The Office of Management & Budget (OMB) has published a revision to Circular A-21, Cost Principles for Educational Institutions which makes additional costs unallowable as either direct or indirect charges to grants and contracts.

The University of Missouri developed a procedure to segregate these costs so they can be excluded from the indirect cost pool by assigning special expenditure accounts to be used on all such expenditures.

Some of these costs are not an issue because they are already prohibited by University policy which must always be the first criteria. If University policy permits an expenditure for an item shown as unallowable on the following list, use the special expenditure account in the major category where it would normally fall. For example; a reception for new faculty would use expenditure account 734100 Supplies A-21 Exclusions. A complete list of the new "exclusion" expenditure accounts is included in the expenditure accounts section. These expenditure accounts are to be used on ALL DeptIDs except grants and contracts.

Direct costs charged to grant or contract accounts may not include any of the items listed below as unallowable.

Indirect costs must be given special attention because all General Operating accounts affect the indirect cost rate. In addition, service operations and other ledger 3 accounts sell goods/services to University accounts (including general operating and grants). Therefore, it is important to use the "exclusion" expenditure accounts for any costs listed below as unallowable to keep these costs out of the indirect cost calculation.

The following is a list of the costs specifically mentioned in A-21 as unallowable.

Advertising and Public Relations

Allowable: Personnel recruitment, procurement of goods and services, disposal of scrap or surplus material, communicating with the public and press about activities or accomplishments resulting from sponsored agreements.

Unallowable: Special events, conventions, trade shows, displays, demonstrations, exhibits, meeting rooms, hospitality suites, other special facilities in conjunction with shows and special events, salaries of employees to set up displays and exhibits, promotional items, memorabilia, gifts, souvenirs, advertising and public relations designed solely to promote the institution, and all other advertising and public relations costs except those specified above.

Alcoholic Beverage

Allowable: None

Unallowable: All costs of alcoholic beverages.

Alumni and Development Activities

Allowable: None

Unallowable: All costs incurred for or in support of alumni and development activities.

Bad Debts

Allowable: None

Unallowable: All losses from uncollectible accounts, including related legal and collection costs.

Civil Defense Costs

Allowable: Reasonable costs of civil defense measures on University premises as required by civil defense authorities.

Unallowable: Costs of local civil defense projects not on University premises; capital expenditures for civil defense purposes.

Commencement and Convocation

Allowable: None

Unallowable: All costs of commencement including convocations held by individual schools and colleges and receptions held in conjunction with these events.

Compensation for Personal Services

Unallowable: That portion of salaries in excess of $120,000 per annum and associated fringe benefits are unallowable as direct or indirect costs.

NOTE: These costs are captured in the Payroll system so special expenditure accounts are not necessary.

Institution-Furnished Automobiles

Unallowable: That portion of the cost of institution-furnished automobiles that relate to personal use by employees (including transportation to and from work).

Donations or Contributions

Unallowable: Donations or contributions, regardless of the recipient.

Employee Morale, Health and Welfare

Allowable: The costs of house publications, health or first-aid clinics and/or infirmaries, recreational activities, food services, employees' counseling services and other expenses incurred in accordance with the institution's established practice or custom for improvement of working conditions, employer-employee relations, employee morale and employee performance are allowable. Income generated from any of these activities will be credited to the cost thereof.

Unallowable: Costs of flowers for employees, their families; Secretaries Week lunches, receptions, etc.; Christmas or other holiday parties/ receptions; picnics, receptions for new or promoted faculty.

Entertainment

Unallowable: Cost of entertainment, amusement, diversion and social activities including tickets to shows or sports events, meals, lodging, rentals, transportation and gratuities. Examples: football, basketball, theater, concert, etc. tickets for Advisory Councils, Boards, and other guests.

Fines and Penalties

Unallowable: Costs resulting from violations of, or failure of the University to comply with Federal, State, local or foreign laws and regulations, except when incurred as a result of compliance with specific provisions of the sponsored agreement or written instructions from the sponsoring agency.

Goods or Services for Personal Use

Unallowable: Goods or services for personal use of employees, e.g. flowers.

Housing and Personal Living Expense

Unallowable: Cost of housing (depreciation, maintenance, utilities, furnishings, rent, etc.) Housing allowances and personal living expenses of the institution's officers.

Memberships, Subscriptions and Professional Activity Costs

Allowable: Cost of the institution's membership in business, technical, and professional organizations; subscriptions to business, professional and technical periodicals; meetings and conferences when the primary purpose is the dissemination of technical information.

Unallowable: Cost of membership in any civic, community organization, country club, social or dining club. Examples: Chamber of Commerce, Women's Network, country clubs.

Preagreement Costs

Unallowable: Costs incurred prior to the effective date of the sponsored agreement, unless approved by the sponsoring agency.

Professional Services

Allowable: Costs of professional and consulting services, including legal services, rendered by members of a particular profession who are not employees of the institution, when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. Retainer fees must be supported by evidence of services rendered to be allowable.

Unallowable: Cost of professional and consulting services for fund raising and alumni relations/ activities.

Recruiting

Allowable: "Help wanted" ads, operating costs of an employment office, aptitude and educational testing program, travel costs of employees engaged in recruiting personnel, travel costs of applicants for interviews (transportation, meals and lodging of the candidate only), relocation costs, and employment agencies paid at standard commercial rates.

Unallowable: Candidate spouse expenses, group meals, receptions, etc. for recruiting purposes; advertising that includes color or material for other than recruitment purposes, or is excessive in size; special emoluments, fringe benefits and salary allowances that do not meet the test of reasonableness or do not conform to the established practices of the institution. All expenses for recruitment of students.

Royalties

Allowable: Unless the Government has a license or the right to free use of the patent, the patent is invalid, unenforceable or expired.

Sabbatical Leave

Allowable: Provided the institution has a uniform policy on sabbatical leave.

Scholarships and Student Aid

Allowable: Only when the purpose of the sponsored agreement is to provide training to selected participants and the charge is approved by the sponsoring agency. Tuition remission paid as, or in lieu of, wages to students performing necessary work provided (1) there is a bonafide employer- employee relationship between the student and the institution for the work performed, (2) the tuition or other payments are reasonable compensation for work performed and are conditioned explicitly upon the performance of necessary work, (3) it is the institution's practice to similarly compensate students in non-sponsored as well as sponsored activities.

Selling and Marketing

Unallowable: Costs of selling and marketing any products or services of the institution. Example: advertising by service operations and auxiliary enterprises, promotional items.

Severance Pay

Allowable: To the extent that such payments are required by law, by employer-employee agreement, by established policy that constitutes in effect an implied agreement or by circumstances of the particular employment.

Unallowable: Any costs in excess of the institution's normal severance pay policy applicable to all persons employed by the institution. Examples: Early retirement incentives, tenure buyouts.

Student Activities

Unallowable: Intramurals, student publications, clubs unless specifically provided for in the sponsored agreement. 

Taxes

Allowable: Taxes the institution is required to pay, payments to local governments in lieu of taxes which are commensurate with the local government services received.

Unallowable: Taxes from which exemptions are available to the institution and special assessments on land which represent capital improvements.

Travel

Allowable: Transportation, lodging, subsistence, and related items incurred by employees in travel status on official business of the institution. Lodging and subsistence costs must not exceed charges normally allowed by the institution in its regular operations. Commercial air travel must be at the lowest available commercial discount fare.

Unallowable: Costs of travel via institution-owned, -leased or -chartered aircraft in excess of the cost of allowable commercial air travel.

Trustees

Unallowable: Travel and subsistence costs of trustees (curators), regardless of the purpose of the trip are unallowable.