This section is designed to help you systematically consider the kinds of items of cost you may need in developing the budget—the financial expression of a sponsored project′s statement of work, project description or work plan. It also introduces the cost principles that most sponsors expect will be followed.
These guiding principles require that you consider:
- Whether the sponsor prohibits paying for particular types of items (e.g. your time, tuition, etc)
- Why the personnel and non-personnel resources are essential to conduct your project
- Is the sponsor paying its fair share of the costs
- How accurate are the cost estimates for these items.
The primary considerations associated with the cost principles are:
Allowable: Does the solicitation, sponsor’s policies, or overarching regulations restrict or disallow an item of cost?
Allocable: Is the item charged in proportion to the anticipated benefit to be received?
Reasonable: Is the cost budgeted an amount that a prudent person would pay in similar circumstances?
Consistency: Is the cost consistently treated treated as a direct or indirect cost in like circumstances?
- Ordinarily administrative costs, both personnel and non-personnel items, are not allowed as direct costs to sponsored projects. This prohibition results from the impracticality of allocating these costs directly to a project, as they routinely benefit many institutional activities and programs, e.g., the range of teaching, research and service activities supported in a department or center. On occasion, however, there there are exceptions to this particular guideline, which will be discussed further.