Allowable, Allocable & Reasonable Costs

Costs for university projects with funding should comply with guidelines stated in  OMB’s Uniform Guidance, 2 CFR 200 Subpart E, Cost Principles.

See also instructions on cost principles related to Professional Service Costs, 2 CFR 200.459.


Charges must meet the following tests:


Is the cost Allowable? (See 2 CFR §200.403)

✓ Be necessary and reasonable for the performance of the Federal award;

✓ Conform to any limitations or exclusions set forth in Uniform Guidance or in the Federal award as to types or amount of cost items;

✓ Be consistent with policies and procedures that apply uniformly to both federally-financed and other UH activities;

✓ Be accorded consistent treatment, for example, not normally treated as an indirect cost;

✓ Be determined in accordance with generally accepted accounting principles (GAAP); and

✓ Not used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period.


Is it Reasonable?  (See 2 CFR §200.404)

✓ Be generally recognized as ordinary and necessary for UH operations, or for the proper and efficient performance of the Federal award;

✓ Be determined with sound business practices; arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award;

✓ Be representative of market prices for comparable goods or services for the geographic area; and

✓ Follow normal UH practices and policies.


Is it Allocable? (See 2 CFR §200.405)

✓ Incurred specifically for the Federal award;

✓ Be beneficial to both the Federal award and other UH work and can be distributed in proportions that may be approximated using reasonable methods; and

✓ Be necessary to the overall operation of UH and assignable in part to the Federal award.



  • If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit.
  • If the award is a contract subject to CAS, costs must be allocated using Cost Accounting Standards.