accurate, or will report that adjustments need to be made based on actual time spent. These certifications will also be signed by a supervisor with direct knowledge of the employees activities.

Supplies and Equipment

Supplies means all tangible personal property other than those meeting the definition of equipment. Equipment is all tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the University for financial statement purposes, or $5,000. A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level established by the University for financial statement purposes or $5,000, regardless of the length of its useful life. Equipment purchased for exclusive use on a federal award and reimbursed by a federal agency shall be accounted for as a direct cost of that award and the full amount will be included as a federal expenditure.

Travel

Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the University. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges consistent with those normally allowed in like circumstances in the University’s non-federally-funded activities and in accordance with the University’s written travel reimbursement policy (see 3.22 Travel and Vehicle Policy).

Costs incurred by employees and officers for travel, including costs of lodging, other subsistence, and incidental expenses, must be considered reasonable and otherwise allowable only to the extent such costs do not exceed charges normally allowed by the University, in its regular operations as the result of the University’s written travel policy. In addition, if these costs are charged directly to the Federal award, documentation must justify that participation of the individual is necessary to the Federal award; and the costs are reasonable and consistent with the University’s established travel policy.

Airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are unallowable except when such accommodations would require circuitous routing, require travel during unreasonable hours, excessively prolong travel, result in additional costs that would offset the transportation savings; or offer accommodations not reasonably adequate for the traveler's medical needs. The University must justify and document these conditions on a case-by-case basis in order for the use of first-class or business-class airfare to be allowable in such cases.

The University will comply with the requirements of the Fly America Act (49 U.S.C. 40118) which generally provides that foreign air travel funded by Federal funds may only be conducted on U.S. flag air carriers and under applicable Open Skies Agreements. (see information on Fly America Act on the GSA website at https://www.gsa.gov/policy-regulations/policy/travel-management-policy/fly-america-act).

Indirect Costs

Indirect costs are those costs that either benefit more than one award (overhead costs) or non-federal function or that are necessary for the overall operation of the University (management and general costs).

The University chooses to use the de minimus rate of 10% on its federal awards rather than negotiate an approved indirect cost rate.

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Section 10 - Grants Management