Appendix B: Examples of Unallowable Costs in OMB A-21, Section J

The following costs are generally unallowable on federal awards, except as noted. OMB A-21, Section J should be consulted for more detailed explanations and guidelines; the corresponding paragraph where more information can be found is provided in parentheses before each item.

  1. (J-1) Advertising and Public Relations Costs. The only allowable advertising costs that may be charged by academic and research units are those which are solely for: (1) the recruitment of personnel required for the performance by the University of obligations arising under the sponsored agreement; (2) the procurement of goods and services for the performance of the sponsored agreement; (3) the disposal of scrap or surplus materials acquired in the performance of the sponsored agreement; or (4) other specific purposes necessary to meet the requirements of the sponsored agreement. The only allowable public relations costs are those (1) specifically required by a sponsored agreement; (2) costs of communicating with the public and press about specific activities or accomplishments under sponsored agreements (which are necessary as part of the outreach effort for the sponsored agreement); and (3) costs of general liaison with news media and government public relations officers.
  2. (J-3) Alcoholic Beverages. Costs of alcoholic beverages are unallowable.
  3. (J-4) Alumni Activities. Costs incurred for, or in support of, alumni activities and similar services are unallowable.
  4. (J-6) Bad Debt. Bad debt, including losses (whether actual or estimated) arising from uncollectible accounts and other claims, related collections costs, and related legal costs are unallowable.
  5. (J-8) Commencement and Convocation. Costs incurred for commencements and convocations are unallowable.
  6. (J-10g) Institution-furnished Automobiles. Costs related to the personal use (including transportation to and from work) of institution-furnished automobiles is unallowable.
  7. (J-11) Contingency Provisions. Contributions to a reserve or any similar provision made for events that cannot be foretold with certainty as to time, intensity, or with an assurance of happening, are unallowable.
  8. (J-15) Donations and Contributions. The value of services and property donated to the University are not allowable for reimbursement either as a direct or F&A cost. However, the donation or contribution may be used to meet cost-sharing requirements. Donations or contributions made by the University, regardless of the recipient, are unallowable.
  9. (J-17) Entertainment. Costs of entertainment-including amusement, diversion, 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.
  10. (J-19) Fines and Penalties. Costs resulting from violations of, or failure to comply with, federal, state, and local or foreign laws and regulations are unallowable.
  11. (J-20) Fund Raising and Investment. Costs 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. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments are also unallowable.
  12. (J-22) Goods or Services for Personal Use. Costs of goods or services for personal use of the institution's employees are unallowable regardless of whether the cost is reported as taxable income to the employee.
  13. (J-23) Housing and Personal Living Expenses of University Officers. Costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent, etc.), housing allowances, and personal living expenses for/of University officers are unallowable.
  14. (J-24) Idle Facilities and Idle Capacity. The costs of idle facilities are unallowable except to the extent that (1) they are necessary to meet fluctuations in workload, or (2) 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 these exceptions, the cost of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year.
  15. (J-25d) Insurance and Indemnification-Losses. Actual losses that could have been covered by permissible insurance (or self-insurance) are unallowable. However, losses not covered under existing deductible clauses for insurance coverage provided in keeping with sound management practice as well as minor losses not covered by insurance (such as spoilage, breakage, and disappearance of small hand tools, which occur in the ordinary course of operations) are allowable.
  16. (J-26) Interest. Interest costs are generally unallowable, except for certain interest expenses paid to an external party to acquire equipment costing $10,000 or more, or to construct, acquire, or renovate buildings, where such assets are used in support of sponsored agreements.
  17. (J-28) Lobbying. Costs associated with lobbying activities are generally unallowable. 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.
  18. (J-29) Losses on Other Sponsored Agreements or Contracts. Any excess of costs over income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to, the institution's contributed portion by reason of cost-sharing agreements or any under recoveries through negotiation of flat amounts for F&A costs.
  19. (J-33) Memberships, Subscription and Professional Activity. Costs of membership in any civic or community organization as well as costs of membership in any country club or social or dining club or organization are unallowable.
  20. (J-36) Pre-agreement. Costs incurred prior to the effective date of the sponsored agreement, whether or not they would have been allowable if incurred after such date, are unallowable unless approved by the sponsoring agency.
  21. (J-46) Selling and Marketing. Costs of selling and marketing any products or services of the University are unallowable.
  22. (J-48) Student Activity. Costs incurred for intramural activities, student publications, student clubs, and other student activities are unallowable.
  23. (J-53) Travel. Airfare costs in excess of the lowest available commercial discount airfare, federal government contract airfare (where authorized and available), or customary standard (coach or equivalent) airfare, are unallowable except when such accommodations would: (1) require circuitous routing; (2) require travel during unreasonable hours; (3) excessively prolong travel; (4) greatly increase the duration of the flight; (5) result in increased costs that would offset transportation savings; or (6) offer accommodations not reasonably adequate for the medical needs of the traveler.
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