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Uniform Guidance Monitored Costs

Job Aids

​Allowable, Allocable, Reasonable & Consistently Treated

In particular, the UG states in 200.403 that a cost must meet the following general criteria in order to be an allowable cost under a federal award:

"(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.
 (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.
 (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.
(d) 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.
(e) Be determined in accordance with generally accepted accounting principles (GAAP)…
(f) 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 a prior period…
(g) Be adequately documented."

Given (d) above, the Uniform Guidance cost principles mandate that U-M normally treat the following items as indirect costs: administrative and clerical staff, office supplies, postage, local telephone costs, memberships, and hosting (of guests). 

Cost principles and restricted expenditures for federal projects are covered in the Uniform Guidance at 2 CFR 200 and are referred to as UG monitored costs (formerly A-21).

The UG (2 CFR 200) establishes principles to help determine the applicability of costs to Federal grants, contracts, and other agreements. It prescribes which costs are allowable for recovery from the government and, of the allowable costs, whether the educational institution should treat them as direct or indirect costs.

Allowable, Allocable, Reasonable & Consistently Treated logo

Use of the qualifier "normally" gives the University some latitude in interpreting the Uniform Guidance cost principles. Whenever such costs are incurred in unlike circumstances (i.e., the actual activities charged as direct cost are not the same as the actual activities normally included in the institution's indirect cost pools), it may be possible to charge them as direct costs. 

Generally Unallowable Costs

Following are the categories of UG monitored costs. These costs are generally unallowable as direct charges to Federally sponsored projects unless they are incurred in unlike circumstances.

Administrative / Clerical Staff

Administrative/Clerical Staff Expenses

Direct charging may be appropriate when the participation of the individuals being charged to a federal project meet all four of the following conditions as set forth in §200.413 of the Uniform Guidance:

“(1) Administrative or clerical services are integral to a project or activity;
 (2) Individuals involved can be specifically identified with the project or activity;
 (3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and
 (4) The costs are not also recovered as indirect costs.”

The meaning of (4) is the same as that of 200.403(d) above.  That is to say, the project must require support services beyond the normal scope necessary for the typical sponsored project (i.e., it is an unlike circumstance).

Examples of when direct charging of administrative or clerical staff salaries may be appropriate include:

  • Large, complex programs such as Program Projects, environmental research centers, engineering research centers, and other grants and contracts that entail assembling and managing teams of investigators from a significant number of institutions.
  • Projects that involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting (such as epidemiological studies, clinical trials, and retrospective clinical records studies).
  • Projects that require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars.
  • Projects whose principal focus is the preparation and production of manuals and large reports, books and monographs (excluding routine progress and technical reports).
  • Projects that are geographically inaccessible to normal departmental administrative services, such as research vessels, radio astronomy projects, and other research fields sites that are remote from campus.

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Office Supplies

This category includes, for example, computers (under $5,000), printers, monitors, fax machines, printer paper, toner cartridges, pens, pencils, legal pads, clips, rubber bands, post-it notes, books, individual subscriptions to journals, notebooks, binders, folders, diskettes, and departmental stationery.

The category does not include printing, photocopying and duplication, research publication costs, and page charges, (i.e., these are generally treated as allowable direct charges).

The category also does not include laboratory supplies such as lab notebooks, data storage supplies (e.g., CDs, CD jackets and wallets, and zip storage), aluminum foil and plastic wrap for packaging and preserving specimens, and materials required for poster or publication preparation (poster board, photographic supplies, color paper).

The circumstances surrounding the expenses in this category play a major role in determining whether to treat as an exception, i.e., to permit as a direct charge. As an example, computers are necessary to the overall administration of a sponsored project. Purchasing computers for this purpose would generally be considered an indirect cost expense -- part of the normal wherewithal the institution can reasonably be expected to provide for its research staff. Purchasing computers to control and monitor scientific equipment, however, represents a different circumstance or use of that equipment and would typically be allowed as a direct charge.

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Postage (stamps)

The postage costs associated with the normal administration of a project are generally not allowable as direct charges to the project. Examples include interactions with vendors, routine correspondence with the sponsor, colleagues, and potential publishers, and students. In general however, the costs of overnight shipping and handling (e.g., Federal Express) are allowable assuming they are directly associated with the conduct of the project. The principal reason for this distinction is that the latter can be directly assigned to a particular project relatively easily and with a high degree of accuracy. Stamps are generally purchased in bulk and consumption cannot, in a cost effective manner, be assigned to a specific activity.

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The costs of local telephone lines used to conduct routine business of the project should not be direct charged to a project. Telephones used for the conduct of surveys are allowable as this would represent an unlike circumstance to routine business purposes. Telephone toll charges are allowable if they are directly related to the project activities.

The University takes the position that cell phones and prepaid long distance calling cards also should not be direct charged to Federal sponsored projects because there is no easy or accurate way to monitor usage to ensure project relatedness.


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The dues to maintain individual memberships in professional and scientific organizations are not allowable direct costs to federal sponsored projects. They are considered professional development expenses and should be covered with discretionary or personal funds.




Hosting of Guests

There are very few cases where hosting is allowable on Federally sponsored projects. These circumstances are stated during the proposal budgeting process and are only allowable when the sponsor gives express consent. ORSP will not utilize the rebudgeting authority to give authorization for hosting expenses. Written authority will need to be obtained directly from the sponsor by the department.



Proposal Budgets

To charge the above costs to a Federally sponsored project, the criteria listed in 2 CFR 200.403 must be met.  In addition, the following two criteria must be met during the proposal process:

  1. The costs are specifically identified with the objectives of the project or activity.
  2. The costs are explicitly listed in the University proposed and sponsor-approved budgets.

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The preferred test for allowability is explicit approval from the sponsoring agency. For all the items listed above, the charges should be explicitly justified and explained in the budget and budget narrative section of the proposal. Before any charges will be allowed against sponsored agreements, awards must provide evidence that the budget has sponsor approval. Principal Investigators and their units are responsible for ensuring that costs assigned to the project are appropriate.

To justify in proposal budgets costs that would normally be treated as indirect costs, the following items should be addressed in the budget or budget narrative:

  • Because all projects require a certain level of account reconciliation, correspondence, communications, and office expenses, how does the proposed charge differ from the standard level expected to be provided by the institution for all projects?
  • The job title within the HR system may imply that the effort is dedicated to administrative purposes. Is the nature of the work different from the general administrative work conducted for all sponsored projects? Are the charges necessary to meet the technical needs of the award rather than to support the administrative needs?
  • The cost category (e.g., office supplies) may imply that the items are being used for administrative purposes. How will the items be used to meet the technical needs of the project? Explain in detail their relevance to the methods used in conducting the project.
  • Can the proposed charges be easily and accurately documented as appropriate to the project? How will this be done?

Post Award Rebudgeting

As an exception, local rebudgeting authority may sometimes be exercised by ORSP and Sponsored Programs, and can substitute for explicit sponsor approval in those instances where 1) the terms of the award allow such post-award rebudgeting flexibility, and 2) the need for the expense was not contemplated at the time the original budget was prepared. It should be noted that in most cases local rebudgeting authority is given only on grants. It is rarely allowed on contracts. On subcontracts, it is advisable to check with the appropriate ORSP or Sponsored Programs representative to discuss local rebudgeting flexibility.

This post-award authority should be used on rare occasions only and should never be used to circumvent the integrity of the proposal budgeting process.

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Unacceptable Practices

Unacceptable direct charging practices include:

  • Purchasing items simply to exhaust an unobligated balance.
  • Rotating charges among projects.
  • Assigning charges to a project on the basis of the remaining balance to resolve availability of funding issues or simply to avoid the loss of carry-forward balances.
  • Charging the budgeted amount (in contrast to an amount based on actual usage), unless the project allows a fixed price or other types of approved reimbursement method that does not require tracking of actual charges to the project.
  • Assigning charges to an award before the cost is incurred.
  • Charging an expense exclusively to a single award when the expense clearly has supported other activities.
  • Applying a unit "tax" to projects to distribute clerical and administrative expenses.
  • Transferring an overdraft from one sponsored project to another, without express sponsor approval.

Post Expense Review Process

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An annual review will be done on all Federal projects to ensure that the expenditures incurred on the projects are in accordance with the budget categories stipulated in the award document. The categories above are indicated on the Project Budget Status Report (PBSR). If those categories have not been requested through the proposal process or not indicated on the award document from the sponsor, the expenditures in those categories will be questioned by Sponsored Programs. Justification for those expenditures will be required to allow the expenses to remain on the project. If justification is not received, those expenses must be removed from the sponsored project.

Audit Resolution

All sponsored projects are subject to audit by their respective agencies. Receiving justification will not guarantee that the expenses may not be questioned at a later date. While the procedures outlined above are in place to put the University in a strong position with respect to potential disallowances, they may still occur. In the event of a disallowance, the responsibility for covering any disallowance will belong to the academic unit.

References and Resources