Research Administration Training
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Example of the Four Cost Principles
Professor Smart has been invited to present a paper at a conference in Atlanta. There are no prohibitions against travel on the award, so Professor Smart's travel costs are ALLOWABLE per the terms of this award and OMB A-21.
At the conference, Professor Smart has dinner with a colleague and orders wine. The cost of the wine (plus tax and tip) is an UNALLOWABLE cost (as identified in A-21), and that part of the bill may NOT be charged to the sponsored project. UVM might reimburse Professor Smart for this portion of her dinner expense, but the money must come from non-sponsored discretionary funds and obtain necessary University approvals for alcohol purchase(see Business Meals and Amenity Policy).
This particular conference focuses on the research activity funded by Professor Smart's grant. The expense of this trip will benefit the project, and is therefore an ALLOCABLE cost.
In cases like this, when Professor Smart submits her expense reports for reimbursement, she should include the conference agenda or other documentation to support the relationship between the travel and the project which paid for it. Adequate documentation is necessary to demonstrate that the expense is ALLOCABLE.
Professor Smart was feeling rather good after her presentation and decided to celebrate in a BIG way. She brings back receipts showing that the cost of her final dinner in Seattle, exclusive of the wine, was $150 per person. Even though the trip was allowable and allocable, this cost is not REASONABLE.
Sponsors reserve the right to decide whether a prudent person would have paid this amount. If not, the expense may not be charged to the sponsored project. Since UVM also has an "actual and reasonable" requirement for travel expenses Professor Smart is probably not eligible for full reimbursement of this expense from UVM either. Consistency is achieved by Professor Smart following University Policy (in this case Travel Policy).
- The key to CONSISTENCY is the application of University policy and accounting procedures.
- Remember that these four cost principles flow down to recipients of any subaward on a University award.
UVM Institutional Policy Website
OMB Circular A-21 Section C Basic Considerations
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Last modified December 12 2007 11:03 AM