Allowability of Troublesome Costs

The following items are discussed at a “Lunch and Learn” training and education opportunity presented by the Office of Sponsored Research on October 15, 2008.  The content of the presentation relies on a section contained in an NCURA live broadcast that was aired in the Spring of 2008 and deals with a topic entitled “Allowability of Certain Troublesome Costs.” 

The Office of Sponsored Research is currently working on a DRAFT Stevens Business Policy that will more specifically address these types of costs and how Stevens will choose to handle them.  Anticipated roll-out of this Business Policy is projected for late 2008.   First, there is no specific guidance or clear-cut directions that can be pointed to for the following kinds of costs.  Rather, guidance from OSR comes from training, education, attendance at professional society meetings, a body of organizational auditor opinions and findings, and disallowances levied by the government auditors.  This is a continually evolving aspect of research administration.    Second, in all cases the more documentation and information that is provided and available…….the better.  Sometimes, what initially appears to be an unallowable cost may prove to be appropriate after a more detailed conversation and dialogue is entered into.
Third, unfortunately there will often be cases where “NO” is going to be the answer.

Three questions that should be asked when reviewing these troublesome, often “squishy” kinds of costs are:

1. Is the cost 100% business related, or is there some personal benefit?
2. If it is 100% business related…….is it allowable/allocable/reasonable as it applies to the L5
3. Is it more appropriately considered a direct cost or an indirect cost?

Finally, the institution and the requestor should consider two items when contemplating the allowability of these kinds of questionable costs:

• How might donors view our decisions?  If we determine that L5 projects are being asked to assume responsibility for some personal benefit, that isn’t reasonable, or allowable; but if we roll those same costs to department L2 accounts, it might not result in a positive PR for donors.
• Auditors might extrapolate potential violation/disallowance based on sample size, i.e., if they sample 20 accounts and find unallowable cell phone charges on 5 accounts, they might extrapolate that we’re inappropriately charging on 25% of our sponsored research accounts.

Cell Phones, Blackberries and home internet costs

Is there any personal benefit that accrues to the person submitting the request for reimbursement?

• If the request is for a cell phone……does the individual have a personal cell phone or are all cell calls received on this one cell phone?
• If the request is for home internet service…..can the individual demonstrate that no personal benefit is received?
• Any personal benefit probably needs to be considered as a taxable benefit under IRS rules

CAUTION: Any cell phones or laptops bought with federal funds will remain as Stevens property, i.e., they are not portable and should be tagged for tracking and monitoring.

Food

The following does not apply to food that is part of Stevens approved business travel.

Food is normally not an allowable expense on a sponsored project unless it is identified in the program announcement as a specific element of cost.

• Food for lab or group meetings in not an allowable cost on L5
  Food for lunches with scientific colleagues to discuss research projects is not an allowable cost on L5
• QUESTION: Can you make the case that it makes more sense at an all-day scientific meeting to stay in place for lunch rather than break, leave and re-gather?  Further, if the case can be made of providing lunch for a large scientific meeting, documentation should be provided that describes the purpose and benefit, as well as an attendees list.  The more non-SIT attendees…..the better
• QUESTION: Why is it necessary to meet at lunch rather than at 10:00 or at 2:00?

Travel

Associated travel costs that might be problematic are those that use the “reasonableness” criteria. 

• QUESTION: Is it reasonable that valet parking (unless there is a circumstance of disability) should be charged to a L5 rather than parking in a remote lot? 
• QUESTION: Is it reasonable that a higher priced luxury car should be charged to a L5 rather than a standard, ‘no-frills’ car?  Can a case be made for the more expensive car and how it benefits the project?

Memberships and Office Supplies

Most often these items are included in SIT’s F&A pool of research associated costs.  Therefore, it isn’t the case that these are unallowable costs, but it is the case they have been determined to be unallowable as DIRECT COSTS.

• QUESTION: Is the membership to a scientific society specific only to a particular L5?  Or does it benefit all the sponsored research on which the faculty serves as PI, as well as their academic and personal knowledge advancement?