Allowability, Allocability, Reasonableness

The principles of OMB Circular A-21 govern costs that may be charged to or paid, even in part, by federal funds. A-21 principles apply both to costs that will be paid directly from sponsored awards or indirectly via the institution's Facilities & Administrative Reimbursement Rate. A-21 requires that all costs being charged to the federal government pass the following three tests:

1. The cost must be allowable under both the provisions of A-21 AND under the terms of a specific award.
   
2. The cost must be allocable; that is, the expense can be associated to a project with a high degree of accuracy. See below for a discussion of appropriate methodologies to match the benefit of an expenditure with the sponsored project.
   
3. The cost must be reasonable, that is the cost reflects what a "prudent person" would pay in a like circumstance.

For additional information, review the Allowability section of the Cardinal Curriculum.