At ÐÇ¿Õ´«Ã½, adherence to four fundamental cost principles ensures fiscal responsibility and compliance across sponsored projects. These principles, including allowability, allocability, reasonableness and consistency guide the determination of appropriate costs for sponsored endeavors.
Four Fundamental Cost Principles
Below are the key considerations for each principle:
1. Allowability
A cost is allowable when it:
- Serves a university business purpose, encompassing instruction, research, and public service.
- Complies with ÐÇ¿Õ´«Ã½ policy and federal regulations, irrespective of sponsorship.
- Aligns with the terms and conditions specified in the sponsored agreement.
2. Allocability
Costs are allocable:
- To a sponsored project when they directly benefit the project's objectives.
- To a gift when they correspond to the donor's intended use.
3. Reasonableness
Costs are deemed reasonable if:
- A prudent individual would agree to purchase the item at the stated price.
- The cost is essential for the activity's performance and conforms to established Institute policies and practices.
4. Consistency
- Consistency requires similar expenses to be treated uniformly under similar circumstances.
- For sponsored projects, consistency entails sponsors reimbursing costs either directly or indirectly (via facilities and administrative costs), not both. The institute's policies ensure consistency if followed.
Additional Federal Regulations for Allowability
- The cost must not serve as a duplicate expense or fulfill cost sharing or matching requirements for any other federally-funded program, in either the present or past periods.
- Adequate documentation must support the incurred cost to validate its legitimacy.
These principles, in conjunction with federal regulations, form the cornerstone of our financial stewardship, ensuring transparency, accountability, and compliance in all sponsored projects at ÐÇ¿Õ´«Ã½.
Agency and Federal Guidance
Unacceptable Costing Practices
- Rotation of charges among sponsored projects
- Assigning charges based on the largest remaining balance
- Charging the budget amount for costs rather than an amount based on actual usage
- Misclassification of charges by identifying a cost as something other than what it actually is, e.g., equipment identified as a supply item
- Charging projects for costs not benefiting the project
- Parking charges: Charging costs to an account that actually belong on another
Expense Approval Roles and Responsibilities
Each school at ÐÇ¿Õ´«Ã½ has its own expense approval process. Every person in a school’s expense approval workflow is responsible for screening an expense for allowability and compliance with cost principles.
Department administrators are responsible for ensuring funds are available and that purchases adhere to cost principles. Though individual school processes may vary, department administrators typically have expenditure approval up to $25,000. Purchases that exceed $25,000 are approved by financial personnel in each school’s management center.
Pcard owners approve purchases made on their Pcard and are required to upload all receipts. The purchasing card team audits Pcard expenditures to ensure they comply with relevant policy and have the proper back-up documentation.
Ultimately, everyone involved in sponsored projects must understand and comply with the cost principles outlined above.
Get in Touch
For cost-principle and allowability questions about what goes into your proposal, contact your department administrator. The department administrator within your school can also help with invoicing or questions about charging to your account.