What’s essential?

In administering federally sponsored awards, UNH must comply with federal cost principles as established by the Office of Management and Budget (OMB) Circular A-21, "Costs Principles for Educational Institutions".

Why it’s important

UNH and its principal investigators are jointly responsible for providing appropriate and compliant stewardship of sponsored funds. Key to this is strict adherence to the cost principles contained in OMB Circular A-21. The consequences of failing to comply may range from disallowance of specific incurred costs to termination of awards and federal sanctions, depending on the particular costs and circumstances questioned. 

How to comply

All UNH personnel responsible for initiating or approving financial transactions under sponsored programs must be familiar with the cost principles contained in OMB Circular A-21.

The “allowability” of particular costs is the key concept of the cost principles. For a cost to be allowable on a specific sponsored award it must be reasonable, allocable, and consistently treated—and it must not be subject to limitation per OMB Circular A-21.

Is it reasonable?

A cost is reasonable if it is necessary for the performance of the specific sponsored award and would have been incurred by a “prudent person” for the particular goods or services obtained.  Additional considerations involved in determining the reasonableness of a cost are:

• The limits or conditions imposed by such factors as arm's length bargaining, laws and regulations, and terms and conditions specific to the award
• The extent to which costs are incurred in a manner consistent with institutional policies and practices. 

Is it allocable?

A cost is allocable to a sponsored award if incurred solely to advance the work under the award.  A cost can also be partially allocable to a sponsored award if its benefit to the award is demonstrable and can be reasonably estimated. For example:

• If a cost benefits two or more sponsored projects or other activities in proportions that can be readily determined, that cost must be allocated to each activity based on the proportional benefit; or
• If a cost benefits two or more sponsored projects or other activities in proportions that cannot be readily determined due to the inter-relationship of the work involved, that cost may be allocated to each activity using a reasonable method for estimating proportional benefits. 

Is it consistent?

A cost is consistently treated if it is always institutionally treated as either a direct cost of research or an indirect (Facilities and Administrative; F&A) cost of research, incurred for the same purpose in like circumstances. 

Is it subject to limitation by OMB Circular A-21?

A cost is subject to limitations per OMB Circular A-21 if it is specifically identified as unallowable or subject to limitation, i.e., alcoholic beverages.

It is important to note that the “allowability” of a cost, however important, is just one aspect of federal cost principles and that adherence to all cost principles is required to account for the expenses of conducting research at UNH. With that in mind, UNH has incorporated these federal cost principles into its policies and procedures for the administration of all research awards. Adherence to UNH policies, therefore, should ensure compliance with these federal regulations.

See also: Financial Management in the Managing Awards section of the Research Office website.

Grant and Contract Administrators in SPA are available to assist in the interpretation and application of University policy and the OMB Circular A-21 Cost Principles.