I had a conversation with a dedicated and innovative engineer about how to receive funding for his organization, which builds specially designed 3D printers to create prosthetic hands for children injured by the effects of war and poverty.

It is certainly an admirable and exciting program that could transform the lives of some of the most vulnerable and traumatized citizens in diverse areas of the world.

However, he was focused on the cool technology rather than on the young lives that could be dramatically improved, from a place of hopelessness to one of pride and excitement.

He failed to recognize that funders care more about programs and people. Simply put, funders want to fund programs that make a difference and change lives for the better.

So, how do you stay in compliance with the rules and keep funders happy?

Make sure you are only charging allowable costs to the award.

Basics of Allowability

The OMB Super Circular outlines several conditions for costs to qualify as allowable.

First, costs must pass the hurdles of being necessary, reasonable, and allocable.

Next, costs must not be limited or excluded by federal cost principles.

The costs must also not be used to meet cost-sharing or matching requirements for any other federally financed program in either the current or a prior period.

The federal award recipient must demonstrate that it applies policies uniformly to all activities, not just federal award activities.

Finally, allowable costs must be adequately documented.

Cost Treatment

Allowable costs can be either direct costs or indirect costs.

Direct costs can be attributed to a particular final cost objective, such as a federally funded project or program.

Direct costs can also be attributed to non-federally funded activities.

These costs are charged directly to the identifiable final cost objective.

Indirect costs are incurred for joint or common objectives.

The objectives of the incurred costs cannot be readily identified with a particular final cost objective, such as a project or program.

Indirect costs are charged to an indirect-cost pool and then allocated to a direct-cost base by one of the various allowable allocation methods.

Conditional Allowability

The concept of conditional allowability has to do with whether there are conditions that affect the allowability of the costs incurred.

In reviewing the various parts of the federal cost principles in 2 CFR Part 200, you will find very few types of costs that are allowable or unallowable without specific conditions.

These conditions may hinge on whether the costs in question are direct or indirect costs or the specific circumstances related to activities supported by the costs.

The OMB Uniform Guidance cites more than fifty examples of costs and the cost treatment associated with them in the Selected Items of Cost.

It is a good resource if you have further questions about the allowability of a particular cost.

Ready to Deepen Your Understanding of Federal Funding?

Would you like to be a better grant writer or manager?

Deepen your understanding of procurement and the single audit for federal grants?

We have another grant training seminar coming soon.

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Hope to see you there!

Rachel Werner, MPA, GPC, PMP

MyFedTrainer Principal, Compliance Champion