Unallowables

What Costs Are Specifically Unallowable?

Costs reimbursed by the federal government are specifically unallowable under two general conditions:

  • The activity is unallowable – the function is prohibited for reimbursement by federal regulation, or
  • The transaction is unallowable – the expenditure itself is for an item that is prohibited even if it is otherwise allowable with Institute funds

Unallowable activities include:

  • Alumni functions
  • Organized fund raising
  • Lobbying
  • Commencement and convocation
  • General public relations and alumni functions
  • Student functions, including intramural events and student clubs
  • Managing investments solely to enhance income
  • Prosecuting claims against the federal government
  • Defending or prosecuting certain criminal, civil, or administrative proceedings
  • Housing and personal living expenses of Institute officers
  • Selling or marketing of goods and services (does not include selling goods or services internal to the Institute by its service centers)

Although these Institute activities may be appropriate, permissible, and necessary except as specifically approved, these costs are not permissible on sponsored awards, the federal government will not reimburse the Institute for the costs of these activities.

Unallowable transactions:

In addition to the unallowable activities, certain costs are always unallowable, regardless of the activity they support. These expressly unallowable costs are defined in OMB A-21. The federal government will not allow for the reimbursement of the following expenses:

  • Advertising (only certain types are allowable)
  • Alcoholic beverages
  • Entertainment
  • Fundraising or lobbying costs
  • Fines and penalties resulting from violation of government laws and regulations
  • Memorabilia or promotional materials
  • Relocation costs if employee resigns within 12 months
  • Certain recruitment costs, such as color advertising
  • Certain travel costs, such as first-class travel
  • Cash donations to other parties, including universities
  • Interest payments, except certain interest specifically coded as paid to outside parties and authorized by the Office of the Vice President for Finance
  • Membership in civic, community, or social organizations or in dining or country clubs are seldom reimbursable by MIT
  • Goods or services for the personal use of employees, including automobiles
  • Insurance against defects in MIT’s materials or workmanship

NOTE: The costs listed above that are unallowable for federal reimbursement purposes may be allowable as a direct cost on a non-federal project with the explicit written approval of the sponsor.

Award Restrictions: Unallowables in the Terms and Conditions of a Sponsored Project

Unallowable costs also may be identified in the specific terms and conditions of a sponsored project. These may be more specific than those outlined in OMB A-21.

Restrictive or permissive conditions in the actual award document take precedence over general OMB A-21 allowables or unallowables. For example:

  • If a sponsor specifies that international travel costs cannot be charged to a particular project, then those costs may not be charged to that project, even though MIT and federal regulations may allow them.
  • If a research project requires the purchase of an otherwise “unallowable,”

the purchase may be an allowable cost; for example, a behavioral study of memory and alcohol requires the purchase of alcohol to conduct the study.

Key Reference: http://vpf.mit.edu/sponsored_projects_accounting/policies_procedures/unallowables