of Research and Project Administration
SPONSORED PROGRAMS COMPLIANCE
Examples of A-21 Cost Principles
hypothetical situation illustrates the cost principles
defined in OMB Circular A-21:
a research grant from the National Science
Foundation to study changing climate patterns. The project includes participating
in a conference in Seattle. A graduate student in your lab has been invited
to present a paper at this conference. There are no prohibitions against
travel on the grant, so the student's travel costs are ALLOWABLE.
At the conference, your student has dinner with a friend and orders wine
(the student is, of course, of legal drinking age in the state of Washington).
The cost of the wine (plus tax and tip) is an UNALLOWABLE cost (as identified
in A-21), and that part of the bill may NOT be charged to the Government.
The University of Rochester can reimburse the student for this portion of
the dinner expense, but the money must come from non-sponsored funds, and
be recorded in the University's accounting system as an UNALLOWABLE cost.
ALLOCABILITY cost principle stipulates that any expense paid by a
project must benefit that project. This particular conference focuses
on the "El Nino" effect
on global climate. Your student will present her paper and interact
with colleagues from other academic institutions. The trip will benefit
the project, and the travel costs are therefore ALLOCABLE to
Without some documentation, the University's Finance Department (or an internal
or external auditor) might question the ALLOCABILITY of this expense to your
project. In a case like this, when your department submits expense reports
for reimbursement, the package should include the conference agenda or other
documentation to support the relationship between the travel and the project
which paid for it.
was feeling rather good after her presentation
and decided to celebrate in a BIG way. She brings back receipts showing that
the cost of her final dinner in Seattle, exclusive of the wine, was $147.
per person. Even though the trip was allowable and allocable, that cost is
not REASONABLE. The cost principle of REASONABLENESS stipulates
that costs will be reimbursed only if a prudent person would have paid this
amount. If not, the expense may not be charged to the Government.
University of Rochester also has an "actual and reasonable" requirement
for travel expenses (a traveler cannot claim/use a "per diem" amount).
Your student may therefore not be fully reimbursed for this expense by the
University either, although she can be reimbursed for a lesser, reasonable
Questions as to whether a particular expense is reasonable or not may be
referred to the department head and / or the Finance Department. See the Finance
Department's Travel and Conference Policies for further detail.
your student's participation in this conference directly benefited
your NSF project, reasonable travel costs should be charged DIRECTLY
to that project. Other expenses incurred in similar circumstances in
other parts of the University should also be charged directly to the
If a trip that benefits a specific project is charged INDIRECTLY, or such
expenses are charged to departmental funds, a portion of those costs could
end up in the University's indirect cost pools.
Pooled research expenses are then charged to
ALL sponsors through the application of the University's
indirect cost rates. Therefore, trips benefiting
specific projects should rarely be charged to
departmental funds. This inconsistency may, in
extreme cases, violate Cost Accounting Standards,
and may lead to unfair "double charging."