HBP Part 10.3.4. Expenditures/Costs

Handbook of Business Procedures

Date published: June 19, 2012
Last revised: February 17, 2020
Issued by: Federal Reporting


A. Introduction

Rates can only include expenditures directly related to the operation of the center and must be designed to recover no more than the operating cost for the services or goods provided.

Costs included in a rate must be reasonable, allocable, and allowable. The cost of one service or product cannot be funded by or included in the rates of another service or product. Failure to mention a particular expense does not imply that it is either allowable or unallowable; rather, determination of allowability in each case is based on the treatment provided for similar or related items of cost.

B. Allowable Costs

Center managers must exercise due prudence to ensure expenses included are reasonable, consistently treated, and conform to any limitations or exclusions. Centers costs may include salaries, longevity, fringes, supplies or materials, travel, and equipment depreciation recovery if they are necessary to the center’s operations. To prevent major fluctuations in rates, major non-capital purchases may be amortized over a period greater than one year if approved by Federal Costing.

C. Unallowable Costs

Centers must not include these costs in their rates (not all inclusive):

  • All unallowable costs, as defined by OMB Uniform Guidance, must not be included in the rates charged to internal users or charged to the center operating account, such as: entertainment, official occasions, tuition, scholarships, student aid, gift income, interest, advertising, recruiting, bonding, bad debt, marketing, severance pay, fundraising, housing allowances, personal living expenses, labor relations, lobbying, losses on other sponsored agreements/contracts, deficits from other centers, proposal costs for agreements or projects, contingencies, fines and penalties from violations or noncompliance of any laws or regulations, and any costs already paid by the federal government.
  • Building depreciation, rent, and operations and maintenance not paid by the center. Only costs incurred and reimbursed by the center can be included in the rates.
  • Any cost specifically designated as unallowable within a sponsored agreement.
  • Any type of reserve or contingency (e.g., equipment, supplies, and salaries or wages) amounts.
  • Any costs already reimbursed through the Facilities and Administrative (F&A) indirect cost rate. Contact Federal Costing for determination.
  • Utilizing excess revenue to purchase equipment, consumables or other expenses, salary increases, salary supplements, tuition, or to offset losses in another center.

D. Guarantee Account

In order to establish a center, a guarantee account must be designated in the center's initial proposal by the unit responsible for the center. This account is a "guarantee" for the payment of unrecovered center expense or uncollectible revenue. The guarantee account cannot be a sponsored research account or a different center account.

E. Unrecovered Costs/Subsidies/Cost Sharing

It Costs to Subsidize. Centers must all of their costs in the rates.

  • The university, school, or department may elect to subsidize a center either by charging billing rates lower than actual costs.
  • Subsidies have a significant financial impact on the department providing the funds and on the university as a whole. Commitments need to be held to a minimum.
  • Center deficits caused by intentional subsidies cannot be carried forward as adjustments to future billing rates.
  • The center department must identify a guarantee account to be used to subsidize any cost pool expenses. The guarantee account cannot be a sponsored research account or a different center account.
  • By signing the center forms, the department is certifying that all costs associated with providing services are included. If any costs are subsidized, they must be clearly shown and justified within the center proposal.
  • Subsidies are fully documented as part of the submission package and must be approved by the following:
    • Department Chair/Head
    • Vice President’s Office
    • CSU Business Office



Part 10. Costing - Table of Contents