What makes a cost allowable under a federal grant? Answer in under 100 words. Cite only eCFR (www.ecfr.gov) sources.
Details / How it works
Under 2 CFR 200.403, except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards (including grants, cooperative agreements, and cost-reimbursement contracts):
- (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto. "Allocable" means the cost can be assigned to the award based on the relative benefit received, typically through direct charging or a negotiated indirect cost rate.
- (b) Conform to any limitations or exclusions set forth in the cost principles (2 CFR 200.400–200.475) 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 — 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 as an indirect cost.
- (e) Be determined in accordance with GAAP (FASB, GASB, or FASAB, as applicable).
- (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior award period (see § 200.306(b)).
- (g) Be adequately documented (see §§ 200.300 through 200.309).
Numbers & thresholds
| Criterion | Requirement | Reference |
|---|---|---|
| Allocability | Assignable to award based on relative benefit received | § 200.403(a) |
| Consistency | Uniform treatment between federally financed and other activities | § 200.403(c), (d) |
| GAAP conformance | Determined per FASB, GASB, or FASAB standards | § 200.403(e) |
| Documentation | Adequate documentation required per §§ 200.300–200.309 | § 200.403(g) |
| Administrative closeout costs | Must be liquidated prior to the due date of the final report(s) and charged to the final budget period | § 200.403(h) |
| Other costs | Must be incurred during the approved budget period | § 200.403(h) |
Exceptions & edge cases
Where otherwise authorized by statute, the allowability criteria in § 200.403 do not strictly apply. The Notice of Award may contain specific limitations or exclusions regarding the types or amounts of costs that are allowable, and recipients and subrecipients must ensure costs meet the cost allowability criteria established by federal regulations. Federal statutes contain definitions that apply to particular programs and take precedence over the definitions provided in 2 CFR Part 200, including those related to allowability.
Sources
- [1]U.S. Government Publishing Office / Office of Management and Budget — 2 CFR 200.403 — Factors affecting allowability of costs under federal awards · as of 2026-08-28
- [2]U.S. Government Publishing Office / Office of Management and Budget — 2 CFR 200.1 — Definitions for federal grants Uniform Guidance · as of 2026-08-28
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