Determining Chargeability of Costs to a Sponsored Program
There are three main considerations related to the chargeability of costs to a sponsored program: Are they Reasonable? Are they Allocable? Are they Allowable? Below are definitions and examples of these factors.
Reasonable
Price
Quantity
Timeliness
Allocable
Must benefit project
Must be necessary
One project
Two or more projects
Proportions Determined with no undue effort
Allowable
Uniform Guidelines
Sponsor Guidelines
University Guidelines
Consistent Treatment
Direct
Indirect
Allowable Direct Costs with Conditions
Reasonable
Reasonable
Price
Quantity
Timeliness
Price and Quantity
Are the prices and quantities requested appropriate under the circumstances?
Timeliness
Is the timing appropriate?
Allocable
Allocable
Must benefit project
Must be necessary
One project
Two or more projects
Proportions Determined with no undue effort
Allocable = benefits the project
Allocable to two or more projects:
If a cost benefits two or more projects it may be charged directly IF proportional benefit can be determined without undue effort or cost.
Allocation method is relatively easy with a high degree of accuracy
Relatively Easy:
- Quick: Does not take much time
- Easy: Most people can understand the allocation method
- Cheap: Benefit to project is clear and obvious, thus making identification method relatively inexpensive
High Degree of Accuracy:
- One-to-one relationship to project
- Clear and objective measure
- number of items consumed
- usage logs
- Individual investigator estimates and certifies in the procurement source documentation
- For costs that benefit multiple projects, the Investigators estimate proposed usage by project using an allocation based on:
- Time used or expended (usage logs)
- Materials or units produced (an output measure)
Allowable
Allowable
Uniform Guidelines
Sponsor Guidelines
University Guidelines
Consistent Treatment
Direct
Indirect
Allowable Direct Costs with Conditions
Cost must conform to limitations set forth in the Uniform Guidance
- Designates certain costs as allowable or unallowable
- Designates certain costs as direct or in-direct
Unallowable Cost – a cost which does not constitute a proper charge to a sponsored project, either as a direct or indirect cost
Examples of OMB Uniform Guidance (Federal) Unallowable Costs:
- Alcoholic Beverages Alumni Activities
- Fund Raising Development Activities
- Personal Costs Lobbying Costs
Similar costs in like circumstances must be allocated consistently as either:
Direct Costs
Direct Cost Examples:
- Salaries, Fringe Benefits
- Travel
- Materials
Indirect Costs
Indirect Cost Examples:
- Office Supplies
- Clerical/Administrative Costs
- Original Proposal Costs
Resources
CAS Guidelines - Cost Accounting Standards - Managerial Accounting Services - Purdue University
