The University of Arizona

Unallowable Costs

Unallowable costs are not eligible for reimbursement from the federal government for two reasons. Either the activity or function is prohibited from reimbursement by federal regulations, or the transaction/item being purchased is prohibited.

Some common unallowable activities include:

  • Alumni functions
  • Organized fundraising
  • Lobbying
  • Commencement and convocation
  • General public relations
  • Student functions such as intramural activities
  • Prosecuting claims against the Federal Government
  • Selling or marketing of good or services (does not include selling goods or services internal to the university by its service centers)
  • Network connection and local telephone charges

Some common unallowable transactions include:

  • Advertising
  • Alcoholic beverages
  • Entertainment
  • Fundraising or lobbying costs
  • Fines and penalties resulting from violating government laws and regulations
  • Memorabilia or promotional material
  • Relocation costs if employee resigns within 12 months
  • Certain travel costs such as first class airfare
  • Cash donations to other organizations including universities
  • Goods or services for employee personal use
  • Insurance against defects in University of Arizona materials or workmanship

Facilities and Administratives Costs

Facilities and administratives costs (F&A) are charged based on the rate approved by the Government and allowed by each award.  These costs, therefore, are not allowed as direct charge on grants and contracts.  See Direct and Indirect (F&A) Costs of Sponsored Agreements for more information.

Supplemental Compensation

Supplemental compensation for faculty during the contracted employment period is not allowed on grants and contracts, unless specifically approved by the sponsor. Supplemental compensation for other personnel budgeted on grants and contracts is also not allowed. See the supplemental compensation section on the Personal Services page.

Compassionate Transfer of Leave

University policy allows employees to transfer their accrued vacation to other vacation-eligible employees who are unable to work due to having suffered a catastrophic illness or injury or who are absent due to catastrophic illness or injury within the employee’s immediate family, established household, or situations that place primary responsibility for care on the employee. Grants and contracts may not be charged for compassionate leave without approval of the sponsoring agency.

Internal Billings

Internal billings not based on actual costs are not allowed on federally sponsored projects. All service centers providing goods and/or services to federally sponsored projects must have cost based rates that are approved by Financial Services Rate Studies.  For example, the communication user FTE charge collected by University Information Technology Services is not allowed on federally sponsored projects. See the 3D memo issued for additional information.  Also see Financial Services Manual, Section 18.10, Service Center Policy for guidance.

Internal billings should not be used for transferring expenses from clearing accounts to grant accounts.  General Error Correction Documents may be used to transfer expenses from clearing accounts to grant accounts. These transfers should be strictly based on costs incurred on the clearing accounts, supported by actual usage by grant accounts, and processed on a timely basis.

Sponsor Restrictions

Some sponsors impose additional restrictions to disallow costs.  See more information about sponsor restrictions under the Budget Categories page.