Title 2 —Federal Financial Assistance Subtitle A —Office of Management and Budget Guidance for Federal Financial Assistance Chapter II —Office of Management and Budget Guidance Part 200 —Uniform Administrative Requirements, Cost Principles, and Audit Requirements for

Federal Awards Authority: 31 U.S.C. 503; 31 U.S.C. 6101-6106; 31 U.S.C. 6307; 31 U.S.C. 7501-7507.

Source: 89 FR 30136, Apr. 22, 2024, unless otherwise noted.

Subpart E Cost Principles

General Provisions

§ 200.400 Policy guide.

§ 200.401 Application.

Basic Considerations

§ 200.402 Composition of costs.

§ 200.403 Factors affecting allowability of costs.

§ 200.404 Reasonable costs.

§ 200.405 Allocable costs.

§ 200.406 Applicable credits.

§ 200.407 Prior written approval (prior approval).

§ 200.408 Limitation on allowance of costs.

§ 200.409 Special considerations.

§ 200.410 Collection of unallowable costs.

§ 200.411 Adjustment of previously negotiated indirect cost rates containing unallowable costs.

Direct and Indirect Costs

§ 200.412 Classification of costs.

§ 200.413 Direct costs.

§ 200.414 Indirect costs.

§ 200.415 Required certifications.

Special Considerations for States, Local Governments and Indian Tribes

§ 200.416 Cost allocation plans and indirect cost proposals.

§ 200.417 Interagency service.

§ 200.418 Costs incurred by states and local governments.

§ 200.419 Cost accounting standards.

General Provisions for Selected Items of Cost

§ 200.420 Considerations for selected items of cost.

§ 200.421 Advertising and public relations.

§ 200.422 Advisory councils.

This content is from the eCFR and is authoritative but unofficial.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR Part 200 Subpart E (May 29, 2025)

2 CFR Part 200 Subpart E (May 29, 2025) (enhanced display) page 1 of 53 https://www.govinfo.gov/link/uscode/31/503 https://www.govinfo.gov/link/uscode/31/6101 https://www.govinfo.gov/link/uscode/31/6307 https://www.govinfo.gov/link/uscode/31/7501 https://www.federalregister.gov/citation/89-FR-30136

§ 200.423 Alcoholic beverages.

§ 200.424 Alumni activities.

§ 200.425 Audit services.

§ 200.426 Bad debts.

§ 200.427 Bonding costs.

§ 200.428 Collections of improper payments.

§ 200.429 Commencement and convocation costs.

§ 200.430 Compensation—personal services.

§ 200.431 Compensation—fringe benefits.

§ 200.432 Conferences.

§ 200.433 Contingency provisions.

§ 200.434 Contributions and donations.

§ 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements.

§ 200.436 Depreciation.

§ 200.437 Employee health and welfare costs.

§ 200.438 Entertainment and prizes.

§ 200.439 Equipment and other capital expenditures.

§ 200.440 Exchange rates.

§ 200.441 Fines, penalties, damages and other settlements.

§ 200.442 Fundraising and investment management costs.

§ 200.443 Gains and losses on the disposition of depreciable assets.

§ 200.444 General costs of government.

§ 200.445 Goods or services for personal use.

§ 200.446 Idle facilities and idle capacity.

§ 200.447 Insurance and indemnification.

§ 200.448 Intellectual property.

§ 200.449 Interest.

§ 200.450 Lobbying.

§ 200.451 Losses on other awards or contracts.

§ 200.452 Maintenance and repair costs.

§ 200.453 Materials and supplies costs, including costs of computing devices.

§ 200.454 Memberships, subscriptions, and professional activity costs.

§ 200.455 Organization costs.

§ 200.456 Participant support costs.

§ 200.457 Plant and security costs.

§ 200.458 Pre-award costs.

§ 200.459 Professional service costs.

§ 200.460 Proposal costs.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR Part 200 Subpart E (May 29, 2025)

2 CFR Part 200 Subpart E (May 29, 2025) (enhanced display) page 2 of 53

§ 200.461 Publication and printing costs.

§ 200.462 Rearrangement and reconversion costs.

§ 200.463 Recruiting costs.

§ 200.464 Relocation costs of employees.

§ 200.465 Rental costs of real property and equipment.

§ 200.466 Scholarships, student aid costs, and tuition remission.

§ 200.467 Selling and marketing costs.

§ 200.468 Specialized service facilities.

§ 200.469 Student activity costs.

§ 200.470 Taxes (including Value Added Tax).

§ 200.471 Telecommunication and video surveillance costs.

§ 200.472 Termination and standard closeout costs.

§ 200.473 Training and education costs.

§ 200.474 Transportation costs.

§ 200.475 Travel costs.

§ 200.476 Trustees.

Subpart E—Cost Principles

GENERAL PROVISIONS

§ 200.400 Policy guide.

The application of these cost principles is based on the fundamental premises that:

(a) The recipient and subrecipient are responsible for the efficient and effective administration of the Federal award through sound management practices.

(b) The recipient and subrecipient are responsible for administering Federal funds in a manner consistent with Federal statutes, regulations, and the terms and conditions of the Federal award.

(c) The recipient and subrecipient, in recognition of their unique combination of staff, facilities, and experience, are responsible for employing organization and management techniques necessary to ensure the proper and efficient administration of the Federal award.

(d) The accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award.

(e) When reviewing, negotiating, and approving cost allocation plans or indirect cost proposals, the cognizant agency for indirect costs should ensure that the recipient consistently applies these cost principles.

Where wide variations exist in the treatment of a given cost item by the recipient, the reasonableness and equity of such treatments should be fully considered. See the definition of indirect costs in § 200.1.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR Part 200 Subpart E (May 29, 2025)

2 CFR 200.400(e) (enhanced display) page 3 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.1/

§ 200.401 Application.

(f) For recipients and subrecipients that educate and engage students in research, the dual role of students as both trainees and employees (including pre- and post-doctoral staff) contributing to the completion of Federal awards for research must be recognized in the application of these principles.

(g) The recipient or subrecipient must not earn or keep any profit resulting from Federal financial assistance unless explicitly authorized by the terms and conditions of the Federal award. See also § 200.307. When the required activities of a fixed amount award were completed in accordance with the terms and conditions of the award, the unexpended funds retained by the recipient or subrecipient are not considered profit.

(a) General. The recipient and subrecipient must apply these principles in determining allowable costs under Federal awards. The recipient and subrecipient must also use these principles as a guide in pricing fixed-price contracts and subcontracts when costs are used in determining the appropriate price. These cost principles do not apply to:

(1) Arrangements under which Federal financing is in the form of loans, scholarships, fellowships, traineeships, or other fixed amounts based on items such as education allowance or published tuition rates and fees.

(2) Capitation awards based on case counts or the number of beneficiaries.

(3) Fixed amount awards, except as provided in § 200.101(b). See also § 200.201.

(4) Federal awards to hospitals (see Appendix IX of this part).

(5) Food commodities provided through grants and cooperative agreements.

(6) Other awards under which the recipient or subrecipient is not required to account for actual costs incurred.

(b) Federal contract. A Federal contract awarded to a recipient is subject to the Cost Accounting Standards (CAS). It must incorporate the applicable CAS requirements per 48 CFR Chapter 99 and 48 CFR part 30 (FAR Part 30). With respect to the allocation of costs, the Cost Accounting Standards at 48 CFR parts 9904 or 9905 take precedence over the cost principles in subpart E. When a contract with a recipient is subject to full CAS coverage, the allowability of certain costs under the cost principles will be affected by the allocation provisions of the Cost Accounting Standards (for example, CAS 414—48 CFR 9904.414—Cost of Money as an Element of the Cost of Facilities Capital, and CAS 417—48 CFR 9904.417—Cost of Money as an Element of the Cost of Capital Assets Under Construction, apply instead of the allowability provisions of § 200.449). For example, the allowability of costs in CAS-covered contracts is determined first by the allocation provisions of the Cost Accounting Standards rather than the allowability provisions in § 200.449 (unless the CAS does not address the specific costs). In complying with those requirements, the recipient's application of cost accounting practices for estimating, accumulating, and reporting costs for Federal awards and CAS-covered contracts must be consistent with 48 CFR. The recipient only needs to maintain one set of accounting records supporting the allocation of costs if the recipient administers both Federal awards and CAS-covered contracts.

(c) Exemptions. Some nonprofit organizations, because of their size and nature of operations, can be considered to be similar to for-profit organizations in terms of the applicability of cost principles. These nonprofit organizations must operate under Federal cost principles that apply to for-profit organizations located at 48 CFR 31.2. Appendix VIII contains a list of these nonprofit organizations. Other organizations may be added to this list if approved by the cognizant agency for indirect costs.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.400(f)

2 CFR 200.401(c) (enhanced display) page 4 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.307/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.101/?#p-200.101(b) https://www.ecfr.gov/on/2025-05-29/title-2/section-200.201/ https://www.ecfr.gov/on/2025-05-29/title-2/part-200/appendix-Appendix%20IX%20to%20Part%20200/ https://www.ecfr.gov/on/2025-05-29/title-48/chapter-99/ https://www.ecfr.gov/on/2025-05-29/title-48/part-30/ https://www.ecfr.gov/on/2025-05-29/title-48/part-9904/ https://www.ecfr.gov/on/2025-05-29/title-48/part-9904/ https://www.ecfr.gov/on/2025-05-29/title-48/part-9905/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9904.414/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9904.414/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9904.417/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9904.417/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.449/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.449/ https://www.ecfr.gov/on/2025-05-29/title-48/section-31.2/

BASIC CONSIDERATIONS

§ 200.402 Composition of costs.

The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs minus any applicable credits

§ 200.403 Factors affecting allowability of costs.

Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards:

§ 200.404 Reasonable costs.

A cost is reasonable if it does not exceed an amount that a prudent person would incur under the circumstances prevailing when the decision was made to incur the cost. In determining the reasonableness of a given cost, consideration must be given to the following:

(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.

(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.

(c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient.

(d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.

(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part.

(f) Not be included as a cost or used to meet cost sharing requirements of any other federally-financed program in either the current or a prior period. See § 200.306(b).

(g) Be adequately documented. See §§ 200.300 through 200.309.

(h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3).

(a) Whether the cost is generally recognized as ordinary and necessary for the recipient's or subrecipient's operation or the proper and efficient performance of the Federal award;

(b) The restraints or requirements imposed by such factors as sound business practices; arm's-length bargaining; Federal, State, local, tribal, and other laws and regulations; and terms and conditions of the Federal award;

(c) Market prices for comparable costs for the geographic area;

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.402

2 CFR 200.404(c) (enhanced display) page 5 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.306/?#p-200.306(b) https://www.ecfr.gov/on/2025-05-29/title-2/section-200.300/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.309/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.308/?#p-200.308(g)(3)

§ 200.405 Allocable costs.

§ 200.406 Applicable credits.

(d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the recipient or subrecipient, its employees, its students or membership (if applicable), the public at large, and the Federal Government; and

(e) Whether the cost represents a deviation from the recipient's or subrecipient's established written policies and procedures for incurring costs.

(a) Allocable costs in general. A cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received.

This standard is met if the cost satisfies any of the following criteria:

(1) Is incurred specifically for the Federal award;

(2) Benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or

(3) Is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with these cost principles.

(b) Allocation of indirect costs. All activities which benefit from the recipient's or subrecipient's indirect cost, including unallowable activities and donated services by the recipient or subrecipient or third parties, will receive an appropriate allocation of indirect costs.

(c) Limitation on charging certain allocable costs to other Federal awards. A cost allocable to a particular Federal award may not be charged to other Federal awards (for example, to overcome fund deficiencies or to avoid restrictions imposed by Federal statutes, regulations, or the terms and conditions of the Federal awards). However, this prohibition would not preclude the recipient or subrecipient from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards.

(d) Direct cost allocation principles. 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 However, when those proportions cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c), the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Where the purchase of equipment or other capital asset is specifically authorized under a Federal award, the costs are assignable to the Federal award regardless of the use that may be made of the equipment or other capital asset involved, when no longer needed for the purpose for which it was originally required. See also §§

200.310 through 200.316 and 200.439.

(e) Costs of contracts subject to CAS. If a contract is subject to CAS, costs must be allocated to that contract according to the Cost Accounting Standards, which take precedence over the allocation provisions in this part.

(a) Applicable credits refer to transactions that offset or reduce direct or indirect costs allocable to a Federal award. Examples of such transactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.404(d)

2 CFR 200.406(a) (enhanced display) page 6 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.310/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.310/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.316/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.439/

§ 200.407 Prior written approval (prior approval).

The reasonableness and allocability of certain costs under Federal awards may be difficult to determine. To avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the recipient may seek the prior written approval of the Federal agency (or, for indirect costs, the cognizant agency for indirect costs) before incurring the cost. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that cost unless prior approval is specifically required for allowability as described under certain circumstances in the following sections:

§ 200.408 Limitation on allowance of costs.

Statutory requirements may limit the allowability of costs. Any costs that exceed the maximum amount allowed by statute may not be charged to the Federal award. Only the amount allowable by statute may be charged to the Federal award.

charges. To the extent that such credits accruing to or received by the recipient or subrecipient relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate.

(b) In some instances, the amounts received from the Federal Government to finance activities or service operations of the recipient or subrecipient should be treated as applicable credits. Specifically, the concept of netting such credit items (including any amounts used to meet cost sharing requirements) must be recognized in determining the rates or amounts to be charged to the Federal award. See §§

200.436 and 200.468 for potential application areas.

(a) Section 200.306 Cost sharing;

(b) Section 200.307 Program income;

(c) Section 200.308 Revision of budget and program plans;

(d) Section 200.333 Fixed amount subawards;

(e) Section 200.430 Compensation—personal services, paragraph (h);

(f) Section 200.431 Compensation—fringe benefits;

(g) Section 200.439 Equipment and other capital expenditures;

(h) Section 200.440 Exchange rates;

(i) Section 200.441 Fines, penalties, damages and other settlements;

(j) Section 200.442 Fund raising and investment management costs;

(k) Section 200.445 Goods or services for personal use;

(l) Section 200.447 Insurance and indemnification;

(m) Section 200.455 Organization costs;

(n) Section 200.458 Pre-award costs;

(o) Section 200.462 Rearrangement and reconversion costs;

(p) Section 200.475 Travel costs.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.406(b)

2 CFR 200.408 (enhanced display) page 7 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.436/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.436/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.468/

§ 200.409 Special considerations.

Other sections in this part describe special considerations and requirements applicable to states, local governments, Indian Tribes, and IHEs. In addition, certain provisions among the items of cost in this subpart are only applicable to certain types of recipients and subrecipients, as specified in the following sections:

§ 200.410 Collection of unallowable costs.

Payments made for costs determined to be unallowable by either the awarding Federal agency, cognizant agency for indirect costs, or pass-through entity must be refunded with interest to the Federal Government. Unless directed by Federal statute or regulation, repayments must be made in accordance with the instructions provided by the Federal agency or pass-through entity that made the allowability determination. See §§ 200.300 through 200.309, and § 200.346.

§ 200.411 Adjustment of previously negotiated indirect cost rates containing unallowable costs.

DIRECT AND INDIRECT COSTS

(a) Direct and Indirect Costs (§§ 200.412-200.415);

(b) Special Considerations for States, Local Governments and Indian Tribes (§§ 200.416 and 200.417); and

(c) Special Considerations for Institutions of Higher Education (§§ 200.418 and 200.419).

(a) Negotiated indirect cost rates based on a proposal later found to have included costs that:

(1) Are unallowable as specified by Federal statutes, regulations or the terms and conditions of a Federal award; or

(2) Are unallowable because they are not allocable to the Federal award(s), must be adjusted, or a refund must be made in accordance with the requirements of this section. These adjustments or refunds are intended to correct the proposals used to establish the rates and do not constitute a reopening of the rate negotiation. The adjustments or refunds must be made regardless of the type of rate negotiated (predetermined, final, fixed, or provisional).

(b) For rates covering a future fiscal year of the recipient or subrecipient, the unallowable costs must be removed from the indirect cost pools and the rates must be adjusted.

(c) For rates covering a past period, the Federal share of the unallowable costs must be computed for each year involved, and a cash refund (including interest) must be made to the Federal Government in accordance with the directions provided by the cognizant agency for indirect costs. When cash refunds are made for past periods covered by provisional or fixed rates, appropriate adjustments must be made when the rates are finalized to avoid duplicate recovery of the unallowable costs.

(d) For rates covering the current period, either a rate adjustment or a refund, as described in paragraphs (b) and (c) of this section, must be required by the cognizant agency for indirect costs. The choice of method must be at the discretion of the cognizant agency for indirect costs, based on its judgment as to which method would be most practical.

(e) The amount or proportion of unallowable costs included in each year's rate will be assumed to be the same as the amount or proportion of unallowable costs included in the base year proposal used to establish the rate.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.409

2 CFR 200.411(e) (enhanced display) page 8 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.412/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.416/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.417/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.418/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.419/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.300/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.309/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.346/

§ 200.412 Classification of costs.

There is no universal rule for classifying certain costs as direct or indirect costs. A cost may be direct for some specific service or function but indirect for the Federal award or other final cost objective. Therefore, each cost incurred for the same purpose in like circumstances must be treated consistently either as a direct or an indirect cost to avoid possible double-charging of Federal awards. Guidelines for determining direct and indirect costs charged to Federal awards are provided in this subpart.

§ 200.413 Direct costs.

(a) General. Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as direct or indirect costs. See § 200.405.

(b) Application to Federal awards. The association of costs with a Federal award determines whether costs are direct or indirect. Costs charged directly to a Federal award are typically incurred specifically for that Federal award (including, for example, supplies needed to achieve the award's objectives and the proportion of employee compensation and fringe benefits expended in relation to that specific award).

Costs that otherwise would be treated as indirect costs may also be considered direct costs if they are directly related to a specific award (including, for example, extraordinary utility consumption, the cost of materials supplied from stock or services rendered by specialized facilities, cybersecurity, integrated data systems, asset management systems, performance management costs, program evaluation costs, or other institutional service operations).

(c) Administrative and clerical staff salaries. Administrative and clerical staff salaries should normally be treated as indirect costs. Direct charging of these costs may be appropriate only if they meet all of the following conditions:

(1) The administrative or clerical services are integral to a Federal award;

(2) Individuals involved can be specifically identified with a Federal award; and

(3) The costs are not also recovered as indirect costs.

(d) Minor items. A direct cost of a minor amount may be treated as an indirect cost, for reasons of practicality, provided that it is treated consistently for all Federal and non-Federal purposes.

(e) Treatment of unallowable costs in determining indirect cost rates. The costs of certain activities are not allowable as charges to Federal awards. Even though these costs are unallowable, they must be treated as direct costs for purposes of determining indirect cost rates and be allocated their equitable share of the recipient's or subrecipient's indirect costs if they represent activities which:

(1) Include the salaries of personnel;

(2) Occupy space; and

(3) Benefit from the recipient's or subrecipient's indirect costs.

(f) Treatment of certain costs for nonprofit organizations. For nonprofit organizations, the costs of activities performed by the nonprofit organization primarily as a service to members, clients, or the general public when significant and necessary to the organization's mission must be treated as direct costs whether or not allowable, and be allocated an equitable share of indirect costs. Some examples of these types of activities include:

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.412

2 CFR 200.413(f) (enhanced display) page 9 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.405/

§ 200.414 Indirect costs.

(1) Maintenance of membership rolls, subscriptions, publications, and related functions. See § 200.454.

(2) Providing services and information to members, the government, or the public. See §§ 200.454 and 200.450.

(3) Promotion, lobbying, and other forms of public relations. See §§ 200.421 and 200.450.

(4) Conferences (except those held to conduct the general administration of the recipient or subrecipient). See also § 200.432.

(5) Maintenance, protection, and investment of special funds not used in the recipient's or subrecipient's operation. See also § 200.442.

(6) Administration of group benefits on behalf of members or clients, including life and hospital insurance, annuity or retirement plans, and financial aid. See also § 200.431.

(a) Facilities and administration classification. For major Institutions of Higher Education (IHE) and major nonprofit organizations, indirect costs must be classified within two broad categories: “Facilities” and “Administration.” “Facilities” is defined as depreciation on buildings, equipment and capital improvements, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. “Administration” is defined as general administration and general expenses such as the director's office, accounting, personnel, and all other types of expenditures not listed specifically under one of the subcategories of “Facilities” (including cross allocations from other pools, where applicable). For nonprofit organizations, library expenses are included in the “Administration” category; for IHEs, they are included in the “Facilities” category. Major IHEs are defined as those required to use the Standard Format for Submission as noted in Appendix III. Major nonprofit organizations are those which receive more than $10 million in direct Federal funding.

(b) Diversity of nonprofit organizations. It is not always possible to specify the types of costs that may be classified as indirect costs for nonprofit organizations due to the diversity of their accounting practices.

The association of a cost with a Federal award is the determining factor in distinguishing direct from indirect costs. However, typical examples of indirect cost for many nonprofit organizations may include depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting.

(c) Federal Agency Acceptance of Negotiated Indirect Cost Rates. (See § 200.306.)

(1) Negotiated indirect cost rates must be accepted by all Federal agencies. A Federal agency may use a rate different from the negotiated rate for either a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by the awarding Federal agency in accordance with paragraph (c)(3) of this section.

(2) The Federal agency must notify OMB of any approved deviations. The recipient or subrecipient may notify OMB of any disputes with Federal agencies regarding the application of a federally negotiated indirect cost rate.

(3) The Federal agency must implement, and make publicly available, the policies, procedures and general decision-making criteria that their programs will follow to seek and justify deviations from negotiated rates.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.413(f)(1)

2 CFR 200.414(c)(3) (enhanced display) page 10 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.454/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.454/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.450/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.421/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.450/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.432/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.442/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.431/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.306/

§ 200.415 Required certifications.

(4) The Federal agency must include, in the notice of funding opportunity, the policies relating to indirect cost rate reimbursement or cost share as approved under paragraph (e). As appropriate, the Federal agency should incorporate discussion of these policies into its outreach activities with applicants before posting a notice of funding opportunity. See § 200.204.

(d) Pass-through entities. Pass-through entities are subject to the requirements in § 200.332(b)(4) and must accept all federally negotiated indirect costs rates for subrecipients.

(e) Appendices. Requirements for development and submission of indirect cost rate proposals and cost allocation plans are contained in the following Appendices:

(1) Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs);

(2) Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations;

(3) Appendix V to Part 200—State/Local Government-wide Central Service Cost Allocation Plans;

(4) Appendix VI to Part 200—Public Assistance Cost Allocation Plans;

(5) Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals;

and

(6) Appendix IX to Part 200—Hospital Cost Principles.

(f) De minimis rate. Recipients and subrecipients that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15 percent of modified total direct costs (MTDC). The recipient or subrecipient is authorized to determine the appropriate rate up to this limit. Federal agencies and pass-through entities may not require recipients and subrecipients to use a de minimis rate lower than the negotiated indirect cost rate or the rate elected pursuant to this subsection unless required by Federal statute or regulation. The de minimis rate must not be applied to cost reimbursement contracts issued directly by the Federal Government in accordance with the FAR.

Recipients and subrecipients are not required to use the de minimis rate. When applying the de minimis rate, costs must be consistently charged as either direct or indirect costs and may not be double charged or inconsistently charged as both. The de minimis rate does not require documentation to justify its use and may be used indefinitely. Once elected, the recipient or subrecipient must use the de minimis rate for all Federal awards until the recipient or subrecipient chooses to receive a negotiated rate.

(g) One-time extension of indirect rates. A recipient or subrecipient with a current Federal negotiated indirect cost rate may apply for a one-time extension of that agreement for up to four years. This extension will be subject to review and approval by the cognizant agency for indirect costs. If this extension is granted, the recipient or subrecipient may not request a rate review until the extension period ends. The recipient or subrecipient must re-apply to negotiate a new rate when the extension ends. After a new rate has been negotiated, the recipient or subrecipient may again apply for a one-time extension of the new rate in accordance with this paragraph.

(a) Financial reports must include a certification, signed by an official who is authorized to legally bind the recipient, which reads as follows: “By signing this report, I certify to the best of my knowledge and belief that the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award. I am aware

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.414(c)(4)

2 CFR 200.415(a) (enhanced display) page 11 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.204/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.332/?#p-200.332(b)(4)

SPECIAL CONSIDERATIONS FOR STATES, LOCAL GOVERNMENTS AND INDIAN TRIBES

§ 200.416 Cost allocation plans and indirect cost proposals.

that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sections 3729-3730 and 3801-3812).”

(b) Subrecipients under the Federal award must certify to the pass-through entity whenever applying for funds, requesting payment, and submitting financial reports: “I certify to the best of my knowledge and belief that the information provided herein is true, complete, and accurate. I am aware that the provision of false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil, or administrative consequences including, but not limited to violations of U.S. Code Title 18, Sections 2, 1001, 1343 and Title 31, Sections 3729-3730 and 3801-3812.” Each such certification must be maintained pursuant to the requirements of § 200.334. This paragraph applies to all tiers of subrecipients.

(c) Certification of cost allocation plan or indirect cost rate proposal. Each cost allocation plan or indirect cost rate proposal must comply with the following:

(1) A proposal to establish a cost allocation plan or an indirect cost rate, whether submitted to a Federal cognizant agency for indirect costs or maintained on file by the recipient, must be certified by the recipient using the Certificate of Cost Allocation Plan or Certificate of Indirect Costs as set forth in appendices III through VII, and IX of this part. The certificate must be signed on behalf of the recipient by an individual at a level no lower than the vice president or chief financial officer of the recipient that submits the proposal.

(2) The Federal Government may either disallow all indirect costs or unilaterally establish an indirect cost rate when the recipient fails to submit a certified proposal for establishing a rate. This rate should be based upon audited historical data or other data furnished to the cognizant agency for indirect costs and for which it can be demonstrated that all unallowable costs have been excluded.

The rate established must ensure that potentially unallowable costs are not reimbursed.

Alternatively, the recipient may use the de minimis indirect cost rate. See § 200.414(f).

(d) Nonprofit organizations must certify that they did not meet the definition of a major nonprofit organization as defined in § 200.414(a), if applicable.

(e) The recipient must certify that the requirements and standards for lobbying (see § 200.450) have been met when submitting its indirect cost rate proposal.

(a) Awards to states, local governments, and Indian Tribes are often implemented at the level of department within the State, local government, or Indian Tribe. A central service cost allocation plan is established to allow such department to claim a portion of centralized service costs that are incurred in proportion to the award's activities. Examples of centralized service costs may include motor pools, computer centers, purchasing, and accounting. Since Federal awards are performed within the individual operating agencies, there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable and consistent basis. The central service cost allocation plan establishes this process.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.415(b)

2 CFR 200.416(a) (enhanced display) page 12 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.334/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.450/

§ 200.417 Interagency service.

An operating department may provide services to another operating department of the same State, local government, or Indian Tribe. In these instances, the cost of services provided may include allowable direct costs of the service plus a pro-rated share of indirect costs. A standard indirect cost rate equal to 15 percent of the direct salaries and wages for providing the service (excluding overtime, shift premiums, and fringe benefits) may be used instead of determining the actual indirect costs of the service. These services do not include centralized services that are included in central service cost allocation plans described in Appendix V of this part.

Special Considerations for Institutions of Higher Education

§ 200.418 Costs incurred by states and local governments.

Costs incurred or paid by a State or local government on behalf of and in direct benefit to its IHEs are allowable.

These costs include but are not limited to fringe benefit programs such as pension costs and Federal Insurance Contributions Act (FICA) costs. These costs are allowable regardless of whether they are recorded in the accounting records of the institutions, subject to the following conditions:

§ 200.419 Cost accounting standards.

An IHE that receive an aggregate total $50 million or more in Federal awards and instruments subject to this subpart (as specified in § 200.101) in its most recently completed fiscal year must comply with the Cost Accounting Standards Board's cost accounting standards located at 48 CFR 9905.501, 9905.502, 9905.505, and

9905.506. CAS-covered contracts and subcontracts awarded to the IHEs are subject to the broader range of CAS requirements at 48 CFR 9900 through 9999 and 48 CFR part 30 (FAR Part 30).

GENERAL PROVISIONS FOR SELECTED ITEMS OF COST

(b) Individual departments typically charge Federal awards for indirect costs through an indirect cost rate. A separate indirect cost rate proposal for each operating department is usually necessary to claim indirect costs under Federal awards. Indirect costs include:

(1) The indirect costs originating in each operating department of the State, local government, or Indian Tribe carrying out Federal awards; and

(2) The costs of central governmental services distributed through the central service cost allocation plan and not otherwise treated as direct costs.

(c) The requirements for developing and submitting cost allocation plans (for central service costs and public assistance programs) and indirect cost rate proposals are contained in appendices V, VI, and VII of this part.

(a) The costs meet the requirements of § 200.402-200.411;

(b) The costs are properly supported by approved cost allocation plans in accordance with the applicable cost accounting principles of this part; and

(c) The costs are not otherwise borne directly or indirectly by the Federal Government.

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.416(b)

2 CFR 200.419 (enhanced display) page 13 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/part-200/appendix-Appendix%20V%20to%20Part%20200/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.402/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.101/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9905.501/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9905.502/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9905.505/ https://www.ecfr.gov/on/2025-05-29/title-48/section-9905.506/ https://www.ecfr.gov/on/2025-05-29/title-48/part-9900/ https://www.ecfr.gov/on/2025-05-29/title-48/part-9999/ https://www.ecfr.gov/on/2025-05-29/title-48/part-30/

§ 200.420 Considerations for selected items of cost.

§ 200.421 Advertising and public relations.

(a) This section provides principles to be applied in establishing the allowability of certain items involved in determining cost, in addition to other requirements of this subpart. These principles apply whether or not a particular cost item is properly treated as a direct or indirect cost.

(b) The following sections are not intended to be a comprehensive list of potential items of cost encountered under Federal awards. Failure to mention a particular item of cost, including as an example in certain sections, is not intended to imply that it is either allowable or unallowable. When determining the allowability for an item of cost, each case should be based on the treatment provided for similar or related items of cost and based on the principles described in §§ 200.402 through 200.411. In case of a discrepancy between the provisions of a specific Federal award and the provisions below, the Federal award governs. Criteria outlined in § 200.403 must be applied in determining allowability.

(a) The term advertising costs means the costs of advertising media and corollary administrative costs.

Advertising media includes, but is not limited to, magazines, newspapers, radio and television, direct mail, exhibits, and electronic or computer transmittals.

(b) The only allowable advertising costs are those which are solely for:

(1) The recruitment of personnel required by the recipient or subrecipient for the performance of a Federal award (See also § 200.463);

(2) The procurement of goods and services for the performance of a Federal award;

(3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except when the recipient or subrecipient is reimbursed for disposal costs at a predetermined amount; or

(4) Program outreach (for example, recruiting project participants) and other specific purposes necessary to meet the Federal award requirements.

(c) The term “public relations” includes community relations and means those activities dedicated to maintaining the recipient's or subrecipient's image or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public.

(d) The only allowable public relations costs are:

(1) Costs specifically required by the Federal award;

(2) Costs of communicating with the public and press about specific activities or accomplishments which result from the performance of the Federal award (these costs are considered necessary as part of the outreach effort for the Federal award); or

(3) Costs of conducting general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of funding opportunities or financial matters.

(e) Unallowable advertising and public relations costs include the following:

(1) All advertising and public relations costs other than as specified in paragraphs (b) and (d) of this section;

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.420

2 CFR 200.421(e)(1) (enhanced display) page 14 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.402/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.411/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.403/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.463/

§ 200.422 Advisory councils.

An advisory council or committee is a body that provides advice to the management of such entities as corporations, organizations, or foundations. Costs incurred by both internal and external advisory councils or committees are allowable if authorized by statute, the Federal agency, or as an indirect cost where allocable to Federal awards. See § 200.444, which applies to States, local governments, and Indian Tribes.

§ 200.423 Alcoholic beverages.

The cost of alcoholic beverages is unallowable.

§ 200.424 Alumni activities.

Costs incurred by IHEs for, or in support of, alumni activities are unallowable.

§ 200.425 Audit services.

(2) Costs of meetings, conventions, conferences, or other events related to other activities of the entity (see also § 200.432), including:

(i) Costs of displays, demonstrations, and exhibits;

(ii) Costs of meeting rooms, hospitality suites, and other special facilities used in conjunction with shows and other special events; and

(iii) Salaries and wages of employees engaged in setting up and displaying exhibits, making demonstrations, and providing briefings;

(3) Costs of promotional items and memorabilia;

(4) Costs of advertising and public relations designed solely to promote the recipient or subrecipient.

(a) A reasonably proportionate share of the costs of audits required by and performed in accordance with the Single Audit Act Amendments of 1996 (31 U.S.C. 7501-7507), and the requirements of this part are allowable. However, the following audit costs are unallowable:

(1) Any costs when audits required by the Single Audit Act and subpart F of this part have not been conducted, or have been conducted but not in accordance with the requirements; and

(2) Except as provided for in paragraph (c) of this section, any costs of auditing a non-Federal entity that is exempted from having an audit conducted under the Single Audit Act and subpart F of this part because its expenditures under Federal awards are less than $1,000,000 during its fiscal year.”

(b) The costs of a financial statement audit of a recipient or subrecipient that does not currently have a Federal award may be included in the indirect cost pool for a cost allocation plan or indirect cost proposal.

(c) Pass-through entities may charge Federal awards for the cost of agreed-upon procedures engagements to monitor subrecipients (in accordance with §§ 200.331-333) exempt from having an audit conducted under the Single Audit Act and the requirements of this part. This cost is allowable only if the agreed-upon procedures engagements are:

(1) Conducted in accordance with GAGAS or applicable international attestation standards, as appropriate;

2 CFR Part 200 Subpart E (up to date as of 5/29/2025) Cost Principles 2 CFR 200.421(e)(2)

2 CFR 200.425(c)(1) (enhanced display) page 15 of 53 https://www.ecfr.gov/on/2025-05-29/title-2/section-200.432/ https://www.ecfr.gov/on/2025-05-29/title-2/section-200.444/ https://www.govinfo.gov/link/uscode/31/7501 https://www.ecfr.gov/on/2025-05-29/title-2/part-200/subpart-F/ https://www.ecfr.gov/on/2025-05-29/title-2/part-200/subpart-F/…