Office of Sponsored Programs

Allowable Costs

Policy ID: 0017 Date: 06/10/2020 Status: Approved

Procedure Type: Public

Issuing Office: Office of Sponsored Programs (OSP)

Responsible Executive: Provost

Purpose: The following guideline outlines the allowable costs for grants, industry sponsored agreements, and subawards at Liberty University. The guideline assures compliance with The Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance): 2 CFR Part 200.

Guideline Statement: Regardless of funding agency, Liberty University determines cost allowability for sponsored programs based on the following questions: • Are costs allocable, allowable, consistent, and reasonable in like circumstances? • Allowed by the OMB Uniform Guidance? • It serves the grant purpose (instruction, research, public service/outreach)? • Allowed by the University’s policy?

Key Cost Principals for Federal Awards: Adherence to these principals is necessary for all federal awards. This guidance is based on the interpretation of federal regulations.

For any costs charged directly to a federal (or federal flow- through) award the expense must be: • Allowable under both the provisions of federal guidance and the terms of a specific award. Costs must conform to any limitations or exclusions stated in the sponsored agreement. • Allocable such that the expense can be associated to an award with a high degree of accuracy. The cost is incurred for the benefit of only one project, or the item can be easily assigned to multiple benefiting projects. A specific project may only be charged that portion of the cost that represents the direct benefit to that project.

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• Reasonable so the cost reflects what a “prudent person” would pay in a similar circumstance and is generally recognized as necessary for the performance of the project. • Consistently so similar costs are treated as direct or Facilities and Administrative (F&A) costs when incurred in like circumstances. Costs generally direct charged to a sponsored project should not be included as F&A costs on other projects when incurred for the same purposes. • Facilities & Administrative Costs (F&A): Costs that are incurred for common or joint objectives and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity. F&A costs are synonymous with the term “indirect costs.”

An expense is a “direct cost” if that expense can be identified specifically with a particular sponsored project or other activity with a high degree of accuracy. Indirect costs are costs that benefit many activities (e.g., building operations and maintenance, information technology (IT) expenses, security or administrative personnel such as grant managers, etc.). F&A costs are recovered through the federally negotiated rate. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct expenses or as an F&A cost. Identification with the sponsored work, (i.e., the scope of work) rather than the nature of the goods and services involved, is the determining factor in distinguishing direct from F&A costs of sponsored agreements.

Key Cost Principals for Non-Federal Awards: Proper stewardship of non-federal awards, including those from non-US governmental sponsors, requires adherence to these key principles: • Allowable under Liberty University policies and procedures, and complies with the terms and conditions of the award. • Directly benefits the purpose of the award such that the expense can be associated with, and is in support of, the project or program. • Reasonable so the expense reflects what a “prudent person” would pay in a similar circumstance

Expenses on non-federal awards require the careful review of terms and conditions and any other supporting documentation (e.g., approved budget, sponsor guidance) in order to determine appropriateness of charges. Any questionable expenses, if not specifically captured in the approved budget, should be reviewed

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by the OSP prior to expending funds. Specific sponsor approval may also be required—and should be documented.

Procedures and Guidelines for Monitoring Sponsored Awards: Regular monitoring by OSP and Finance of sponsored awards helps to: • Confirm the availability of funds to complete the project; • Ensure costs are consistent with the project schedule; • Discover any errors in the budget, encumbrances or actual expenditures that need to be corrected; • Avoid over-spending; and • Verify cost transfers/labor redistributions have been completed in a timely manner

To minimize risk of non-compliance, principal investigators are encouraged to review their budgets on a monthly basis.

Unallowable Costs: Typically unallowable costs on federal awards include:

• Advertising for general promotion of the University, including printed materials, promotional items, memorabilia, gifts, and souvenirs • Advertising for recruitment purposes that includes color or is excessive in size • Alcoholic beverages • Alumni or fund-raising activities • Antiques • Bad debt write-offs • Donations or Contributions • Commencement expenses • Cost Overruns • Costs on Industry, Foreign Government, or Other Non- Government Grants/Contracts • Decorative objects for private offices • Entertainment • Fine/original art • Fines and penalties • First-class/business-class air travel differentials • Flowers • Gifts, prizes, and awards • Goods or services for personal use • Lobbying • Memberships in airline travel clubs

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• Memberships in civic, social, community organizations, or country clubs • Faculty and exempt staff salary in excess of base rates paid by the institution (as defined by the OSP IBS policy) • Selling or marketing products or services of the University • Social events

Allowable Costs: A cost is allowable when allowed by OMB Uniform Guidance, it serves the sponsored program purpose (instruction, research, service) federal regulations, and is allowed by Liberty University. Such costs are:

• Salaries and fringe benefits of faculty, technicians, research assistants, and other personnel directly engaged in performing sponsored program’s scope of work • Supplies and materials necessary for performing sponsored program’s scope of work • Other costs such as travel, subcontracts, specialty equipment repairs and maintenance, and other directly related costs necessary for performing sponsored program’s specific scope of work • Capital equipment that is approved by the sponsor • Service/maintenance agreements on capital equipment approved by the sponsor

Review Cycle: Every two years or as needed. The Provost will approve all OSP policies.

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