Allowable Costs / OMB Circulars
The U.S. Office of Management and Budget (OMB) establishes the regulations which must be used to administer Federal grants. The USDOT's regulation in 49 CFR 18.22 refers to applicable OMB circulars to determine allowable costs. All OMB circulars are available on the World Wide Web at www.whitehouse.gov/omb/circulars/index.html.
Allowable costs are regulated in 49 CFR 18.22. Section 18.22(b) lists the appropriate cost principles for various kinds of organizations.
| For the costs of a | Use the principles in |
|---|---|
| State, local, or Indian tribal government. | OMB Circular A-87. |
| Private, nonprofit organization other than an (1) institution of higher education, (2) hospital, or (3) organization named in OMB Circular A-122 as not subject to that circular. | OMB Circular A-122. |
| Educational institutions. | OMB Circular A-21. |
| For-profit organization other than a hospital and an organization named in OMB Circular A-122 as not subject to that circular. | 48 CFR Part 31. Contract Cost Principles and Procedures, or uniform cost accounting standards that comply with cost principles acceptable to the Federal agency. |
Audit requirements for grants and subgrants are found in 49 CFR 18.26 and 49 CFR 19.26, which refer to OMB Circular A-133: Audits of States, Local Governments, and Non-Profit Organizations.
In general, costs are allowable, as specified in the appropriate OMB Circular, if the costs are necessary, reasonable, and benefit this grant program. Examples of unallowable costs are those for purposes not related to this program.
OMB Circular A-87 lists Cost Principles for State, Local, and Indian Tribal Governments.
Attachment A covers General Principles for Determining Allowable Costs.
Attachment B covers Selected Items of Cost. Among the selected items is Compensation for personnel services. Generally, reasonable personnel services related to a project are allowable.
Attachment C covers State/Local-Wide Central Service Cost Allocation Plans.
Attachment D covers Public Assistance Cost Allocation Plans.
Attachment E covers State and Local Indirect Cost Rate Proposals. Although some indirect costs are allowed under the Federal regulations, some States may disallow indirect costs. If the State allows some indirect costs, the State must determine whether or not the indirect cost rates are reasonable in terms of the on-the-ground benefit for the project. See FHWA's Policy on Indirect Costs.
If the applicant is not a State, local, or Indian tribal government, use the appropriate attachment for the appropriate OMB Circular. For example, OMB Circular A-122, Attachment A, Section C, covers indirect costs for nonprofit organizations.
