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Allowable Costs for Sponsored Research and Programs Policy

Home / About Arcadia / Offices, Facilities, and Services / General Counsel / University Policies / Policy Library / Allowable Costs for Sponsored Research and Programs Policy
Home / About Arcadia / Offices, Facilities, and Services / The Office of General Counsel and Secretary to the University / University Policies / University Policy Library / Allowable Costs for Sponsored Research and Programs Policy
Policy TitleAllowable Costs for Sponsored Research and Programs
Policy CategoryAcademic/Resource Policies
Original Policy Approval DateFebruary 22, 2023
Policies SupersededNone
Responsible Office/Vice PresidentOffice of Sponsored Research & Programs/Financial Services
Related PoliciesNone
Frequency of Review3 Years
Date of Next ReviewFebruary 22, 2025
Date of Revision

I. Scope

This Allowable Costs for Sponsored Research and Programs Policy (“Policy”) pertains to all Principal Investigators/Project Directors, faculty, administrative and support staff at the University who are involved in the administration and conduct of Sponsored Awards. All capitalized terms contained in the Policy are defined in Section IV below.  

II. Policy Statement

This Policy is intended to ensure responsible stewardship of sponsored funding at Arcadia University. The Federal government’s Office of Management and Budget’s (OMB) Guidance for Grants and Agreements at Title 2 of the Code of Federal Regulations, Part 200, Subpart E, entitled “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Cost Principals”),” sets forth principles to be followed by federal funding agencies for the uniform administration of grants, cooperative agreements, and other funding instruments. The University, as a recipient of Federal grants and funds, agrees to efficiently and effectively administer awards through sound management practices that are consistent with the provisions of the Sponsored Award and its terms and conditions. To ensure continued Federal funding for Sponsored Projects and activities, the University must adhere to the requirements set forth in the Cost Principles and all other requirements set forth in Title 2.  The Cost Principles establish the allowability of certain costs for reimbursement from the Federal government related to certain Federal programs and Sponsored Projects at the University and prohibit reimbursement for certain unallowable costs from Federally funded sources.

Failure to comply with this Policy and adhere to the Cost Principles could result in harm to the University’s reputation, disallowance of otherwise Allowable Costs on Sponsored Projects, or jeopardize current and future funding. 

III. Policy

Costs incurred for a Sponsored Project will ordinarily be considered Allowable for reimbursement from the Sponsored Award if they meet the general criteria presented in the definition of Allowable Costs as set forth in Section IV.  In brief, Allowable Costs on Sponsored Awards are necessary for the efficient conduct of the award, reasonable in cost, Allocable to the award in proportion to the benefit received, and consistently treated regardless of the source of support. These attributes, and others as may be required for the specific cost item, should be documented in the Sponsored Award’s financial records to provide evidence of this responsible stewardship. From time to time, ordinarily Allowable Costs may be disallowed (unallowable) on a Sponsored Award if (i) otherwise prohibited by statute, (ii) prohibited by the award’s terms and conditions, or (iii) Sponsor-required prior-approval was not obtained before incurring the cost.

Arcadia may identify a cost as a Disallowed Cost for reimbursement on a Sponsored Award if upon review its acquisition would be inconsistent with University policies or practices or based on consideration of the facts and circumstances and the Sponsored Award.

IV. Definitions

These definitions are taken from the Code of Federal Regulations; the University will also use these definitions in reference to funding from non-Federal Sponsors. 

Allowable costs means those that:

  1. Are necessary and reasonable for the performance of the award and be Allocable as described in the Cost Principles.
  2. Conform to any limitations or exclusions set forth in the Cost Principles or in the Federal award as to types or amount of cost items.
  3. Are consistent with policies and procedures that apply uniformly to both federally financed and other activities of Arcadia University.
  4. Are 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. Are determined in accordance with generally accepted accounting principles (GAAP).
  6. Are not 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. 2 C.F.R. § 200.306(b).
  7. Are adequately documented. 
  8. Are incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to 2 C.F.R. § 200.308(e)(3).

Allocable: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: 

  1. Is incurred specifically for the Federal award; 
  2. Benefits both the Federal award and other work of the non-federal entity and can be distributed in proportions that may be approximated using reasonable methods; and 
  3. Is necessary to the overall operation of the non-federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart.

Application/Proposal: A request for financial support of a project or activity authorized by the University and submitted to a Sponsor in accordance with the Sponsor’s instructions. The project or activity is typically well-aligned with both the University’s mission and the Sponsor’s interests and priority areas and upon completion is expected to result in outcomes or findings of broad benefit to society. If selected for funding, an Application/Proposal ordinarily results in a grant, Subaward, or other similar legal instrument to the University.

Direct cost allocation principles:  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. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding the prohibition below, the costs may be allocated or transferred to benefited projects on any reasonable documented basis. Where the purchase of equipment or other capital asset is specifically authorized under a Federal award, the costs are assignable to the Federal award regardless of the use that may be made of the equipment or other capital asset involved when no longer needed for the purpose for which it was originally required. 2 C.F.R. § 200.310-316; 2 C.F.R. § 200.439.

Caveats to direct cost allocation principles: Any cost Allocable to a particular Federal award under the Cost Principles may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards.

If the contract is subject to the Cost Accounting Standards (CAS), costs must be allocated to the contract pursuant to the CAS. To the extent that CAS is applicable, the allocation of costs in accordance with CAS takes precedence over the allocation provisions in this part.

Disallowed Costs means those charges to a Federal award that the Federal awarding agency or Pass-Through Entity determines to be unallowable, in accordance with the applicable Federal statutes, regulations, or the terms and conditions of the Federal award.

Federal award has the meaning, depending on the context, in either paragraph (1) or (2) of this definition:

(1)(i) The Federal financial assistance that a recipient receives directly from a Federal awarding agency or indirectly from a pass-through entity, as described in § 200.101; or

(ii) The cost-reimbursement contract under the Federal Acquisition Regulations that a non-Federal entity receives directly from a Federal awarding agency or indirectly from a pass-through entity, as described in § 200.101.

(2) The instrument setting forth the terms and conditions. The instrument is the grant agreement, cooperative agreement, other agreement for assistance covered in paragraph (2) of the definition of Federal financial assistance in this section, or the cost-reimbursement contract awarded under the Federal Acquisition Regulations.

Pass-through entity (PTE): a non-Federal entity that provides a Subaward to a Subrecipient to carry out part of a Federal program. 2 C.F.R. § 200.101.

Reasonable. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. In determining reasonableness of a given cost, consideration must be given to: 

  1. Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-federal entity or the proper and efficient performance of the federal award. 
  2. The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. 
  3. Market prices for comparable goods or services for the geographic area. 
  4. Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the federal government. 
  5. Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.

Sponsor: the organization or funding agency that funds a Sponsored Project. The Sponsor may be a Federal, state, or local agency; a non-profit organization; a charitable or non-charitable foundation; a professional society; or a for-profit entity such as a corporation or a small business.

Sponsored Award: a formal, written legal agreement executed by the University and the Sponsor for specific work outlined in the Application/Proposal with the reciprocal transfer of something of value. The term includes but is not limited to grants; cooperative agreements; traineeships, scholarships, and fellowships; sponsored service, testing, and training agreements; sub-awards; and contracts, including fixed-price contracts. 

Sponsored Project: the specific activity (e.g., research, instruction, training), deliverable (e.g., service), and associated requirements (e.g., technical and financial progress reports) to be provided or completed as a condition of and supported by the Sponsor’s funding. The Sponsored Project and proposed personnel to be involved are ordinarily described in a University-authorized Application/Proposal submitted to the Sponsor for their consideration of funding. Sponsored Projects ordinarily do not include major construction or renovation activities.

Subaward: an award provided by a PTE to a Subrecipient to carry out part of a Sponsored Award received by the PTE. It does not include payments to a Contractor or payments to an individual that is a beneficiary of a Federal program. A Subaward may be provided through any form of legal agreement, including an agreement that the PTE considers a contract. 2 C.F.R. § 200.101.

Subrecipient: an entity, usually but not limited to non-Federal entities, that receives a Subaward from a PTE to carry out part of a Sponsored Award, but does not include an individual that is a beneficiary of such award. A Subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency.  2 C.F.R. § 200.1.

Characteristics which support the classification of a non-Federal entity as a Subrecipient include when the non-Federal entity:

  1. Determines who is eligible to receive what Federal assistance;
  2. Has its performance measured in relation to whether objectives of a Federal program were met;
  3. Has responsibility for programmatic decision-making;
  4. Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
  5. In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in the authorizing statute, as opposed to providing goods or services for the benefit of the PTE.

2 C.F.R. § 200.331. 

V. Effective Date

This policy is effective on the date that it is signed by the President.

VI. Signature, Title, and Date of Approval

 Signed:  /s/ Ajay Nair, President 

Date:  February 22, 2023

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