One of the most important aspects of grant administration is the proper expenditure of funds. Sponsored project funds may be used to defray most if not all of the costs of doing the project work. It is imperative, however, to abide by federal guidelines that specify which expenses should be listed as direct costs on awards and which should be reimbursed through indirect cost recovery. PIs and their research administrative staff should be aware of the following principles, as outlined in OMB Circular A-21, which are used to determine the appropriateness (allowability) of listing an expense as a direct charge on a sponsored award.
It is the principal investigator's/project director's responsibility to ensure that the funding he or she has received is expended for charges that are "allowable" for the project in question. Specific guidance is provided in OMB Circular A-21, but in general an allowable cost must satisfy four conditions:
Reasonable - The nature and amount of the expenditure should reflect the action that a prudent person would have taken under the same circumstances.
Allocable - Chargeable or assignable in that is it either incurred solely to advance the project work or has a reasonable basis for proportional assignment. Note that items generally covered by indirects (e.g. office supplies, administrative personnel, facilities costs) should not be assigned to sponsored projects. However, if administrative personnel are doing work that directly furthers the project goals (as opposed to, for example, managing the finances of the project) it is possible that they are allowed to be direct-charged to the award. Please contact OSP for a determination of allowabilitiy.
Consistently Treated - Through application of generally accepted accounting principles.
Conforming to any limitations or exclusions either specific to the sponsor or to OMB Circular A-21.
Questions regarding the allowability of costs should be directed to the Cost Accounting Unit of the Office of Sponsored Programs. You may also choose to view the Power Point file in our Training section of the OSP website. Note that expenses incurred after the termination date of an award are unallowable and will become a departmental responsibility.