Uniform Guidance Monitored Costs

General criteria for allowable costs

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:

• “Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles
• Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items
• Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity
• 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
• Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.
• Not be included as a cost or used to meet cost sharing requirements of any other federally-financed program in either the current or a prior period. See § 200.306(b).
• Be adequately documented. See §§ 200.300 through 200.309.
• Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See§ 200.308(g)(3).”

Costs that are generally allowable include:

• Consumable supplies
• Telephone toll charges and other project-specific communication costs
• Laboratory animals
• Animal care
• Computing
• Travel
• Specialized shop services

Generally unallowable costs

Given the criteria above for costs to have consistent treatment, U-M normally treats the items listed below as indirect costs. These are generally unallowable as direct charges to federally sponsored projects unless they are incurred in unlike circumstances.

• Administrative/clerical staff expenses
• Office supplies
• Postage (stamps)
• Telephones
• Memberships
• Hosting
• Computer Costs

Considerations for justifying indirect costs as direct

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?

Allowability of charges for federal projects

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

• The costs must be specifically identified with the objectives of the project or activity.
• The costs must be explicitly listed in the University proposed and sponsor-approved budgets.

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.

As an exception, local re-budgeting 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 re-budgeting 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 re-budgeting authority is given only on grants. It is rarely allowed on contracts. On subcontracts, it is advisable to check with the appropriate ORSP officer or Sponsored Programs representative to discuss local re-budgeting 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.

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

Microphase thresholds and bidding processes

As defined in the Federal Acquisition Regulation 2.101, a micro-purchase is an acquisition of supplies or services using simplified acquisition procedures, the aggregate (total) amount of which does not exceed the micro-purchase threshold. The micro-purchase threshold for federal projects is $10,000. Small purchase transactions less than $10,000 do not require a bid.

For purchases between $10,000 and less than $50,000, Procurement Services will review the purchase request for compliance and best value. For transactions $50,000 and above, except as outlined in the Sole Source Process, Procurement Services will conduct a formal and structured competitive bidding process. Visit Procurement Policies and Standard Practice Guide 507.01: Procurement General Policies for more information.

Post expense review process

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 (administrative salaries, clerical salaries, general supplies and other, postage, telephone, and hosting/conference/entertainment) 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.

Post award rebudgeting

As an exception, local rebudgeting authority may sometimes be exercised by ORSP and Finance-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.

Annual reports and audit resolution

U-M reports on Federal Awards in Accordance with OMB Uniform Guidance (formerly OMB Circular A-133). See current and past audit reports. In addition, 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.