Unallowable Costs

Identifying Unallowable Costs Under Uniform Guidance

 

Activities and Expenses that are unallowable for reimbursement by the federal government may still be appropriate and necessary business activities/expenses permitted by OSU. These activities/expenses may still be incurred, however, such costs must be coded as properly to ensure that they can be readily identified.

 

Types of Costs

• Advertising and Public Relations Costs

  Rule: Advertising costs that are solely for the recruitment of personnel, the procurement of goods and services, the disposal of scrap or surplus materials, or other specific purposes necessary to meet the requirements of the sponsored agreement are allowable. All other advertising costs are unallowable. 2 CFR 200.421 defines advertising costs as “the costs of advertising media [magazines, newspapers, radio and television programs, direct mail, exhibits, electronic or computer transmittals, etc.] and corollary administrative costs.”

   

  Public relations costs specifically required by sponsored agreements or deemed necessary for communication with the public, news media, and/or government public relations officers pertaining to specific activities or accomplishments or matters of public concern are allowable. All other public relations costs are unallowable.

   

  Public relations costs specifically required by sponsored agreements or deemed necessary for communication with the public, news media, and/or government public relations officers pertaining to specific activities or accomplishments or matters of public concern are allowable. All other public relations costs are unallowable.

   

  Method of Identification: Advertising expenses are authorized per OSU Policy and Procedures Letter 1-0120.

   

  Allowable advertising costs incurred for personnel recruiting are recorded under subcode 8500. All other advertising costs are treated as unallowable. These are recorded under subcodes 8510-8520.

• Alcoholic Beverages

  Rule: Costs of alcoholic beverages are unallowable per 2 CFR 200.423.

   

  Method of Identification: Alcoholic beverages are not charged to any of the OSU funds except for uses related to academic purposes (e.g., wine tasting course, etc.)

• Alumni Activities

  Rule: Costs incurred for, or in support of, alumni activities and similar services are unallowable  per 2 CFR 200.424

   

  Method of Identification: Expenses associated with alumni activities are charged either to OSU Foundation accounts or to Ledger 9 accounts, neither are part of the University's accounting records.

• Bad Debts

  Rule: “Bad debts, including losses (whether actual or estimated) arising from uncollectible accounts and other claims, related collections costs, and related legal costs, are unallowable” per  2 CFR 200-426

   

  Method of Identification: The Bursar's Office uses two procedures to record bad debts:

   

  1. An allowance for doubtful accounts is offset against revenue in Current Funds Unrestricted (Ledger 1 accounts), and

   

  2. An allowance for doubtful accounts is recorded as an expenditure in Agency Special Accounts (Ledger 3). Subcode 8870 is used to record the expense.

   

  The University does not offset against the following ledgers for contributions to a bad debt reserve: Ledgers 2,4,5, and 6.

• Commencement and Convocations

  Rule: Costs incurred for commencements and convocations are unallowable, except as provided for in Section F9 (Student Administration and Services) per 2 CFR 200.429

   

  Method of Identification: Expenses associated with commencement and convocations are specifically identified. These expenses are allowable only as indirect costs and are included in the Student Administration and Services Cost Pool.

• Late-Funded Pension Costs

  Rule: Increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 days after each quarter of the year to which such costs are assignable are unallowable per 2 CFR.431.g(5)

   

  Method of Identification: OTRS and TIAA-CREF. This is not applicable to OSU.

• Employee Auto Allowances

  Rule: Employee auto allowances are unallowable where personal use applies per 2 CFR.431.f

   

  Method of Identification: OSU Policy and Procedures Letter 3-0160 prohibits the personal use of University-owned motor pool vehicles.

• Contingency Provisions

  Rule: Contributions to a contingency reserve or any similar provisions made for events, the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening, are unallowable. They do not include bona fide insurance costs, which are a legitimate cost of doing business per 2 CFR.433

   

  Method of Identification: Under the Store Policy and Procedure Letter 4-0140, contributions to a contingency reserve are prohibited.

• Defense and Prosecution of Criminal and Civil Proceedings

  Rule: Costs incurred in connection with (1) any criminal, civil, or administrative proceeding commenced by the Federal government if the proceeding related to a violation of law and results in a conviction, determination of liability, monetary penalty, or debarment/ suspension, (2) the prosecution of claims or appeals against the Federal government, or (3) patent infringement litigation are unallowable per 2 CFR 200.435

   

  Method of Identification: Legal fees will be recorded under subcode 8220 or recorded in a separate General University account.

• Legal Services

  Rule: Legal services and associated costs for prosecution of claims or patient infringement are Generally unallowable unless otherwise provided in the federal award per 2 CFR 200 (f)(g)(h)(i)

   

  Method of Identification: Legal fees will be recorded under subcode 8220 or recorded in a separate General University account.

• Legal Settlements

  Rule: Costs incurred by the institution in connection with defense of suits brought by its employees or ex-employees under are unallowable per 2 CFR 200.435

   

  Method of Identification: Legal settlements will be recorded under subcode 8930 or 8935, or recorded in a separate General University account.

• Contributions and Gifts

  Rule: Contributions or donations, including cash, property, and services, made by the University, regardless of the recipient, are unallowable per 2 CFR 200.434

   

  Method of Identification: Article X, Sections 14 and 15 of the Oklahoma Constitution prohibits State agencies from expending agency funds in any manner for the purpose of making any award or gift to any employee or other person. Attorney General's opinion No. 79-78 confirms the rule.

• Entertainment

  Rule: Costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (e.g., tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable without agency approval per 2 CFR 200.438

   

  Method of Identification: Costs of meals are authorized while an employee is performing regular business travel for the University, provided the trip meets the overnight criteria [OSF §330.C.3.] Except for those related to academic and sponsored program purposes, expenses incurred for food/meals are not charged to OSU's E&G Part I or II accounts. For EREDF, these expenses are charged to the accounts that can be identified as unallowable.

• Lobbying

  Rule: Costs incurred for influencing activities for obtaining grants, contracts, cooperative agreements or loans are unallowable. Executive lobbying or legislative liaison activities are unallowable per 2 CFR 200.450

   

  Method of Identification: Expenses associated with the office of Federal Relations are treated as Other Institutional Activities.

   

  Expenses associated with employees engaged in legislative liaison activities are specifically identified.

• Fines and Penalties

  Rule: Costs resulting from violations of, or failure to comply with federal, state, local, or foreign laws and regulations are unallowable, except when incurred as a result of compliance with specific provisions of a sponsored agreement, or instructions in writing from the authorized official of the sponsoring agency authorizing in advance such payments per 2 CFR 200.441

   

  Method of Identification: Fines and penalties are treated as unallowable costs and recorded either under subcode 8820 or in accounts that can be identified as unallowable.

• Personal Use Expenses

  Rule: Costs of goods or services for personal use of the institution's employees are unallowable regardless of whether the cost is reported as taxable income to the employee.

   

  Method of Identification: Personal expenses are reimbursed as credits to expenditures.

• Employee Housing Allowances

  Rule: Employee housing allowances and other living expenses are unallowable. These include depreciation, maintenance, utilities, furnishings, rent, etc., whether or not taxable.

   

  Method of Identification: Employee housing allowances are separately identified in the payroll system.

• Insurance Against Defects

  Rule: Costs of insurance with respect to any costs incurred to correct defects in the institution's materials or workmanship are unallowable per 2 CFR 200.447 (b)(5)

   

  Method of Identification: The University does not normally incur expenses for insurance against defects. If such expenses are incurred, they will be separately identified for the calculation of indirect cost rates.

   

• Medical Malpractice Insurance (Allowable Only as Direct Costs)

  Rule: Medical liability (malpractice) insurance is an allowable cost of research programs only to the extent that the research involves human subjects. Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance per 2 CFR 200 (b)(6)

   

  Method of Identification: When costs are incurred for medical malpractice insurance, these costs will be identified and reported using Form Q505, Questionnaire for Identifying Unallowable Costs .

   

• Fund Raising and Investment Management

  Rule: Costs of organized fund-raising, including financial campaigns, endowment drives, solicitations of gifts and bequests incurred solely to raise capital or obtain contributions are unallowable. Costs of investment counsel and staff and similar expenses incurred to enhance income from investments are unallowable. Costs related to the physical custody and control of monies and securities are allowable per 2 CFR 200.442

   

  Method of Identification: Expenses associated with fund raising are charged to OSU Foundation accounts. Expenses associated with employees engaged in development activities are specifically identified.

• Interest

  Rule: Financial interest is unallowable with the exception of that incurred for the acquisition of new facilities and equipment (costing $10,000 or more), subject to lease-purchase analysis per CFR200.449

   

  Method of Identification: Debt obligations are monitored by Accounting Services.

• Covering Overruns and Losses on Other Sponsored Projects

  Rule: These costs are unallowable per 2 CFR200.451

   

  Method of Identification: The rules regarding covering overruns are explained in OSU Policy and Procedure Letter 4-0136, Retroactive Cost Transfers Relating to Sponsored Agreements .

• Meetings and Conferences

  Rule: Costs of meetings and conferences, when the primary purpose is the dissemination of technical information, are allowable per 2 CFR 200.432

   

  Method of Identification: Expenses related to meetings and conferences for business purposes are treated as allowable costs. When these meetings do not meet the test of business purposes, their associated expenses must be specifically identified as unallowable costs.

• Memberships in Social and Civic Clubs
  Rule: Memberships in social and civic clubs are unallowable per 2 CFR200.454

  Method of Identification: Allowable institutional professional memberships are recorded under subcode 8401. Other institutional memberships, including social and civic clubs, are unallowable and recorded under subcode 8410.

• Private Patent Development (Intellectual Property)

  Rule: Patent-related costs where the federal government holds an interest are allowable. Where only private patent rights apply, related costs are unallowable per 2 CFR200.448

   

  Method of Identificaiton: Expenses associated with OSU/EREDF-owned patent development are specifically identified.

• Pre-Award Costs

  Rule: Unless approved by the sponsoring agency, preagreement costs are unallowable per 2 CFR 200.458

   

  Method of Identification: The Uniform Guidance rules are enforced.

• Recruiting Costs

  Rule: Most recruiting costs are allowable. However, “costs of help wanted advertising, special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel from other institutions that do not meet the test of reasonableness or do not conform with the established practices of the institution are unallowable.” Also, in publications, “costs of help wanted advertising that includes color, includes advertising material for other than recruitment purposes, or is excessive in size (taking into consideration recruitment purposes for which intended and normal institutional practices in this respect), are unallowable.” per 2 CFR 200.463

   

  Method of Identification: Allowable advertising costs (see item 1) are recorded using subcode 8500. All other advertising costs are treated as unallowable and are recorded using subcodes 8510-8520 or segregated in separate accounts that can be identified as unallowable.

• Selling and Marketing

  Rule: Costs of selling and marketing any products or services of the institution are unallowable per 2 CFR 200.467

   

  Method of Identification: Allowable advertising costs (see item 1) are recorded using subcode 8500. All other advertising costs are treated as unallowable and are recorded using subcodes 8510-8520 or segregated in separate accounts that can be identified as unallowable.

• Student Activity Costs

  Rule: Student activity costs are unallowable, except where permitted by the sponsored agreement per 2 CFR 200.467

   

  Method of Identification: OSU Policy and Procedure Letter 4-0135, Costing Practices for Sponsored Research and Service Projects outlines the rules regarding sponsored agreements.

• Airfare and Related Travel

  Rule: Airfare and related costs in excess of basic accommodations or available discount rates are generally unallowable. 2 CFR 200474.(e)(I)

   

  Method of Identification: Office of State Finance - Procedure Manual Chapter 300, Section 29.19 states that regardless of the mode of travel, reimbursement for out-of-state transportation costs shall not exceed that of coach class airplane fare. Travel by first-class commercial airline may be reimbursed if coach class is not available within a reasonable time and is justified by a statement of the facts from the agency in support of the payment.

• Termination Costs Applicable to Sponsored Agreements

  Rule: Restrictions on allowable termination costs applicable to Sponsored Programs per 2 CFR 200.471

   

  Method of Identification: Termination costs applicable to sponsored programs are monitored by GCFA.

• Trustees Travel

  Rule: Trustees travel costs are subject to the same restricted provided in 2 CFR 200.475

   

  Method of Identification: Board expenses are reviewed for calculation of indirect cost rates.

• Late/Unsupported Cost Transfers

  Rule: Cost transfer must meet the criteria specified in Uniform Guidance 2 CFR 200.403, 404, 405 and 406

   

  Method of Identification: The rules regarding retroactive costs transfers applicable to Sponsored Programs are outlined in OSU Policy & Procedure Letter, Retroactive Cost Transfers Relating to Sponsored Agreements.

• Student Administration and Services

  Rule: The costs include those incurred for the administration of student affairrs and for services to students, including such activites as deans of students, admissions, registrar, counseling and placement services, student advisers, student health and infirmary services, catalogs, and commencements and convocations. The expenses in this category must be identified and allocated solely to the instruction function.

   

  Method of Identification: As in the case of expenses associated with commencement and convocation, expenses related to student administration and services are specifically identified or segregated in seperate funds. These expenses are allowable only as indirect costs and included in the Student Administration & Services Cost Pool.

• Professional Services

  Rule: The cost of consulting services rendered by an employee of the university is unallowable per 2 CFR 200.459.

   

  Method of Identification: In general, individuals cannot work simultaneously as an employee and a consultant. The Rules regarding consulting costs applicable to Sponsored Programs are outlined in OSU Policy & Procedure Letter 4-0135, Costing Practices for Sponsored Research and Service Projects.