The University of Arizona

Allowable Costs

Sponsored projects expenditures are governed by federal law and regulations, State of Arizona laws, Arizona Board of Regents (ABOR) policies, University of Arizona's policies, and specific terms and conditions of awards.

The Office of Management and Budget (OMB) prescribes guidance via pronouncements, called circulars, to federal agencies in formulating regulations applicable to institutional research financial activities. University of Arizona financial policies are required to comply with federal pronouncements.

All expenditures charged to sponsored projects must be allowable. Inappropriate charges pose audit risks and can cause financial and reputation loss for the University of Arizona.  Therefore, it is important to understand the OMB prescribed cost principles in order to ensure the allowability of costs associated with your sponsored projects.

Use the following cost accounting principles to test the allowability of costs:

  • Reasonable: A cost may be considered reasonable if the purchase decision reflects the action that a prudent person would have taken under the circumstances prevailing at the time. These questions should be asked in order to know if a cost is reasonable:
    • Is the cost necessary for the completion of the project?
    • Was the transaction conducted at arm's length; did the buyers and sellers act independently and in the interests of their institutions?
    • Did the individuals involved act prudently and with due diligence?
    • Is the cost treated consistently university wide under similar circumstances?
  • Allocable: A cost is allocable for a sponsored project if the goods and services involved are charged and assigned directly to a project in accordance with the relative benefits conferred to the project or via other reasonable methods. These questions should be asked to assess the allocability of a cost:
    • Is the cost incurred solely to benefit the project?
    • If the cost benefits multiple activities at the institution, can the cost be reasonably divided into proportions?
  • Treated consistently throughout the institution
  • Conform to limitations or exclusions set by regulations and by terms of the award

Examples of common allowable costs include:

  • Salaries of technical staff
  • Laboratory supplies (e.g. chemicals)
  • Long distance phone charges
  • Animals
  • Animal care costs
  • Travel costs
  • Specialized shop costs
  • Research equipment repair and maintenance costs
  • Data processing supplies
  • Printing costs for technical reports
  • Express mail

Non-Federal Sponsors:

Whenever possible, the University of Arizona applies OMB Circular A-21 Cost Principles to non-federally sponsored projects so costs are treated consistently across projects. However, the university treats each award separately when terms and conditions dictate. Please work with Sponsored Projects Services to understand the specific terms of your project.

Below please find selected links to specific agencies and policy documents on allowability.

National Institutes of Health (NIH):

The NIH Grants Policy, Section 7, Cost Considerations, provides a list of specific items whose costs are allowable and other items or specific cases in which item costs are not allowed.

National Science Foundation (NSF):

The NSF Chapter V Allowability of Costs summarizes the allowability of frequently encountered direct cost items.

Defense Contracts:

10 USC Section 2324, Allowable Costs under Defense Contracts, lists the specific costs that are allowable and not allowable under defense contracts.