Accounting for Unallowable Costs

A prinicipal investigator and graduate research assistant consult on details related to research work.


An unallowable cost is a cost which the sponsor prohibits and will not reimburse. Because New York University (NYU) complies with all the terms and conditions of a sponsored award, at no time should unallowable costs be charged to an award whose sponsor does not allow the cost. Proper tracking of unallowable costs is required for compliance with federal regulations.

NYU Approach

It’s important to keep in mind that activities and expenses that are unallowable on a federal award may still be allowable on a non-federal award.

Departments may still incur federally unallowable expenses, but they must be coded as unallowable so they can be readily identified and excluded from the indirect cost rate calculation.

The following methods are used by NYU to identify, separately code, and monitor Unallowable Costs:

  • NYU provides separate accounts within the University’s financial system (see Resource: Identifying Unallowable Costs under Cost Accounting Standards (CAS) 505, OMB Circular A-21).
  • Principal Investigator's (PI's) and their staff monitor award expenditures to ensure unallowable costs are identified and separately coded.
  • At award closing, Sponsored Programs Administration (SPA) Financial Analysts review expenses.
  • There is an in-depth review of expenses when developing the F&A rate proposal.

Examples of Unallowable Costs include:

  • Advertising for NYU
  • Alcoholic beverages
  • Alumni Activities
  • Bad debts
  • Contingency provisions
  • Costs overrun from other projects
  • Donations & gifts
  • Employee auto allowances
  • Entertainment
  • Fines and penalties
  • Fundraising
  • Lobbying
  • Personal use expenses

Frequently Asked Questions