The federal government, in Section C of OMB Circular A-21, Cost Principles for Educational Institutions, defines allowable costs as follows: “The cost of a sponsored agreement is comprised of the allowable direct costs incident to its performance, plus the allocable portion of the allowable F&A costs. The tests of allowability of costs under these principles are:

1. They must be reasonable
2. They must be allocable to sponsored agreements under the principles and methods provided herein
3. They must be given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances and
4. 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.

Generally, the documentation and procedures required for research and non research expenditures are the same. Commitment and expenditures must comply with university purchasing policies and procedures. See Section 11 of the Rice Purchasing and Payment Manual for the procurement requirements for expenditures on sponsored project funds. See the Payment Solutions Website for links to purchasing, PCard, travel, and business meeting and entertainment policies and procedures. Costs must be incurred during the period of performance of the project. Every transaction should be adequately documented and its purpose fully explained by the person responsible for it so it can be easily understood by someone who is not familiar with either research in general or the project in particular. Avoid using acronyms.

UNALLOWABLE COSTS

Some direct costs by their very nature are unallowable on federal projects and most other awards. These costs include:

• Entertainment
• Flowers and gifts
• Office morale expenses
• Alcoholic beverages
• Intramural faculty/staff meeting costs, including meals and refreshments
• Public relations costs, including advertising and lobbying expenses
• Interest expenses and fines, penalties, and late fees
• Cost transfers to cover under spending or overspending on research funds

ALLOWABLE UNDER CERTAIN CONDITIONS

Some direct costs are allowable under certain conditions. Refer to Section 11 of the Rice Purchasing and Payment Manual (PDF) for additional information.

Administrative and Clerical (A&C) Costs. A&C costs include administrative staff, office supplies, postage, monthly telephone lines, and membership dues. Under OMB Circular A-21, A&C costs are included in the F&A cost pool and are allowed as direct costs only under certain circumstances. To be allowable, they must have been clearly stated in the budget and supported in the budget narrative as an exception to OMB Circular A-21 and appear as an allowable cost on the award document. See the Funds Text note section of Web Apps for information on A&C costs on award.

Travel. Sponsors may limit specific travel costs, limit total travel costs to the approved budget, or require prior approvals for domestic and/or foreign travel. The Rice Travel Policy includes a section on charging travel expenses to an R fund. Be sure to include sufficient information to describe the benefit of the travel to the project. A phrase such as “to present paper on research results of study of XYZ at the annual meeting of the American Chemical Society” provides more information than “to attend conference.”

INTERNATIONAL TRAVEL. Rice University Travel Policy 806, Appendix A states, “Use of U. S.-flag carriers is required for all international travel chargeable to a federal award unless special conditions are met, including guidelines for code-sharing tickets. Contact the Research Accounting Office or the Office of Sponsored Research before (emphasis added) making travel arrangements which involve a non-U.S. carrier to ensure such special conditions are satisfied.” If charging airfare to a federal award, a U.S. carrier must be used not only for travel between the U.S. and a foreign city, but also between two foreign cities, unless the flight meets one of the exceptions. If a U.S. carrier does not serve the destination city, then a U.S. carrier must be used to the nearest city that does. Many U.S. carriers have expanded their foreign markets and now fly to more than one or two cities on a continent. For help in determining if a U.S. carrier serves a foreign city, visit Amadeus.net.

NOTE ON CODE SHARING: If a U.S. carrier has a code sharing arrangement with a foreign carrier, the U.S. carrier code and flight number must appear on the ticket in order to charge international airfare to a Federal award. Example: NW code shares with KLM from Houston to Paris. If the ticket shows NW#8662 the airfare is allowable on a Federal award if the ticket shows KL#662 the airfare is unallowable. U.S. carrier codes include: CO, DL, UA, NW. Foreign carrier codes include: LH, AF, BA, KL.

GUIDELINES ON USE OF U.S.-FLAG AIR CARRIERS

1. The Comptroller General of the United States, by Decision B138942 of June 17, 1975, as amended March 31, 1981, provided guidelines for implementation of Section 5 of the International Air Transportation Fair Competitive Practices Act of 1974.
2. Any air transportation to, from, between, or within a country other than the U.S., of persons or property, the expense of which will be assisted by this award, must be performed on a U.S. flag air carrier if service provided by such carrier is “available.”
3. The following rules apply unless the result would be use of a foreign air carrier (“foreign carrier”) for the first or last leg of travel from or to the U.S.:
   1. A U.S. flag air carrier (“U.S. carrier”) shall be used to destination or, in the absence of through service, to farthest interchange point.
   2. If a U.S. carrier does not serve an origin or interchange point, a foreign carrier shall be used to the nearest interchange point to connect with a U.S. carrier.
   3. If a U.S. carrier involuntarily reroutes the traveler via a foreign carrier, the foreign carrier may be used.
4. Exceptions. In the following situations, use of a foreign carrier is permissible:
   1. Travel to and from the U.S. Use of a foreign carrier is permissible if:
      1. The airport abroad is the origin or destination airport, and use of a U.S. carrier would extend the total travel time 24 hours or more than would travel by foreign carrier or
      2. The airport abroad is an interchange point, and use of a U.S. carrier would require the traveler to wait six (6) hours or more to make connection or would extend the total travel time six (6) hours or more than would travel by foreign carrier.
   2. Travel Between Points Outside the U.S. Use of a foreign carrier is permissible if:
      1. Travel by foreign carrier would eliminate two (2) or more aircraft changes en route or
      2. Travel by U.S. carrier would extend the total travel time six (6) hours or more than would travel by foreign carrier.
   3. Short Distance Travel. For all short distance travel, regardless of origin and destination, use of a foreign carrier is permissible if the elapsed travel time on a scheduled flight from origin to destination airport by foreign carrier is three (3) hours or less and service by U.S. carrier would double the travel time.”

Exception to policy is the responsibility of the Principal Investigator and department and should be documented at the time the reservations are booked.

Business Meeting Costs. Costs must meet requirements of the funding agency as well as Rice policy and procedures. They may be charged to a grant or contract ONLY if the awarding agency allows such a cost. Rice policy and procedures require that a detailed outline/agenda and an explanation of the purpose of the meeting and the relationship to the award be submitted along with the business meeting and entertainment form. No intramural meetings may be charged to a federal award.

Equipment. Costs must meet requirements of the funding agency as well as Rice policy and procedures. For equipment items costing $5,000 or more, complete the Research Equipment Procurement Form and submit it along with the purchase order to Payment Solutions. It should describe the equipment and how it will be used on the project. The PO Checklist form is used by Research Accounting to review and approve equipment POs prior to posting the expense to an R fund.

General Purpose Computer and Software Under $5,000. Any purchase requires the signature of the PI or PI designee (Department Administrator). The signature certifies that the items will be used primarily for the conduct of the research and not simply for report preparation. A General Purpose Equipment Certification is required if the payment documentation does not otherwise include needed PI/designee signature. See Forms.

Consultants, Professional Services, and Salary Reimbursement Agreements. Services must be arranged in compliance with Section 5 of the Rice Purchasing Manual. Salary reimbursement agreements must be arranged through the Office of Sponsored Research and must be signed by authorized officials of both institutions participating in the agreement. A copy of the consultant/professional services/salary reimbursement agreement, along with invoices, is to be attached to the PO or payment requests if payments total more than $2,500 and they are charged to a research fund. The agreement must describe the nature of the services rendered and the basis for the rate of pay and it requires the signature of PI or PI designee (Department Administrator). This signature certifies that:

• Services are essential and cannot be provided by Rice employees,
• A selection process has been used to secure the most qualified individual,
• The fees are appropriate.

Some agreements, for example with NSF, NASA, EPA, may be subject to a daily limit.