Action required: Ensure appropriate charging of costs

June 30, 2021

FY22 will be the “base year” for negotiating Yale University’s Facilities and Administrative (F&A) indirect cost recovery rate with the U.S. government, and we need your assistance in this important financial and regulatory activity.

First and foremost, please continue to ensure that all costs are accurately recorded and assigned to the proper spend category, ledger account, and program hierarchy. This requirement takes on heightened importance during FY22 for all departments, regardless of whether or not the department has federal grants or contracts or charges grants and contracts for goods or services.

Departments and costs that are part of the F&A calculations include administration, facility and computing departments, the library system, Yale Health, and other service departments. Therefore, we write to remind departments of Yale’s expectation to follow these important practices:

  • Ensure that controls and procedures are in place to charge costs appropriately to all grants and contracts; and
  • Consistently assign charges to proper spend categories and ledger accounts. This enables the University to appropriately include allowable, and exclude unallowable, costs from the federal F&A rate proposal that will ultimately result in cost reimbursement to Yale when the F&A rate is applied to sponsored awards.

Procedure for Handling Unallowable Costs

Under federal regulations (2 CFR 200), unallowable costs cannot be charged directly to federal grants or contracts. Even when charged to other sources of funds, they must be coded to the appropriate unallowable cost spend category and ledger account so that they are not included in the calculation of the F&A rates.

Please review Yale’s procedure for handling unallowable costs: Procedure 1305 PR.04 Unallowable Costs. The procedure lists unallowable cost spend categories and also lists the relevant sections of 2 CFR 200, Subpart E discussing selected items of cost. Individuals in schools and departments who process unallowable cost transactions must, therefore, assign these costs to the appropriate unallowable spend categories and ledger accounts. Yale is required to certify that no unallowable costs are included in the F&A rate calculations.

Costs Associated with Unallowable Activities

In addition to unallowable costs there are certain activities that are unallowable under the federal costing principles, such as alumni, investment, commencement, and fund-raising activities. All costs associated with these activities are considered unallowable, regardless of the spend category used.

The program segment of the chart of accounts (COA) includes program values to capture these activities. If, for any reason, a department is unable to use a program that appropriately describes the unallowable activity, please consult the COA department ( for assistance with program usage or to determine if an individual project is necessary. The department must notify the Cost Analysis Office or YSM Financial Operations in writing of these special project numbers so that such costs can be deducted from the calculation of the F&A rates.

Please refer questions to:

Thank you for your attention to these important policies.