What are the Federal Cost Principles for Educational
Four guiding principles or criteria from OMB
Circular A-21 for Educational Institutions shall be used
to determine whether a cost can be charged to a sponsored
agreement. These criteria apply for both direct and indirect
(Facilities & Administrative) costs, which are defined
below. For a given cost to be charged to a sponsored agreement,
all four (4) of these criteria must be met.
Reasonable – For a cost to be considered reasonable, it must be:
- Recognized as necessary for the operation of the institution or the performance of the sponsored agreement,
- Consistent with the requirements imposed by arms-length bargaining, federal or state laws and regulations, and ethical business practices, and
- Related to an action and/or in an amount deemed within the norms of business conduct (i.e., passes the “prudent person” test).
- Be incurred solely to advance the work under a sponsored agreement, or
- Benefit both the sponsored agreement and other work of the institution, in proportions that can be approximated through the use of reasonable methods, and
- Be assignable to the benefiting activities without undue effort or cost.
- Not be designated as “unallowable” under Section J of OMB Circular A-21,
- Adhere to sponsor-specific policies and award-specific terms and conditions regarding specific items of cost, and
- Adhere to University policies regarding specific items of cost.
Last modified January 12 2012 02:01 PM