Federal Regulations establish principles for determining costs applicable to Awards.  There are four main guidelines to follow:

All charges must be:


1.     Reasonable

A cost may be considered reasonable if the nature of the goods or services, and the price paid for the goods or services, reflects the action that a prudent person would have taken given the prevailing circumstances at the time the decision to incur the cost was made.

To determine if an expenditure is reasonable, ask yourself the following questions:

  1.  Is the cost a type generally recognized as necessary for the performance of the sponsored agreement?
  2. Does incurring this expenditure violate the restraints or requirements imposed by such factors as arm's-length bargaining, federal and state laws and regulations, or sponsored agreement terms and conditions?
  3. Have the individuals incurring this cost acted with due prudence (discretion and good sense) in the circumstances? Have they considered their responsibilities to the institution, its employees, its students, the Federal Government, and the public at large?
  4. Were the actions that were taken in respect to incurring the cost consistent with established institutional policies and practices applicable to the work of the institution, including sponsored agreements?


2.     Allocable

A cost is allocable to a particular Award if the goods or services involved are able to be directly assigned to the Award based on the benefit provided.

To determine if an expenditure is allocable, ask yourself the following questions:

  1. Is it incurred solely to advance the work under the Award?
  2. Does it benefit the Award and other activities, and can it be distributed to all benefitted activities using reasonable methods? 
  3.  Is it necessary to the overall operation of the institution and, in light of sponsored research rules and regulations, is it deemed to be assignable in part to the Award?
  4. Does the basis for allocating the cost represent a reasonable estimation of the direct benefit provided to the Award objectives?

​If a cost is to be allocated to more than one Award, see “Cost Multi-Award Allocation” on the Cost Allocation page.


3. Consistently Treated

All costs incurred for the same purpose, in like circumstances, must be treated uniformly either as direct costs or as indirect (F&A) costs. Since certain costs, such as salaries of administrative and clerical staff and office supplies are normally treated as F&A costs, these costs cannot be charged directly to federal Awards unless the circumstances related to a particular project are clearly different from the normal operations of the unit. See Direct Charging of F&A Costs on PAFC website. See GIM 23 for more information on types included in the F&A rate.

4.     Allowable

Costs expressly unallowable or mutually agreed to be unallowable shall be identified and excluded from any billing, claim, application, or proposal related to a sponsored project.

Sponsoring agencies use the term "allowable" to mean permitted as a cost within general federal regulations, the terms of a specfic Award, and/or the institution's indirect cost rate. 

Federal Regulations (2 CFR 200.415) require the institution to sign the following certification on all financial reports and requests for payment:

“By signing this report, I certify to the best of my knowledge and belief that the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award. I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sections 3729-3730 and 3801-3812).”