1305 PR.04 Unallowable Costs

Revision Date: 
June 30, 2017

Contents

  1. Overview
  2. Procedure Applicability
  3. Common Unallowable Expenses
  4. Unallowable Activities
  5. Office of Management and Budget’s (OMB) General Provisions for Selected Items of Cost
  6. Year-End Closing

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 Subpart E of 2 CFR Part 200 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 ledger accounts:

Ledger Account (LA)

Ledger Account Name

81035

Group Meals and Food (Business Meals, including catering)

81036

Travel Expenses (Domestic/Foreign)

81037

Entertainment & Alcohol – Unallowable – Domestic/Foreign

When using any of the above LAs for a sponsored award, it is necessary to identify the cost of any alcoholic beverage and charge it to a non-sponsored award using LA 81037 for either domestic or foreign Entertainment & Alcohol – Unallowable expenses because alcoholic beverages cannot be directly charged to sponsored awards,

Travel

Section 200.474 of 2 CFR Part 200 describes allowable costs for business travel, including commercial air travel and requires the use of the least expensive available airfare with only certain exceptions as noted 2 CFR 200.474.  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 81036 – Travel - Unallowable

Travelers are encouraged to use the University’s preferred travel supplier Eugencia 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.

Use ledger account 81036 for all unallowable travel costs, domestic or international.

Other Common Unallowable Costs

Ledger

Account

Ledger Account

Name

71006

Faculty Salaries—Unallowable (for example, a bonus)

72005

Staff—Unallowable

81025

ITS/Telecom Charge

81034

Services–Student

81029

Advertising

81014

Rare Books

81014

Manuscripts

81011

Collection Art and Museum Acquisition

81036

Domestic Travel–Unallowable

81036

International Travel–Unallowable

81034

Professional Service Fees–Unallowable

81048

Losses

81018

Materials for Resale

81049

Prizes & Awards

81041

Commissions

81051

P-Card Write-offs

81050

Subsidies

81050

Community Support

81051

Parking Tickets

81043

Dues & Membership—Unallowable

According to OMB Circular A-81 (Subpart E of 2 CFR Part 200 ), certain activities are unallowable both as direct and F&A costs 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 ledger account.  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 ledger account 81034.

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 ledger account for unallowable salaries and wages. 

Note:  Any travel related to such activities must be coded to ledger account 81036 as appropriate for all related unallowable travel costs (domestic or international).

If a department is involved in “unallowable” activities, the department must contact the Associate Controller, 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 their exclusion from the calculation of the F&A rate.

OMB Circular A-81 (Subpart E of 2 CFR 200) provides principles to be applied in establishing the allowability of certain items of cost.  These principles should apply irrespective of whether a particular item of cost is properly treated as direct cost or 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

200.428

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

Termination costs

200.472

Training and education costs

200.473

Transportation costs

200.474

Travel costs

200.475

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.)

Reviewed for Workday Purposes on 6/27/2017.