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1305 PR.04 Unallowable Costs
Revision Date:
March 19, 2021
Contents
3. Common Unallowable Expenses
5. Office of Management and Budget’s (OMB) General Provisions for Selected Items of Cost
The purpose of this procedure is to describe the treatment of unallowable costs for all University accounts and sources of funds (not just for sponsored awards).
Consistent assignment of charges to specific expense types enables the University to appropriately capture and exclude unallowable costs as a direct cost as well as from the federal Facilities & Administrative (F&A) rate proposal and subsequent reimbursement when the F&A rate is applied to sponsored awards.
Definition:
Unallowable costs: Those expenses incurred by the University which are not reimbursable by the Federal Government either as a direct or F&A type cost.
The following University entities must apply the federal costing regulations contained in 2 CFR Part 200, Subpart E for classifying their expenses:
- schools and departments that have federal awards; and
- departments that charge for goods or services, or are included in the Facilities and Administrative (F&A) cost rate calculation, such as administrative departments, facility departments, computing departments, the library system, health services, and other service departments or internal service providers.
Business Meals, Catering, Food & Beverages and Alcoholic Beverages
In order to comply with Federal Regulations when charging non-sponsored funds, the total costs of these types of expenses, including the cost of alcoholic beverages, are to be charged to the following spend categories:
Spend Category (SC) |
Spend Category Name |
---|---|
SC249 |
Group Meals and Food (Business Meals, not including travel) |
SC749 |
Travel – Domestic – Unallowable |
SC744 |
Travel – International – Unallowable |
SC256 |
Entertainment and Alcohol |
When using any of the above SCs for a sponsored award, it is necessary to identify the cost of any alcoholic beverage and charge it to a non-sponsored award using SC256 Entertainment and Alcohol for either domestic or foreign Entertainment and Alcohol expenses because alcoholic beverages cannot be directly charged to sponsored awards.
Travel
2 CFR Part 200.475 describes the basis for and the types of business travel costs appropriate to charge to federal awards. Such costs include, but are not limited to, lodging and subsistence and commercial air travel with certain restrictions (e.g., least expensive available airfare with only certain exceptions as noted in 2 CFR Part 200.475).
University Policy 3301 Travel on University Business sets forth certain instances for International Travel where business class fares are acceptable. In such cases, the excess amount over the coach fare price must be charged to SC744 Travel – International – Unallowable.
Travelers are encouraged to use the University’s preferred travel supplier Egencia by contacting them directly. Travelers and arrangers will be able to take advantage of a complete offering of travel options and discounts; including University negotiated rates and low service fees. If this preferred travel supplier is not used or the lowest available airfare is not obtained, the department will be responsible for substantiating compliance with the federal regulations.
Note: Any unallowable domestic or international travel must be coded to either SC749 Travel – Domestic – Unallowable or SC744 Travel – International – Unallowable, as appropriate.
Other Common Unallowable Costs
Spend Category |
Spend Category Name |
---|---|
SC191 |
Internal Expense – IT Hosting and Platform Admin |
SC190 |
Internal Expense – IT On Demand Services |
SC194 |
Internal Expense – IT Portfolio Projects – Central |
SC195 |
Internal Expense – IT Portfolio Projects – Client |
SC193 |
Internal Expense – IT Support Agreements |
SC196 |
IT Services |
SC647 |
Pass-through Yale Labor Cost Allocation |
SC192 |
Telecommunications Expense |
SC199 |
Services – Student |
SC406 |
Advertising – Electronic |
SC405 |
Advertising – Print Media |
SC121 |
Collections Rare Archives – Mixed Format |
SC120 |
Collections Rare Graphic Materials |
SC122 |
Collections Rare Manuscripts |
SC670 |
Collections Rare Maps |
SC118 |
Collections Rare Monographs |
SC119 |
Collections Rare Other |
SC669 |
Collections Rare Serials |
SC127 |
Collection Art and Museum Acquisition |
SC749 |
Travel – Domestic – Unallowable |
SC233 |
Professional Services Fees – Unallowable |
SC744 |
Travel – International – Unallowable |
SC292 |
Losses |
SC189 |
Materials for Resale |
SC293 |
Prizes and Awards |
SC273 |
Commissions |
SC383 |
P-Card Write-offs |
SC296 |
Community Support |
SC295 |
Subsidies |
SC275 |
Dues and Membership Expenses |
According to 2 CFR Part 200, Subpart E, certain activities are unallowable both as a direct and a F&A cost such as lobbying (review lobbying primer), alumni activities, investment activities, commencement activities, and fund-raising activities. Charges associated with any of these “unallowable” activities should be charged to the appropriate unallowable spend category. For example, engaging an external consulting firm or consultant to lobby for federal funds is an unallowable activity. Since there is not a Lobbying expense type the cost of engaging the consultant would be charged to SC233.
Most employees in schools and departments are not typically involved in these “unallowable” activities. However, for faculty and staff who are involved, salaries (including miscellaneous payroll) and associated compensation should be charged to the appropriate spend category for unallowable salaries and wages.
If a department incurs an expense considered to be an “unallowable” activity, the department must contact the Senior Director, Costing in writing (e-mail: anne.navin@yale.edu) so that a determination can be made regarding the proper treatment of the costs associated with this activity to ensure its exclusion from the F&A rate calculation.
2 CFR Part 200, Subpart E provides principles to be applied when establishing the allowability of certain items of cost. These principles should apply irrespective of whether a particular item of cost is properly treated as a direct cost or a F&A cost. Failure of OMB to mention a particular item of cost is not intended to imply that it is either allowable or unallowable; rather, determination as to allowability in each case should be based on the treatment provided for similar or related items of cost. In case of a discrepancy between the provisions of a specific sponsored agreement and the list below, the agreement would govern. Click here to review the definition of each cost Item and its applicability and allowability.
2 CFR 200 Section |
Cost Item |
---|---|
200.421 |
Advertising and Public Relations |
200.422 |
Advisory councils |
200.423 |
Alcoholic beverages |
200.424 |
Alumni/ae activities |
200.425 |
Audit services |
200.426 |
Bad debts |
200.427 |
Bonding costs |
200.428 |
Collections of improper payments |
200.429 |
Commencement and convocation costs |
200.430 |
Compensation - personal services |
200.431 |
Compensation – fringe benefits |
200.432 |
Conferences |
200.433 |
Contingency provisions |
200.434 |
Contributions and donations |
200.435 |
Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements |
200.436 |
Depreciation |
200.437 |
Employee health and welfare costs |
200.438 |
Entertainment costs |
200.439 |
Equipment and other capital expenditures |
200.440 |
Exchange rates |
200.441 |
Fines, penalties, damages and other settlements |
200.442 |
Fund raising and investment management costs |
200.443 |
Gain and losses on disposition of depreciable assets |
200.444 |
General costs of government |
200.445 |
Goods or services for personal use |
200.446 |
Idle facilities and idle capacity |
200.447 |
Insurance and indemnification |
200.448 |
Intellectual property |
200.449 |
Interest |
200.450 |
Lobbying |
200.451 |
Losses on other awards or contracts |
200.452 |
Maintenance and repair costs |
200.453 |
Material and supplies costs, including costs of computing devices |
200.454 |
Memberships, subscriptions and professional activity costs |
200.455 |
Organization costs |
200.456 |
Participant support costs |
200.457 |
Plant and security costs |
200.458 |
Pre-award costs |
200.459 |
Professional service costs |
200.460 |
Proposal costs |
200.461 |
Publication and printing costs |
200.462 |
Rearrangement and reconversion costs |
200.463 |
Recruiting costs |
200.464 |
Relocation costs of employees |
200.465 |
Rental costs of real property and equipment |
200.466 |
Scholarships and student aid costs |
200.467 |
Selling and marketing costs |
200.468 |
Specialized service facilities |
200.469 |
Student activity costs |
200.470 |
Taxes (including Value Added Tax) |
200.471 | Telecommunication costs and video surveillance costs |
200.472 |
Termination costs |
200.473 |
Training and education costs |
200.474 |
Transportation costs |
200.475 |
Travel costs |
200.476 |
Trustees |
Unallowable costs at fiscal year-end that are not identified with the correct unallowable ledger account must be reclassified. This action must be completed by the first close of the June period. (Contact the Controller’s Office for the current year-end closing schedule.)