University of Vermont

Cost Accounting Services 

Cost Accounting Standards

What are the Federal Cost Principles for Educational Institutions?

Costing principles or criteria from the applicable Federal Government regulations (Uniform Guidance Subpart E - Cost Principles). 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 of these criteria must be met.

– For a cost to be considered reasonable, it must be:

  • Generally recognized as ordinary and necessary for the operation of the University or the proper and efficient performance of the Federal award.
  • The applied restraints or requirements imposed by the University are reasonable in such factors as: sound business practices; arm's-length bargaining; Federal, state, local, and other laws and regulations; and terms and conditions of the Federal award.
  • Costs incurred were reasonable in comparison to market prices for comparable goods or services for the geographic area
  • The individuals concerned acted with prudence in the circumstances considering their responsibilities to the University, its employees, where applicable its students or membership, the public at large, and the Federal Government.
  • University doesn't deviate from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost.
Allocable – For a cost to be considered allocable, it must:
  • 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.
  • Costs on a particular Federal award are not charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards.
Allowable – For a cost to be considered allowable, it must:
  •  Not be designated as “unallowable” under SUBPART E - Costing Principles of the Federal Government's Uniform Guidance
  •  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.
  • Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
  • Be determined in accordance with generally accepted accounting principles (GAAP)
  • Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period
  •  Be adequately documented.

Last modified July 03 2017 09:31 AM