Understanding Cost Policy
DOR-1101
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1.4 Unallowable Costs
Prior to paying ANY cost, you must assure that it is allowed by University policy. Stanford University does not allow reimbursement to individuals for costs incurred for:
- Personal amusement, social activities, or entertainment (outside of activities directly related to University functions or purposes, including employee-employer relations, performance improvement, etc.)
- Stanford Faculty Club dues for individual members
- Personal, social, or travel club dues
- University parking permits for employees or students
- Traffic citations for either personal or University vehicles
- Personal services or personal purchases
- Interest charges incurred by individuals for late payment of their own personal bills
- Or any costs specifically disallowed by school or department policy
Once you determine a cost is allowable according to Stanford policy, you must determine whether it is allowable for reimbursement according to federal regulations. Costs are defined as allowable or unallowable for reimbursement by the government in OMB Circular A-21 and the Uniform Guidance. The federal government asserts that federal funds may not be used to pay unallowable expenses. Unallowable expenses may NOT be charged either directly or indirectly to the federal government.
All costs at Stanford, regardless of funding source, must be coded as "allowable" or "unallowable" so they can be included or excluded from the indirect cost calculation as appropriate.
Expenses that are unallowable for federal reimbursement may be reasonable and necessary business expenses permitted by the University. Departments may incur these expenses but they must code them as unallowable.
1. Expenses and Activities Unallowable for Reimbursement by the Federal Government
The federal government will not reimburse certain items of cost as well as expenses supporting specific activities.
A. Unallowable Items of Cost
- Advertising (only certain types are allowable)
- Alcoholic beverages
- Entertainment
- Fundraising or Lobbying costs (see Fundraising Flowchart)
- Fines and penalties
- Memorabilia or promotional materials
- Moving costs if employee resigns within 12 months
- Certain recruitment costs, e.g., color advertising
- Certain travel costs, e.g., first-class travel
- Cash donations to other parties, such as donations to other universities (small contributions for purposes of Employee Morale, e.g., a donation in lieu of flowers at a memorial must be coded as Employee Moral)
- Costs in excess of University severance policy
- Interest payments, except certain interest specifically coded as paid to outside parties and authorized by Financial Management Services (FMS)
- Memberships in civic, community or social organizations, or dining or country clubs (seldom reimbursable by Stanford)
- Goods or services for the personal use of employees, including automobiles
- Insurance against defects in Stanford's materials or workmanship
- In addition, Stanford University voluntarily treats the travel and subsistence expenses of University trustees as unallowable.
B. Unallowable Activities
- Fund raising (requires a unique task *)
- Lobbying (requires a unique task *)
- Commencement and convocation (can be allowable when charged to a Task with the appropriate Student Services - Service Type)
- General public relations and alumni activities
- Certain student activities, e.g., intramural activities, students clubs, etc.
- Managing investments solely to enhance income
- Prosecuting claims against the Federal Government
- Defending or prosecuting certain criminal, civil or administrative proceedings
- Housing and personal living expenses of University Officers
Selling or marketing of goods or services (does not apply to selling goods or services internal to the university by its Service Centers)*For incidental fundraising/lobbying costs, charges may be made to the appropriate fundraising or lobbying ET.
It is crucial to code and categorize expenses correctly to comply with Stanford’s obligation to the federal government for both direct and indirect cost recovery. Our ability to obtain federal grants and contracts is dependent upon our performance in meeting federal requirements.
We must understand the distinction between allowable and unallowable costs whenever we record University expenses. The integrity of the University's financial systems depends on the knowledge and skill of each of the individuals who process the thousands of financial transactions here every day.
2. Unallowable Costs Can Be:
| Unallowable by Stanford |
Allowable by Stanford and Unallowable for reimbursement by Federal Government
|
Unallowable by Sponsor
|
|---|---|---|
|
University expenses that are:
|
University expenses that are:
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University expenses that do not conform to the sponsor’s terms and conditions and OMB A-21 or the Uniform Guidance.
|
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These expenses will not be paid for by Stanford. If incurred, they must be paid for by the individual. |
These expenses:
|
These expenses will not be paid for by the sponsor. Stanford may pay for the expenses, code as appropriate. |
A. Examples
- Costs unallowable for reimbursement by Stanford:
A Senior Research Associate purchases a leather brief case and would like to use university funds to pay for the item. The designer briefcase is made of fine grain leather with brass trim and costs $1250.
Explanation:
The cost is not reasonable, it is not necessary for the performance of the person's job, and is not permitted by University policy because it is a personal item. It must be paid for by the individual.
- Costs unallowable for reimbursement by the federal government, but allowable for reimbursement by Stanford:
An important faculty member is retiring from 35 years of service to Stanford. A party is given in his honor.
Explanation: Although this is something the federal government should not pay for as a direct or indirect cost, it certainly is an appropriate Institutional expense. This event should use the expenditure types: 52310 ALCOHOL BEV UNALW for all alcohol, and 52240 EMP MORALE for the food cost. The expenditure types are designated unallowable for reimbursement by the Federal Government in both cases.
- Costs unallowable for reimbursement by the sponsor, but allowable for reimbursement by Stanford:
Your State of California grant explicitly states NO TRAVEL OUTSIDE OF CALFORINIA. Professor Smart would like to travel outside the state to present a paper about her research. Explanation: No matter how great a speaker she is or how interesting her research may be, the expense is unallowable as a direct charge to the grant per the award terms and conditions. If Professor Smart does travel, the expense must be charged to a PTA where the travel is Allowable, Allocable and Reasonable. The expenditure type would be: 52410 DOMESTIC TRAVEL ALLOW.
