![Page 1: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/1.jpg)
Allowable/Unallowable Costs at MIT
Presented by
The Office of Sponsored ProgramsJohn Donahue, Susie Won
&Office of the Vice President for Finance
Paul Arsenault/ Ellen Sico/ John Larkin/ Doug Le Vie
![Page 2: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/2.jpg)
2
Why Is This Training Needed ? Everyone who initiates and/or approves
financial transactions at MIT needs to be able to accurately determine: Is the cost is eligible for reimbursement?
Per MIT Policy Per Federal Policy (Circular OMB A-21)
What is the appropriate: Cost object? G/L account?
![Page 3: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/3.jpg)
3
What is an unallowable cost and why does the Institute track it?
OMB (U.S. Office of Management and Budget) Circular A-21 prohibits the charging of certain “unallowable” costs to federally sponsored agreements, either as a direct cost to sponsored research or on a recoverable facilities and administrative cost center (indirect).
![Page 4: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/4.jpg)
4
Exclusion of Unallowable Costs from Federal Cost Submissions
Specific Unallowable GL Accounts
Training
Allowance for Unallowable Costs
Account Scrubbing
Statistical Sampling
![Page 5: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/5.jpg)
5
Cost Certification All Cost Submissions
Signature of the Executive VP
Under Penalty of Perjury
![Page 6: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/6.jpg)
6
OMB Circular A-21 “Provides specific guidelines for determining
costs applicable to research and development, training, and other sponsored work performed by colleges and universities under grants, contracts, and other Agreements with the Federal Government.”
These agreements are referred to as Sponsored Agreements
![Page 7: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/7.jpg)
7
Test for Allowability Per A-21 costs must be:
Reasonable – reflects that actions of a “prudent person”
Allocable -- provide a benefit to research projects, either directly or indirectly
Consistently Treated -- cost treated the same in like circumstances, either as a direct or indirect
![Page 8: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/8.jpg)
8
Section J Sections J.1 - J.54 of Circular A-21 provide
Principles to be applied when determining the allowability of certain costs
In case of a discrepancy between the principles listed in Section J and a specific sponsored agreement, the sponsored agreement should always govern.
![Page 9: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/9.jpg)
9
Unallowable Activities / Costs ?Based on your experience, please list some examples of what you
consider to be an unallowable cost:
![Page 10: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/10.jpg)
10
Unallowable Activities Alumni Activities Student Recruitment Convocation Contingency
provisions Fines and Penalties Lobbying Costs
Fund Raising Advertising, selling or
marketing of Institute products or services
Entertainment Student activities Social Memberships
![Page 11: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/11.jpg)
11
Unallowable G/L Accounts @ MIT 420080 Travel-Unallowable Cost 420166 Entertainment 420254 Non-Reimbursable Expenses 420302 Promotion & Memorabilia 420304 Public Relations 420306 Publicity 420318 Recreation Related Expense 421205 Alcoholic Beverages 421584 Memberships and Dues-Social
![Page 12: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/12.jpg)
12
Unallowable G/L Accounts(Cont.) Unallowable Salaries (400812) Record Project Overrun (420314) Student-related costs:
Scholarship allowance (420342) Scholarship (422305) Undergraduate student fees (422320)
Bad Debts (421552)
![Page 13: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/13.jpg)
13
MIT Unallowable G/L Accounts Unallowable Travel (420080)
This G/L account is for travel costs which are reimbursable under MIT’s Travel Policy but which are not recoverable from the Federal government. Examples would be spousal travel and airfare in excess of the lowest available commercial discount airfare.
![Page 14: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/14.jpg)
14
MIT Unallowable G/L Accounts Entertainment (420166)
This G/L account is used for non-reimbursable costs normally incurred for social types of activities (e.g. a department meeting that does not qualify as a true business meeting). Entertainment also includes tickets to shows and sporting events and related meals, indoor floral arrangements, etc.
The entire cost of a non-reimbursable activity can be charged to this G/L account, it is
not necessary to itemize food, alcohol, etc.
![Page 15: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/15.jpg)
15
MIT Unallowable G/L Accounts Non-Reimbursable Expenses (420254)
This G/L account is to be used for unallowable costs that do not seem to fit any of the other unallowable G/L accounts
![Page 16: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/16.jpg)
16
MIT Unallowable G/L Accounts Promotional Items and Memorabilia (420302)
This G/L account is used for the cost of items that promote or provide memorabilia of MIT, its departments, labs or centers. Give-aways of any kind to non-MIT employees are unallowable.
![Page 17: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/17.jpg)
17
MIT Unallowable G/L Accounts Public Relations (420304) Publicity (420306)
These G/L accounts are used for public and community relations: activities with the intention of enhancing the image of MIT to the general public
![Page 18: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/18.jpg)
18
MIT Unallowable G/L Accounts Recreation Related Expenses (420318)
This G/L account is for costs expended for employee morale activities such as retirement parties, birthday parties, or other office social events to a maximum of $15.00 per employee per year
![Page 19: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/19.jpg)
19
MIT Unallowable G/L Accounts Alcoholic Beverages (421205)
This G/L account is used for the cost of alcoholic beverages bought on a PO for an Institute function or identifiable from receipts supporting a dinner meeting. Alcohol cannot be charged to research accounts.
Alcohol does not need to be segregated out if charged to another unallowable G/L account such as entertainment or non-reimbursable expenses
![Page 20: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/20.jpg)
20
MIT Unallowable G/L Accounts Memberships and Social (421584)
This G/L account is used for the cost of membership in any civic or community organization or in any country club, social, or dining club or organization. All such memberships are unallowable.
![Page 21: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/21.jpg)
21
MIT Unallowable G/L Accounts Unallowable Salaries (400812)
Use of this G/L account applies to directly associated staff time in an unallowable event, that time being measured over the course of the year. If the staff time is 25% or greater in an unallowable activity, then this G/L account must be used for that person’s effort. You should contact the Payroll Office before using this G/L.
![Page 22: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/22.jpg)
22
MIT Unallowable G/L Accounts Recorded Project Overrun (420314)
This G/L account is used to remove an overrun on a sponsored program in accordance with Institute policy. Project overruns may be recorded to selected general accounts (cost centers) or fund accounts (internal orders) using this G/L account.
![Page 23: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/23.jpg)
23
MIT Unallowable G/L Accounts Student Related Costs
Scholarship Allowance (420342) Scholarship (422305) Undergraduate student fees (422320)
![Page 24: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/24.jpg)
24
MIT Unallowable G/L Accounts Bad Debts (421552)
This G/L account is used for any losses, whether actual or estimated, arising from uncollectible accounts, included associated costs of collections.
![Page 25: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/25.jpg)
25
Exercise Flower arrangement for department headquarters
reception area A research group has monthly lunch meetings to facilitate
collaboration and share ideas Visiting professor receives MIT parking ticket $100 gift certificates given as awards within the
department (charged to M&S GL) Dry cleaning for Dean’s convocation attire Beginning of the year kick-off lunch for a lab’s
undergraduate research assistants (UROP) Lab orders coffee mugs with lab name and logo to
commemorate its 25th anniversary
![Page 26: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/26.jpg)
26
“Directly Associated” Costs A cost which is “directly associated” with an
unallowable cost is also unallowable.
Cost Accounting Standards (CAS) definition of a directly associated cost:
“any cost which is generated solely as a result of the incurrence of another unallowable cost and which would not have been incurred had the other cost not been incurred?”
![Page 27: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/27.jpg)
27
“Directly Associated” Costs Example of a Directly Associated Cost:
A department conducts a meeting which is largely a social gathering. Alcohol and food served at the meeting are unallowable costs……the cost of invitations, postage or other costs related to the unallowable nature of the meeting should also be coded as non-reimbursable
![Page 28: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/28.jpg)
28
“Directly Associated” Costs There is no specific definition of when meetings qualify
for reimbursement and when they should be considered entertainment. In most cases the meeting will qualify as either business (allowable) or entertainment (unallowable)
Allowable meetings require a business purpose, agenda, list of attendees, etc.
The business purpose must be clearly documented
![Page 29: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/29.jpg)
29
Rates as Direct Costs Activities charging rates as direct costs to
research are also subject to federal allowability rules and must ensure that no unallowable expenses are being charged through its rates
Service Centers Laboratory Allocations
![Page 30: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/30.jpg)
30
Items of Particular Interest MIT Memorabilia Personal Expenses Prizes & Awards Flowers/Floral Arrangements Catering/Food Contributions/Donations
![Page 31: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/31.jpg)
31
Sponsored Accounting Impact of unallowable charges on Sponsored
Accounting Billings, Cost Reimbursable, Letter of Credit Journal document approvals Removal/reclassification of unallowable
charges Audits and Final Reporting
![Page 32: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/32.jpg)
32
Travel
Unallowable Travel (420080) Airfare in excess of the lowest available discount airfare Foreign flag carriers Code share flights when the designator code is a foreign carrier Spousal travel when the spouse is not formally representing MIT Alcohol Prospective student visits Fundraising Resource development Food & beverage, entertainment Gifts Approved travel exceptions, out of policy - extenuating circumstances
![Page 33: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/33.jpg)
33
Accounts PayableCommonly Used Unallowable GL Accounts
421000 - Meetings - Food & Beverage 420254 - Non-Reimbursable Expenses 420166 - Entertainment 420318 - Recreation Related Expenses 420302 - Promotional Items and Memorabilia 420319 - Prizes & Awards - Other
Please call if help is needed in determining which G/L to use
![Page 34: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/34.jpg)
34
Accounts Payable Staff John Larkin, Manager 3-2729 Wayne Dwyer, Supervisor 8-8485 General AP Questions 3-2750 [email protected]
Catherine Cherico 3-2768MIT internal request for payments
Janet Mulstay 3-1349 Wire Transfers
![Page 35: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/35.jpg)
35
Scenario 1 MIT faculty member wins Nobel Prize and department
organizes a special lecture and outdoor reception. A department administrative assistant spends time preparing invitations and planning the event (securing the location, reserving table/chair/tent rentals, ordering reception refreshments, purchasing decorations, etc.). Identify various costs of this activity How might you expense these costs and where would you
put the unallowables?
![Page 36: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/36.jpg)
36
Scenario 2 A wealthy couple (MIT alumni) is considering making a
large gift to the MIT lab where they did research. They invite the Lab Director to their home in Florida to discuss the details and request that the Director’s spouse also attend. The Lab Director asks the administrative assistant to pick up some MIT insignia items at The Coop as gifts for the couple. Identify various costs of this activity How might you expense these costs and where would you
put the unallowables?
![Page 37: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/37.jpg)
37
What Do You Need to Do ? Be aware of OMB Circular A-21 rules
(accessed through the OSP homepage) Code transactions with correct G/L
account Review accounting statements for errors Ask for help when you’re not sure
![Page 38: Allowable/Unallowable Costs at MIT Presented by The Office of Sponsored Programs John Donahue, Susie Won & Office of the Vice President for Finance Paul](https://reader036.vdocument.in/reader036/viewer/2022062408/56649e245503460f94b12d7e/html5/thumbnails/38.jpg)
38
Where to Go for HelpArea Contact Email Phone
Accounts Payable John Larkin [email protected] 3-2729
Journal Vouchers Mary Nicholson [email protected] 2-2764
Payroll Kathie Lalor
Payroll Service Center
3-3869
3-4255
Sponsored ResearchAccounting Doug LeVie - Industrial/Foundations
Betty Trammell- Governmental
3-3868
8-8228
Travel Ellen Sico [email protected] 3-3547
Cost Analysis John DonahueSusie Won
[email protected]@mit.edu
8-79502-3297