U.S. Department of Justice, Office of Justice Programs

Part III - Chapter 16: Unallowable Costs

HIGHLIGHTS OF CHAPTER:

  • 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

The funding legislation specifies that no Federal award involving the renting, leasing, or construction of buildings or other physical facilities shall be used for land acquisition. Accordingly, land acquisition costs are unallowable.

COMPENSATION OF FEDERAL EMPLOYEES

Salary payments, consulting fees, or other remuneration of full-time Federal employees are unallowable costs.

TRAVEL OF FEDERAL EMPLOYEES

Costs of transportation, lodging, subsistence, and related travel expenses of awarding agency employees are unallowable charges. Travel expenses of other Federal employees, for advisory committees or other program or project duties or assistance, are allowable if they have been:

  1. Approved by the Federal employee's department or agency; and
  2. Included as an identifiable item in the funds budgeted for the project, or subsequently approved by the awarding agency.

NOTE: Travel expenses are not allowable if Federal employees receive additional compensation along with Federal salary for their assistance.

BONUSES OR COMMISSIONS

The recipient or subrecipient is prohibited from paying any bonus or commission to any individual or organization for the purpose of obtaining approval of an application for award assistance. Bonuses to officers or board members of profit or nonprofit organizations are determined to be a profit or fee and are unallowable.

MILITARY-TYPE EQUIPMENT

Costs for such items as armored vehicles, explosive devices, and other items typically associated with the military arsenal, excluding automatic weapons, are unallowable. Exceptions MAY be made by the awarding agency upon a written request and justification from the recipient.

LOBBYING

All recipients and subrecipients must comply with the provisions of the government-wide Common Rule on Restrictions on Lobbying, as appropriate. Refer to Part II, Chapter 1: Application Process, for more specifics about these provisions.

In addition, the lobbying cost prohibition applicable to all recipients of funding states that no funds may be used for the purposes of:

  1. 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.
  2. 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.
  3. 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.
  4. Publicity or propaganda purposes designed to support or defeat legislation pending before legislative bodies.
  5. Paying, directly or indirectly, for any personal service, advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or designed to influence in any manner 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.
  6. 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.
  7. Paying a publicity expert.
  8. The Anti-Lobbying Act, 18 U.S.C. §1913, recently was 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.

    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 Office of General Counsel through your program manager.

FUNDRAISING

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, may not be charged either as direct or indirect costs against the award. Neither the salary of persons engaged in such activities nor indirect costs associated with those salaries may be charged to the award, except insofar as such persons perform other funding-related activities.

An organization may accept donations (i.e., goods, space, services) as long as the value of the donations is not charged as a direct or indirect cost to the award.

A recipient may also expend funds, in accordance with approved award terms, to seek future funding sources to "institutionalize" the project as stipulated in the terms and conditions of an OJP grant award, but not for the purpose of raising funds to finance related or complementary project activities.

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 non-Federal award funds.

NOTE: OJP occasionally issues awards which include the purpose of assisting an entity to become self-sufficient in operating a particular project to preserve its longevity and sustentation. In those cases, certain fundraising expenditures may be allowable and may be unique to OJP awards as disclosed in the terms and conditions of the awards.

CORPORATE FORMATION

The cost for corporate formation may not be charged either as direct or indirect costs against the award.

STATE AND LOCAL SALES TAXES

These are unallowable when the Government assesses taxes upon itself or, disproportionately, to Federal programs. An example of an unallowable tax would be if the Government levied taxes as a result of Federal funding. An example of an allowable tax would be user taxes, such as gasoline tax. These provisions became effective as of the Government's fiscal year beginning on or after January 1, 1998.

OTHER UNALLOWABLE COSTS

Unallowable costs include:

  • Entertainment;
  • Sporting events;
  • Fines & penalties (except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the awarding agency);
  • Visa fees;
  • Passport charges;
  • Tips;
  • Bar charges/alcoholic beverages;
  • Conferences and workshops. Lodging costs in excess of Federal per diem. For events of 30 or more participants that are funded with an OJP award, if lodging costs exceed the Federal per diem rate, none of the lodging costs are allowable. (When Federal grant funds are expended for grant conferences for more than 30 attendees and zero hotel rooms are being billed to Federal grants, the award recipients must still ensure that lodging rates are within Federal per diem rates).
  • Membership fees to organizations whose primarily activity is lobbying; and
  • Premium pay. Grantees should not pay premium cost solely because they are using Federal funds. Any premium pay must be authorized in advance through written approval from the awarding agency.

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 is granted by the awarding agency (preagreeement costs or no cost extension).

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