02 - 060 Unallowable Costs per Uniform Guidance


This policy explains the handling of Uniform Guidance defined unallowable costs in the accounting system. Costs that are disallowed by USNH financial and administrative policies are addressed in Chapter 8, Business Expenditures, of this Financial and Administrative procedures Manual.

1. Definition: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, commonly called Uniform Guidance, defines those costs that are allowable and which are unallowable. The tests of allow ability under these principles are: (a) the costs must be reasonable; (b) they must be allocable to sponsored agreements under the principles and methods provided herein; (c) they must be given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances; and (d) they must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items. Unallowable items fall into two categories: expenses which are by their nature unallowable (e.g., alcohol), and unallowable activities (e.g., fund raising).
2. Why is an Unallowable Costs Policy Necessary? Uniform Guidance defines which costs may be charged as direct costs to federal programs as well as which costs may be included as Facilities and Administrative (F&A) costs (indirect costs). Since USNH engages in federally sponsored programs, all institutional costs must comply with Uniform Guidance.

Uniform Guidance requires USNH to maintain an accounting system that properly captures and eliminates from our F&A cost proposal all unallowable costs. Since all department expenditures are a part of the F&A cost rate calculations, it is important that all staff understand and consistently follow this policy.
3. Guidelines on the proper handling of Uniform Guidance Unallowable Costs: Non-employment Advertising, Bad Debts and Legal Costs must be charged to specific account codes as described insection B.1. Alcohol is an expense that is allowed only on specific accounts (see section B.1.). In addition, the activities listed in section B.2. have predefined FOAPAL's that were established to specifically account for these activities. All such activities must be in one of these FOAPALS and should not be charged to other kinds of accounts. Directly associated costs must be captured as well. A directly associated cost is any cost which is generated solely as a result of the incurrence of another cost, and which would not have been incurred had the other cost not been incurred.
4. Responsibility: Responsibility for following these guidelines lies with project directors; department chairs; and administrators charged with the financial oversight of the campuses, colleges, schools, and divisions. Sponsored programs administration offices at each campus, the USNH Controller's Office and other administrative offices are responsible for guidance, training and insuring compliance through periodic reviews. Questions on the allowability of costs should be directed to sponsored programs administration offices at each campus. As questions on allowability of certain costs can require interpretation and judgment, departments are encouraged to ask for assistance in making those determinations.


1. Unallowable Expenses: Unique object code ranges have been assigned to properly track and eliminate specific types of expenses that may not be charged to federally sponsored agreements, either directly or indirectly. The one exception is alcohol, which is authorized only on specific accounts.

a. Advertising (Non-Employment), Selling and Marketing Expense (account codes 71C0%): These are costs of selling and marketing any products or services of the institution to the public. This includes radio, television and newspaper marketing costs associated with campus student recruitment. It also includes posters and pamphlets for recruiting graduate students, per Uniform Guidance §200.421. The only allowable advertising costs are those which are solely for recruitment of personnel, the procurement of goods and services, or the disposal of scrap and surplus materials, and program outreach and other specific purposes necessary to meet the requirements of the federal award. Further guidance is contained in Procedure 8-002, Advertising.
b. Bad Debts and Collection Costs (account codes 71C3%): Per Uniform Guidance §200.426, any losses (whether actual or estimated) arising from uncollectible accounts and other claims and related legal and collection costs are unallowable.
c. Legal Expenses & Settlements, Fines and Penalties (account code 71C400): Per Uniform Guidance §200.435 and §200.441, all legal, settlement, and fine expenses (including the costs of legal, accounting and consultant services incurred in connection with any criminal, civil, or administrative proceeding commenced by the Federal, State, local or foreign government) are unallowable.
d. Alcohol for consumption: While alcohol is an item of expense, a separate object code range has not been established. Only specifically identified accounts (approved by the applicable campus president) may incur costs for alcohol, per Uniform Guidance §200.423. Further guidance is contained in Procedure 8-003, Alcohol.

2. Unallowable Activities: In addition to the account codes used to track unallowable expenses noted above, specific FOAPALs are used to track the costs of activities that may not be charged to federal programs. Some of these activities are explicitly unallowable under other USNH policies (see cross-reference below). Other items, such as alumni activities or public relations, are entirely appropriate and permissible activities of USNH. However, none of these costs are allowable for the purpose of calculating indirect costs based on Uniform Guidance. These items are noted below (followed by their Uniform Guidance section reference):

a. Commencement and convocation costs, per Uniform Guidance §200.429.
b. Contributions to a contingency reserve or any similar provision made for events, the occurrence of which cannot be foretold with certainty as to time or intensity, per Uniform Guidance §200.433.
c. Costs in excess of normal severance (e.g., golden parachutes), per Uniform Guidance §200.431(i).
d. Costs incurred for, or in support of, alumni/ae activities, per Uniform Guidance §200.424.
e. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments, per Uniform Guidance §200.442.
f. Costs of organized fund raising, including financial campaigns, endowment drives, solicitations of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions, per Uniform Guidance §200.442.
g. Donations and contributions made by USNH to benefit other individuals or organizations, per Uniform Guidance §200.434. (Further guidance is contained in Procedure 8-006, Contributions - Charitable and Political.)
h. Entertainment costs, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities), per Uniform Guidance §200.438.
i. Excessive recruitment costs, per Uniform Guidance §200.463. (Further guidance is contained in Procedure 8-001, Introduction to Business Expenditures.)
j. Goods and services for personal use of the institution's employees, regardless of whether the cost is reported as taxable income to the employees, per Uniform Guidance §200.445. (Further guidance is contained in Procedure 8-001, Introduction to Business Expenditures.)
k. Housing allowances and personal living expenses of the institution's officers, regardless of whether the cost is reported as taxable income to the employees, per Uniform Guidance §200.445.
l. Interest on borrowed capital or temporary use of endowment funds, however represented, per Uniform Guidance §200.449. (An exception exists for the costs of interest paid to an external party which is associated with the purchase, construction or replacement of buildings or equipment §200.449(b) of the Uniform Guidance outlines exception conditions in more detail.
m. Legal Counsel Office costs, per Uniform Guidance §200.435.
n. Lobbying costs, per Uniform Guidance §200.450. These are specifically not allowed at USNH. (Further guidance is contained in Procedure 8-006, Contributions - Charitable and Political.)
o. Losses, where expenses exceed income under any other sponsored agreement or contract of any nature, per Uniform Guidance §200.451. (This includes, but is not limited to, the Institution's contributed portion under cost-sharing agreements and any under-recoveries resulting from the negotiation of flat amounts for F&A costs.)
p. Memberships in civic organizations, country or dinner clubs, per Uniform Guidance §200.454. (Further guidance is contained in Procedure 8-001, Introduction to Business Expenditures.)
q. Non-coach travel, under normal circumstances, per Uniform Guidance §200.474 (These costs are also specifically prohibited in Procedure 7-005, Air, Travel, Domestic and Foreign.)
r. Public relations costs, per Uniform Guidance §200.421.
s. Student activities costs for intramural sports, student publications, student clubs, and the like, unless specifically provided for in the sponsored agreements, per Uniform Guidance §200.469.

The official version of this information will only be maintained in an on-line web format. Any and all printed copies of this material are dated as of the print date. Please make certain to review the material on-line prior to placing reliance on a dated printed version.


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