Preparing the budget: allowable and unallowable costs

The majority of external sponsored funding at Duke is supplied by the Federal government. Higher education grantees receiving Federal support must abide by the cost accounting principles established by the Federal Office of Management and Budget (OMB). 

Access GAP 200.320, Direct Costing on Sponsored Projects and GAP 200.360, Charging Clerical and/or Administrative Expenses to Federally Funded Projects for more information.

Allowable costs

The primary source for identifying costs which may be charged to grants, contracts, and other agreements is the Uniform Guidance (link is external) prepared by the Office of Management and Budget (OMB). The document identifies costs that may be charged to these agreements and further clarifies which of those costs may be charged as direct costs and which may be charged as indirect costs. While not all of the projects sponsored at Duke are federally funded, and while not all sponsors allow the inclusion of indirect costs in a project budget, the distinction between direct and indirect costs must be maintained throughout the University.

Not every cost associated with a project may be included in the budget. For example, entertainment costs are not allowable either as direct or F&A costs.

Unallowable costs

A sponsor's program announcement may identify costs which cannot be included in the budget, although they would qualify as direct costs according to Uniform Guidance.

Sponsors may also limit the dollar amount in certain budget categories. For example, salary caps may be set in place as part of appropriation legislation or agency policy. Many federal agencies also limit payment to individual consultants.

For either Indirect (F&A) costs or direct costs, the federal government identifies specific activities or transactions that are not allowed to be charged to sponsored research, either as a direct cost or an F&A cost. The following costs have been specifically identified by the government as unallowable on government grants and contracts.

Examples of unallowable costs

The list below is not all-inclusive. Individual agency and program requirements may list other "unallowable" costs. When in doubt, adhere to the federal government's Uniform Guidance (linked above).

  1. Advertising for general promotion of the University, including printed materials, promotional items, memorabilia, gifts, and souvenirs
  2. Advertising for recruitment purposes that includes color or is excessive in size
  3. Alcoholic beverages
  4. Alumni or fundraising activities
  5. Antiques
  6. Bad debt write-offs
  7. Charitable Contributions
  8. Commencement expenses
  9. Decorative objects for private offices
  10. Entertainment
  11. Fine/original art
  12. Fines and penalties
  13. First-class/business-class air travel differentials
  14. Flowers
  15. Gifts, prizes, and awards
  16. Goods or services for personal use
  17. Lobbying
  18. Memberships in airline travel clubs
  19. Memberships in civic, social, community organizations or country clubs
  20. Faculty and exempt staff salary in excess of base rates paid by the institution.
  21. Selling or marketing products or services of the University.
  22. Social events