The University of Houston’s costing practices for grants and cooperative agreements comply with the Uniform Administrative Requirements, Cost Principles And Audit Requirements for federal grant awards and with the Uniform Grant Management Standards for State of Texas grant awards. Unless otherwise indicated in the Notice of Award, or approved by the sponsor in the budget and Scope of Work or via prior written approval, the costs/activities allowed on Federal and State awards are governed by the applicable regulations stated here.
Generally, costs are considered allowable under grants when they have the following features:
- The costs are necessary, reasonable and allocable to the grant program;
- The costs comply with the limitations of a grant agreement as well as other applicable federal and state laws and regulations;
- The costs are accounted for consistently and in accordance with generally accepted accounting principles;
- The costs have not been allocated to or used to meet cost sharing or matching requirements of any other federal award in either the current or a prior period, except when allowed by federal law or regulation;
- The costs are adequately documented; and the net of all applicable credits is applied.
Allowability or Unallowability of Selected Cost Items
Unallowable costs are not eligible for reimbursement by the sponsor. Unallowable costs will be removed from the award cost center and placed on the departmental indirect cost center during the review or close out period unless a new funding source is provided by the department. Below is a list of costs normally considered unallowable. However, depending on the nature of the award and the sponsor specific agreement, some costs that are generally unallowable may be allowable for a specific award.
|Advertising||These costs are only allowable when solely related to the project. See UG 200.421 for the only allowable costs|
|Alcoholic beverages||Costs of alcoholic beverages are unallowable|
|Commencement and convocation cost||
|Costs of entertainment are unallowable except for specific costs which have a programmatic purpose and are authorized either in the approved budget for the award or with prior written approval|
|Fundraising, lobbying and public relations costs||Costs associated with these activities are unallowable|
|Fines and penalties and defense of fraud proceeding, including insurance against defects in University’s materials or workmanship||Fines, penalties, damages, and other settlements resulting from violations of, or failure to comply with, Federal, State, and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of the award or written approval by the sponsor|
Memorabilia or promotional material
|The only allowable expenses for memorabilia, promotional or public relations costs are those specifically required by the award|
Moving or relocation costs if employee resigns within 12 months
|Relocation costs on federal awards must follow the standards in the Uniform Guidance section 200.464 Relocation costs of employees|
Certain travel costs
|Travel costs should be reasonable and in compliance with university policy. On state awards, travel must follow state rules. On federal awards the Fly America Act applies. The Fly America Act requires that foreign air travel funded with federal dollars be performed on U.S. flag air carriers, unless one has a good reason not to|
Cash donations to other organizations including universities
|Unallowable regardless of the recipient|
Goods or services for employee personal use
|Gratuity||Tips and gratuity are not allowable on State awards|
|Additional compensation||Supplemental compensation for faculty during the contracted employment period is not allowed on grants and contracts, unless specifically approved by the sponsor|
Salaries of administrative and clerical staff (Uniform Guidance 200.413) should normally be treated as F&A costs, but may be allowable as direct costs if appropriately justified and if the charges meet all of the following criteria:
|Membership costs||These are costs in community organizations, country clubs or social or dining clubs and are unallowable. Costs of memberships in organizations whose primary purpose is lobbying are unallowable. Membership and subscription costs related to award SOW and conference registrations are allowable|
|Selling and marketing costs||These costs are unallowable except when approved by the awarding agency when necessary for the performance of the award|
|Severance costs incurred in excess of the institution's normal severance||When these costs are for normal severance pay that is within the university pay policy and applicable to all persons employed at UH upon termination it is allowable|
|Sponsor restricted costs||Costs that are expressly restricted by a sponsor or mutually agreed to be unallowable in awards terms and conditions|
Consistent Treatment of Costs
Consistent treatment of costs is a basic cost accounting principle and is specifically required by the Uniform Guidance to ensure that the same types of costs are not charged to federally sponsored agreements both as direct costs and as F&A costs. Consistency in this context means that costs incurred for the same purpose, in like circumstances, must be treated uniformly as either direct costs or as F&A costs. Although these are not the sole determining factors, the size, nature and complexity of federally sponsored projects are important considerations in determining circumstances for which exceptions are justified. Due to the unique requirements of each federally sponsored project, the existence of special circumstances must be evaluated on a case-by-case basis.
Under any given award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the university may seek the prior written approval from the awarding agency in advance of the incurrence of special or unusual costs. The requests should be in writing and addressed to the sponsor. When the request is submitted by the Office of Contracts and Grants (OCG), it should be signed by the Principal Investigator (PI) or requested via email by the PI.
Cost allocation is the process of assigning a cost, or group of costs, to one or more awards in a reasonable proportion to the benefit provided to each award. If an expenditure solely benefits one award, it should be charged entirely to that award. However, sometimes an expenditure can benefit more than one award or activity. When this occurs, the expenditure must be charged in the same proportion as it benefits each of the awards or activities.
If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. The PI and the department should determine the allocation based on the proportional benefit each project receives and process the transaction in the financial system to reflect the allocation. The University’s procurement, payable and payroll systems have the capability to split a single cost proportionately among various funding sources and budget categories. If a cost benefits two or more projects or activities in proportions that cannot be determined at the time of the initial expenditure because of the interrelationship of the work involved, the costs may be allocated or transferred to benefitted projects in accordance with the University’s Cost Transfer policy at a later date, once the allocation has been determined. Any cost allocable to a particular award may not be charged to other awards to overcome fund deficiencies, to avoid restrictions, regulations, or terms and conditions of the awards, or for other reasons.
At the University of Houston, various allocation methods are used based on type of expenditure. For payroll expenditures, allocation is based on budgeted Full-time Effort (FTE) that assigns the number of hours worked to each activity or award. The allocation is reviewed on a routine basis and certified quarterly for effort reporting. For non-payroll expenditures, the allocation method can be described directly on the Purchase Order or Voucher used to setup and pay the expense. The PI and department determine the basis, which can include usage, number of experiments, number of hours, number of clients or the proportional allocation of supplies on each project.
Reference: Uniform Guidance (2 CFR 200.405)