What’s allowable and unallowable?

An allowable cost is a cost that can be charged or assigned to a sponsored program. The University of Texas at Dallas follows the following guideline, Allowable Cost on Federally funded Contracts and Grants, which outlines the allowable costs for grants, contracts, and sub‐awards. This guideline follows cost accounting standards as prescribed in OMB 2 CFR Part 220 (Uniform Guidance) and The University of Texas at Dallas Expenditure of Funds policy – UTDBP3097.

These are the basic criteria to determine direct costs on federally sponsored projects. Regardless of the funding agency, costs for sponsored programs are based on answering the following questions:

Are costs allocable, allowable, consistent, and reasonable in like circumstances, allowed by UTD policy, sponsor policy, federal and state polices?

What’s allowable and unallowable?

An allowable cost is a cost that can be charged or assigned to a sponsored program. The University of Texas at Dallas follows the following Unallowable cost policy which outlines the unallowable costs for grants, contracts, and sub‐awards. This policy follows cost accounting standards as prescribed in 2 CFR Part 220(Uniform Guidance) and The University of Texas at Dallas Expenditure of Funds policy – UTDBP3097.

These policies are the basic criteria to determine direct costs on federally sponsored projects. Regardless of the funding agency, costs for sponsored programs are based on answering the following questions:

Are costs allocable, allowable, consistent, and reasonable in like circumstances, allowed by UTD policy, sponsor policy, federal and state polices?

Cost Allocation Definition

The process of charging a cost, or a group of costs, to the funding sources that receive the benefit of the goods or services purchased. For purposes of this discussion, funding sources are defined as either Sponsored Awards or other, non-award budgets.

If a cost benefits two or more projects, the cost must be allocated to (i.e. shared between) the projects based on the proportional benefit to each project.

 If the exact proportions cannot be reasonably determined because of the interrelationship of the work involved, then the costs may be allocated using one of the cost allocation methodologies described below.

Allocation Methods

If a cost solely benefits one funding source, it should be charged entirely to that funding source. If a cost benefits more than one funding source, the cost should be charged to each funding source in the same proportion as it provides benefit. NOTE: Different allocation methodologies may be required for different types of expense.

There are two methods for allocating a cost to multiple funding sources:

• The Proportional Benefit Rule: when it is possible to determine the exact benefit of the cost to each funding source, the cost is allocated according to the proportion of benefit provided.
  • Example: A lab purchases 12 gallons of solution. 3 gallons of solution are used on Award A and 9 gallons on Award B.
    • 25% (3/12) is charged to Award A
    • 75% (9/12) is charged to Award B.
• The Interrelationship Rule: when it is not possible or cost effective to determine the exact allocation or use for each funding source, the cost is distributed on a reasonable and rational basis.
  • ​Example: A lab purchases syringes for use in experiments on two Awards. It is impossible to tell in advance exactly how many syringes will be used for each Award, and it would not be cost effective to track the use of each syringe. Instead, the lab allocates the cost of the syringes based on the amount of effort the lab personnel who uses the syringes expends on each Award.
    • If the effort allocation is 70/30 on Awards A and B, the cost of the syringes would also be 70/30.

Costs may not be allocated based on:

• Amount of available funds on a given award
• Budgetary convenience, e.g., accommodating an Award that is either over or under budget, budget is ending soon, etc
• Avoidance of restrictions on an Award
• Offset where costs are charged to Award A onetime and Award B the next time
• Exclusively charging to sponsored projects when the expense also supports non-sponsored activities

Allocation Best Practices

• Document the allocation methodology. As per Office of Management and Budget 2 CFR 200.405 “Allocable Costs”, documentation should explain how the allocation methodology is reasonably related to the costs being allocated
  • The allocation should be approved in advance by the Principal Investigator (PI) of the projects to which the costs are allocated.
    • The PI working with the Research Administrators must ensure that the costs are reasonable and that costs allocated to more than one project have appropriate documentation.
  • When it is not possible to allocate costs to the benefiting sponsored projects at the time when the goods or services are purchased, costs must be recorded in a non-sponsored account instead of being charged to a sponsored project.
    • Cost Accounting Standards Board Disclosure Statement
    • Award Management
    • Cost Transfers
• The allocation methodology must be used consistently in like circumstances.
• Update allocations when a funding source is no longer available or a new source has been added. The methodology should not change unless it no longer provides a reasonable representation of the benefit provided.
• The end dates of all Awards should be taken into consideration. The benefit received on each Award may be impacted if, for example, two Awards have significantly different end dates.

Allocation Examples

Lab supplies allocation based on usage: 

The cost of lab supplies allocated based on the quantity used on each Award:

A Principal Investigator uses 5 gallons of solution per month on Award A and 7 gallons of the same solution per month on Award B.

The department orders 12 gallons of solution per month at $10 per gallon including tax and shipping for a total cost of $120.

• Award A should be charged $50 ($10/gallon x 5 gallons)
• Award B should be charged $70 ($10/gallon x 7 gallons).

Lab supplies allocation based on percentage of effort: 

The cost of lab supplies allocated based on the PI’s percentage of effort charged to each Award.

A PI spends 70% effort on Award A and 30% effort on Award B.

The PI uses lab supplies totaling $6,000/month on the two Awards.

• Award A is charged $4,200 (70% of $6,000)
• Award B is charged $1,800 (30% of $6,000).

Cost sharing is that portion of a project or program cost that is not reimbursed by the sponsor (whether Federal or non-Federal) to support the scope of work defined by the sponsor and as such, represents a commitment of institutional resources that would otherwise be devoted to other University purposes. Cost sharing is funded by UTD or, in some cases, a third-party resource, generally a non-federal sponsor.

The University of Texas at Dallas follows the following guideline, Cost Sharing which outlines the cost sharing guidelines for contracts and grants. This policy follows cost sharing standards as prescribed in OMB 2 CFR 200 Uniform Guidance sections 200.29, 200.99, and 200.306

These are the basic criteria to determine cost sharing on federally sponsored projects.

View the webinar on cost share.

A cost transfer is defined as an after-the-fact reallocation of a cost (expenditure) from one cost center to another. Cost transfer that move costs from or to a sponsored project cost center are monitored, reviewed, and approved by the Office of Post Award Management.

The University of Texas at Dallas follows the following guideline, Cost Transfers, which outlines cost transfers for grants, contracts, and sub-awards. This guideline follows the cost accounting standards as prescribed in OMB 2 CFR 200 (Uniform Guidance), UT System Cost Transfer Policy, and The Office Of Finance Financial Reporting and Award Closeout for Sponsored Projects procedure.

Cost transfers involving sponsored projects are allowable only in special circumstances, including:

• Error correction
• Transfers between suballocations of the same sponsored project
• Costs benefiting more than one project
• Clearing potential or actual overruns
• Disallowed costs

Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding/budget period unless carryover of unobligated balances are permitted, in which case the carryover balances may be charged for costs resulting from obligations of the subsequent funding period.

The University of Texas at Dallas follows the following guideline, Period of Performance, which outlines the timeframe during which an entity may incur costs to carry out the work authorized under the Federal award. This policy follows cost accounting standards as prescribed in OMB Uniform Guidance 2 CFR 200 – 200.77 and The University of Texas at Dallas Expenditure of Funds policy – UTDBP3097.

These are the basic criteria to determine direct costs on federally sponsored projects.

Travel is allowable as a direct cost when such travel will provide direct benefit to the project.  The University of Texas at Dallas follows the following Travel guideline, which outlines the allowable travel costs for grants, contracts, and sub‐awards. Sponsored projects are subject to certain federal laws (if federally funded), the guidelines set forth in the Office of Management and Budget (OMB) 2 CFR 200 200.474 (if federally funded), specific agency restrictions, as well as The University of Texas at Dallas Travel Policy. The terms and conditions of the individual agreement should be reviewed prior to incurring and/or processing any travel cost. When there is a conflict between university policy and award requirements, the most restrictive policy applies.

These are the basic criteria to determine Travel costs.

Aids for Travel on Sponsored Programs

Travel Training for Sponsored Research

Travel Process Training for Sponsored Research

Accurate research records are an essential and required component of any research related project. Both the University of Texas at Dallas and the Principal Investigator have responsibilities and rights concerning access to, use of, and maintenance of original research data regardless of the source of funding for the project.

Please note that except where precluded by the specific terms of a sponsored agreement, tangible research property, including the scientific data and other records of research conducted by the faculty or staff of the University, belongs to the University.

The University of Texas at Dallas follows the following internal Office of Research policy, Sponsored Projects Record Retention, which outlines the requirements and procedures for retaining official Sponsored Projects grant documents, and The University of Texas at Dallas Record Retention policies and requirements.

The role of the Office of Post-award Management (OPM) is to assist departments in monitoring grant expenditures. One procedures that OPM conducts is to reviews all expenditures and ensures that budget exists on the Budget Line item for that expense (Budget Line Item control).

This Budget Line Item checking procedure was put into effect due to the change in December 2014 of the OMB Circulars (Cost Principles and Administrative requirements for federal grants distributed by the Office of Management and Budget (OMB)) to a more “Uniformed Guidance”. One of the most significant changes is the timeframe of award close-out reporting MUST BE no later than 120 days after end date of period of performance – submittal of all performance, financial and other reports as required. – OMB 2 CFR 200.344 Closeout. It has been stated by OMB that there will be a stricter adherence to this guideline.

This Budget Line Item checking will better enable the Office of Post Award Management, Office of Finance, and Departments to ensure compliance with the proposed budget award terms, New Uniform Guidance requirements , ease of financial management throughout the life cycle of the award, and the above mentioned award close-out process/45 day policy.

In cases of over expenditure, the PI and department administrator should take immediate steps to eliminate the shortfall within the month after it appears on the Financial Summary Reports. In practice, over expenditures should not continue beyond a three month period.

How OPM manages over expended grants:

• OPM will notify the Principal Investigator and/or department if an over expenditure occurred.
  • However, you should not wait until you are notified by OPM of the overdraft to initiate corrective action. If OPM is advised that additional funds are forthcoming within ninety days (either through continuation, renewal, or incremental funding of the award), then the over expenditure can remain in place.
  • If additional funds are not expected, then action should be taken to clear the over expenditure before month end. It is a normal course of action for the department to transfer expenses off the grant to another grant as allowable (IDT or ePAR).
• If the PI is unable to resolve or propose a plan to remedy the over expenditure, a notice will be sent to the School Fiscal Officer specifying the project/grant, and amount overspent to request assistance to clear the over expenditure.
• If the over expenditure is still not cleared, an unrestricted department account will be requested by OPM from the School Fiscal Officers to absorb the over expended balance.

No-Cost Extensions

Due to unanticipated circumstances, a Principal Investigator may need additional time to complete the project. A request for a no-cost extension must be submitted to the Office of Sponsored Projects (OSP) and should provide such information as cause of delay, objectives to be accomplished, period of extension, and the remaining funding. Please refer to Period of Performance guideline and Office of Sponsored Projects website for further information on No-cost extensions.

Participant support costs are those direct costs paid to (or on behalf of) participants or trainees (not employees) for participation in meetings, conferences, symposia, and workshops or other training projects, when there is a category for participant support costs in the award.

The University of Texas at Dallas follows the following Participant Support guideline, which outlines the participant support costs guidelines. This guideline follows cost accounting standards as prescribed in OMB 2 CFR Part 220 (Uniform Guidance).

Please refer to the following matrix to determine the best classification: Research Assistant vs Participant Support vs Research Subject Payment.

Research projects involving human subjects often offer a small payment to research subjects for purposes of recruitment or encouragement for participation in the project.

The University of Texas at Dallas complies the following guideline, Research Subjects Payment, which outlines Research Subject’s payments for grants, contracts, and sub-awards. This guideline follows the UTD’s Institutional Review Board (IRB) and The University of Texas at Dallas UTDBP3036 – Policy on Payment of Research Subjects.

Please visit Research Integrity and Outreach website for further information on Human Subjects Research.

Why computers or data storage devices are normally treated as indirect costs?
Technology has changed rapidly over the past few decades. Desktops, laptops, and data-storage devices include a wide range of functions: computation, data storage, correspondence, communication, entertainment, etc. The regular use of computers and data-storage devices in daily business operations makes it difficult and impractical to isolate specific scientific functions and their related costs with a high degree of accuracy.

Desktops, laptops, and data-storage devices below the capitalization threshold are generally considered to support a variety of activities and cannot be linked to one specific project. Therefore, computers are typically treated as indirect costs.

Examples of computers that should be considered an indirect cost:

• Computers that are assigned routinely to students, staff, or faculty members
• Computers located in any generally accessible area in a lab or office space

When may computers or data-storage devices be charged as a direct cost?
A computer or data-storage device may be charged as a direct cost if the purchase will be necessary for a specific sponsored research project and will not be used as general-purpose equipment.

Examples of computers that can be charged as direct costs:

• A computer is physically attached to another piece of scientific equipment and/or is required for collection and analysis of information/data
• A laptop is specifically needed to record data in field research
• A computer is used primarily on the designated sponsored award

The Principal Investigator must attest that the computer would not be purchased if not for the sponsored project.

If you plan to charge computers or software to a sponsored project as a direct cost:

• Conform to restrictions and approval requirements outlined in the terms and conditions of the award
• Provide a written justification to explain the way that the computer is being used and to outline its specific purpose related to the scientific scope of workAccordion Item

The University of Texas at Dallas is responsible for ensuring that all sub recipients of its sponsored research awards are in compliance with applicable procedures and requirements, including The OMB Uniform Guidance review of all pending and executed Subcontracts with particular attention paid to scope of work statements (SOW), billing instructions, contact information, and amendment and modification sections.

Sub-recipient is defined as a non-Federal entity that expends Federal awards received from a pass-through entity to carry out a Federal program, but does not include an individual that is a beneficiary of such a program. A sub-recipient may also be a recipient of other Federal awards directly from a Federal awarding agency.

The University of Texas at Dallas follows the following Subrecipient Monitoring guideline, which outlines the procedures and guidelines for sub-awards. This policy assures compliance with the OMB 2 CFR 200.331-333 Subrecipient Monitoring and Management.

What you Should Know

2 CFR 200 (Uniform Guidance)

The Office of Management and Budget (OMB) combined many of OMB federal circulars, including A21 and A110, into a single guidance document to be used by all agencies. This combined document is known as “Uniform Guidance.” As stated, per the OMB webpage this guidance “will supersede requirements from OMB Circulars A-21, A-87, A-110, and A-122 (which have been placed in 2 C.F.R. Parts 220, 225, 215, and 230); Circulars A-89, A-102, and A-133; and the guidance in Circular A-50 on Single Audit Act follow-up.” The Uniform Guidance was updated with new changes taking effect Fall 2020.

Resources

The University of Texas at Dallas Quick Reference Guide

A quick reference of some of the key changes in the Uniform Guidance.

Navigating the Uniform Guidance (2 CFR 200)

Preamble – Major Policy Reforms
Subpart A (200.0 – 200.99) – Acronyms and Definitions
Subpart B (200.100 – 200.113) – General Provisions
Subpart C (200.200 – 200.211) – Pre Award Requirements
Subpart D (200.300 – 200.345) – Post Award Requirements
Subpart E (200.400 – 200.475) – Cost Principles
Subpart F (200.500 – 200.521) – Audit Requirements (includes Appendices I-XI) -Subpart F will apply to audits of fiscal years beginning on or after December 26, 2014

In addition, the Uniform Guidance Table of Contents is a useful resource.

In December 2014, the U.S Office of Management and Budget (OMB) issued the Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”)  that replaced the administrative and accounting rules and principles previously found in several OMB Circulars (A21). The Uniform Guidance is intended to improve efficiency, effectiveness and transparency of administrative requirements while also reducing waste, abuse, and administrative burden.

Uniform Guidance offers the ability to reduce administrative burden on faculty researchers by transitioning to an acceptable alternative method for faculty effort certification programs. Moreover, the Uniform Guidance allows for institutional autonomy on financial and compliance risks, which aligns with the Chancellor’s vision of empowering UT System institutions, where appropriate.

In August of 2016, UT System gave each UT System Institution the responsibility to establish policies that address the compensation requirements in the above-mentioned Uniform Guidance Cost principles. Additionally, each institution should be supported by procedures and monitoring activities to ensure the policy is implemented as intended.

As a recipient of federal funds, The University of Texas at Dallas must comply with the OMB “Uniform Guidance”. For sponsored projects governed under 2 CFR Subpart E §200.430 , all compensation charges must be reasonable for the work performed, necessary for the performance of the project, allowable per sponsor and institutional policy, and allocable to the project. Compensation for personal services charged to and/or committed as cost sharing on federally funded projects must be based on a rate not in excess of an individual’s Institutional Base Salary (IBS), be adequately documented in accordance with 2 CFR 200 Subpart E Section 430 Compensation – personal services, and be in accordance with federal guidance, sponsor requirements, and institutional policy.

The Sponsored Projects Compensation Confirmation policy and related procedures are intended to meet these requirements.

Compensation Review and Certification

To be compliant with OMB Uniform Guidance, compensation charged to federal grants will undergo after-the-fact review to confirm the charges reasonably reflect the work performed on the project. 

 UT Dallas’ Cost Center Reconciliation application provides an after-the-fact review and approval that demonstrates good stewardship and accountability of financial resources. It is a comparison of the department’s monthly financial transactions in PeopleSoft to supporting documentation.

Reconciliation is essential for an effective internal control environment to ensure:

• The accuracy and validity of the entries and balances.
• The transactions are accurately recorded.
• Unauthorized charges/changes did not occur.
• Resolution of discrepancies occurs in a timely fashion.

In accordance with UTD’s procedures for cost center reconciliation, the after-the-fact review of compensation charges are performed by the cost center owner, Principal Investigator/Co-Principal Investigator (Co-PI) or assigned Departmental Administrator. Thru this review, the designated approver is certifying that the salary and wages charged to their sponsored projects, including committed cost share, are accurate and reasonable in relation to the work performed for the reported time period.