All costs that you request in your budget must be allowable, allocable, reasonable, necessary and consistent line items with your main proposal and research project. To understand allowable vs. unallowable costs, you will need to consult both the funding agency and local standards. For example, the NIH may disallow the costs if it determines, through audit or otherwise, that the costs do not meet the tests of allowability, allocability, reasonableness, necessity, and consistency.
- Stop and Consider: Your institution must ensure that all costs charged to grants are allowable and appropriate.
- A cost is allowable if it is:
- Reasonable: A prudent person would have purchased this item at this price.
- Necessary: The expense is required to fulfill the terms and needs of the project.
- Allocable: The expense directly benefits the project and this fact can be adequately documented.
- Consistently Treated: Expenses for the same purpose are treated and classified the same way under like circumstances.
- Not Prohibited: The expense is not specifically prohibited by the applicable federal regulations, other rules or laws, the relevant agreement, or local policies.
- These rules constitute best practices for all grant funding, but they are applied with special strictness to federal funds.
- When is allowability determined?
- Allowability is determined when the budget is created and also when costs are actually charged to the project.
- If unallowable costs are included in a budget and the sponsor then makes an award, the unallowable expenses will not be charged to the award.
- Unallowable items that have been purchased will be moved to the division’s cost center.
- Examples of Unallowable Costs (not a comprehensive list)
- Food or drink,
- Office supplies, and
- Administrative or other support staff.
- Items that will be used for several projects and/or for general duties and whose proportionate usage cannot be accurately calculated (i.e., computers, smartphones, copiers, printers)
- Note: If NIH discovers an unallowable cost in your budget, generally we will discount that cost from your total award amount, so it is in your best interest to avoid requesting unallowable costs. If you have any question over whether a cost is allowable, contact your Research Administration or Research and Grants Accounting specialist.
