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Chapters:

3.13 Unallowable Costs

Unallowable Cost Categories

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Land Acquisition
Compensation of Federal Employees
Travel of Federal Employees
Bonuses or Commissions
Military-Type Equipment
Lobbying
Fundraising
Corporate Formation
State and Local Sales Taxes
Other Unallowable Costs
Costs Incurred Outside the Project Period

Land Acquisition

No Federal funds that are awarded for renting, leasing, or construction of buildings or other physical facilities shall be used for land acquisition.

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Compensation of Federal Employees

This category of unallowable costs includes salary payments, consulting fees, or other compensation to full-time Federal employees.

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Travel of Federal Employees

You may not spend award funds on transportation, lodging, subsistence, and related travel expenses of awarding agency employees.

  • The Office of Justice Programs (OJP) does consider to be allowable the travel expenses of other Federal employees, such as those persons serving on advisory committees or other program or project duties or assistance, if travel expenses have been:
  • Approved by the Federal employee's department or agency; and
  • Included as an identifiable item in the funds budgeted for the project or subsequently approved by the awarding agency.

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Bonuses or Commissions

You or your subrecipient cannot pay any bonus or commission to any individual or organization to obtain approval of an application for award assistance.

  • Bonuses to officers or board members of for-profit or nonprofit organizations are determined to be a profit or fee and are unallowable.
  • Some programs do not allow reimbursement for bonuses to employees.

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Be sure to check your award document and, if applicable, financial clearance memorandum, to determine which salaries, fringe benefits, and other personnel costs are allowable under your specific award.

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Military-Type Equipment

This category of unallowable costs includes such items as armored vehicles, explosive devices, and other items typically associated with the military arsenal, excluding automatic weapons.

  • If as a recipient you submit a written request and justification, the awarding agency may make an exception to this rule.

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Lobbying

You and your subrecipients must comply with the provisions of the Government-wide common rule on restrictions on lobbying, as appropriate. Refer to Chapter 2.2 of this Guide for more specifics about restrictions on lobbying.

  • The lobbying cost prohibition applies to all award recipients.
  • You cannot use your grant funds for the following purposes:
  • Attempting to influence the outcome of any Federal, State, or local election, referendum, initiative, or similar procedure, through in-kind or cash contributions, endorsements, publicity, or similar activity;
  • Establishing, administering, contributing to, or paying for the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcome of elections;
  • Attempting to influence (a) the introduction of Federal or State legislation; or (b) the enactment or modification of any pending Federal or State legislation through communication with any member or employee of the Congress or State legislature (including efforts to influence State or local officials to engage in similar lobbying activity), or with any Government official or employee in connection with a decision to sign or veto enrolled legislation;
  • Engaging in or supporting the development of publicity or propaganda designed to support or defeat legislation pending before legislative bodies;
  • Paying, directly or indirectly, for any personal service, advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or designed to influence a member of Congress or of a State legislature to favor or oppose, by vote or otherwise, any legislation or appropriation by either Congress or a State legislature, whether before or after the introduction of any bill or resolution proposing such legislation or appropriation;
  • Engaging in legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, and analyzing the effect of legislation, when such activities are carried out in support of or in knowing preparation for an effort to engage in unallowable lobbying;
  • Paying a publicity expert; or
  • Attempting to improperly influence, either directly or indirectly, an employee or officer of the executive branch of the Federal Government to give consideration or to act regarding a sponsored agreement or a regulatory matter.
  • The Anti-Lobbying Act, 18 United States Code (U.S.C.) 1913, was recently amended to expand significantly the restriction on use of appropriated funding for lobbying.
  • This expansion also makes the anti-lobbying restrictions enforceable via large civil penalties, with civil fines between $10,000 and $100,000 per each individual occurrence of lobbying activity.
  • These restrictions are in addition to the anti-lobbying and lobbying disclosure restrictions imposed by 31 U.S.C. 1352 [PDF - 176 Kb].
  • All grantees must understand that no federally appropriated funding made available under the grant program may be used, either directly or indirectly, to support the enactment, repeal, modification, or adoption of any law, regulation, or policy, at any level of government, without the express approval of OJP.
  • Any violation of this prohibition is subject to a minimum $10,000 fine for each occurrence. This prohibition applies to all activity, even if currently allowed within the parameters of the existing OMB circulars.
  • Any question(s) relating to this statute should be submitted in writing to the DOJ Office of General Counsel through your program manager.

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Fundraising

You may not charge as direct or indirect costs against your award the costs of organized fundraising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions.

  • Neither the salary of persons engaged in such activities nor indirect costs associated with those salaries may be charged to the award.
  • An organization may accept donations (e.g., goods, space, services) towards fundraising, as long as the value of the donations is not charged as a direct or indirect cost to the award.
  • Nothing in this section should be read to prohibit a recipient from engaging in fundraising activities, as long as such activities are not financed by Federal or matching funds.

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Corporate Formation

Unless specifically stated in your award agreement, the cost for corporate formation (startup costs) may not be charged either as direct or indirect costs against the award.

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State and Local Sales Taxes

Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes that disproportionately affect Federal programs or changes in tax policies that disproportionately affect Federal programs.

  • This provision becomes effective for taxes paid during the governmental unit's first fiscal year that begins on or after January 1, 1998, and applies thereafter.
  • Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the Federal Government are allowable.
  • This provision does not restrict the authority of Federal agencies to identify taxes where Federal participation is inappropriate.
  • Where the identification of the amount of unallowable taxes would require an inordinate amount of effort, the cognizant Federal agency may accept a reasonable approximation thereof.

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Other Unallowable Costs

These other categories of unallowable costs include:

  • Entertainment, including amusement, diversion, and social activities, and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities);
  • Fines and penalties (except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the awarding agency);
  • Credit card fees;
  • Passport charges;
  • Tips;
  • Bar charges/alcoholic beverages;
  • Membership fees to organizations whose primary activity is lobbying; and
  • Premium (overtime) pay.
  • You should not pay overtime costs solely because you are using Federal funds.
  • Any overtime pay must be authorized in advance through written approval from the awarding agency.

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Costs Incurred Outside the Project Period

Any costs that are incurred either before the start of the project period or after the expiration of the project period are not allowable, unless written approval covering pre-agreement costs or a no-cost extension is granted by the awarding agency.

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