TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Cost Principles for Non-Profit Organizations
1. Purpose. This Circular establishes principles for determining costs of grants, contracts and other agreements with non-profit organizations. It does not apply to colleges and universities which are covered by Office of Management and Budget (OMB) Circular A-21, "Cost Principles for Educational Institutions"; State, local, and federally recognized Indian tribal governments which are covered by OMB Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments"; or hospitals. The principles are designed to provide that the Federal Government bear its fair share of costs except where restricted or prohibited by law. The principles do not attempt to prescribe the extent of cost sharing or matching on grants, contracts, or other agreements. However, such cost sharing or matching shall not be accomplished through arbitrary limitations on individual cost elements by Federal agencies. Provision for profit or other increment above cost is outside the scope of this Circular.
2. Supersession. This Circular supersedes cost principles issued by individual agencies for non-profit organizations.
- These principles
shall be used by all Federal agencies in determining the costs of work
performed by non-profit organizations under grants, cooperative agreements,
cost reimbursement contracts, and other contracts in which costs are used
in pricing, administration, or settlement. All of these instruments are
hereafter referred to as awards. The principles do not apply to awards under
which an organization is not required to account to the Federal Government
for actual costs incurred.
- All cost reimbursement subawards (subgrants, subcontracts, etc.) are subject to those Federal cost principles applicable to the particular organization concerned. Thus, if a subaward is to a non-profit organization, this Circular shall apply; if a subaward is to a commercial organization, the cost principles applicable to commercial concerns shall apply; if a subaward is to a college or university, Circular A-21 shall apply; if a subaward is to a State, local, or federally recognized Indian tribal government, Circular A-87 shall apply.
organization means any corporation, trust, association, cooperative, or
other organization which:
- Prior approval means securing the awarding agency's permission in advance to incur cost for those items that are designated as requiring prior approval by the Circular. Generally this permission will be in writing. Where an item of cost requiring prior approval is specified in the budget of an award, approval of the budget constitutes approval of that cost.
(2) is not organized primarily for profit; and
(3) uses its net proceeds to maintain, improve, and/or expand its operations. For this purpose, the term "non-profit organization" excludes (i) colleges and universities; (ii) hospitals; (iii) State, local, and federally recognized Indian tribal governments; and (iv) those non-profit organizations which are excluded from coverage of this Circular in accordance with paragraph 5.
5. Exclusion of some non-profit organizations. Some non-profit organizations, because of their size and nature of operations, can be considered to be similar to commercial concerns for purpose of applicability of cost principles. Such non-profit organizations shall operate under Federal cost principles applicable to commercial concerns. A listing of these organizations is contained in Attachment C. Other organizations may be added from time to time.
6. Responsibilities. Agencies responsible for administering programs that involve awards to non-profit organizations shall implement the provisions of this Circular. Upon request, implementing instruction shall be furnished to OMB. Agencies shall designate a liaison official to serve as the agency representative on matters relating to the implementation of this Circular. The name and title of such representative shall be furnished to OMB within 30 days of the date of this Circular.
7. Attachments. The principles and related policy guides are set forth in the following Attachments:
Attachment A - General Principles
Attachment B - Selected Items of Cost
Attachment C - Non-Profit Organizations Not Subject To This Circular
8. Requests for exceptions. OMB may grant exceptions to the requirements of this Circular when permissible under existing law. However, in the interest of achieving maximum uniformity, exceptions will be permitted only in highly unusual circumstances.
9. Effective Date. The provisions of this Circular are effective immediately. Implementation shall be phased in by incorporating the provisions into new awards made after the start of the organization's next fiscal year. For existing awards, the new principles may be applied if an organization and the cognizant Federal agency agree. Earlier implementation, or a delay in implementation of individual provisions, is also permitted by mutual agreement between an organization and the cognizant Federal agency.
10. Inquiries. Further information concerning this Circular may be obtained by contacting the Office of Federal Financial Management, OMB, Washington, DC 20503, telephone (202) 395-3993.
Table of Contents
- Composition of total costs
- Factors affecting allowability of costs
- Reasonable costs
- Allocable costs
- Applicable credits
- Advance understandings
- Conditional exemptions
B. Direct Costs
- Simplified allocation method
- Multiple allocation base method
- Direct allocation method
- Special indirect cost rates
- Negotiation and approval of rates
1. Composition of total costs. The total cost of an award is the sum of the allowable direct and allocable indirect costs less any applicable credits.
2. Factors affecting allowability of costs. To be allowable under an award, costs must meet the following general criteria:
- Be reasonable
for the performance of the award and be allocable thereto under these
to any limitations or exclusions set forth in these principles or in
the award as to types or amount of cost items.
- Be consistent
with policies and procedures that apply uniformly to both federally
financed and other activities of the organization.
- Be accorded
- Be determined
in accordance with generally accepted accounting principles (GAAP).
- Not be
included as a cost or used to meet cost sharing or matching requirements
of any other federally financed program in either the current or a prior
- Be adequately documented.
3. Reasonable costs. A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or separate divisions thereof which receive the preponderance of their support from awards made by Federal agencies. In determining the reasonableness of a given cost, consideration shall be given to:
the cost is of a type generally recognized as ordinary and necessary
for the operation of the organization or the performance of the award.
- The restraints
or requirements imposed by such factors as generally accepted sound
business practices, arms length bargaining, Federal and State laws and
regulations, and terms and conditions of the award.
the individuals concerned acted with prudence in the circumstances,
considering their responsibilities to the organization, its members,
employees, and clients, the public at large, and the Federal Government.
- Significant deviations from the established practices of the organization which may unjustifiably increase the award costs.
4. Allocable costs.
- A cost
is allocable to a particular cost objective, such as a grant, contract,
project, service, or other activity, in accordance with the relative
benefits received. A cost is allocable to a Federal award if it is treated
consistently with other costs incurred for the same purpose in like
circumstances and if it:
(1) Is incurred specifically for the award.
(2) Benefits both the award and other work and can be distributed in reasonable proportion to the benefits received, or
(3) Is necessary to the overall operation of the organization, although a direct relationship to any particular cost objective cannot be shown.
- Any cost allocable to a particular award or other cost objective under these principles may not be shifted to other Federal awards to overcome funding deficiencies, or to avoid restrictions imposed by law or by the terms of the award.
5. Applicable credits.
- The term
applicable credits refers to those receipts, or reduction of expenditures
which operate to offset or reduce expense items that are allocable to
awards as direct or indirect costs. Typical examples of such transactions
are: purchase discounts, rebates or allowances, recoveries or indemnities
on losses, insurance refunds, and adjustments of overpayments or erroneous
charges. To the extent that such credits accruing or received by the
organization relate to allowable cost, they shall be credited to the
Federal Government either as a cost reduction or cash refund, as appropriate.
- In some
instances, the amounts received from the Federal Government to finance
organizational activities or service operations should be treated as
applicable credits. Specifically, the concept of netting such credit
items against related expenditures should be applied by the organization
in determining the rates or amounts to be charged to Federal awards
for services rendered whenever the facilities or other resources used
in providing such services have been financed directly, in whole or
in part, by Federal funds.
- For rules covering program income (i.e., gross income earned from federally supported activities) see Sec. __.24 of Office of Management and Budget (OMB) Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations."
6. Advance understandings. Under any given award, the reasonableness and allocability of certain items of costs may be difficult to determine. This is particularly true in connection with organizations that receive a preponderance of their support from Federal agencies. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, it is often desirable to seek a written agreement with the cognizant or awarding agency in advance of the incurrence of special or unusual costs. The absence of an advance agreement on any element of cost will not, in itself, affect the reasonableness or allocability of that element.
7. Conditional exemptions.
- OMB authorizes
conditional exemption from OMB administrative requirements and cost
principles circulars for certain Federal programs with statutorily-authorized
consolidated planning and consolidated administrative funding, that
are identified by a Federal agency and approved by the head of the Executive
department or establishment. A Federal agency shall consult with OMB
during its consideration of whether to grant such an exemption.
- To promote
efficiency in State and local program administration, when Federal non-entitlement
programs with common purposes have specific statutorily-authorized consolidated
planning and consolidated administrative funding and where most of the
State agency's resources come from non-Federal sources, Federal agencies
may exempt these covered State-administered, non-entitlement grant programs
from certain OMB grants management requirements. The exemptions would
be from all but the allocability of costs provisions of OMB Circulars
A-87 (Attachment A, subsection C.3), "Cost Principles for State,
Local, and Indian Tribal Governments," A-21 (Section C, subpart
4), "Cost Principles for Educational Institutions," and A-122
(Attachment A, subsection A.4), "Cost Principles for Non-Profit
Organizations," and from all of the administrative requirements
provisions of OMB Circular A-110, "Uniform Administrative Requirements
for Grants and Agreements with Institutions of Higher Education, Hospitals,
and Other Non-Profit Organizations," and the agencies' grants management
- When a Federal agency provides this flexibility, as a prerequisite to a State's exercising this option, a State must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of OMB Circular A-87, and extend such policies to all subrecipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not be used for general expenses required to carry out other responsibilities of a State or its subrecipients.
1. Direct costs are those that can be identified specifically with a particular final cost objective, i.e., a particular award, project, service, or other direct activity of an organization. However, a cost may not be assigned to an award as a direct cost if any other cost incurred for the same purpose, in like circumstance, has been allocated to an award as an indirect cost. Costs identified specifically with awards are direct costs of the awards and are to be assigned directly thereto. Costs identified specifically with other final cost objectives of the organization are direct costs of those cost objectives and are not to be assigned to other awards directly or indirectly.
2. Any direct cost of a minor amount may be treated as an indirect cost for reasons of practicality where the accounting treatment for such cost is consistently applied to all final cost objectives.
3. The cost of certain activities are not allowable as charges to Federal awards (see, for example, fundraising costs in paragraph 17 of Attachment B). However, even though these costs are unallowable for purposes of computing charges to Federal awards, they nonetheless must be treated as direct costs for purposes of determining indirect cost rates and be allocated their share of the organization's indirect costs if they represent activities which (1) include the salaries of personnel, (2) occupy space, and (3) benefit from the organization's indirect costs.
4. The costs of activities performed primarily as a service to members, clients, or the general public when significant and necessary to the organization's mission must be treated as direct costs whether or not allowable and be allocated an equitable share of indirect costs. Some examples of these types of activities include:
of membership rolls, subscriptions, publications, and related functions.
services and information to members, legislative or administrative bodies,
or the public.
lobbying, and other forms of public relations.
and conferences except those held to conduct the general administration
of the organization.
protection, and investment of special funds not used in operation of
- Administration of group benefits on behalf of members or clients, including life and hospital insurance, annuity or retirement plans, financial aid, etc.
1. Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. Direct cost of minor amounts may be treated as indirect costs under the conditions described in subparagraph B.2. After direct costs have been determined and assigned directly to awards or other work as appropriate, indirect costs are those remaining to be allocated to benefiting cost objectives. A cost may not be allocated to an award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been assigned to an award as a direct cost.
2. Because of the diverse characteristics and accounting practices of non-profit organizations, it is not possible to specify the types of cost which may be classified as indirect cost in all situations. However, typical examples of indirect cost for many non-profit organizations may include depreciation or use allowances on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting.
3. Indirect costs shall be classified within two broad categories: "Facilities" and "Administration." "Facilities" is defined as depreciation and use allowances on buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. "Administration" is defined as general administration and general expenses such as the director's office, accounting, personnel, library expenses and all other types of expenditures not listed specifically under one of the subcategories of "Facilities" (including cross allocations from other pools, where applicable). See indirect cost rate reporting requirements in subparagraphs D.2.e and D.3.g.
a non-profit organization has only one major function, or where all
its major functions benefit from its indirect costs to approximately
the same degree, the allocation of indirect costs and the computation
of an indirect cost rate may be accomplished through simplified allocation
procedures, as described in subparagraph 2.
an organization has several major functions which benefit from its indirect
costs in varying degrees, allocation of indirect costs may require the
accumulation of such costs into separate cost groupings which then are
allocated individually to benefiting functions by means of a base which
best measures the relative degree of benefit. The indirect costs allocated
to each function are then distributed to individual awards and other
activities included in that function by means of an indirect cost rate(s).
- The determination
of what constitutes an organization's major functions will depend on
its purpose in being; the types of services it renders to the public,
its clients, and its members; and the amount of effort it devotes to
such activities as fundraising, public information and membership activities.
methods for allocating indirect costs and computing indirect cost rates
along with the conditions under which each method should be used are
described in subparagraphs 2 through 5.
- The base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to work performed in that period. The base period normally should coincide with the organization's fiscal year but, in any event, shall be so selected as to avoid inequities in the allocation of the costs.
2. Simplified allocation method.
an organization's major functions benefit from its indirect costs to
approximately the same degree, the allocation of indirect costs may
be accomplished by (i) separating the organization's total costs for
the base period as either direct or indirect, and (ii) dividing the
total allowable indirect costs (net of applicable credits) by an equitable
distribution base. The result of this process is an indirect cost rate
which is used to distribute indirect costs to individual awards. The
rate should be expressed as the percentage which the total amount of
allowable indirect costs bears to the base selected. This method should
also be used where an organization has only one major function encompassing
a number of individual projects or activities, and may be used where
the level of Federal awards to an organization is relatively small.
the direct costs and the indirect costs shall exclude capital expenditures
and unallowable costs. However, unallowable costs which represent activities
must be included in the direct costs under the conditions described
in subparagraph B.3.
- The distribution
base may be total direct costs (excluding capital expenditures and other
distorting items, such as major subcontracts or subgrants), direct salaries
and wages, or other base which results in an equitable distribution.
The distribution base shall generally exclude participant support costs
as defined in paragraph 32 of Attachment B.
where a special rate(s) is required in accordance with subparagraph
5, the indirect cost rate developed under the above principles is applicable
to all awards at the organization. If a special rate(s) is required,
appropriate modifications shall be made in order to develop the special
- For an organization that receives more than $10 million in Federal funding of direct costs in a fiscal year, a breakout of the indirect cost component into two broad categories, Facilities and Administration as defined in subparagraph C.3, is required. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost category (i.e., Facilities or Administration) is of the distribution base identified with that category.
3. Multiple allocation base method
Where an organization's indirect costs benefit its major functions in
varying degrees, indirect costs shall be accumulated into separate cost
groupings, as described in subparagraph b. Each grouping shall then
be allocated individually to benefitting functions by means of a base
which best measures the relative benefits. The default allocation bases
by cost pool are described in subparagraph c.
of indirect costs. Cost groupings shall be established so as to permit
the allocation of each grouping on the basis of benefits provided to
the major functions. Each grouping shall constitute a pool of expenses
that are of like character in terms of functions they benefit and in
terms of the allocation base which best measures the relative benefits
provided to each function. The groupings are classified within the two
broad categories: "Facilities" and "Administration,"
as described in subparagraph C.3. The indirect cost pools are defined
(1) Depreciation and use allowances. The expenses under this heading are the portion of the costs of the organization's buildings, capital improvements to land and buildings, and equipment which are computed in accordance with paragraph 11 of Attachment B ("Depreciation and use allowances").
(2) Interest. Interest on debt associated with certain buildings, equipment and capital improvements are computed in accordance with paragraph 23 of Attachment B ("Interest").
(3) Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administration, operation, maintenance, preservation, and protection of the organization's physical plant. They include expenses normally incurred for such items as: janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal; property, liability and other insurance relating to property; space and capital leasing; facility planning and management; and, central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs, depreciation and use allowances, and interest costs.
(4) General administration and general expenses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category shall also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation and use allowances, and interest costs. Examples of this category include central offices, such as the director's office, the office of finance, business services, budget and planning, personnel, safety and risk management, general counsel, management information systems, and library costs.
In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff, project supplies, project publication, telephone toll charges, computer costs, travel costs, and specialized services costs shall be treated as direct costs wherever identifiable to a particular program. The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity. Items such as office supplies, postage, local telephone costs, periodicals and memberships should normally be treated as indirect costs.
bases. Actual conditions shall be taken into account in selecting the
base to be used in allocating the expenses in each grouping to benefitting
functions. The essential consideration in selecting a method or a base
is that it is the one best suited for assigning the pool of costs to
cost objectives in accordance with benefits derived; a traceable cause
and effect relationship; or logic and reason, where neither the cause
nor the effect of the relationship is determinable. When an allocation
can be made by assignment of a cost grouping directly to the function
benefited, the allocation shall be made in that manner. When the expenses
in a cost grouping are more general in nature, the allocation shall
be made through the use of a selected base which produces results that
are equitable to both the Federal Government and the organization. The
distribution shall be made in accordance with the bases described herein
unless it can be demonstrated that the use of a different base would
result in a more equitable allocation of the costs, or that a more readily
available base would not increase the costs charged to sponsored awards.
The results of special cost studies (such as an engineering utility
study) shall not be used to determine and allocate the indirect costs
to sponsored awards.
(1) Depreciation and use allowances. Depreciation and use allowances expenses shall be allocated in the following manner:
(a) Depreciation or use allowances on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment used in such buildings, shall be assigned to that function.
(b) Depreciation or use allowances on buildings used for more than one function, and on capital improvements and equipment used in such buildings, shall be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding common areas, such as hallways, stairwells, and restrooms.
(c) Depreciation or use allowances on buildings, capital improvements and equipment related space (e.g., individual rooms, and laboratories) used jointly by more than one function (as determined by the users of the space) shall be treated as follows. The cost of each jointly used unit of space shall be allocated to the benefitting functions on the basis of:
(i) the employees and other users on a full-time equivalent (FTE) basis or salaries and wages of those individual functions benefitting from the use of that space; or
(ii) organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the organization.
(d) Depreciation or use allowances on certain capital improvements to land, such as paved parking areas, fences, sidewalks, and the like, not included in the cost of buildings, shall be allocated to user categories on a FTE basis and distributed to major functions in proportion to the salaries and wages of all employees applicable to the functions.
(2) Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on the buildings, equipment and capital equipments to which the interest relates.
(3) Operation and maintenance expenses. Operation and maintenance expenses shall be allocated in the same manner as the depreciation and use allowances.
(4) General administration and general expenses. General administration and general expenses shall be allocated to benefitting functions based on modified total direct costs (MTDC), as described in subparagraph D.3.f. The expenses included in this category could be grouped first according to major functions of the organization to which they render services or provide benefits. The aggregate expenses of each group shall then be allocated to benefitting functions based on MTDC.
(1) Indirect cost categories consisting of depreciation and use allowances, interest, operation and maintenance, and general administration and general expenses shall be allocated in that order to the remaining indirect cost categories as well as to the major functions of the organization. Other cost categories could be allocated in the order determined to be most appropriate by the organization. When cross allocation of costs is made as provided in subparagraph (2), this order of allocation does not apply.
(2) Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives, and costs shall not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modification to the composition of the indirect cost categories is required.
of indirect cost rate or rates. Except where a special indirect cost
rate(s) is required in accordance with subparagraph D.5, the separate
groupings of indirect costs allocated to each major function shall be
aggregated and treated as a common pool for that function. The costs
in the common pool shall then be distributed to individual awards included
in that function by use of a single indirect cost rate.
basis. Indirect costs shall be distributed to applicable sponsored awards
and other benefitting activities within each major function on the basis
of MTDC. MTDC consists of all salaries and wages, fringe benefits, materials
and supplies, services, travel, and subgrants and subcontracts up to
the first $25,000 of each subgrant or subcontract (regardless of the
period covered by the subgrant or subcontract). Equipment, capital expenditures,
charges for patient care, rental costs and the portion in excess of
$25,000 shall be excluded from MTDC. Participant support costs shall
generally be excluded from MTDC. Other items may only be excluded when
the Federal cost cognizant agency determines that an exclusion is necessary
to avoid a serious inequity in the distribution of indirect costs.
- Individual Rate Components. An indirect cost rate shall be determined for each separate indirect cost pool developed. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools shall be classified within two broad categories: "Facilities" and "Administration," as described in subparagraph C.3.
4. Direct allocation method.
non-profit organizations treat all costs as direct costs except general
administration and general expenses. These organizations generally separate
their costs into three basic categories: (i) General administration
and general expenses, (ii) fundraising, and (iii) other direct functions
(including projects performed under Federal awards). Joint costs, such
as depreciation, rental costs, operation and maintenance of facilities,
telephone expenses, and the like are prorated individually as direct
costs to each category and to each award or other activity using a base
most appropriate to the particular cost being prorated.
method is acceptable, provided each joint cost is prorated using a base
which accurately measures the benefits provided to each award or other
activity. The bases must be established in accordance with reasonable
criteria, and be supported by current data. This method is compatible
with the Standards of Accounting and Financial Reporting for Voluntary
Health and Welfare Organizations issued jointly by the National Health
Council, Inc., the National Assembly of Voluntary Health and Social
Welfare Organizations, and the United Way of America.
- Under this method, indirect costs consist exclusively of general administration and general expenses. In all other respects, the organization's indirect cost rates shall be computed in the same manner as that described in subparagraph 2.
5. Special indirect cost rates. In some instances, a single indirect cost rate for all activities of an organization or for each major function of the organization may not be appropriate, since it would not take into account those different factors which may substantially affect the indirect costs applicable to a particular segment of work. For this purpose, a particular segment of work may be that performed under a single award or it may consist of work under a group of awards performed in a common environment. These factors may include the physical location of the work, the level of administrative support required, the nature of the facilities or other resources employed, the scientific disciplines or technical skills involved, the organizational arrangements used, or any combination thereof. When a particular segment of work is performed in an environment which appears to generate a significantly different level of indirect costs, provisions should be made for a separate indirect cost pool applicable to such work. The separate indirect cost pool should be developed during the course of the regular allocation process, and the separate indirect cost rate resulting therefrom should be used, provided it is determined that (i) the rate differs significantly from that which would have been obtained under subparagraphs 2, 3, and 4, and (ii) the volume of work to which the rate would apply is material.
1. Definitions. As used in this section, the following terms have the meanings set forth below:
agency means the Federal agency responsible for negotiating and approving
indirect cost rates for a non-profit organization on behalf of all Federal
rate means an indirect cost rate, applicable to a specified current
or future period, usually the organization's fiscal year. The rate is
based on an estimate of the costs to be incurred during the period.
A predetermined rate is not subject to adjustment.
rate means an indirect cost rate which has the same characteristics
as a predetermined rate, except that the difference between the estimated
costs and the actual costs of the period covered by the rate is carried
forward as an adjustment to the rate computation of a subsequent period.
rate means an indirect cost rate applicable to a specified past period
which is based on the actual costs of the period. A final rate is not
subject to adjustment.
rate or billing rate means a temporary indirect cost rate applicable
to a specified period which is used for funding, interim reimbursement,
and reporting indirect costs on awards pending the establishment of
a final rate for the period.
cost proposal means the documentation prepared by an organization to
substantiate its claim for the reimbursement of indirect costs. This
proposal provides the basis for the review and negotiation leading to
the establishment of an organization's indirect cost rate.
- Cost objective means a function, organizational subdivision, contract, grant, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, projects, jobs and capitalized projects.
2. Negotiation and approval of rates.
different arrangements are agreed to by the agencies concerned, the
Federal agency with the largest dollar value of awards with an organization
will be designated as the cognizant agency for the negotiation and approval
of the indirect cost rates and, where necessary, other rates such as
fringe benefit and computer charge-out rates. Once an agency is assigned
cognizance for a particular non-profit organization, the assignment
will not be changed unless there is a major long-term shift in the dollar
volume of the Federal awards to the organization. All concerned Federal
agencies shall be given the opportunity to participate in the negotiation
process but, after a rate has been agreed upon, it will be accepted
by all Federal agencies. When a Federal agency has reason to believe
that special operating factors affecting its awards necessitate special
indirect cost rates in accordance with subparagraph D.5, it will, prior
to the time the rates are negotiated, notify the cognizant agency.
- A non-profit
organization which has not previously established an indirect cost rate
with a Federal agency shall submit its initial indirect cost proposal
immediately after the organization is advised that an award will be
made and, in no event, later than three months after the effective date
of the award.
that have previously established indirect cost rates must submit a new
indirect cost proposal to the cognizant agency within six months after
the close of each fiscal year.
- A predetermined
rate may be negotiated for use on awards where there is reasonable assurance,
based on past experience and reliable projection of the organization's
costs, that the rate is not likely to exceed a rate based on the organization's
rates may be negotiated where predetermined rates are not considered
appropriate. A fixed rate, however, shall not be negotiated if (i) all
or a substantial portion of the organization's awards are expected to
expire before the carry-forward adjustment can be made; (ii) the mix
of Federal and non-Federal work at the organization is too erratic to
permit an equitable carry-forward adjustment; or (iii) the organization's
operations fluctuate significantly from year to year.
and final rates shall be negotiated where neither predetermined nor
fixed rates are appropriate.
- The results
of each negotiation shall be formalized in a written agreement between
the cognizant agency and the non-profit organization. The cognizant
agency shall distribute copies of the agreement to all concerned Federal
- If a
dispute arises in a negotiation of an indirect cost rate between the
cognizant agency and the non-profit organization, the dispute shall
be resolved in accordance with the appeals procedures of the cognizant
- To the extent that problems are encountered among the Federal agencies in connection with the negotiation and approval process, OMB will lend assistance as required to resolve such problems in a timely manner.
SELECTED ITEMS OF COST
Table of Contents
- Advertising and public relations costs
- Advisory councils
- Alcoholic beverages
- Audit costs and related services
- Bad debts
- Bonding costs
- Communication costs
- Compensation for personal services
- Contingency provisions
- Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement
- Depreciation and use allowances
- Donations and contributions
- Employee morale, health, and welfare costs
- Entertainment costs
- Equipment and other capital expenditures
- Fines and penalties
- Fund raising and investment management costs
- Gains and losses on depreciable assets
- Goods or services for personal use
- Housing and personal living expenses
- Idle facilities and idle capacity
- Insurance and indemnification
- Labor relations costs
- Losses on other sponsored agreements or contracts
- Maintenance and repair costs
- Materials and supplies costs
- Meetings and conferences
- Memberships, subscriptions, and professional activity costs
- Organization costs
- Page charges in professional journals
- Participant support costs
- Patent costs
- Plant and homeland security costs
- Pre-agreement costs
- Professional services costs
- Publication and printing costs
- Rearrangement and alteration costs
- Reconversion costs
- Recruiting costs
- Relocation costs
- Rental costs of buildings and equipment
- Royalties and other costs for use of patents and copyrights
- Selling and marketing
- Specialized service facilities
- Termination costs applicable to sponsored agreements
- Training costs
- Transportation costs
- Travel costs
Circular No. A-122
SELECTED ITEMS OF COST
Paragraphs 1 through 53 provide principles to be applied in establishing the allowability of certain items of cost. These principles apply whether a cost is treated as direct or indirect. Failure to mention a particular item of cost is not intended to imply that it is unallowable; rather, determination as to allowability in each case should be based on the treatment or principles provided for similar or related items of cost.
- The term
advertising costs means the costs of advertising media and corollary
administrative costs. Advertising media include magazines, newspapers,
radio and television, direct mail, exhibits, electronic or computer
transmittals, and the like.
- The term
public relations includes community relations and means those activities
dedicated to maintaining the image of the non-profit organization or
maintaining or promoting understanding and favorable relations with
the community or public at large or any segment of the public.
- The only
allowable advertising costs are those which are solely for:
(1) The recruitment of personnel required for the performance by the non-profit organization of obligations arising under a Federal award (See also Attachment B, paragraph 41, Recruiting costs, and paragraph 42, Relocation costs);
(2) The procurement of goods and services for the performance of a Federal award;
(3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except when non-profit organizations are reimbursed for disposal costs at a predetermined amount; or
(4) Other specific purposes necessary to meet the requirements of the Federal award.
- The only
allowable public relations costs are:
(1) Costs specifically required by the Federal award;
(2) Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of Federal awards (these costs are considered necessary as part of the outreach effort for the Federal award); or
(3) Costs of conducting general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary keep the public informed on matters of public concern, such as notices of Federal contract/grant awards, financial matters, etc.
identified in subparagraphs c and d if incurred for more than one Federal
award or for both sponsored work and other work of the non-profit organization,
are allowable to the extent that the principles in Attachment A, paragraphs
B. (“Direct Costs”) and C. (“Indirect Costs”)
advertising and public relations costs include the following:
(1) All advertising and public relations costs other than as specified in subparagraphs c, d, and e; (2) Costs of meetings, conventions, convocations, or other events related to other activities of the non-profit organization, including:
(a) Costs of displays, demonstrations, and exhibits;(3) Costs of promotional items and memorabilia, including models, gifts, and souvenirs;
(b) Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and
(c) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings;
(4) Costs of advertising and public relations designed solely to promote the non-profit organization.
Costs incurred by advisory councils or committees are allowable as a direct cost where authorized by the Federal awarding agency or as an indirect cost where allocable to Federal awards.
- The costs
of audits required by, and performed in accordance with, the Single
Audit Act, as implemented by Circular A-133, "Audits of States,
Local Governments, and Non-Profit Organizations” are allowable.
Also see 31 USC 7505(b) and section 230 (“Audit Costs”)
of Circular A-133.
audit costs are allowable if included in an indirect cost rate proposal,
or if specifically approved by the awarding agency as a direct cost
to an award.
- The cost of agreed-upon procedures engagements to monitor subrecipients who are exempted from A-133 under section 200(d) are allowable, subject to the conditions listed in A-133, section 230 (b)(2).
- Bonding costs arise when the Federal Government requires assurance
against financial loss to itself or others by reason of the act or default
of the non-profit organization. They arise also in instances where the
non-profit organization requires similar assurance. Included are such
bonds as bid, performance, payment, advance payment, infringement, and
- Costs of bonding required pursuant to the terms of the award are allowable.
- Costs of bonding required by the non-profit organization in the general conduct of its operations are allowable to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances.
7. Communication costs. Costs incurred for telephone services, local and long distance telephone calls, telegrams, postage, messenger, electronic or computer transmittal services and the like are allowable.
- Definition. Compensation for personal services includes all compensation
paid currently or accrued by the organization for services of employees
rendered during the period of the award (except as otherwise provided
in subparagraph h). It includes, but is not limited to, salaries, wages,
director's and executive committee member's fees, incentive awards,
fringe benefits, pension plan costs, allowances for off-site pay, incentive
pay, location allowances, hardship pay, and cost of living differentials.
- Allowability. Except as otherwise specifically provided in this paragraph,
the costs of such compensation are allowable to the extent that:
(1) Total compensation to individual employees is reasonable for the services rendered and conforms to the established policy of the organization consistently applied to both Federal and non-Federal activities; and
(2) Charges to awards whether treated as direct or indirect costs are determined and supported as required in this paragraph.
(1) When the organization is predominantly engaged in activities other than those sponsored by the Federal Government, compensation for employees on federally sponsored work will be considered reasonable to the extent that it is consistent with that paid for similar work in the organization's other activities.
(2) When the organization is predominantly engaged in federally sponsored activities and in cases where the kind of employees required for the Federal activities are not found in the organization's other activities, compensation for employees on federally sponsored work will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor markets in which the organization competes for the kind of employees involved.
- Special considerations in determining allowability. Certain conditions
require special consideration and possible limitations in determining
costs under Federal awards where amounts or types of compensation appear
unreasonable. Among such conditions are the following:
(1) Compensation to members of non-profit organizations, trustees, directors, associates, officers, or the immediate families thereof. Determination should be made that such compensation is reasonable for the actual personal services rendered rather than a distribution of earnings in excess of costs.
(2) Any change in an organization's compensation policy resulting in a substantial increase in the organization's level of compensation, particularly when it was concurrent with an increase in the ratio of Federal awards to other activities of the organization or any change in the treatment of allowability of specific types of compensation due to changes in Federal policy.
- Unallowable costs. Costs which are unallowable under other paragraphs
of this Attachment shall not be allowable under this paragraph solely
on the basis that they constitute personal compensation.
- Overtime, extra-pay shift, and multi-shift premiums. Premiums for
overtime, extra-pay shifts, and multi-shift work are allowable only
with the prior approval of the awarding agency except:
(1) When necessary to cope with emergencies, such as those resulting from accidents, natural disasters, breakdowns of equipment, or occasional operational bottlenecks of a sporadic nature.
(2) When employees are performing indirect functions, such as administration, maintenance, or accounting.
(3) In the performance of tests, laboratory procedures, or other similar operations which are continuous in nature and cannot reasonably be interrupted or otherwise completed.
(4) When lower overall cost to the Federal Government will result.
- Fringe benefits.
(1) Fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as vacation leave, sick leave, military leave, and the like, are allowable, provided such costs are absorbed by all organization activities in proportion to the relative amount of time or effort actually devoted to each.
(2) Fringe benefits in the form of employer contributions or expenses for social security, employee insurance, workmen's compensation insurance, pension plan costs (see subparagraph h), and the like, are allowable, provided such benefits are granted in accordance with established written organization policies. Such benefits whether treated as indirect costs or as direct costs, shall be distributed to particular awards and other activities in a manner consistent with the pattern of benefits accruing to the individuals or group of employees whose salaries and wages are chargeable to such awards and other activities.
(3) (a) Provisions for a reserve under a self-insurance program for unemployment compensation or workers' compensation are allowable to the extent that the provisions represent reasonable estimates of the liabilities for such compensation, and the types of coverage, extent of coverage, and rates and premiums would have been allowable had insurance been purchased to cover the risks. However, provisions for self-insured liabilities which do not become payable for more than one year after the provision is made shall not exceed the present value of the liability.
(b) Where an organization follows a consistent policy of expensing actual payments to, or on behalf of, employees or former employees for unemployment compensation or workers' compensation, such payments are allowable in the year of payment with the prior approval of the awarding agency, provided they are allocated to all activities of the organization.
(4) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibility are allowable only to the extent that the insurance represents additional compensation. The costs of such insurance when the organization is named as beneficiary are unallowable.
- Organization-furnished automobiles. That portion of the cost of organization-furnished
automobiles that relates to personal use by employees (including transportation
to and from work) is unallowable as fringe benefit or indirect costs
regardless of whether the cost is reported as taxable income to the
employees. These costs are allowable as direct costs to sponsored award
when necessary for the performance of the sponsored award and approved
by awarding agencies.
- Pension plan costs.
(1) Costs of the organization's pension plan which are incurred in accordance with the established policies of the organization are allowable, provided:
(a) Such policies meet the test of reasonableness;
(b) The methods of cost allocation are not discriminatory;
(c) The cost assigned to each fiscal year is determined in accordance with generally accepted accounting principles (GAAP), as prescribed in Accounting Principles Board Opinion No. 8 issued by the American Institute of Certified Public Accountants; and
(d) The costs assigned to a given fiscal year are funded for all plan participants within six months after the end of that year. However, increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 days after each quarter of the year to which such costs are assignable are unallowable.
(2) Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income Security Act (ERISA) of 1974 (Pub. L. 93-406) are allowable. Late payment charges on such premiums are unallowable.
(3) Excise taxes on accumulated funding deficiencies and other penalties imposed under ERISA are unallowable.
- Incentive compensation. Incentive compensation to employees based
on cost reduction, or efficient performance, suggestion awards, safety
awards, etc., are allowable to the extent that the overall compensation
is determined to be reasonable and such costs are paid or accrued pursuant
to an agreement entered into in good faith between the organization
and the employees before the services were rendered, or pursuant to
an established plan followed by the organization so consistently as
to imply, in effect, an agreement to make such payment.
- Severance pay.
(1) Severance pay, also commonly referred to as dismissal wages, is a payment in addition to regular salaries and wages, by organizations to workers whose employment is being terminated. Costs of severance pay are allowable only to the extent that in each case, it is required by
(b) employer-employee agreement,
(c) established policy that constitutes, in effect, an implied agreement on the organization's part, or
(d) circumstances of the particular employment.
(2) Costs of severance payments are divided into two categories as follows:
(a) Actual normal turnover severance payments shall be allocated to all activities; or, where the organization provides for a reserve for normal severances, such method will be acceptable if the charge to current operations is reasonable in light of payments actually made for normal severances over a representative past period, and if amounts charged are allocated to all activities of the organization.
(b) Abnormal or mass severance pay is of such a conjectural nature that measurement of costs by means of an accrual will not achieve equity to both parties. Thus, accruals for this purpose are not allowable. However, the Federal Government recognizes its obligation to participate, to the extent of its fair share, in any specific payment. Thus, allowability will be considered on a case-by-case basis in the event or occurrence.
(c) Costs incurred in certain severance pay packages (commonly known as "a golden parachute" payment) which are in an amount in excess of the normal severance pay paid by the organization to an employee upon termination of employment and are paid to the employee contingent upon a change in management control over, or ownership of, the organization's assets are unallowable.
(d) Severance payments to foreign nationals employed by the organization outside the United States, to the extent that the amount exceeds the customary or prevailing practices for the organization in the United States are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies.
(e) Severance payments to foreign nationals employed by the organization outside the United States due to the termination of the foreign national as a result of the closing of, or curtailment of activities by, the organization in that country, are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies.
- Training costs. See paragraph 49.
- Support of salaries and wages.
(1) Charges to awards for salaries and wages, whether treated as direct costs or indirect costs, will be based on documented payrolls approved by a responsible official(s) of the organization. The distribution of salaries and wages to awards must be supported by personnel activity reports, as prescribed in subparagraph (2), except when a substitute system has been approved in writing by the cognizant agency. (See subparagraph E.2 of Attachment A.)
(2) Reports reflecting the distribution of activity of each employee must be maintained for all staff members (professionals and nonprofessionals) whose compensation is charged, in whole or in part, directly to awards. In addition, in order to support the allocation of indirect costs, such reports must also be maintained for other employees whose work involves two or more functions or activities if a distribution of their compensation between such functions or activities is needed in the determination of the organization's indirect cost rate(s) (e.g., an employee engaged part-time in indirect cost activities and part-time in a direct function). Reports maintained by non-profit organizations to satisfy these requirements must meet the following standards:
(a) The reports must reflect an after-the-fact determination of the actual activity of each employee. Budget estimates (i.e., estimates determined before the services are performed) do not qualify as support for charges to awards.
(b) Each report must account for the total activity for which employees are compensated and which is required in fulfillment of their obligations to the organization.
(c) The reports must be signed by the individual employee, or by a responsible supervisory official having first hand knowledge of the activities performed by the employee, that the distribution of activity represents a reasonable estimate of the actual work performed by the employee during the periods covered by the reports.
(d) The reports must be prepared at least monthly and must coincide with one or more pay periods.
(3) Charges for the salaries and wages of nonprofessional employees, in addition to the supporting documentation described in subparagraphs (1) and (2), must also be supported by records indicating the total number of hours worked each day maintained in conformance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR Part 516). For this purpose, the term "nonprofessional employee" shall have the same meaning as "nonexempt employee," under FLSA.
(4) Salaries and wages of employees used in meeting cost sharing or matching requirements on awards must be supported in the same manner as salaries and wages claimed for reimbursement from awarding agencies.
9. Contingency provisions. Contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening, are unallowable.
The term “contingency reserve” excludes self-insurance reserves (see Attachment B, paragraphs 8.g. (3) and 22.a(2)(d)); pension funds (see paragraph 8.i): and reserves for normal severance pay (see paragraph 8.k.)
(1) Conviction, as used herein, means a judgment or a conviction of a criminal offense by any court of competent jurisdiction, whether entered upon as a verdict or a plea, including a conviction due to a plea of nolo contendere.
(2) Costs include, but are not limited to, administrative and clerical expenses; the cost of legal services, whether performed by in-house or private counsel; and the costs of the services of accountants, consultants, or others retained by the organization to assist it; costs of employees, officers and trustees, and any similar costs incurred before, during, and after commencement of a judicial or administrative proceeding that bears a direct relationship to the proceedings.
(3) Fraud, as used herein, means (i) acts of fraud corruption or attempts to defraud the Federal Government or to corrupt its agents, (ii) acts that constitute a cause for debarment or suspension (as specified in agency regulations), and (iii) acts which violate the False Claims Act, 31 U.S.C., sections 3729-3731, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54.
(4) Penalty does not include restitution, reimbursement, or compensatory damages.
(5) Proceeding includes an investigation.
- (1) Except
as otherwise described herein, costs incurred in connection with any
criminal, civil or administrative proceeding (including filing of a
false certification) commenced by the Federal Government, or a State,
local or foreign government, are not allowable if the proceeding: (1)
relates to a violation of, or failure to comply with, a Federal, State,
local or foreign statute or regulation by the organization (including
its agents and employees), and (2) results in any of the following dispositions:
(a) In a criminal proceeding, a conviction.
(b) In a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of organizational liability.
(c) In the case of any civil or administrative proceeding, the imposition of a monetary penalty.
(d) A final decision by an appropriate Federal official to debar or suspend the organization, to rescind or void an award, or to terminate an award for default by reason of a violation or failure to comply with a law or regulation.
(e) A disposition by consent or compromise, if the action could have resulted in any of the dispositions described in (a), (b), (c) or (d).
(2) If more than one proceeding involves the same alleged misconduct, the costs of all such proceedings shall be unallowable if any one of them results in one of the dispositions shown in subparagraph b.(1).
- If a
proceeding referred to in subparagraph b is commenced by the Federal
Government and is resolved by consent or compromise pursuant to an agreement
entered into by the organization and the Federal Government, then the
costs incurred by the organization in connection with such proceedings
that are otherwise not allowable under subparagraph b may be allowed
to the extent specifically provided in such agreement.
- If a
proceeding referred to in subparagraph b is commenced by a State, local
or foreign government, the authorized Federal official may allow the
costs incurred by the organization for such proceedings, if such authorized
official determines that the costs were incurred as a result of (1)
a specific term or condition of a federally sponsored award, or (2)
specific written direction of an authorized official of the sponsoring
incurred in connection with proceedings described in subparagraph b,
but which are not made unallowable by that subparagraph, may be allowed
by the Federal Government, but only to the extent that:
(1) The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action;
(2) Payment of the costs incurred, as allowable and allocable costs, is not prohibited by any other provision(s) of the sponsored award;
(3) The costs are not otherwise recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise; and,
(4) The percentage of costs allowed does not exceed the percentage determined by an authorized Federal official to be appropriate, considering the complexity of the litigation, generally accepted principles governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80 percent. However, if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage, then the full amount of costs resulting from that agreement shall be allowable.
incurred by the organization in connection with the defense of suits
brought by its employees or ex-employees under section 2 of the Major
Fraud Act of 1988 (Pub. L. 100-700), including the cost of all relief
necessary to make such employee whole, where the organization was found
liable or settled, are unallowable.
of legal, accounting, and consultant services, and related costs, incurred
in connection with defense against Federal Government claims or appeals,
antitrust suits, or the prosecution of claims or appeals against the
Federal Government, are unallowable.
of legal, accounting, and consultant services, and related costs, incurred
in connection with patent infringement litigation, are unallowable unless
otherwise provided for in the sponsored awards.
- Costs which may be unallowable under this paragraph, including directly associated costs, shall be segregated and accounted for by the organization separately. During the pendency of any proceeding covered by subparagraphs b and f, the Federal Government shall generally withhold payment of such costs. However, if in the best interests of the Federal Government, the Federal Government may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreements by the organization to repay all unallowable costs, plus interest, if the costs are subsequently determined to be unallowable.
for the use of buildings, other capital improvements, and equipment
on hand may be made through use allowance or depreciation. However,
except as provided in Attachment B, paragraph f, a combination of the
two methods may not be used in connection with a single class of fixed
assets (e.g., buildings, office equipment, computer equipment, etc.).
- The computation
of use allowances or depreciation shall be based on the acquisition
cost of the assets involved. The acquisition cost of an asset donated
to the non-profit organization by a third party shall be its fair market
value at the time of the donation.
- The computation
of use allowances or depreciation will exclude:
(1) The cost of land;
(2) Any portion of the cost of buildings and equipment borne by or donated by the Federal Government irrespective of where title was originally vested or where it presently resides; and
(3) Any portion of the cost of buildings and equipment contributed by or for the non-profit organization in satisfaction of a statutory matching requirement.
depreciation method is followed, the period of useful service (useful
life) established in each case for usable capital assets must take into
consideration such factors as type of construction, nature of the equipment
used, technological developments in the particular program area, and
the renewal and replacement policies followed for the individual items
or classes of assets involved. The method of depreciation used to assign
the cost of an asset (or group of assets) to accounting periods shall
reflect the pattern of consumption of the asset during its useful life.
In the absence of clear evidence indicating that the expected consumption of the asset will be significantly greater or lesser in the early portions of its useful life than in the later portions, the straight-line method shall be presumed to be the appropriate method.
Depreciation methods once used shall not be changed unless approved in advance by the cognizant Federal agency. When the depreciation method is introduced for application to assets previously subject to a use allowance, the combination of use allowances and depreciation applicable to such assets must not exceed the total acquisition cost of the assets.
the depreciation method is used for buildings, a building's shell may
be segregated from each building component (e.g., plumbing system, heating,
and air conditioning system, etc.) and each item depreciated over its
estimated useful life; or the entire building (i.e., the shell and all
components) may be treated as a single asset and depreciated over a
single useful life.
the depreciation method is used for a particular class of assets, no
depreciation may be allowed on any such assets that, under subparagraph
d, would be viewed as fully depreciated. However, a reasonable use allowance
may be negotiated for such assets if warranted after taking into consideration
the amount of depreciation previously charged to the Federal Government,
the estimated useful life remaining at time of negotiation, the effect
of any increased maintenance charges or decreased efficiency due to
age, and any other factors pertinent to the utilization of the asset
for the purpose contemplated.
the use allowance method is followed, the use allowance for buildings
and improvement (including land improvements, such as paved parking
areas, fences, and sidewalks) will be computed at an annual rate not
exceeding two percent of acquisition cost.
The use allowance for equipment will be computed at an annual rate not exceeding six and two-thirds percent of acquisition cost. When the use allowance method is used for buildings, the entire building must be treated as a single asset; the building's components (e.g., plumbing system, heating and air conditioning, etc.) cannot be segregated from the building's shell.
The two percent limitation, however, need not be applied to equipment which is merely attached or fastened to the building but not permanently fixed to it and which is used as furnishings or decorations or for specialized purposes (e.g., dentist chairs and dental treatment units, counters, laboratory benches bolted to the floor, dishwashers, modular furniture, carpeting, etc.). Such equipment will be considered as not being permanently fixed to the building if it can be removed without the need for costly or extensive alterations or repairs to the building or the equipment. Equipment that meets these criteria will be subject to the 6 2/3 percent equipment use allowance limitation.
- Charges for use allowances or depreciation must be supported by adequate property records and physical inventories must be taken at least once every two years (a statistical sampling basis is acceptable) to ensure that assets exist and are usable and needed. When the depreciation method is followed, adequate depreciation records indicating the amount of depreciation taken each period must also be maintained.
or donations rendered. Contributions or donations, including cash, property,
and services, made by the organization, regardless of the recipient,
(1) Donated or volunteer services may be furnished to an organization by professional and technical personnel, consultants, and other skilled and unskilled labor. The value of these services is not reimbursable either as a direct or indirect cost. However, the value of donated services may be used to meet cost sharing or matching requirements in accordance with the Common Rule.
(2)The value of donated services utilized in the performance of a direct cost activity shall, when material in amount, be considered in the determination of the non-profit organization's indirect costs or rate(s) and, accordingly, shall be allocated a proportionate share of applicable indirect costs when the following exist:
(a) The aggregate value of the services is material;
(b) The services are supported by a significant amount of the indirect costs incurred by the non-profit organization; and
(c) The direct cost activity is not pursued primarily for the benefit of the Federal Government.
(3) In those instances where there is no basis for determining the fair market value of the services rendered, the recipient and the cognizant agency shall negotiate an appropriate allocation of indirect cost to the services.
(4) Where donated services directly benefit a project supported by an award, the indirect costs allocated to the services will be considered as a part of the total costs of the project. Such indirect costs may be reimbursed under the award or used to meet cost sharing or matching requirements.
(5) The value of the donated services may be used to meet cost sharing or matching requirements under conditions described in Sec.__.23 of Circular A-110. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made.
goods or space.
(1) Donated goods; i.e., expendable personal property/supplies, and donated use of space may be furnished to a non-profit organization. The value of the goods and space is not reimbursable either as a direct or indirect cost.
(2) The value of the donations may be used to meet cost sharing or matching share requirements under the conditions described in Circular A-110. Where donations are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made.
- The costs
of employee information publications, health or first-aid clinics and/or
infirmaries, recreational activities, employee counseling services,
and any other expenses incurred in accordance with the non-profit organization's
established practice or custom for the improvement of working conditions,
employer-employee relations, employee morale, and employee performance
- Such costs will be equitably apportioned to all activities of the non-profit organization. Income generated from any of these activities will be credited to the cost thereof unless such income has been irrevocably set over to employee welfare organizations.
14. Entertainment costs. Costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.
- For purposes
of this subparagraph, the following definitions apply:
(1) "Capital Expenditures” means expenditures for the acquisition cost of capital assets (equipment, buildings, land), or expenditures to make improvements to capital assets that materially increase their value or useful life. Acquisition cost means the cost of the asset including the cost to put it in place. Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Ancillary charges, such as taxes, duty, protective in transit insurance, freight, and installation may be included in, or excluded from the acquisition cost in accordance with the non-profit organization's regular accounting practices.
(2) "Equipment" means an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-profit organization for financial statement purposes, or $5000.
(3) "Special purpose equipment" means equipment which is used only for research, medical, scientific, or other technical activities. Examples of special purpose equipment include microscopes, x-ray machines, surgical instruments, and spectrometers.
(4) "General purpose equipment" means equipment, which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles.
- The following
rules of allowability shall apply to equipment and other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except where approved in advance by the awarding agency.
(2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5000 or more have the prior approval of the awarding agency.
(3) Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior approval of the awarding agency.
(4) When approved as a direct charge pursuant to paragraph 15.b.(1), (2), and (3) above, capital expenditures will be charged in the period in which the expenditure is incurred, or as otherwise determined appropriate by and negotiated with the awarding agency.
(5) Equipment and other capital expenditures are unallowable as indirect costs. However, see Attachment B, paragraph 11., Depreciation and use allowance, for rules on the allowability of use allowances or depreciation on buildings, capital improvements, and equipment. Also, see Attachment B, paragraph 43., Rental costs of buildings and equipment, for rules on the allowability of rental costs for land, buildings, and equipment.
(6) The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on the equipment, or by amortizing the amount to be written off over a period of years negotiated with the cognizant agency.
16. Fines and penalties. Costs of fines and penalties resulting from violations of, or failure of the organization to comply with Federal, State, and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the awarding agency.
of organized fund raising, including financial campaigns, endowment
drives, solicitation of gifts and bequests, and similar expenses incurred
solely to raise capital or obtain contributions are unallowable.
of investment counsel and staff and similar expenses incurred solely
to enhance income from investments are unallowable.
- Fund raising and investment activities shall be allocated an appropriate share of indirect costs under the conditions described in subparagraph B.3 of Attachment A.
- (1) Gains
and losses on sale, retirement, or other disposition of depreciable
property shall be included in the year in which they occur as credits
or charges to cost grouping(s) in which the depreciation applicable
to such property was included. The amount of the gain or loss to be
included as a credit or charge to the appropriate cost grouping(s) shall
be the difference between the amount realized on the property and the
undepreciated basis of the property.
(2) Gains and losses on the disposition of depreciable property shall not be recognized as a separate credit or charge under the following conditions:
(a) The gain or loss is processed through a depreciation account and is reflected in the depreciation allowable under paragraph 11.
(b) The property is given in exchange as part of the purchase price of a similar item and the gain or loss is taken into account in determining the depreciation cost basis of the new item.
(c) A loss results from the failure to maintain permissible insurance, except as otherwise provided in Attachment B, paragraph 22.
(d) Compensation for the use of the property was provided through use allowances in lieu of depreciation in accordance with paragraph 9.
(e) Gains and losses arising from mass or extraordinary sales, retirements, or other dispositions shall be considered on a case-by-case basis.
- Gains or losses of any nature arising from the sale or exchange of property other than the property covered in subparagraph a shall be excluded in computing award costs.
19. Goods or services for personal use. Costs of goods or services for personal use of the organization's employees are unallowable regardless of whether the cost is reported as taxable income to the employees.
of housing (e.g., depreciation, maintenance, utilities, furnishings,
rent, etc.), housing allowances and personal living expenses for/of
the organization's officers are unallowable as fringe benefit or indirect
costs regardless of whether the cost is reported as taxable income to
the employees. These costs are allowable as direct costs to sponsored
award when necessary for the performance of the sponsored award and
approved by awarding agencies.
- The term "officers" includes current and past officers and employees.
- As used
in this section the following terms have the meanings set forth below:
(1) "Facilities" means land and buildings or any portion thereof, equipment individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the non-profit organization.
(2) "Idle facilities" means completely unused facilities that are excess to the non-profit organization's current needs.
(3) "Idle capacity" means the unused capacity of partially used facilities. It is the difference between: (a) that which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting from time lost for repairs, setups, unsatisfactory materials, and other normal delays; and (b) the extent to which the facility was actually used to meet demands during the accounting period. A multi-shift basis should be used if it can be shown that this amount of usage would normally be expected for the type of facility involved.
(4) "Cost of idle facilities or idle capacity" means costs such as maintenance, repair, housing, rent, and other related costs, e.g., insurance, interest, property taxes and depreciation or use allowances.
- The costs
of idle facilities are unallowable except to the extent that:
(1) They are necessary to meet fluctuations in workload; or
(2) Although not necessary to meet fluctuations in workload, they were necessary when acquired and are now idle because of changes in program requirements, efforts to achieve more economical operations, reorganization, termination, or other causes which could not have been reasonably foreseen. Under the exception stated in this subparagraph, costs of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year, depending on the initiative taken to use, lease, or dispose of such facilities.
- The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates from period to period. Such costs are allowable, provided that the capacity is reasonably anticipated to be necessary or was originally reasonable and is not subject to reduction or elimination by use on other Federal awards, subletting, renting, or sale, in accordance with sound business, economic, or security practices. Widespread idle capacity throughout an entire facility or among a group of assets having substantially the same function may be considered idle facilities.
includes insurance which the organization is required to carry, or which
is approved, under the terms of the award and any other insurance which
the organization maintains in connection with the general conduct of
its operations. This paragraph does not apply to insurance which represents
fringe benefits for employees (see subparagraphs 8.g and 8.i(2)).
(1) Costs of insurance required or approved, and maintained, pursuant to the award are allowable.
(2) Costs of other insurance maintained by the organization in connection with the general conduct of its operations are allowable subject to the following limitations:
(a) Types and extent of coverage shall be in accordance with sound business practice and the rates and premiums shall be reasonable under the circumstances.(3) Actual losses which could have been covered by permissible insurance (through the purchase of insurance or a self-insurance program) are unallowable unless expressly provided for in the award, except:
(b) Costs allowed for business interruption or other similar insurance shall be limited to exclude coverage of management fees.
(c) Costs of insurance or of any provisions for a reserve covering the risk of loss or damage to Federal property are allowable only to the extent that the organization is liable for such loss or damage.
(d) Provisions for a reserve under a self-insurance program are allowable to the extent that types of coverage, extent of coverage, rates, and premiums would have been allowed had insurance been purchased to cover the risks. However, provision for known or reasonably estimated self-insured liabilities, which do not become payable for more than one year after the provision is made, shall not exceed the present value of the liability.
(e) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibilities are allowable only to the extent that the insurance represents additional compensation (see subparagraph 8.g(4)). The cost of such insurance when the organization is identified as the beneficiary is unallowable.
(f) Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in the organization's materials or workmanship are unallowable.
(g) Medical liability (malpractice) insurance. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance.
(a) Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sound business practice are allowable.
(b) Minor losses not covered by insurance, such as spoilage, breakage, and disappearance of supplies, which occur in the ordinary course of operations, are allowable.
- Indemnification includes securing the organization against liabilities to third persons and any other loss or damage, not compensated by insurance or otherwise. The Federal Government is obligated to indemnify the organization only to the extent expressly provided in the award.
incurred for interest on borrowed capital, temporary use of endowment
funds, or the use of the non-profit organization’s own funds,
however represented, are unallowable. However, interest on debt incurred
after September 29, 1995 to acquire or replace capital assets (including
renovations, alterations, equipment, land, and capital assets acquired
through capital leases), acquired after September 29, 1995 and used
in support of Federal awards is allowable, provided that:
(1) For facilities acquisitions (excluding renovations and alterations) costing over $10 million where the Federal Government's reimbursement is expected to equal or exceed 40 percent of an asset's cost, the non-profit organization prepares, prior to the acquisition or replacement of the capital asset(s), a justification that demonstrates the need for the facility in the conduct of federally sponsored activities. Upon request, the needs justification must be provided to the Federal agency with cost cognizance authority as a prerequisite to the continued allowability of interest on debt and depreciation related to the facility. The needs justification for the acquisition of a facility should include, at a minimum, the following:
(a) A statement of purpose and justification for facility acquisition or replacement(2) For facilities costing over $500,000, the non-profit organization prepares, prior to the acquisition or replacement of the facility, a lease/purchase analysis in accordance with the provisions of Sec. __.30 through __.37 of Circular A-110, which shows that a financed purchase or capital lease is less costly to the organization than other leasing alternatives, on a net present value basis. Discount rates used should be equal to the non-profit organization's anticipated interest rates and should be no higher than the fair market rate available to the non-profit organization from an unrelated ("arm's length") third-party. The lease/purchase analysis shall include a comparison of the net present value of the projected total cost comparisons of both alternatives over the period the asset is expected to be used by the non-profit organization. The cost comparisons associated with purchasing the facility shall include the estimated purchase price, anticipated operating and maintenance costs (including property taxes, if applicable) not included in the debt financing, less any estimated asset salvage value at the end of the period defined above. The cost comparison for a capital lease shall include the estimated total lease payments, any estimated bargain purchase option, operating and maintenance costs, and taxes not included in the capital leasing arrangement, less any estimated credits due under the lease at the end of the period defined above. Projected operating lease costs shall be based on the anticipated cost of leasing comparable facilities at fair market rates under rental agreements that would be renewed or reestablished over the period defined above, and any expected maintenance costs and allowable property taxes to be borne by the non-profit organization directly or as part of the lease arrangement.
(b) A statement as to why current facilities are not adequate
(c) A statement of planned future use of the facility
(d) A description of the financing agreement to be arranged for the facility
(e) A summary of the building contract with estimated cost information and statement of source and use of funds
(f) A schedule of planned occupancy dates
(3) The actual interest cost claimed is predicated upon interest rates that are no higher than the fair market rate available to the non-profit organization from an unrelated ("arm's length") third party.
(4) Investment earnings, including interest income, on bond or loan principal, pending payment of the construction or acquisition costs, are used to offset allowable interest cost. Arbitrage earnings reportable to the Internal Revenue Service are not required to be offset against allowable interest costs.
(5) Reimbursements are limited to the least costly alternative based on the total cost analysis required under subparagraph (b). For example, if an operating lease is determined to be less costly than purchasing through debt financing, then reimbursement is limited to the amount determined if leasing had been used. In all cases where a lease/purchase analysis is performed, Federal reimbursement shall be based upon the least expensive alternative.
(6) Non-profit organizations are also subject to the following conditions:
(a) Interest on debt incurred to finance or refinance assets acquired before or reacquired after September 29, 1995, is not allowable.
(b) Interest attributable to fully depreciated assets is unallowable.
(c) For debt arrangements over $1 million, unless the non-profit organization makes an initial equity contribution to the asset purchase of 25 percent or more, non-profit organizations shall reduce claims for interest expense by an amount equal to imputed interest earnings on excess cash flow, which is to be calculated as follows. Annually, non-profit organizations shall prepare a cumulative (from the inception of the project) report of monthly cash flows that includes inflows and outflows, regardless of the funding source. Inflows consist of depreciation expense, amortization of capitalized construction interest, and annual interest expense. For cash flow calculations, the annual inflow figures shall be divided by the number of months in the year (usually 12) that the building is in service for monthly amounts. Outflows consist of initial equity contributions, debt principal payments (less the pro rata share attributable to the unallowable costs of land) and interest payments. Where cumulative inflows exceed cumulative outflows, interest shall be calculated on the excess inflows for that period and be treated as a reduction to allowable interest expense. The rate of interest to be used to compute earnings on excess cash flows shall be the three month Treasury Bill closing rate as of the last business day of that month.
(d) Substantial relocation of federally sponsored activities from a facility financed by indebtedness, the cost of which was funded in whole or part through Federal reimbursements, to another facility prior to the expiration of a period of 20 years requires notice to the Federal cognizant agency. The extent of the relocation, the amount of the Federal participation in the financing, and the depreciation and interest charged to date may require negotiation and/or downward adjustments of replacement space charged to Federal programs in the future.
(e) The allowable costs to acquire facilities and equipment are limited to a fair market value available to the non-profit organization from an unrelated ("arm's length") third party.
- For non-profit
organizations subject to "full coverage"' under the Cost Accounting
Standards (CAS) as defined at 48 CFR 9903.201, the interest allowability
provisions of subparagraph a do not apply. Instead, these organizations'
sponsored agreements are subject to CAS 414 (48 CFR 9903.414), cost
of money as an element of the cost of facilities capital, and CAS 417
(48 CFR 9903.417), cost of money as an element of the cost of capital
assets under construction.
- The following
definitions are to be used for purposes of this paragraph:
(1) Re-acquired assets means assets held by the non-profit organization prior to September 29, 1995 that have again come to be held by the organization, whether through repurchase or refinancing. It does not include assets acquired to replace older assets.
(2) Initial equity contribution means the amount or value of contributions made by non-profit organizations for the acquisition of the asset or prior to occupancy of facilities.
(3) Asset costs means the capitalizable costs of an asset, including construction costs, acquisition costs, and other such costs capitalized in accordance with GAAP.
24. Labor relations costs. Costs incurred in maintaining satisfactory relations between the organization and its employees, including costs of labor management committees, employee publications, and other related activities are allowable.
other provisions of this Circular, costs associated with the following
activities are unallowable:
(1) Attempts to influence the outcomes of any Federal, State, or local election, referendum, initiative, or similar procedure, through in kind or cash contributions, endorsements, publicity, or similar activity;
(2) Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections;
(3) Any attempt to influence: (i) The introduction of Federal or State legislation; or (ii) the enactment or modification of any pending Federal or State legislation through communication with any member or employee of the Congress or State legislature (including efforts to influence State or local officials to engage in similar lobbying activity), or with any Government official or employee in connection with a decision to sign or veto enrolled legislation;
(4) Any attempt to influence: (i) The introduction of Federal or State legislation; or (ii) the enactment or modification of any pending Federal or State legislation by preparing, distributing or using publicity or propaganda, or by urging members of the general public or any segment thereof to contribute to or participate in any mass demonstration, march, rally, fundraising drive, lobbying campaign or letter writing or telephone campaign; or
(5) Legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, and analyzing the effect of legislation, when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable lobbying.
- The following
activities are excepted from the coverage of subparagraph a:
(1) Providing a technical and factual presentation of information on a topic directly related to the performance of a grant, contract or other agreement through hearing testimony, statements or letters to the Congress or a State legislature, or subdivision, member, or cognizant staff member thereof, in response to a documented request (including a Congressional Record notice requesting testimony or statements for the record at a regularly scheduled hearing) made by the recipient member, legislative body or subdivision, or a cognizant staff member thereof; provided such information is readily obtainable and can be readily put in deliverable form; and further provided that costs under this section for travel, lodging or meals are unallowable unless incurred to offer testimony at a regularly scheduled Congressional hearing pursuant to a written request for such presentation made by the Chairman or Ranking Minority Member of the Committee or Subcommittee conducting such hearing.
(2) Any lobbying made unallowable by subparagraph a(3) to influence State legislation in order to directly reduce the cost, or to avoid material impairment of the organization's authority to perform the grant, contract, or other agreement.
(3) Any activity specifically authorized by statute to be undertaken with funds from the grant, contract, or other agreement.
- (1) When
an organization seeks reimbursement for indirect costs, total lobbying
costs shall be separately identified in the indirect cost rate proposal,
and thereafter treated as other unallowable activity costs in accordance
with the procedures of subparagraph B.3 of Attachment A.
(2) Organizations shall submit, as part of the annual indirect cost rate proposal, a certification that the requirements and standards of this paragraph have been complied with.
(3) Organizations shall maintain adequate records to demonstrate that the determination of costs as being allowable or unallowable pursuant to paragraph 25 complies with the requirements of this Circular.
(4) Time logs, calendars, or similar records shall not be required to be created for purposes of complying with this paragraph during any particular calendar month when: (1) the employee engages in lobbying (as defined in subparagraphs (a) and (b)) 25 percent or less of the employee's compensated hours of employment during that calendar month, and (2) within the preceding five-year period, the organization has not materially misstated allowable or unallowable costs of any nature, including legislative lobbying costs. When conditions (1) and (2) are met, organizations are not required to establish records to support the allowabliliy of claimed costs in addition to records already required or maintained. Also, when conditions (1) and (2) are met, the absence of time logs, calendars, or similar records will not serve as a basis for disallowing costs by contesting estimates of lobbying time spent by employees during a calendar month.
(5) Agencies shall establish procedures for resolving in advance, in consultation with OMB, any significant questions or disagreements concerning the interpretation or application of paragraph 25. Any such advance resolution shall be binding in any subsequent settlements, audits or investigations with respect to that grant or contract for purposes of interpretation of this Circular; provided, however, that this shall not be construed to prevent a contractor or grantee from contesting the lawfulness of such a determination.
- Executive lobbying costs. Costs incurred in attempting to improperly influence either directly or indirectly, an employee or officer of the Executive Branch of the Federal Government to give consideration or to act regarding a sponsored agreement or a regulatory matter are unallowable. Improper influence means any influence that induces or tends to induce a Federal employee or officer to give consideration or to act regarding a federally sponsored agreement or regulatory matter on any basis other than the merits of the matter.
26. Losses on other sponsored agreements or contracts. Any excess of costs over income on any award is unallowable as a cost of any other award. This includes, but is not limited to, the organization's contributed portion by reason of cost sharing agreements or any under-recoveries through negotiation of lump sums for, or ceilings on, indirect costs.
27. Maintenance and repair costs. Costs incurred for necessary maintenance, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life shall be treated as capital expenditures (see paragraph 15).
incurred for materials, supplies, and fabricated parts necessary to
carry out a Federal award are allowable.
materials and supplies shall be charged at their actual prices, net
of applicable credits. Withdrawals from general stores or stockrooms
should be charged at their actual net cost under any recognized method
of pricing inventory withdrawals, consistently applied. Incoming transportation
charges are a proper part of materials and supplies costs.
materials and supplies actually used for the performance of a Federal
award may be charged as direct costs.
- Where federally donated or furnished materials are used in performing the Federal award, such materials will be used without charge.
29. Meetings and conferences. Costs of meetings and conferences, the primary purpose of which is the dissemination of technical information, are allowable. This includes costs of meals, transportation, rental of facilities, speakers' fees, and other items incidental to such meetings or conferences. But see Attachment B, paragraphs 14., Entertainment costs, and 33., Participant support costs.
of the non-profit organization’s membership in business, technical,
and professional organizations are allowable.
of the non-profit organization’s subscriptions to business, professional,
and technical periodicals are allowable.
of membership in any civic or community organization are allowable with
prior approval by Federal cognizant agency.
- Costs of membership in any country club or social or dining club or organization are unallowable.
31. Organization costs. Expenditures, such as incorporation fees, brokers' fees, fees to promoters, organizers or management consultants, attorneys, accountants, or investment counselors, whether or not employees of the organization, in connection with establishment or reorganization of an organization, are unallowable except with prior approval of the awarding agency.
- The research
papers report work supported by the Federal Government; and
- The charges are levied impartially on all research papers published by the journal, whether or not by federally sponsored authors.
33. Participant support costs. Participant support costs are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia, or training projects. These costs are allowable with the prior approval of the awarding agency.
- The following
costs relating to patent and copyright matters are allowable: (i) cost
of preparing disclosures, reports, and other documents required by the
Federal award and of searching the art to the extent necessary to make
such disclosures; (ii) cost of preparing documents and any other patent
costs in connection with the filing and prosecution of a United States
patent application where title or royalty-free license is required by
the Federal Government to be conveyed to the Federal Government; and
(iii) general counseling services relating to patent and copyright matters,
such as advice on patent and copyright laws, regulations, clauses, and
employee agreements (but see paragraphs 37., Professional services costs,
and 44., Royalties and other costs for use of patents and copyrights).
- The following
costs related to patent and copyright matter are unallowable:
(1) Cost of preparing disclosures, reports, and other documents and of searching the art to the extent necessary to make disclosures not required by the award
(2) Costs in connection with filing and prosecuting any foreign patent application, or any United States patent application, where the Federal award does not require conveying title or a royalty-free license to the Federal Government (but see paragraph 45., Royalties and other costs for use of patents and copyrights).
35. Plant and homeland security costs. Necessary and reasonable expenses incurred for routine and homeland security to protect facilities, personnel, and work products are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security activities; equipment; barriers; contractual security services; consultants; etc. Capital expenditures for homeland and plant security purposes are subject to paragraph 15., Equipment and other capital expenditures, of this Circular.
36. Pre-agreement costs. Pre-award costs are those incurred prior to the effective date of the award directly pursuant to the negotiation and in anticipation of the award where such costs are necessary to comply with the proposed delivery schedule or period of performance. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award and only with the written approval of the awarding agency.
of professional and consultant services rendered by persons who are
members of a particular profession or possess a special skill, and who
are not officers or employees of the non-profit organization, are allowable,
subject to subparagraphs b and c when reasonable in relation to the
services rendered and when not contingent upon recovery of the costs
from the Federal Government.
In addition, legal and related services are limited under Attachment B, paragraph 10.
- In determining
the allowability of costs in a particular case, no single factor or
any special combination of factors is necessarily determinative. However,
the following factors are relevant:
(1) The nature and scope of the service rendered in relation to the service required.
(2) The necessity of contracting for the service, considering the non-profit organization's capability in the particular area.
(3) The past pattern of such costs, particularly in the years prior to Federal awards.
(4) The impact of Federal awards on the non-profit organization's business (i.e., what new problems have arisen).
(5) Whether the proportion of Federal work to the non-profit organization's total business is such as to influence the non-profit organization in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal grants and contracts.
(6) Whether the service can be performed more economically by direct employment rather than contracting.
(7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-Federal awards.
(8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions).
- In addition to the factors in subparagraph b, retainer fees to be allowable must be supported by evidence of bona fide services available or rendered
costs include the costs of printing (including the processes of composition,
plate-making, press work, binding, and the end products produced by
such processes), distribution, promotion, mailing, and general handling.
Publication costs also include page charges in professional publications.
- If these
costs are not identifiable with a particular cost objective, they should
be allocated as indirect costs to all benefiting activities of the non-profit
charges for professional journal publications are allowable as a necessary
part of research costs where:
(1) The research papers report work supported by the Federal Government: and
(2) The charges are levied impartially on all research papers published by the journal, whether or not by federally sponsored authors.
39. Rearrangement and alteration costs. Costs incurred for ordinary or normal rearrangement and alteration of facilities are allowable. Special arrangement and alteration costs incurred specifically for the project are allowable with the prior approval of the awarding agency.
40. Reconversion costs. Costs incurred in the restoration or rehabilitation of the non-profit organization's facilities to approximately the same condition existing immediately prior to commencement of Federal awards, less costs related to normal wear and tear, are allowable.
to subparagraphs b, c, and d, and provided that the size of the staff
recruited and maintained is in keeping with workload requirements, costs
of "help wanted" advertising, operating costs of an employment
office necessary to secure and maintain an adequate staff, costs of
operating an aptitude and educational testing program, travel costs
of employees while engaged in recruiting personnel, travel costs of
applicants for interviews for prospective employment, and relocation
costs incurred incident to recruitment of new employees, are allowable
to the extent that such costs are incurred pursuant to a well-managed
recruitment program. Where the organization uses employment agencies,
costs that are not in excess of standard commercial rates for such services
- In publications,
costs of help wanted advertising that includes color, includes advertising
material for other than recruitment purposes, or is excessive in size
(taking into consideration recruitment purposes for which intended and
normal organizational practices in this respect), are unallowable.
of help wanted advertising, special emoluments, fringe benefits, and
salary allowances incurred to attract professional personnel from other
organizations that do not meet the test of reasonableness or do not
conform with the established practices of the organization, are unallowable.
- Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct or indirect cost, and the newly hired employee resigns for reasons within his control within twelve months after being hired, the organization will be required to refund or credit such relocation costs to the Federal Government.
costs are costs incident to the permanent change of duty assignment
(for an indefinite period or for a stated period of not less than 12
months) of an existing employee or upon recruitment of a new employee.
Relocation costs are allowable, subject to the limitation described
in subparagraphs b, c, and d, provided that:
(1) The move is for the benefit of the employer.
(2) Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer.
(3) The reimbursement does not exceed the employee's actual (or reasonably estimated) expenses.
relocation costs for current employees are limited to the following:
(1) The costs of transportation of the employee, members of his immediate family and his household, and personal effects to the new location.
(2) The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging during the transition period, up to maximum period of 30 days, including advance trip time.
(3) Closing costs, such as brokerage, legal, and appraisal fees, incident to the disposition of the employee's former home. These costs, together with those described in (4), are limited to 8 percent of the sales price of the employee's former home.
(4) The continuing costs of ownership of the vacant former home after the settlement or lease date of the employee's new permanent home, such as maintenance of buildings and grounds (exclusive of fixing up expenses), utilities, taxes, and property insurance.
(5) Other necessary and reasonable expenses normally incident to relocation, such as the costs of canceling an unexpired lease, disconnecting and reinstalling household appliances, and purchasing insurance against loss of or damages to personal property. The cost of canceling an unexpired lease is limited to three times the monthly rental.
relocation costs for new employees are limited to those described in
(1) and (2) of subparagraph b. When relocation costs incurred incident
to the recruitment of new employees have been allowed either as a direct
or indirect cost and the employee resigns for reasons within his control
within 12 months after hire, the organization shall refund or credit
the Federal Government for its share of the cost. However, the costs
of travel to an overseas location shall be considered travel costs in
accordance with paragraph 50 and not relocation costs for the purpose
of this paragraph if dependents are not permitted at the location for
any reason and the costs do not include costs of transporting household
- The following
costs related to relocation are unallowable:
(1) Fees and other costs associated with acquiring a new home.
(2) A loss on the sale of a former home.
(3) Continuing mortgage principal and interest payments on a home being sold.
(4) Income taxes paid by an employee related to reimbursed relocation costs.
to the limitations described in subparagraphs b. through d. of this
paragraph 43, rental costs are allowable to the extent that the rates
are reasonable in light of such factors as: rental costs of comparable
property, if any; market conditions in the area; alternatives available;
and, the type, life expectancy, condition, and value of the property
leased. Rental arrangements should be reviewed periodically to determine
if circumstances have changed and other options are available.
costs under “sale and lease back” arrangements are allowable
only up to the amount that would be allowed had the non-profit organization
continued to own the property. This amount would include expenses such
as depreciation or use allowance, maintenance, taxes, and insurance.
costs under "less-than-arms-length" leases are allowable only
up to the amount (as explained in subparagraph b. of this paragraph
43.) that would be allowed had title to the property vested in the non-profit
organization. For this purpose, a less-than-arms-length lease is one
under which one party to the lease agreement is able to control or substantially
influence the actions of the other. Such leases include, but are not
limited to those between (i) divisions of a non-profit organization;
(ii) non-profit organizations under common control through common officers,
directors, or members; and (iii) a non-profit organization and a director,
trustee, officer, or key employee of the non-profit organization or
his immediate family, either directly or through corporations, trusts,
or similar arrangements in which they hold a controlling interest. For
example, a non-profit organization may establish a separate corporation
for the sole purpose of owning property and leasing it back to the non-profit
- Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as explained in subparagraph b) that would be allowed had the non-profit organization purchased the property on the date the lease agreement was executed. The provisions of Financial Accounting Standards Board Statement 13, Accounting for Leases, shall be used to determine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria in subparagraph 23. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the non-profit organization purchased the facility.
on a patent or copyright or amortization of the cost of acquiring by
purchase a copyright, patent, or rights thereto, necessary for the proper
performance of the award are allowable unless:
(1) The Federal Government has a license or the right to free use of the patent or copyright.
(2) The patent or copyright has been adjudicated to be invalid, or has been administratively determined to be invalid.
(3) The patent or copyright is considered to be unenforceable.
(4) The patent or copyright is expired.
care should be exercised in determining reasonableness where the royalties
may have arrived at as a result of less-than-arm's-length bargaining,
(1) Royalties paid to persons, including corporations, affiliated with the non-profit organization.
(2) Royalties paid to unaffiliated parties, including corporations, under an agreement entered into in contemplation that a Federal award would be made.
(3) Royalties paid under an agreement entered into after an award is made to a non-profit organization.
- In any case involving a patent or copyright formerly owned by the non-profit organization, the amount of royalty allowed should not exceed the cost which would have been allowed had the non-profit organization retained title thereto.
45. Selling and marketing. Costs of selling and marketing any products or services of the non-profit organization are unallowable (unless allowed under Attachment B, paragraph 1. as allowable public relations cost. However, these costs are allowable as direct costs, with prior approval by awarding agencies, when they are necessary for the performance of Federal programs.
- The costs
of services provided by highly complex or specialized facilities operated
by the non-profit organization, such as computers, wind tunnels, and
reactors are allowable, provided the charges for the services meet the
conditions of either 46 b. or c. and, in addition, take into account
any items of income or Federal financing that qualify as applicable
credits under Attachment A, subparagraph A.5. of this Circular.
- The costs
of such services, when material, must be charged directly to applicable
awards based on actual usage of the services on the basis of a schedule
of rates or established methodology that (i) does not discriminate against
federally supported activities of the non-profit organization, including
usage by the non-profit organization for internal purposes, and (ii)
is designed to recover only the aggregate costs of the services. The
costs of each service shall consist normally of both its direct costs
and its allocable share of all indirect costs. Rates shall be adjusted
at least biennially, and shall take into consideration over/under applied
costs of the previous period(s).
the costs incurred for a service are not material, they may be allocated
as indirect costs.
- Under some extraordinary circumstances, where it is in the best interest of the Federal Government and the institution to establish alternative costing arrangements, such arrangements may be worked out with the cognizant Federal agency.
- In general,
taxes which the organization is required to pay and which are paid or
accrued in accordance with GAAP, and payments made to local governments
in lieu of taxes which are commensurate with the local government services
received are allowable, except for (i) taxes from which exemptions are
available to the organization directly or which are available to the
organization based on an exemption afforded the Federal Government and
in the latter case when the awarding agency makes available the necessary
exemption certificates, (ii) special assessments on land which represent
capital improvements, and (iii) Federal income taxes.
- Any refund of taxes, and any payment to the organization of interest thereon, which were allowed as award costs, will be credited either as a cost reduction or cash refund, as appropriate, to the Federal Government.
48. Termination costs applicable to sponsored agreements.
Termination of awards generally gives rise to the incurrence of costs, or the need for special treatment of costs, which would not have arisen had the Federal award not been terminated. Cost principles covering these items are set forth below. They are to be used in conjunction with the other provisions of this Circular in termination situations.
- The cost
of items reasonably usable on the non-profit organization's other work
shall not be allowable unless the non-profit organization submits evidence
that it would not retain such items at cost without sustaining a loss.
In deciding whether such items are reasonably usable on other work of
the non-profit organization, the awarding agency should consider the
non-profit organization's plans and orders for current and scheduled
Contemporaneous purchases of common items by the non-profit organization shall be regarded as evidence that such items are reasonably usable on the non-profit organization's other work. Any acceptance of common items as allocable to the terminated portion of the Federal award shall be limited to the extent that the quantities of such items on hand, in transit, and on order are in excess of the reasonable quantitative requirements of other work.
- If in
a particular case, despite all reasonable efforts by the non-profit
organization, certain costs cannot be discontinued immediately after
the effective date of termination, such costs are generally allowable
within the limitations set forth in this Circular, except that any such
costs continuing after termination due to the negligent or willful failure
of the non-profit organization to discontinue such costs shall be unallowable.
of useful value of special tooling, machinery, and is generally allowable
(1) Such special tooling, special machinery, or equipment is not reasonably capable of use in the other work of the non-profit organization,
(2) The interest of the Federal Government is protected by transfer of title or by other means deemed appropriate by the awarding agency, and
(3) The loss of useful value for any one terminated Federal award is limited to that portion of the acquisition cost which bears the same ratio to the total acquisition cost as the terminated portion of the Federal award bears to the entire terminated Federal award and other Federal awards for which the special tooling, special machinery, or equipment was acquired.
costs under unexpired leases are generally allowable where clearly shown
to have been reasonably necessary for the performance of the terminated
Federal award less the residual value of such leases, if:
(1) the amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the Federal award and such further period as may be reasonable, and
(2) the non-profit organization makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease. There also may be included the cost of alterations of such leased property, provided such alterations were necessary for the performance of the Federal award, and of reasonable restoration required by the provisions of the lease.
expenses including the following are generally allowable:
(1) Accounting, legal, clerical, and similar costs reasonably necessary for:
(a) The preparation and presentation to the awarding agency of settlement claims and supporting data with respect to the terminated portion of the Federal award, unless the termination is for default (see Subpart __.61 of Circular A-110); and(2) Reasonable costs for the storage, transportation, protection, and disposition of property provided by the Federal Government or acquired or produced for the Federal award, except when grantees or contractors are reimbursed for disposals at a predetermined amount in accordance with Subparts __.32 through ___.37 of Circular A-110.
(b) The termination and settlement of subawards.
(3) Indirect costs related to salaries and wages incurred as settlement expenses in subparagraphs (1) and (2). Normally, such indirect costs shall be limited to fringe benefits, occupancy cost, and immediate supervision.
under sub awards, including the allocable portion of claims which are
common to the Federal award, and to other work of the non-profit organization
are generally allowable.
An appropriate share of the non-profit organization's indirect expense may be allocated to the amount of settlements with subcontractors and/or subgrantees, provided that the amount allocated is otherwise consistent with the basic guidelines contained in Attachment A. The indirect expense so allocated shall exclude the same and similar costs claimed directly or indirectly as settlement expenses.
of preparation and maintenance of a program of instruction including
but not limited to on-the-job, classroom, and apprenticeship training,
designed to increase the vocational effectiveness of employees, including
training materials, textbooks, salaries or wages of trainees (excluding
overtime compensation which might arise therefrom), and (i) salaries
of the director of training and staff when the training program is conducted
by the organization; or (ii) tuition and fees when the training is in
an institution not operated by the organization, are allowable.
of part-time education, at an undergraduate or post-graduate college
level, including that provided at the organization's own facilities,
are allowable only when the course or degree pursued is relative to
the field in which the employee is now working or may reasonably be
expected to work, and are limited to:
(1) Training materials.
(3) Fees charges by the educational institution.
(4) Tuition charged by the educational institution or, in lieu of tuition, instructors' salaries and the related share of indirect costs of the educational institution to the extent that the sum thereof is not in excess of the tuition which would have been paid to the participating educational institution.
(5) Salaries and related costs of instructors who are employees of the organization.
(6) Straight-time compensation of each employee for time spent attending classes during working hours not in excess of 156 hours per year and only to the extent that circumstances do not permit the operation of classes or attendance at classes after regular working hours; otherwise, such compensation is unallowable.
of tuition, fees, training materials, and textbooks (but not subsistence,
salary, or any other emoluments) in connection with full-time education,
including that provided at the organization's own facilities, at a post-graduate
(but not undergraduate) college level, are allowable only when the course
or degree pursued is related to the field in which the employee is now
working or may reasonably be expected to work, and only where the costs
receive the prior approval of the awarding agency. Such costs are limited
to the costs attributable to a total period not to exceed one school
year for each employee so trained. In unusual cases the period may be
of attendance of up to 16 weeks per employee per year at specialized
programs specifically designed to enhance the effectiveness of executives
or managers or to prepare employees for such positions are allowable.
Such costs include enrollment fees, training materials, textbooks and
related charges, employees' salaries, subsistence, and travel. Costs
allowable under this paragraph do not include those for courses that
are part of a degree-oriented curriculum, which are allowable only to
the extent set forth in subparagraphs b and c.
expense, and normal depreciation or fair rental, on facilities owned
or leased by the organization for training purposes are allowable to
the extent set forth in paragraphs 11, 27, and 50.
or donations to educational or training institutions, including the
donation of facilities or other properties, and scholarships or fellowships,
- Training and education costs in excess of those otherwise allowable under subparagraphs b and c may be allowed with prior approval of the awarding agency. To be considered for approval, the organization must demonstrate that such costs are consistently incurred pursuant to an established training and education program, and that the course or degree pursued is relative to the field in which the employee is now working or may reasonably be expected to work.
50. Transportation costs. Transportation costs include freight, express, cartage, and postage charges relating either to goods purchased, in process, or delivered. These costs are allowable. When such costs can readily be identified with the items involved, they may be directly charged as transportation costs or added to the cost of such items (see paragraph 28). Where identification with the materials received cannot readily be made, transportation costs may be charged to the appropriate indirect cost accounts if the organization follows a consistent, equitable procedure in this respect.
Travel costs are the expenses for transportation, lodging, subsistence,
and related items incurred by employees who are in travel status on
official business of the non-profit organization. Such costs may be
charged on an actual cost basis, on a per diem or mileage basis in lieu
of actual costs incurred, or on a combination of the two, provided the
method used is applied to an entire trip and not to selected days of
the trip, and results in charges consistent with those normally allowed
in like circumstances in the non-profit organization’s non-federally
and subsistence. Costs incurred by employees and officers for travel,
including costs of lodging, other subsistence, and incidental expenses,
shall be considered reasonable and allowable only to the extent such
costs do not exceed charges normally allowed by the non-profit organization
in its regular operations as the result of the non-profit organization’s
written travel policy. In the absence of an acceptable, written non-profit
organization policy regarding travel costs, the rates and amounts established
under subchapter I of Chapter 57, Title 5, United States Code (“Travel
and Subsistence Expenses; Mileage Allowances”), or by the Administrator
of General Services, or by the President (or his or her designee) pursuant
to any provisions of such subchapter shall apply to travel under Federal
awards (48 CFR 31.205-46(a)).
(1) Airfare costs in excess of the customary standard commercial airfare (coach or equivalent), Federal Government contract airfare (where authorized and available), or the lowest commercial discount airfare are unallowable except when such accommodations would: (a) require circuitous routing; (b) require travel during unreasonable hours; (c) excessively prolong travel; (d) result in additional costs that would offset the transportation savings; or (e) offer accommodations not reasonably adequate for the traveler’s medical needs. The non-profit organization must justify and document these conditions on a case-by-case basis in order for the use of first-class airfare to be allowable in such cases.
(2) Unless a pattern of avoidance is detected, the Federal Government will generally not question a non-profit organization's determinations that customary standard airfare or other discount airfare is unavailable for specific trips if the non-profit organization can demonstrate either of the following: (a) that such airfare was not available in the specific case; or (b) that it is the non-profit organization’s overall practice to make routine use of such airfare.
- Air travel
by other than commercial carrier. Costs of travel by non-profit organization-owned,
-leased, or -chartered aircraft include the cost of lease, charter,
operation (including personnel costs), maintenance, depreciation, insurance,
and other related costs. The portion of such costs that exceeds the
cost of allowable commercial air travel, as provided for in subparagraph]
c., is unallowable.
- Foreign travel. Direct charges for foreign travel costs are allowable only when the travel has received prior approval of the awarding agency. Each separate foreign trip must receive such approval. For purposes of this provision, “foreign travel” includes any travel outside Canada, Mexico, the United States, and any United States territories and possessions. However, the term “foreign travel” for a non-profit organization located in a foreign country means travel outside that country.
52. Trustees. Travel and subsistence costs of trustees (or directors) are allowable. The costs are subject to restrictions regarding lodging, subsistence and air travel costs provided in paragraph 51.
NON-PROFIT ORGANIZATIONS NOT SUBJECT TO THIS CIRCULAR
- Advance Technology Institute (ATI), Charleston, South Carolina
- Aerospace Corporation, El Segundo, California
- American Institutes of Research (AIR), Washington D.C.
- Argonne National Laboratory, Chicago, Illinois
- Atomic Casualty Commission, Washington, D.C.
- Battelle Memorial Institute, Headquartered in Columbus, Ohio
- Brookhaven National Laboratory, Upton, New York
- Charles Stark Draper Laboratory, Incorporated, Cambridge, Massachusetts
- CNA Corporation (CNAC), Alexandria, Virginia
- Environmental Institute of Michigan, Ann Arbor, Michigan
- Georgia Institute of Technology/Georgia Tech Applied Research Corporation/Georgia Tech Research Institute, Atlanta, Georgia
- Hanford Environmental Health Foundation, Richland, Washington
- IIT Research Institute, Chicago, Illinois
- Institute of Gas Technology, Chicago, Illinois
- Institute for Defense Analysis, Alexandria, Virginia
- LMI, McLean, Virginia
- Mitre Corporation, Bedford, Massachusetts
- Mitretek Systems, Inc., Falls Church, Virginia
- National Radiological Astronomy Observatory, Green Bank, West Virginia
- National Renewable Energy Laboratory, Golden, Colorado
- Oak Ridge Associated Universities, Oak Ridge, Tennessee
- Rand Corporation, Santa Monica, California
- Research Triangle Institute, Research Triangle Park, North Carolina
- Riverside Research Institute, New York, New York
- South Carolina Research Authority (SCRA), Charleston, South Carolina
- Southern Research Institute, Birmingham, Alabama
- Southwest Research Institute, San Antonio, Texas
- SRI International, Menlo Park, California
- Syracuse Research Corporation, Syracuse, New York
- Universities Research Association, Incorporated (National Acceleration Lab), Argonne, Illinois
- Urban Institute, Washington D.C.
- Non-profit insurance companies, such as Blue Cross and Blue Shield Organizations
- Other non-profit organizations as negotiated with awarding agencies