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45.06 - Allowable and Unallowable Sponsored Project Expenditures


  • Position: Office of Sponsored Programs Director
  • Email:

Last updated: February 13, 2024

A. Purpose. The purpose of this policy is to ensure that expenses charged to externally-funded sponsored projects comply with federal, sponsor, state, and university requirements.

B. Scope. This policy applies to any external funding determined as being a sponsored project must follow this guidance.

C. Definitions

C-1. Allowable costs. For a cost to be regarded as an allowable charge to a sponsored project, it must satisfy the four conditions below as per the federal requirements outlined in 2 CFR 200 or any such future federal guidance as may become applicable:

  1. Reasonable. A cost is considered reasonable if the nature and the amount involved for goods or services acquired or applied reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made. 2 CFR 200.404.
  2. Allocable to sponsored agreements. A cost is considered allocable to a particular project if the goods or services involved are chargeable or assignable to the project in accordance with relative benefit received or other equitable relationship. Subject to the foregoing, a cost is considered allocable if:
    • it is incurred solely to advance the work under the sponsored agreement;
    • it benefits both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods; or
    • it is necessary to the overall operation of the institution and is deemed to be assignable in part to sponsored projects.
    2 CFR 200.405.
  3. Consistently applied. Costs must be given consistent treatment by applying them uniformly to both federally-financed and other activities of the institution. 2 CFR 200.403.
  4. Conforming to any limitations or exclusions. Costs must conform to any limitation set forth in the federal guidance, or in the sponsored award itself, as to types or amounts of cost items. 2 CFR 200.403. Certain costs are designated as expressly unallowable.

C-2. Unallowable Costs. Costs that fail to meet any of the four conditions described above will be treated as unallowable. Questions regarding the allowability of costs should be directed to the Office of Sponsored Programs, (208) 885-6651 or emailed to

D. Policy. The University, as a recipient of sponsored project funding, must comply with all regulations and standards established by the federal government and other sponsoring agencies. The Federal Office of Management and Budget (OMB) is responsible for setting forth the general principles and practices for federal costing standards associated with federally sponsored project activity.

All sponsored projects are subject to regular review and any expenses charged against sponsored projects must be consistent with federal guidance, University policies and procedures, and sponsor requirements. The primary responsibility for ensuring that only proper expenditures are charged to sponsored project budgets rests with the Principal Investigator (PI). The Office of Sponsored Programs (OSP) is responsible for monitoring adherence to all federal, state, and other cost-related restrictions on sponsored projects.

D-1. Responsibility for compliance. The general University mandate is that all employees act as responsible stewards of resources and assets under their control (FSH 3170).

  1. Principal Investigator (PI). Under UI policy, the PI bears primary responsibility for ensuring the appropriateness or allowability of all costs on sponsored projects. (FSH 5100).
  2. Departmental Grant Administrator (DGA). A Departmental Grant Administrator (DGA) is charged with assisting PIs in reviewing, justifying, charging and tracking costs, and is also responsible for making certain that expenditures are charged against awards in a manner that is consistent with applicable federal regulations, sponsor conditions, and University policies.
  3. Unit administrator. The unit administrator (department chair/head/director) is responsible for implementing procedures to ensure adherence to federal cost principles including allowability, accounting regulations, and University policies. Charges which have been determined to be unallowable to sponsored projects will be apportioned to the sponsoring unit or college for payment. (FSH 5100).
  4. College deans and Vice President for Research and Economic Development. Oversight of these procedures lies within the authority of the College Deans or equivalent, for units, and the Vice President for Research and Economic Development, for institutes, or their delegates. Decisions regarding the source(s) of repayment of unallowable costs and any penalties and interest charges shall be made by the Dean and/or the Vice President for Research and Economic Development.
  5. Employees. Employees are encouraged to use the confidential hotline, speak to the Ombuds Office, or speak with their direct supervisor, college finance director, chair, director, dean or OSP in cases where there is undue influence to process charges that are unallowable. Employees should note that protections are afforded through federal and University policies to prevent retaliation in such instances. It is a violation of University policy for any employee to engage in retaliatory conduct, see FSH 3810. University employees are responsible to report unethical behavior when it is encountered. (FSH 3170).

D-2. Unallowable expenses. OSP reviews expenditures periodically through the life of a sponsored project budget and prior to closeout based on the information in the University’s financial system. If through this review it is determined that an unallowable expenditure has been assessed to a project, OSP will contact the responsible departmental grant administrator to either correct the transaction or perform a review of the facts associated with the assessment of the expenditure.

The review will identify who was responsible for the assessment of the expenditure, the circumstances surrounding placement of the unallowable expenditure on a sponsored project budget, and where the expenditure is to be transferred. OSP may be consulted to assist in the review process to ensure allocation of costs is completed in accordance with existing regulations, award conditions, and applicability to the scope of the project. Action, such as a review of policies and procedures, identification of resources available in making cost determinations, and improvement of internal controls, will be taken by the college to ensure unallowable costs are not placed on sponsored projects in the future. Based upon the review, the college will determine the severity of the infraction and the potential for recurrence. Taking into consideration the severity and potential for recurrence, the college will make a recommendation for resolution.

Once a review has been completed, any unallowable expenditure(s) shall be removed from the sponsored project budget and placed on an unrestricted University budget. If an unrestricted University budget is not available, the expenditure(s) will be deducted from the facilities and administrative costs returned annually to the college. Copies of all back-up documentation for the review process and associated transfers must be retained by the college. OSP has access to view these transfers within the university’s enterprise applications should the need arise. Any resolution and provision of necessary paperwork will not preclude OSP from conducting a full review of sponsored project activity within the area under review.

This process shall also be used if an unallowable expense is placed on a project and the unallowable expense is identified by persons other than OSP.

If it is determined that the potential for recurrence is high, the Office for Research and Economic Development (ORED), with the concurrence of the college, will require the individual to take or retake training offered by OSP.

If an individual commits the same infraction or fails to comply with responsive actions required, the individual's repeated actions may be referred for review by an ad hoc committee comprising the Associate Vice President for Research and Economic Development, the dean or dean’s designee of the individual’s college(s), a representative from OSP, a representative of the University controller, and two peers. A representative from HR and internal audit will be included in an advisory capacity. The committee will review the available facts and make recommendations for further investigation or remedial and/or disciplinary action to the appropriate individual(s). Recommended employee disciplinary action will be made to the individual’s supervisor and unit administrator or dean, and any such action shall be at the discretion of the appropriate supervisor and shall proceed in accordance with the employee disciplinary procedures in the applicable University policies. Recommendations for nondisciplinary remedial actions, such as required training or revocation of access to manage sponsored project activity, shall be made to the Vice President for Research and Economic Development. Nothing herein shall limit the authority of an individual’s administrative unit or ORED to otherwise impose discipline or remedial activities within their existing authority and without referral to the above-described committee.

E. Procedure. Expenditures incurred for sponsored projects typically fall into one of the following classifications: salaries; fringe benefits; temporary hourly employees; travel; operating expenditures; equipment <$5k; capital outlay >$5k; subawards; participant support, and tuition remission, fees, stipends and Student Health Insurance Program (SHIP). The following guidelines provide assistance to assure that all charges against sponsored projects are correctly processed.

E-1. Salaries

  • For externally-sponsored awards, an individual’s rate of pay may not be charged in excess of the institutional base salary rate received for that individual’s regular appointment.
  • Payroll expenditures and changes to an individual’s effort percentage are to be processed in a timely manner through Banner Electronic Personnel Action Forms (EPAFs).
  • EPAFs to terminate personnel from sponsored projects should be processed prior to the award end date to reduce the necessity for labor redistributions (formerly payroll cost transfers).
  • EPAF and any Banner records must accurately reflect the percentage of time individuals are working on a given project and verified regularly via Banner Effort Reporting as per APM 45.09.
  • Payroll and budget reports should be produced and reviewed regularly to ensure that projects are not over budget.
  • All leave is to be charged to the appropriate account(s), as it is taken. Terminal leave is paid through a consolidated fringe benefit rate. See E-2. All salaried employees who are paid in whole or in part from sponsored projects, federal funding, or committed cost share must complete an effort report as per APM 45.09.
  • For guidelines on Faculty Summer Salary Release, see

E-2. Fringe benefits. The university pays fringe benefits through a consolidated fringe rate negotiated annually or as required with the Department of Health and Human Services. Rates are assigned based on the employee’s position class of faculty, staff, or student. Check the Budget Office website for current rates.

E-3. Temporary Hourly (TH) employees. The guidelines issued above for salaries are also applicable to TH employees with the exception of effort reporting.

E-4. Travel

  • The purpose of travel must be in direct support of project objectives.
  • Travel must take place within the time period of the project.
  • Reservations or airline tickets cannot be purchased with sponsored project funds if the actual travel occurs before the start date or after the termination date of the project.
  • All travel charges must be documented by receipts.
  • Allowable travel expense rates must comply with UI travel policy, the terms of the agreement, or agency requirements, whichever is most restrictive.
  • All foreign travel must be registered with the International Programs Office before travel is undertaken.
  • All foreign air travel on federal funds must comply with the Fly America Act. A link to this Act, and additional information are available on the OSP website.

E-5. Operating expenditures

  • Operating supplies and services must be purchased and received during the time period of the project.
  • Operating supplies and services must provide a direct, verifiable benefit to the funded project.
  • It is not an acceptable procedure to “stockpile” supplies at the end of a project period. Such stockpiled supplies would not reflect a direct and verifiable connection to the project being funded and may result in an obligation back to the sponsor. 2 CFR 200.314.

E-6. Capital outlay

  • Capital outlay (CO) is defined as items having a useful life of more than one year and a cost of $5,000 or more.
  • Capital outlay items must be purchased during the time period of the project and in accordance with Purchasing requirements.
  • Capital outlay items must be received with enough time remaining on the project to benefit the project.
  • See APM 10.40 Property Inventory and Products for tracking and accountability. Note: Some agencies place lower dollar limits on items that must be inventoried and insured.
  • Transfers into and out of the CO category can affect the F&A allocation on a sponsored project. Budget transfers into or out of the CO category require OSP involvement.

E-7. Subawards and subcontracts. If the University is subawarding or subcontracting a portion of the project work scope, a contractual award document will need to be issued by OSP at the request of the PI or the unit. If the subaward or subcontract is not included in the original proposal, agency approval may be required prior to issuance.

  • Subaward or subcontract costs are split out from the award and budgeted on a separate index within the overall grant budget.
  • All subrecipient requests for payment (invoices) must be approved by both the PI and OSP prior to being charged against the subaward or subcontract.
    • Cumulative amounts invoiced may not exceed the total amount of the subrecipient index.
    • Invoices must be reviewed for allowable expenses per the prime contract and PI must certify both that the work is progressing and that expenses are appropriate. OSP will review and approve all subaward or subcontract invoices prior to forwarding to Accounts Payable for payment.

E-8. Participant support. Participant support costs are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences or training projects. Other participant support costs such as incentives, gifts, souvenirs, t-shirts, and memorabilia must be justified in the budget justification as these costs are highly scrutinized.

Speakers and trainers are not typically considered participants, however if the primary purpose is to speak or assist with the management of the conference then these costs can be classified as participant support. For some educational projects, the participants being trained are employees. If the payment is made through a stipend or training allowance method, this can be categorized as participant support costs. To help defray the costs of participating in a conference or training activity, funds may be proposed for payment of stipends, per diem or subsistence allowances, based on the type and duration of the activity. Allowances must be reasonable, in conformance with university policies and the sponsor’s terms and conditions. Days must be limited to the attendance of the conference and actual travel time to/from the conference. Per diem and subsistence allowances must be reduced in cases where meals or lodging are provided at no charge or included in the registration fee. Rebudgeting from participant support costs to other budget categories requires prior sponsor approval. CFR 200.308.

E-9. Tuition remission, fees, stipends, scholarships, and insurance (TFSSI)

  • If graduate assistants are receiving a salary or stipend, then tuition remission must be paid on a proportional basis to the salaries. When tuition remission is not allowed as a direct charge on a sponsored project it must be charged to a different funding source.
  • Tuition remission and fees may be charged for graduate assistants only.
  • TFSSI expenses are allowed on most sponsored projects when associated with a graduate assistant’s appointment to work on the project. Note: USDA may restrict the expensing of tuition, fees and insurance to sponsored projects; review your project guidelines or ask OSP if you have questions.
  • Scholarships are not an allowable expense unless specifically approved by the sponsor.
  • TFSSI expenses are allowable on formal training grants as a scholarship.

F. Contact information. For additional information, please contact the Cost Accounting Unit of the Office of Sponsored Programs at 208-885-6651 or

Version History

Updated Feb. 13, 2024

Campus Locations

Physical Address:
Bruce M. Pitman Center
875 Perimeter Drive MS 4264
Moscow, ID 83844-4264

Phone: 208-885-6111

Fax: 208-885-9119