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- Senior Leadership Team
Office of Sponsored Programs
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Allowable Cost Policy
All costs proposed to be charged on externally sponsored projects (as defined at SLT 3.11: EXTERNALLY SPONSORED PROJECTS POLICY) at Grand Valley State University (the University) must comply with the Federal cost principles prescribed in 2 CFR 200 Subpart E, §200.400; the policies of the sponsoring agency; the specific funding solicitation for which the cost is proposed; and all applicable policies of the University.
Specifically, in order to be deemed an allowable cost on such a project, the cost of any particular item must:
- Be necessary and reasonable for the performance of the awarded project. That is, the project cannot be performed without the item and a reasonable and prudent person would incur the cost of the item under the circumstances prevailing at the time the decision was made to propose or incur the cost (§200.403-404).
- Be fully allocable to the particular awarded project or be proportionally allocable to it and another cost objective according to the relative benefit derived (§200.405).
- Be treated consistently. A cost may not be assigned to a sponsored project as a Direct Cost if any other cost incurred for the same purpose in like circumstances has been allocated to the awarded project as an Indirect Cost. University policies governing the treatment of costs must apply uniformly to both sponsored- and non-sponsored activities. Like expenses must be treated the same in like circumstances (§200.400(e)).
Such costs much also meet one of the following two criteria:
- Be an item or category of cost that is not expressly disallowed by the federal government (guidance available at §200.420-475, General Provisions for Selected Items of Cost); the sponsor (as documented in sponsor policy statements and in the applicable sponsor funding solicitation); or the University (as defined below under Unallowable Costs and documented in the Business and Finance Procedures and the University-Wide Policies); OR
- Be an otherwise unallowable cost that is expressly allowed by the sponsor, whether as stipulated in an award or proposal-solicitation document or as documented in a prior written approval request duly executed by an Authorized Organizational Representative of the University. If an expense does not meet the above criteria, it must not be charged to an externally sponsored project at the University.
Direct Costs are expenses that are specifically associated with a particular externally sponsored project that can be directly assigned to such activities with a high degree of accuracy.
Indirect Costs (also referred to as Facilities & Administration [F&A] or overhead costs) are expenses that cannot be identified specifically with a particular project or activity. Indirect costs benefit multiple activities and programming objectives. In order to capture the amount of indirect costs that should be allocated to a grant, the University has calculated an indirect cost rate, approved by the federal government.
The indirect costs included in this rate are made up of two broad categories: Facilities and Administration.
Facilities costs include:
- Custodial and Maintenance
- Grounds Services
- Parking Operations, less parking fines and fees
- Property and Liability Insurance
- Facility Planning and Management
- Engineering Planning and Management
Administration costs include all the expenses incurred in providing the following university services:
- Central Administration
- Business & Finance, including financial audit
- Human Resources
- Legal Services
- Inclusion & Equity
- Library Operations
- Administrative Computer Operations
- Grants and Research Administration
- Department Administration, as defined by the federal government to be 20% of Dean and Dean’s assistant compensation
- Mail Services
- Public Safety
- University Communications
Federal Cost Principles are the Federal regulations that govern expenditures on federal awards and which also apply to non-federal awards to GVSU because of the University’s required federal compliance under 2 CFR 200 Subpart F: Audit Reporting.
Prior Written Approval is a formal permission the University must document before it proposes or incurs a special or unusual cost that may be deemed unallowable under the federal cost principles under normal circumstances.
Requests for prior written approval must be rationalized in writing as allowable under an “unlike circumstances” justification by the University personnel who wish to propose the special or unusual costs. The requests are then reviewed, approved, and (assuming approval is granted) formally submitted to the sponsoring agency by the Authorized Organizational Representative of the University (as defined in SLT 3.11: EXTERNALLY SPONSORED PROJECTS POLICY).
In accordance with the Uniform Guidance at 2 CFR 200, prior written approval from the sponsor is explicitly required (either in the awarded proposal budget, during award negotiation, or prior to incurrence of costs in the event that the expense is to be proposed post-award) for a number of items, including the following:
- Administrative expenses (§200.413(c))
- Change of scope (§200.308 (c)(1))
- Cost sharing or matching (§200.308 (c)(7))
- Entertainment costs (§200.438)
- Equipment and other capital expenditures (§200.313, 439)
- Exchange rates (§200.440)
- Fines, penalties, damages and other settlements (§200.441)
- Fixed amount subawards (§200.332)
- Fund raising and investment management expenses (§200.442)
- Memberships in any civic or community organization (§200.457 (c))
- Organization costs (§200.455)
- Participant support costs, any transfer of budget (§200.308 (c)(5))and (§200.456)
- Rearrangement and reconversion expenses (Renovations) (§200.462)
- Selling and marketing costs (§200.467)
- Subawards, any changes or transfers (§200.308) (c)(6))
- Supplemental compensation for incidental activities (§200.430 (h) (ii))
- Use of program income (§200.307)
Unallowable Costs are costs that could be considered appropriate and reasonable, but which are not eligible for reimbursement by the federal government and therefore to ensure consistent treatment under the federal cost principles, are not allowable on any sponsored program. Exceptions are possible with a strong justification for unlike circumstances and with prior written approval (as defined above) from the Authorized Organizational Representative of the University and the sponsor.
Unallowable costs include:
- Advertising and public relations
- Advisory councils
- Alcoholic beverages
- Alumni/ae activities
- Bad debt expense
- Collections of improper payments
- Commencement and convocation costs
- Contributions and donations
- Entertainment costs
- Fines, penalties, damages and other settlements
- Fund raising and investment management costs
- Intra-Institution of Higher Education (IHE) Consulting
- Losses on other awards or contracts
- Club, social, dining club or lobbying organization memberships
- Proposal costs
- Meals and travel associated with lobbying, fund raising, alumni activities
- Student activities
- Passports and immigration visas
For more information about this policy and the procedures established to ensure compliance with it, please contact the Office of Sponsored Programs at 616-331-6826 or firstname.lastname@example.org.