OMB Circular A21

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OMB Circular A-21

• Cost Principles for Educational Institutions

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• Purpose
• Gives instruction to federal agencies affected
  by the circulars federal agencies are
  required to implement by passing requirements on
  to institutions.
• Effect
• Sets minimum standards applicable to institutions

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• Responsibility for compliance to standards set by
  
• OMB A-21belongs to
• Principal Investigator
• Office of Sponsored Projects, and
• Other Administrative Offices
• Payroll
• Purchasing
• Property Control
• Risk Management and Insurance
• Counsels Office
• Any office dealing with a Sponsored Project

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• What the Cost Principles Do
• Requires a cost to
• Be allowable
• Be allocable
• Be reasonable (prudent person test)
• Be treated consistently
• Be necessary to perform the program
• Be permissible under the law

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• Section J of OMB A-21 provides specific rules on
  cost allowability.
• Sub-sections 1 through 54 provides principles to
  be applied in establishing the allowability of
  costs.
• Specifies approval requirements, documentation
  and other provisions, for some costs.
• Determination of allowability in each case should
  be based on the treatment provided for similar or
  related items of cost.
• When there is a discrepancy between the
  provisions of a sponsored agreement and the
  provisions, the agreement should govern.

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How is allowability determined?

• Allowable Under the agreement, regulations, and
  public laws
• Reasonable A prudent person would have purchased
  this item and paid this price
• Allocable They can be assigned to the activity
  on some reasonable basis
• Consistently Treated Like costs must be treated
  same in like circumstances

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If a cost cannot meet the criteria listed in the
previous slide, it is unallowable, no matter what
it is for.
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EXAMPLES of Unallowable Costscannot be
charged against Federal agreements, used as cost
sharing (match) or used as part of Indirect (FA)
cost baseUnallowable Activities (something you
do) -organized fund raising -lobbying -gener
al public relations alumni activities -student
activities -managing investments solely to
enhance income
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Unallowable Objects (something you buy, or a line
item) -advertising -alcoholic
beverages -entertainment -fines
penalties -moving costs if employee resigns
within twelve months -certain recruitment
costs
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OMB A-21 Constantly Changes-to tighten rules on
allowability and allocation of costs.-to
promote greater standardization in treatment of
costs.OSP assists in identifying what costs
are allowable, or unallowable under A-21.