Fiscal Management & Oversight

Although cost principles specifically apply to federally sponsored agreements, the Office of Management and Budget (OMB) Uniform Guidance (UG) (2 CFR 200) (Cost Principles for Educational Institutions) is commonly used to describe the cost principles for all sponsored agreements at Cornell.

The tests for appropriateness under these principles are:

• Reasonableness: A cost may be considered reasonable if the nature of the expenditure and the amount involved reflects the action that a prudent person would take under the circumstances.
  • Ordinary and necessary
  • In accordance, with laws, policies, market conditions
• Allocability: A cost is allocable if it is beneficial to the project.
  • Direct: Is incurred specifically for the award; or benefits both the award and other work of Cornell and can be distributed in proportions that may be approximated using reasonable methods
  • Indirect: Is necessary to the overall operation of Cornell and is assignable in part to the award in accordance with the cost principles
• Consistency: Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or facilities and administrative (F&A) costs. The method used to estimate, record, and report costs must be consistent.
• Allowability: Costs must be allowed in accordance with UG 2 CFR §200.403
  • Necessary, reasonable, and allocable
  • Conform with UG or in the award, including period of performance
  • Consistent with policies and procedures uniformly applied
  • Consistently treated
  • Comply with GAAP
  • Not otherwise used for cost sharing
  • Adequately documented
• Conformity: All costs charged to sponsored agreements should conform to these principles and any specific conditions stated in the agreement.

Expenditures for which Cornell may not, by regulation, request reimbursement, either in whole or in part, from the federal government are considered nonrecoverable (unallowable). The Uniform Guidance (UG), in section 2 CFR §200.403 Factors affecting allowability of costs, establishes guidelines on what is an allowable cost on a federally funded project. When preparing a budget, the following costs are nonrecoverable and should be excluded:

• Alcoholic beverages
• Advertising and public relations such as:
  • Recruitment of personnel (unless required as a term of the Federal award);
  • Costs of communicating with the public and press (unless these costs are considered necessary as part of the outreach effort for the Federal award)
  • Costs of meetings, conventions, convocations, or other events (Events that are not specifically required as part of the Federal award and are not a Cornell-hosted event) See also § 200.432:
    • Costs of displays, demonstrations, and exhibits;
    • Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and
    • Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings;
  • Costs of promotional items (mugs, shirts, key chains, pens, hats, thermoses, and bags that typically display an agency’s name or seal), aka “swag”
  • Costs of advertising and public relations designed solely to promote the non-Federal entity.
• Alumni activities
• Bad debts
• Commencement and convocation costs
• Donations or contributions
• Development/fundraising costs
• Entertainment costs: Costs of entertainment (e.g., tickets to shows or sporting events, meals, lodging, rentals, transportation, and gratuities) are nonrecoverable.

Note: Business meals (those necessary to carry out the unit's mission) are recoverable with proper documentation and justification. All attendees who claim federal reimbursement must have contributed to the business purpose. Proper documentation includes the date, location, food costs (with an itemization of any alcoholic beverages), attendees, and business purpose. This documentation is also required for Internal Revenue Service purposes.

• Fines and penalties
• Goods or services for personal use (including gifts)
• Housing and personal living expenses
• Investment management costs
• Lobbying costs
• Memberships (including airline clubs)
• Moving costs (if the employee resigns within 12 months)
• Student activity costs (those activities normally directed by students)
• Travel costs in excess of commercial coach airfare. Costs in excess of the lowest available commercial coach fare are normally nonrecoverable. Exceptions may be granted if unreasonable travel arrangements would result when traveling coach, if the upgrade would decrease the cost, or if it is required to meet the medical needs of the traveler. In order for excess airfare costs to be recoverable the institution must justify and document, on a case-by-case basis, the applicable condition(s), and when required, obtain the sponsor's approval.
• Trustee travel