Identifying and Allocating Unallowable Expenses

Directive Statement

According to Uniform Guidance 2 CFR 200, (200.403) “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:

  1. Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles
  2. Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amounts of costs
  3. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity
  4. 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
  5. Be determined in accordance with generally accepted accounting principles (GAAP)
  6. 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 prior period
  7. Be adequately documented”

In other words, we can only record expenses if they are:

  • Reasonable – A prudent person would have purchased the item and paid that price
  • Allocable – Expenses are at least partially applicable to a sponsored agreement
  • Consistently Treated – Expenses for similar purposes must be treated the same way (throughout the university) under like circumstances
  • Allowable – The expense must be allowable or not specifically excluded as specified by government regulations (examples of specifically excluded costs are discussed later) or by the contract/grant/cooperative agreement requirements

If an expense cannot meet the above criteria, it is NOT eligible for inclusion in the indirect cost rate regardless of its purpose.

A cost may be allowable by University of Florida and State of Florida standards but unallowable for the purpose of calculating the Indirect Cost Rate based on Uniform Guidance 2 CFR 200. The federal government will not reimburse these costs, however, they may be entirely appropriate and permissible activities. Guidance is given in this document as to classification of costs if unallowable. If there are any questions, please call Contracts and Grants (352) 392-1235 for assistance.

Reason for Directive

Uniform Guidance 2 CFR 200 establishes principles for determining costs applicable to grants, contracts and other agreements with Institutions of Higher Education (IHE). In order for the University of Florida to meet federal requirements it is necessary to identify and correctly allocate unallowable expenses as defined in Uniform Guidance 2 CFR 200. All departmental expenditures, both direct and indirect costs, are a part of the indirect cost rate calculations, therefore it is important that all department staff and Principal Investigators (PIs), as well as the offices of Cost Analysis and Contracts and Grants, understand and consistently follow the stated guidelines.

Who must comply?

Responsibility for following these guidelines lies primarily with Principle Investigators, Department Chairs and fiscal personnel with the general guidance and oversight of the colleges, schools, and divisions.

The University of Florida administration is responsible for guidance and training and for ensuring compliance through periodic internal and external audits.

Procedures & Best Practices

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