Allowable Expenses & Types of Costs
Each cost charged to a sponsored project should be allowable, reasonable, allocable and consistent. If an expense does not meet one of these standards, it should not be charged to the project.
What does “Allowable” Mean? An allowable cost must be:
- Reasonable: A prudent business person would have purchased this item and paid this price.
- Allocable: It can be assigned to the activity on a reasonable basis and the assigned costs benefits the project.
- Consistent: Like costs must be treated the same in like circumstances, either direct or F&A costs.
Both activities and transactions could be considered unallowable or restricted whether by state or federal regulation or by sponsor limitations. For example, if a sponsor specifies that meal receipts must be provided for reimbursement, then per diem meal costs may not be charged to the project via travel vouchers even though Texas Tech allows for this. The following tables list typically unallowable activities and transactions to sponsored projects.
Typically Unallowable Activities
- Alumni activities
- General advertising or public relations to promote TTU
- Defending or prosecuting certain criminal, civil or administrative proceedings
- Organized fundraising
- Commencement and convocation costs
- Student activities such as intramural activities and student clubs
- Selling or marketing of goods and services (does not include service center related costs)
Typically Unallowable Transactions
- Advertising (only certain types are allowable)
- Bad debt, fines, interest payments or penalties
- Goods or services for personal use
- Certain travel costs, such as first class airfare
- Alcohol and entertainment
- Donations including cash, property, or services
- Relocation costs if employee resigns within 12 months
- Memberships to social dining or country clubs
Direct costs can be identified specifically with a particular project relatively easily with a high degree of accuracy. Some examples of direct costs include the following: the salary of a researcher (including benefits costs), laboratory supplies purchased for a project, or equipment purchased to complete a scope of work. Types of direct charges include, but are not limited to, the following:
- Institutional Base Salaries (IBS): Institutional Base Salary as defined in TTU OP 74.16 Institutional Base Salary is used to compute salaries charged to sponsored projects. Salaries are appointed
to sponsored project FOPs on ePAFs and future forms, and associated fringe benefits
follow the allocation of the salary appointment. In depth training on ePAF processing
is offered by AFISM for further guidance. Separately, administrative salaries are normally treated as
indirect costs, however, they may be charged directly if the following requirements
- Specifically budgeted for in the proposal or subsequently approved in writing; and
- Integral to the project or activity; and
- Individuals can be specifically identified with the project.
- Additional Compensation: Additional compensation is salary paid above and beyond institutional base salary
(IBS) and is only allowed in limited circumstances as listed below. Additional guidance
may be found in TTU OP 70.16 Compensation in Excess of Base Salary.
- Performed across department lines or in a remote location; and
- Approved as in-addition to normal workload by the supervisor; and
- Is approved in writing by the sponsoring agency where it is specifically stated payment will be above IBS (federal and state awards); and
- Rates are commensurate with IBS.
- Tuition & Fee Waivers: Tuition remission is compensation paid in lieu of wages for Teaching Assistants,
Research Assistants, and Graduate Part-Time Instructors. Doctoral students receive
additional supplements as outlined in TTU OP 62.40 Graduate Tuition and Fee Waivers. Students must meet the following criteria to be eligible for the exemption:
- Appointed at least half-time as of certain class dates; and
- Enrolled full-time for a given term as of certain class dates; and
- Appointed to a position title listed above.
- Scholarships: Scholarships are allowable only when the purpose of the sponsored agreement is to provide training to select participants and is approved by the sponsoring agency. To charge a scholarship to a sponsored project, departments will complete the Scholarship Establishment Form provided by Accounting Services (AS). AS will submit the form with FOP information to Student Business Services to establish in the Scholarship Tracking System. Departments may then award the scholarships in the online system. Additional guidance may be found in TTU OP 62.17 Payment of Scholarships, Fellowship Grants, and Awards.
- Materials & Supplies: Procurement of goods less than $5,000 are typically expensed as materials and supplies. These are typically only limited to the standard cost principles (reasonable, allocable, allowable, and consistent treatment).
- Equipment: Equipment is property with a useful life of one year or more with a cost greater than $5,000 and may be purchased, fabricated, federally or sponsor-provided, or transferred from another institution. For sponsored projects, ownership typically vests with TTU unless an award states otherwise and often must be listed in the budget or subsequently approved in advance in order to be an allowable cost. For federal projects, equipment must be encumbered on the Federal Equipment Form in TechBuy. Additional information and related guidance may be found in TTU OP 65.05 Sub-recipient Monitoring.
- Sub-Award Costs: Sub-awards are issued to external agencies to carry out part of the scope of work rather than just providing goods or services and are required to adhere to applicable award compliance requirements. Principal investigators (PI) monitor sub-recipient progress and spending through term of the sub-award. Financial invoices are approved by both the PI and Accounting Services before payment is released. Additional information on monitoring and payment requirements can be found in TTU OP 65.05 Sub-recipient Monitoring.
- Research Service Provider Agreements (RSP): RSPs are agreements with individuals for services that cannot be performed by TTU personnel. RSPs are procured and paid via TechBuy on the Research Service Provider Form in accordance with guidance written in TTU OP 72.17 Procurement of Independent Contractors.
Indirect costs, or facilities and administrative (F&A), costs are those incurred for a common or joint objective, and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity. Some examples of indirect costs include the following: the salary of a departmental administrator, building utility and maintenance costs, or sponsored project administration (such as president, provost, or CFOs and their offices).
TTU is required to negotiate indirect costs rates with a designated cognizant Federal agency (Department of Health and Human Services (DHHS) for TTU) every 4 years for rates applied to different activities. Our current approved rates are as follows:
|Location/Type of Agreement||Applicable Rate|
|On Campus Research or Instruction||49%*|
|On Campus Other Sponsored Activities||37%|
|On Campus IPA Agreements||14%|
|All Off Campus Programs*||26%*|
*Most commonly used are on-campus rates for research (program 200) and instruction (program 100) or the off-campus rate.
How are these rates decided?
- On campus rates are comprised of facilities + administrative costs. Administrative costs are currently capped at 26% by the Federal government. That means, any increase in our full on campus rate every 4 years is due to increased facilities costs.
- The off campus rate is only made up of administrative costs capped at 26%. This is why the off campus indirect cost rate has not increased!
Overall, the cost of doing research at Texas Tech is greater than 49%. However, due to caps on administrative cost recovery and facilities costs negotiated down by DHHS, Texas Tech is only able to recover a portion of the costs of doing research. This is why voluntary F&A reductions or waivers (reductions not required by an agency) have to be approved by the Vice President for Research.
For additional questions, Grant Specialist contacts can be found by college and department in the Accounting Services Find My Grant Specialist contact listing.
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Phone806.742.2985 | Fax: 806.742.8076