Allowable and Non-Allowable Costs Guidance

1. General Categories of Allowable Non-Allowable Costs

2. Supplementing Versus Supplanting

In accordance with the Perkins Act of 2006, Section 311 (a), funds made available under the Act must supplement and not supplant non-federal funds expended to carry out CTE activities. In other words, federal Perkins funds may only be used in addition to funds already spent by the state and colleges on CTE, and cannot be used in place of non-Perkins funds.

1. It will be presumed that supplanting has occurred where:
• NCCCS or one of the colleges uses Perkins funds to provide services that NCCCS or one of the colleges is required to make available under another federal, state, or local law; or
• NCCCS or one of the colleges uses Perkins funds to provide services that NCCCS or one of the colleges provided with non-Perkins funds in the prior year; or
• NCCCS or one of the colleges provides services for non-CTE students with non-federal funds, and provides the same services to CTE students using Perkins funds.
2. These presumptions are rebuttable if NCCCS or one of the colleges can demonstrate that it would have not been provided the services in question with non-Perkins funds had the Perkins funds not been available.
3. If presumed supplanting occurred, due to a significant reduction in non-federal funds or a change in the state’s priorities, NCCCS and/or the college will develop and maintain contemporaneous written documents, such as meeting minutes and/or itemized budget documents for one year to the next, demonstrating that the decision to not fund an activity with state or local funds was made without regard to the availability of Perkins funds. If NCCCS or a college uses Perkins funds to support activities that otherwise would be funded with state or local funds, the activities funded must be allowable under Perkins.
4. NCCCS provides technical assistance and training on supplanting as needed. If you are a college who has questions or concerns regarding supplanting or any other Perkins matters, please contact the Director for Career and Technical Education.

3. Specific Cost Guidance by Category

3.1. Advertising and public relations costs

Ref: 2 CFR Part 200, § 200.421. 

The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like. The term public relations includes community relations and means those activities dedicated to maintaining the image of the governmental unit or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. The only allowable advertising costs are those which are solely required for the performance of the Perkins program are program outreach and other specific purposes necessary to meet the requirements of the Federal award. (Ref 2 CFR Part 200, para 200.421). 

The only allowable public relations costs required for the performance of the Perkins program are: 

1. Costs specifically required by Perkins; 
   
2. Costs of communicating with the public and press pertaining to specific activities or endeavors; or 
   
3. Costs of conducting general liaison with news media and government public relations officers. 
   

1. All advertising and public relations costs; 
   
2. Costs of meetings, conventions, convocations, or other events related to other activities, including: 
   
• Costs of displays, demonstrations, and exhibits; 
• Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and 
3. Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; 
   
4. Costs of promotional items and memorabilia, including models, gifts, and souvenirs; 
   
5. Costs of advertising and public relations designed solely to promote the college or NCCCS.
   

3.2. Advisory councils

3.3. Alcoholic beverages

Costs of alcoholic beverages are unallowable.

3.4. Alumni/ae activities

Costs incurred for, or in support of, alumni/ae activities and similar services are unallowable.

3.5. Audit costs and related services

Request prior approval from your CTE Program Coordinator.

3.6. Bad debts

Bad debts, including losses (whether actual or estimated) arising from uncollectable accounts and other claims, related collection costs, and related legal costs, are unallowable

3.7. Bonding costs

Bonding costs arise when the Federal Government requires assurance against financial loss to itself or others by reason of the act or default of the institution. They arise also in instances where the institution requires similar assurance. Included are such bonds as bid, performance, payment, advance payment, infringement, and fidelity bonds. Costs of bonding required pursuant to the terms of the award are allowable. Costs of bonding required by the institution in the general conduct of its operations are allowable to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances

3.8. Commencement and convocation costs

Costs incurred for commencements and convocations are unallowable.

3.9. Compensation for personal services

3.10. Conferences

Conference hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner that minimizes costs to the Federal Award. The Federal awarding agency may authorize exceptions where appropriate for programs including Indian tribes, children, and the elderly. Request prior approval from your CTE Program Coordinator.

3.11. Contingency provisions

Contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening, are unallowable, except as noted in the cost principles in this circular regarding self-insurance, pensions, severance and post-retirement health costs.

3.12. Legal Costs

Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement. 

Ref: 2CFR Part 200, § 200.435. 

Definitions: "Conviction," as used herein, means a judgment or conviction of a criminal offense by any court of competent jurisdiction, whether entered upon verdict or a plea, including a conviction due to a plea of nolo contendere. Costs, which may be allowable or unallowable under this section, including directly associated costs, shall be segregated and accounted for by the institution separately. Contact the Director of CTE at NCCCS prior to expending any federal funds for defense or prosecution.

3.13. Depreciation

3.14. Donations and contributions

3.15. Employee health, and welfare costs and costs

3.16. Entertainment costs

3.17. Equipment and other capital expenditures

3.18. Fines and penalties

3.19. Fund raising and investment management costs

Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions, are unallowable. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments are unallowable. Costs related to the physical custody and control of monies and securities are allowable

3.20. Gain and losses on depreciable assets

Gains and losses on the sale, retirement, or other disposition of depreciable property shall be included in the year in which they occur as credits or charges to the asset cost grouping(s) in which the property was included. The amount of the gain or loss to be included as a credit or charge to the appropriate asset cost grouping(s) shall be the difference between the amounts realized on the property and the un-depreciated basis of the property.

3.21. General cost to government

For states, local governments, and Indian Tribes, the general costs of government are unallowable (except as provided in §200.474 Travel costs). 

Unallowable costs include: 

1. Salaries and expenses of the Office of the Governor of a state or the chief executive of a local government or the chief executive of an Indian tribe; 
   
2. Salaries and other expenses of a state legislature, tribal council, or similar 34 local governmental body, such as a county supervisor, city council, school board, etc., whether incurred for purposes of legislation or executive direction; 
   
3. Costs of the judicial branch of a government; 
   
4. Costs of prosecutorial activities unless treated as a direct cost to a specific program if authorized by statute or regulation (however, this does not preclude the allowability of other legal activities of the Attorney General as described in §200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements); and 
   
5. Costs of other general types of government services normally provided to the general public, such as fire and police, unless provided for as a direct cost under a program statute or regulation. (b) For Indian tribes and Councils of Governments (COGs) (see §200.64 Local government), up to 50% of salaries and expenses directly attributable to managing and operating Federal programs by the chief executive and his or her staff can be included in the indirect cost calculation without documentation.
   

3.22. Idle facilities and idle capacity

3.23. Insurance and indemnification

Ref: 2 CFR Part 200, §200.447. 

Costs of insurance required or approved, and maintained, pursuant to the sponsored agreement, are allowable. Costs of other insurance maintained by the institution in connection with the general conduct of its activities, are allowable subject to limitations. Request prior approval from your CTE Program Coordinator.

3.24. Interest

Ref: 2 CFR Part 200, §200.449. 

Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the College's own funds, however represented, are unallowable. Financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this section. Request prior approval from your CTE Program Coordinator.

3.25. Lobbying

The cost of certain influencing activities associated with obtaining grants, contracts, cooperative agreements, or loans are unallowable.

3.26. Losses on other awards or contracts

Ref: 2 CFR Part 200, §200.451. 

Any excess of costs over income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to, the institution's contributed portion by reason of cost sharing agreements or under recoveries via negotiation of flat amounts for F&A costs.

3.27. Maintenance and repair costs

Ref: 2 CFR Part 200, §200.452. 

Costs incurred for necessary maintenance, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their life shall be treated as capital expenditures. Request prior approval from your CTE Program Coordinator.

3.28. Material and supplies costs

Ref: 2 CFR Part 200, §200.453. 

Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal award are allowable. Purchased materials and supplies must be charged at their actual prices, net of applicable credits. Withdrawals from general stores or stockrooms must be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consistently applied. Incoming transportation charges are a proper part of materials and supplies costs. 

Materials and supplies used for the performance of a Federal award may be charged as direct costs. In the specific case of computing devices, charging as direct costs is allowable for 35 devices that are essential and allocable, but not solely dedicated, to the performance of a Federal award. 

Where federally-donated or furnished materials are used in performing the Federal award, such materials will be used without charge. Consumable supplies are unallowable.

3.29. Memberships, subscriptions and professional activity costs

Ref: 2 CFR Part 200, §200.454. 

Costs of the institution’s membership in business, technical, and professional organizations are allowable. Costs of the institution’s subscriptions to business, professional, and technical periodicals are allowable. Costs of membership in any civic or community organization are unallowable. Costs of membership in any country club or social or dining club or organization are unallowable. Costs of membership in organizations whose primary purpose is lobbying are unallowable.

3.30. Plant and homeland security costs

Ref: 2 CFR Part 200, §200.457. 

Necessary and reasonable expenses incurred for protection and security of facilities, personnel, and work products are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security activities; equipment; barriers; protective (non-military) gear, devices, and equipment; contractual security services; and consultants. Capital expenditures for plant security purposes are subject to §200.439 

3.31. Pre-award costs

Ref: 2 CFR Part 200, §200.458. 

Costs incurred prior to the effective date of the sponsored agreement, whether or not they would have been allowable if incurred after such date, are unallowable unless approved by the Director of CTE at NCCCS.

3.32. Professional service costs

Ref: 2 CFR Part 200, §200.459. 

Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the College, are allowable, subject to limitations of this section. Request prior approval from your CTE Program Coordinator.

3.33. Proposal costs

2 CFR Part 200, §200.460. 

Proposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the development of data necessary to support the College's bids or proposals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities of the College. No proposal costs of past accounting periods will be allocable to the current period. Request prior approval from your CTE Program Coordinator.

3.34. Publication and printing costs

Ref: 2 CFR Part 200, §200.461. 

Publication costs for electronic and print media, including distribution, promotion, and general handling are allowable. If these costs are not identifiable with a particular cost objective, they should be allocated as indirect costs to all benefiting activities of the College. 

Page charges for professional journal publications are allowable where: 

1. The publications report work supported by the Federal Government; and 
   
2. The charges are levied impartially on all items published by the journal, whether or not under a Federal award. 
   
3. The College may charge the Federal award before closeout for the costs of publication or sharing of research results if the costs are not incurred during the period of performance of the Federal award. 
   

Page charges for professional journal publications are allowable as a necessary part of research costs where: 

1. The research papers report work supported by the Federal Government: and 
   
2. The charges are levied impartially on all research papers published by the journal, whether or not by federally sponsored authors. 
   

3.35. Rearrangement and reconversion costs

Ref: 2 CFR Part 200, §200.462.
Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements and alterations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the Federal awarding agency or passthrough entity. Request prior approval from the Director of CTE at NCCCS.

3.36. Recruiting costs

Ref: 2 CFR Part 200, §200.462. 

Subject to conditions of this reference, recruiting costs are allowable to the extent that such costs are incurred pursuant to the College's standard recruitment program. Where the College uses employment agencies, costs not in excess of standard commercial rates for such services are allowable. Obtain prior approval from NCCCS. 

Special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel that do not meet the test of reasonableness or do not conform with the established practices of the College, are unallowable. 

Where relocation costs incurred incident to recruitment of a new employee have been funded in whole or in part to a Federal award, and the newly hired employee resigns for reasons within the employee's control within 12 months after hire, the College will be required to refund or credit the Federal share of such relocation costs to the Federal Government. See also §200.464 Relocation costs of employees. 

Short-term, travel visa costs (as opposed to longer-term, immigration visas) are generally allowable expenses that may be proposed as a direct cost. Since short-term visas are issued for a specific period and purpose, they can be clearly identified as directly connected to work performed on a Federal award. For these costs to be directly charged to a Federal award, they must: 

1. Be critical and necessary for the conduct of the project; 
   
2. Be allowable under the applicable cost principles; 
   
3. Be consistent with the College's cost accounting practices and College policy; and 
   
4. Meet the definition of “direct cost” as described in the applicable cost principles. 
5. Request prior approval from the Director of CTE at NCCCS.
   

3.37. Relocation costs

Ref: 2 CFR Part 200, §200.464. 

Unallowable

3.38. Rental costs of buildings and equipment

Ref: 2 CFR Part 200, §200.465. 

Subject to the limitations described in paragraphs (b) through (d) of this section, rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased. 

Rental arrangements should be reviewed periodically to determine if circumstances have changed and other options are available. 

Rental costs under “sale and lease back” arrangements are allowable only up to the amount that would be allowed had the College continued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. 

Rental costs under “less-than-arm's-length” leases are allowable only up to the amount (as explained in paragraph (b) of this section). For this purpose, a less-than-arm's-length lease is one under which one party to the lease agreement is able to control or substantially influence the actions of the other. Such leases include, but are not limited to those between: (1) Divisions of the College; (2) The College under common control through common officers, directors, or members; and (3) The College and a director, trustee, officer, or key employee of the College or an immediate family member, either directly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. For example, the College may establish a separate corporation for the sole purpose of owning property and leasing it back to the College. Obtain prior approval from NCCCS. 

Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as explained in paragraph (b) of this section) that would be allowed had the College purchased the property on the date the lease agreement was executed. The provisions of GAAP must be used to determine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria in §200.449 Interest. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the College purchased the property. 

The rental of any property owned by any individuals or entities affiliated with the College, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable.

3.39. Scholarships and student aid costs

Ref: 2 CFR Part 200, §200.466. 

Costs of scholarships, fellowships, and other programs of student aid are allowable only when the purpose of the sponsored agreement is to provide training to selected participants. Request prior approval from your CTE Program Coordinator.

3.40. Selling and marketing

Ref: 2 CFR Part 200, §200.467. 

Costs of selling and marketing any products or services of the College (unless allowed under §200.421 Advertising and public relations.) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award

3.41. Specialized service facilities

Ref: 2 CFR Part 200, §200.468. 

The costs of services provided by highly complex or specialized facilities operated by the College, such as computing facilities, wind tunnels, and reactors are allowable, provided the charges for the services meet the conditions of either paragraphs (b) or (c) of this section, and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under §200.406 Applicable credits. 

The costs of such services, when material, must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established methodology that: 

1. Does not discriminate between activities under Federal awards and other activities of the College, including usage by the College for internal purposes, and 
   
2. Is designed to recover only the aggregate costs of the services. The costs of each service must consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration over/under applied costs of the previous period(s). 

Under some extraordinary circumstances, where it is in the best interest of the Federal Government and the College to establish alternative costing arrangements, such arrangements may be worked out with the Federal cognizant agency for indirect costs.

3.42. Student activity costs

Ref 2 CFR Part 200, § 200.469. 

Costs incurred for intramural activities, student publications, student clubs, and other student activities, are unallowable, unless specifically provided for in the sponsored agreements. Request prior approval from your CTE Program Coordinator.

3.43. Taxes (including Value Added Tax)

Ref: 2 CFR Part 200, §200.470. 

For states, local governments and Indian tribes:

1. Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes that disproportionately affect Federal programs or changes in tax policies that disproportionately affect Federal programs.
   
2. Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the Federal Government are allowable. 
   
3. This provision does not restrict the authority of the Federal awarding agency to identify taxes where Federal participation is inappropriate. Where the identification of the amount of unallowable taxes would require an inordinate amount of effort, the cognizant agency for indirect costs may accept a reasonable approximation thereof. 

1. In general, taxes which the College is required to pay and which are paid or accrued in accordance with GAAP, and payments made to local governments in lieu of taxes which are commensurate with the local government services received are allowable, except for: (i) Taxes from which exemptions are available to the College directly or which are available to the College based on an exemption afforded the Federal Government and, in the latter case, when the Federal awarding agency makes available the necessary exemption certificates, (ii) Special assessments on land which represent capital improvements, and (iii) Federal income taxes. 
   
2. Any refund of taxes, and any payment to the College of interest thereon, which were allowed as Federal award costs, will be credited either as a cost reduction or cash refund, as appropriate, to the Federal Government. However, any interest actually paid or credited to an College incident to a refund of tax, interest, and penalty will be paid or credited to the Federal Government only to the extent that such interest accrued over the period during which the College has been reimbursed by the Federal Government for the taxes, interest, and penalties. (c) Value Added Tax (VAT) foreign taxes charged for the purchase of goods or services that a College is legally 38 required to pay in country is an allowable expense under Federal awards. Foreign tax refunds or applicable credits under Federal awards refer to receipts, or reduction of expenditures, which operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect costs. To the extent that such credits accrued or received by the College relate to allowable cost, these costs must be credited to the Federal awarding agency either as costs or cash refunds. If the costs are credited back to the Federal award, the College may reduce the Federal share of costs by the amount of the foreign tax reimbursement, or where Federal award has not expired, use the foreign government tax refund for approved activities under the Federal award with prior approval of the Federal awarding agency.
   

3.44. Termination costs applicable to sponsored agreements

Ref: § 200.471. 

Termination of a Federal award generally gives rise to the incurrence of costs, or the need for special treatment of costs, which would not have arisen had the Federal award not been terminated. Cost principles covering these items are set forth in this section. They are to be used in conjunction with the other provisions of this part in termination situations. Cost principles covering these items are generally allowable.

3.45. Training and education costs

Ref: 2 CFR Part 200, §200.472. 

The cost of training and education provided for employee development is allowable.

3.46. Transportation costs

Ref: 2 CFR Part 200, § 200.473 

Costs incurred for freight, express, cartage, postage, and other transportation services relating either to goods purchased, in process, or delivered, are allowable. When such costs can readily be identified with the items involved, they may be charged directly as transportation costs or added to the cost of such items. Where identification with the materials received cannot readily be made, inbound transportation cost may be charged to the appropriate indirect (F&A) cost accounts if the college follows a consistent, equitable procedure in this respect. Outbound freight, if reimbursable under the terms and conditions of the Federal award, should be treated as a direct cost.

3.47. Travel costs

Ref: 2 CFR Part 200, § 200.474. 

Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business in support of Perkins activities are allowable as budgeted. Must follow state guidelines.