Unallowable costs are not eligible for reimbursement from the federal government for two reasons. Either the activity or function is prohibited from reimbursement by federal regulations, or the transaction/item being purchased is prohibited.
Refer to Financial Services Manual 9.10 Unallowable Expenditure Table for costs not allowed on any University fund, including sponsored projects.
Also refer to Financial Services Manual 9.10 Allowable Expenditures by Fund Source
Examples of unallowable transactions on sponsored awards include:
- Personal expenses
- Alcoholic beverages
- Entertainment
- Lobbying or fundraising
- Fines and penalties resulting from violating government laws and regulations
- Relocation costs if employee resigns within 12 months
- Certain travel costs such as first class airfare
- Cash donations to other organizations including universities
- Goods or services for employee personal use
- Internal costs not based on actual costs or through an approved rate study, such as Network connection and local telephone charges
Accounting Treatment of Unallowable Costs
An unallowable cost mistakenly charged to a sponsored award must be transferred to a non-sponsored unrestricted account via a Cost Transfer. If the department does not remove a cost identified as unallowable by Sponsored Projects Services, SPS will transfer the cost to the administering unit's indirect cost recovery account.
Facilities and Administrative Costs
Facilities and administrative costs (F&A) are charged based on the rate approved by the Government and allowed by each award. These costs, therefore, are not allowed as direct charge on grants and contracts. See Direct and Indirect (F&A) Costs of Sponsored Agreements for more information.
Supplemental Compensation
Supplemental compensation for faculty during the academic or fiscal contract employment period is not generally allowed on grants and contracts, as described in Uniform Guidance 200.430 - Compensation for Personal Service (Intra-Institution of Higher Education (IHE) consulting). See the supplemental compensation section on the Personal Services page and the UA HR Supplemental Compensation Guide for more information.
Compassionate Transfer of Leave
University policy allows employees to access leave time from vacation hours that other employees have forfeited due to excess accruals. See https://hr.arizona.edu/compassionate-transfer-leave Before charging compassionate leave to a sponsored project, the sponsor terms should be consulted for allowability.
Internal Billings
Internal Billing (IB) and Service Billing (SB) documents are used to bill for goods or services provided by one University department to another University department, reflecting income to the provider and expense to the customer. These are most commonly used by Service Centers and Auxiliary Enterprise units.
Internal billings not supported by a Financial Services approved Service Center rate or an approved Auxiliary Enterprise unit are not allowed on sponsored projects. Internal units providing goods and services to sponsored projects must have cost based rates that are approved by Financial Services Rate Studies. Refer to Financial Services Manual, Section 18.10, Service Center Policy and the Internal Billings and Service Billings - Best Practices for guidance.
As an alternative to an Internal Billing, a General Error Correction Document may be used to transfer actual costs associated with work performed, such as labor and supplies used for the sponsored project activity.
Sponsor Restrictions
Some sponsors impose additional restrictions to disallow costs. See more information about sponsor restrictions under the Budget Categories page.