The following hypothetical situation illustrates the cost principles
defined in OMB Circular A-21:

ALLOWABILITY

You have a research grant from the National Science
Foundation to study changing climate patterns. The project includes participating in a conference in Seattle. A graduate student in your lab has been invited to present a paper at this conference. There are no prohibitions against travel on the grant, so the student's travel costs are ALLOWABLE.

At the conference, your student has dinner with a friend and orders wine (the student is, of course, of legal drinking age in the state of Washington). The cost of the wine (plus tax and tip) is an UNALLOWABLE cost (as identified in A-21), and that part of the bill may NOT be charged to the Government. The University of Rochester can reimburse the student for this portion of the dinner expense, but the money must come from non-sponsored funds, and be recorded in the University's accounting system as an UNALLOWABLE cost.

ALLOCABILITY

The ALLOCABILITY cost principle stipulates that any expense paid by a project must benefit that project. This particular conference focuses on the "El Nino" effect on global climate. Your student will present her paper and interact with colleagues from other academic institutions. The trip will benefit the project, and the travel costs are therefore ALLOCABLE to the project.

Without some documentation, the University's Finance Department (or an internal or external auditor) might question the ALLOCABILITY of this expense to your project. In a case like this, when your department submits expense reports for reimbursement, the package should include the conference agenda or other documentation to support the relationship between the travel and the project which paid for it.

REASONABLENESS

Your student was feeling rather good after her presentation
and decided to celebrate in a BIG way. She brings back receipts showing that the cost of her final dinner in Seattle, exclusive of the wine, was $147. per person. Even though the trip was allowable and allocable, that cost is not REASONABLE. The cost principle of REASONABLENESS stipulates that costs will be reimbursed only if a prudent person would have paid this amount. If not, the expense may not be charged to the Government.

The University of Rochester also has an "actual and reasonable" requirement for travel expenses (where a traveler is not using "per diem" reimbursement). Your student may therefore not be fully reimbursed for this expense by the University either, although she can be reimbursed for a lesser, reasonable amount.

Questions as to whether a particular expense is reasonable or not may be referred to the department head and / or the Finance Department. See the Finance Department's Travel and Conference Policies for further detail.

CONSISTENCY

Because your student's participation in this conference directly benefited your NSF project, reasonable travel costs should be charged DIRECTLY to that project. Other expenses incurred in similar circumstances in other parts of the University should also be charged directly to the appropriate projects.

If a trip that benefits a specific project is charged INDIRECTLY, or such expenses are charged to departmental funds, a portion of those costs could end up in the University's indirect cost pools.

Pooled research expenses are then charged to ALL sponsors through the application of the University's indirect cost rates. Therefore, trips benefiting specific projects should rarely be charged to departmental funds. This inconsistency may, in extreme cases, violate Cost Accounting Standards, and may lead to unfair "double charging."