Segregation of Unallowable Costs

The government generally supplies the recipient of a Federal grant or contract (also referred to as an award) with the funds necessary to cover the costs directly associated with a project. In addition, the government will reimburse the institution for the indirect (also known as Facilities & Administrative or F&A) costs necessary to create and maintain the environment in which the research is conducted. However, there are certain costs that are deemed unallowable by the Federal government for the purpose of reimbursement.

Unallowable costs are identified by the government's Office of Management and Budget in Uniform Guidance Part 200 Subpart E and must be segregated in ARC so that they are excluded from the University’s Facilities & Administrative Cost proposals and not charged either directly or indirectly to the government. Examples of unallowable costs include expenditures for alcohol, entertainment, flowers or gifts or excessive costs, such as first or business class travel and lodging.

Please note that the term unallowable is defined by the Federal government and is for the purpose of complying with federal costing regulations. Schools and departments must properly identify unallowable costs by using appropriate natural account codes or initiatives.

Natural accounts in the range 66320 through 66475 are required to segregate such costs in all circumstances and on all funding sources.

Unallowable Costs – Natural Accounts

Unallowable Costs – Initiatives

Commencement expenses are also considered unallowable expenses for the purposes of the calculation of the F&A rate. In ARC, all expense types (Captured by various natural accounts) for commencement, are identified by the Initiative chartfield. Each School is required to establish an initiative to record commencement associated expenses. Please contact your school/department financial officer to ensure the appropriate coding of commencement-related expenses.