Generally, accepting gifts from suppliers/vendors could be construed as creating a conflict of interest. For more information see Internal Audit's ethics page.
It is the expectation that these funds are for the benefit of the University rather than the individual PI. The Dean/Director/Chair has the authority to direct the use of the funds at the request of an individual PI.
The value (cost) of the unused gift cards should be refunded to the sponsored award as the gift cards were not used. The cost should be transferred to a non-sponsored budget. The gift cards may then be used in accordance with the requirements of the funding source where the cost of the gift cards was transferred to. For example, if the cost of the gift cards was transferred to a department budget, the gift cards should be used in accordance with the requirements or guidelines of the department budget.
Answer: This type of expense is not allowable. According to §2 CFR 200.434 Contributions and donations:
Costs of contributions and donations, including cash, property, and services, from the non-Federal entity to other entities, are unallowable.