VUMC Academic Enterprise Accounting for Unallowable Costs Federal regulations guide the accounting for many of the charges that we incur on sponsored agreements, whether as direct charges or as indirect charges. Attached is a reminder regarding the costs which can not be charged to a federally-funded grant or contract. Many of these costs may be allowable under VUMC policy when paid for from unrestricted or non-governmental restricted funds. Because we are in our base year for indirect cost purposes, it is important that all unallowable charges be charged to the proper account code in our accounting system. Although the regulations have not changed in recent years, please take this opportunity to refresh your department s method of accounting for such costs. Many costs which are specifically identified as unallowable for federal funding purposes may be allowable if paid for from non-governmental funds. As a result, special attention should be given to properly account for such costs if they are paid for from institutional or non-governmental funds. Following is a list of those costs which are specifically prohibited by the federal government: Advertising for general promotion of the Institution, including printed materials, promotional items, memorabilia, gifts and souvenirs Alcoholic beverages Alumni or fundraising activities Antiques Bad debt write offs Charitable contributions Commencement expenses Decorative objects for private offices Entertainment Fine/original art Fines and penalties First-class/business-class air travel differentials Flowers Gifts and awards Goods or services for personal use Lobbying Membership in airline travel clubs Membership in civic, social, community organizations or country clubs Selling or marketing products or services of the Institution Social events provides additional detail on some of the costs that may be allowable in the Medical Center. For all costs, the federal government will allow only those costs that are reasonable, allocable, properly documented, and consistently charged throughout the Medical Center (Uniform Guidance, Part 200, Subpart E, Subsection 200.403). Reasonable costs are defined by the government as those that reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made" (Uniform Guidance, Part 200, Subpart E, Subsection 200.404). All costs must be reasonable and necessary. Costs are considered allocable if they are charged or assignable to a particular cost objective in accordance with relative benefits received or other equitable relationships (Uniform Guidance, Part 200, Subpart E, Subsection 200.405). Properly documented costs are those for which valid supporting invoices or receipts are provided or are within established Institutional guidelines for reimbursement. May 2016
VUMC Academic Enterprise Accounting for Unallowable Costs Consistency in charging costs means that costs are treated similarly whether charged to government grants or to Institutional funds and are given consistent treatment through application of generally accepted accounting principles. We recognize the effort and judgment necessary to comply with these cost principles, particularly for your unrestricted expenditures, and we appreciate those efforts. Please make every effort to ensure that all costs falling into these categories are charged to the proper account codes, and please do not hesitate to call Paula Yarbrough as questions and issues arise. May 2016
* Description Advertising 61420 ALLOW Advertising costs are allowable on government grants and contracts only for recruiting personnel, procurement of goods and services necessary for the performance of the sponsored agreement, or the disposal of scrap or surplus materials acquired in the performance of a sponsored Advertising; Promotional agreement. 61419 Promotional advertising costs are not allowable on government grants and contracts. Alcoholic Beverages Alumni or Fundraising Activities General advertising and promotional advertising costs are incurred solely to promote the Medical Center for public/customer relations, fundraising and alumni relations purposes, etc. (including promotional items and memorabilia, models, gifts and souvenirs). 62110 Alcoholic beverages are not allowable on government grants and contracts. When using non-governmental funds, use account 62110 ( Entertainment ). When alcohol is a portion of another expense, such as catering, meetings expense, travel or recruitment, calculate the portion related to alcohol and code that portion to account 62110. Whenever possible, obtain a separate itemization for costs containing alcoholic beverages. If actual amount is not known, estimate the total cost of the alcohol and code the estimated cost to account 62110. 61490 Alumni or fundraising activities are not allowable on government grants and contracts. Generally, alumni or fundraising activities are unique to certain designated Medical Center departments. If alumni or fundraising costs (including visiting alumni and/or meeting expenses with alumni) are incurred on any non-governmental funds, use this account. Page 1 of 1
Catering 62100 * Description ALLOW Catering costs are generally unallowable on governmental grants and contracts unless the cost meets the specific criteria found under Meetings Expense in Uniform Guidance. If expenditure meets criteria for meetings expense, use account 62100 ( Meetings Expense ) whether expense is charged to governmental funding source or non-governmental funding source. Commencement Expenses Employee relations (employee morale, health and welfare) 62110 If expenditure does not meet Uniform Guidance criteria for meetings expense, use account 62110 ( Entertainment Expense ) whether expense is charged to governmental funding source. or non- 65300 Commencement expenses are not allowable on Commencement expenses are charged to centers specifically created for that purpose. If commencement expenses are incurred on any non-governmental funds, use this account. 62115 ALLOW Employee relations expenses are generally not 62110 allowable on The costs of in-house publications, health or firstaid clinics, infirmaries, recreational activities, food services, employee counseling services and other expenses incurred in accordance with the institution s established practice or custom for the improvement of working conditions, employeremployee relations, employee morale and employee performance are allowable when paid for from non-governmental funds. Examples of activities that meet the criteria for Employee Relations include the annual football tailgate party, annual merit/years-of-service recognition events, and annual employee functions such as division-wide employee events as long as they are in accordance with the Medical Center s established practice or custom. Any such expenses must also meet the criteria of reasonableness as referenced in the cover memo. If the expenditure meets the above criteria, it should be charged to account 62115 ( Employee Relations ). If the expenditure does not meet the above criteria, it should be charged to account 62110 ( Entertainment ). If alcohol is purchased for any of these events, it must be charged to account 62110 ( Entertainment ). Page 2 of 2
Entertainment 62110 62114 * Description Entertainment expenses are not allowable on This account should be used when nongovernmental funds are used to fund an entertainment expenditure. Examples of items that meet the criteria for Entertainment includes alcohol, amusement, diversion and social activities and any costs directly associated with these activities (such as tickets to shows or sports events, meals, lodging, rentals, transportation and gratuities). See Meetings Expense for explanation of allowable costs of meals. Fines and Penalties 61915 Fines and penalties are not allowable on Flowers 62110 62115 ALLOW If expenditures for fines or penalties are incurred on non-governmental funds, use this account. Flowers are not allowable on governmental grants and contracts. Gifts and Contributions Generally, when flowers are purchased from nongovernmental funds, account 62110 ( Entertainment ) should be used. If flower purchase would meet the criteria of Employee Relations, account 62115 should be used. An example of a flower purchase meeting the criteria would be if Vanderbilt policy was to provide flowers to all hospitalized employees. All other flower purchases initiated by individual offices should be coded to account 62110. See Employee Relations and/or Gifts for more information. 62120 Gifts and contributions are not allowable on If expenditures for gifts and contributions are incurred on any other center, use this account. Page 3 of 3
Meals 62600-62699 62100 61490 62110 Meetings Expense 62100 * Description ALLOW Reasonable meal expense incurred while traveling on VUMC business is allowable on government grants and contracts unless specifically prohibited by the granting agency. Use account 62600 through 62699 as appropriate. ALLOW See Meetings Expense for information on meals expense incurred as part of a meeting. Meals for alumni activities should be charged to account 61490. All other meals should be charged to ALLOW account Meetings 62110 expenses ( Entertainment ). are generally not allowable on governmental grants and contracts unless specifically provided for in the budget, approved by the sponsoring agency and directly related to the work on the project. If the meeting meets these criteria, use account 62100 ( Meetings Expense ) and charge expense directly to the project. Payment documents related to such expenses must contain meeting agenda, date and a list of attendees. 62110 When using non-governmental funds, use account 62100 ( Meetings Expense ) for the reasonable costs of meals/refreshments served at staff meetings, conferences or business meetings where the meal is necessary in order to conduct VUMC business directly related to work under government grants and contracts or related to allowable administrative and operational activities (i.e. not fundraising, alumni, public relations, etc.). Payment documents agenda, date must and contain a list of attendees. When meetings expense does not meet the above criteria or is incurred for amusement, entertainment, etc., use account 62110 ( Entertainment ) and attach documentation including agenda, date and a list of attendees. Page 4 of 4
Type of Cost Memberships and Dues Account* * Description 61410 ALLOW Memberships and dues are allowable on governmental grants and contracts only if expenditure meets certain criteria. If the expenditure is necessary to conduct the research and/or the cost of the membership in the society is less than the cost of buying a necessary journal or attending a necessary event as a non-member, then the charge may be allowable on a governmental project. If charged to a governmental project, documentation describing the specific circumstances causing the expenditure to be allowable should be attached to the payment request. When using non-governmental funds, expenditures meeting VUMC policy for membership in professional, business or technical organizations should be charged to this account. Prizes and Awards 64080 Prizes and awards are not allowable on Recruitment 62400 62420 Selling or Marketing Products or Services of the Medical Center ALLOW When using non-governmental funds, use this account. All requests for payments of prizes or awards must comply with VUMC policy. Reasonable costs of recruitment, including advertising and relocation, are allowable as direct charges to governmental grants and nongovernmental funds. No color advertising is allowable, and material for anything other than the grant-related position cannot be included. In the event that an employee for whom relocation costs were directly charged to a governmental project resigns for reasons under his/her control within twelve months of the hire date, the expense becomes unallowable on the governmental project, and the cost must be transferred to account 62605 ( Travel Excluded ) or account 62110 ( Entertainment ). 61419 Not allowable on governmental grants and contracts. In general, marketing expenses are charged to centers specifically created for that purpose. If expenditures for the purpose of marketing are incurred on any non-governmental funds, use this account. Page 5 of 5