Vanderbilt University

Guidelines for Budgeting and Charging Direct Costs on Sponsored Projects (11/15/96)

Direct Costs: Allowability

D. Allowability

Government Regulation......

The following costs have been specifically identified by the Government as unallowable on Government grants and contracts in Office of Management and Budget Circular A-21.

However, individual agencies and programs have authority to approve certain of these costs. For example, it may be appropriate to budget "alcoholic beverages" as a direct cost of a sponsored project to study effects of alcohol on reflex movement. To budget or charge such a cost, one must fully disclose such items in the budget narrative or have written approval by the sponsoring agency grant/contract management officer (if approval was not obtained in the original proposal and award document).

The list below is not all inclusive. Individual agency and program requirements may list other "unallowable" costs.

1. Advertising for general promotion of the University, including printed materials, promotional items, memorabilia, gifts, and souvenirs;
2. Advertising for recruitment purposes that includes color or is excessive in size;
3. Alcoholic beverages;
4. Alumni or fund-raising activities;
5. Antiques;
6. Bad debt write-offs;
7. Charitable contributions;
8. Commencement expenses;
9. Cost Overruns; Any costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.
10. Costs on Industry, Foreign Government or Other Non-Government Grants/Contracts; Any costs allocable to activities sponsored by industry, foreign governments or other sponsors may not be shifted to federally-sponsored agreements.
11. Decorative objects for private offices;
12. Entertainment;
13. Fine/original art;
14. Fines and penalties;
15. First-class/business-class air travel differentials;
16. Flowers;
17. Gifts, prizes, and awards;
18. Goods or services for personal use;
19. Lobbying;
20. Memberships in airline travel clubs;
21. Memberships in civic, social, community organizations or country clubs;
22. Faculty and exempt staff salary in excess of base rates paid by the institution. Other limitations may apply, such as the Public Health Service salary cap. [See below full text of government regulation concerning allowable rates of pay for faculty.]
23. Selling or marketing products or services of the University; and
24. Social events.

Allowable Rates of Pay for Faculty, Office of Management and Budget Circular A-21, Section J.8.d.:

J.8.d. Salary rates for faculty members.

(1) Salary rates for academic year.

Charges for work performed on sponsored agreements by faculty members during the academic year will be based on the individual faculty member's regular compensation for the continuous period which, under the policy of the institution concerned, constitutes the basis of his salary. Charges for work performed on sponsored agreements during all or any portion of such period are allowable at the base salary rate. In no event will charges to sponsored agreements, irrespective of the basis of computation, exceed the proportionate share of the base salary for that period. This principle applies to all members of the faculty at an institution. Since intra-University consulting is assumed to be undertaken as a University obligation requiring no compensation in addition to full-time base salary, the principle also applies to faculty members who function as consultants or otherwise contribute to a sponsored agreement conducted by another faculty member of the same institution. However, in unusual cases where consultation is across departmental lines or involves a separate or remote operation, and the work performed by the consultant is in addition to his regular departmental load, any charges for such work representing extra compensation above the base salary are allowable provided that such consulting arrangements are specifically provided for in the agreement or approved in writing by the sponsoring agency.

(2) Periods outside the academic year (i.e., Summer Salary).

(a) Except as otherwise specified for teaching activity in subsection (b) below, charges for work performed by faculty members on sponsored agreements during the summer months or other period not included in the base salary period will be determined for each faculty member at a rate not in excess of the base salary divided by the period to which the base salary relates, and will be limited to charges made in accordance with other parts of this section. The base salary period used in computing charges for work performed during the summer months will be the number of months covered by the faculty member's official academic year appointment.

(b) Charges for teaching activities performed by faculty members on sponsored agreements during the summer months or other periods not included in the base salary period will be based on the normal policy of the institution governing compensation to faculty members for teaching assignments during such periods.

(3) Part-time faculty.

Charges for work performed on sponsored agreements by faculty members having only part-time appointments will be determined at a rate not in excess of that regularly paid for the part-time assignments. For example, an institution pays $5000 to a faculty member for half-time teaching during the academic year. He devoted one-half of his remaining time to a sponsored agreement. Thus, his additional compensation, chargeable by the institution to the agreement, would be one-half of $5000, or $2500.

[Office of Management and Budget Circular A-21, Section J.8.d.]

NOTE: Section J.8.d. as reprinted above discusses sponsoring agency approvals for payroll/consulting transactions. The appropriate Vanderbilt University internal approvals are also required.