Grants Office

Cost Principles and Federal Policy

Principal Investigators (PIs) and Project Directors (PDs) are expected to have a basic understanding of the cost principles and federal regulations to ensure that only allowable costs are charged to the project account.

Costs on grants are allowable if they meet the following criteria:


Federal regulations consider that a cost is reasonable if the item purchased and the cost of the item reflects the action that a prudent person would take under similar circumstances at the time the individual makes the purchase. The cost must be necessary to the College’s operations and/or the sponsored project’s performance. The purchase must comply with established college, state and federal regulations and the purchaser must be acting with due prudence in carrying out their responsibilities to the College.


A cost is allocable to a specific sponsored account if the goods or services involved are assignable to that account in accordance with the relative benefits received or other reasonable allocation. A cost is allocable to a sponsored account if it is incurred solely in order to advance the work on the project.

Conformance with policy and regulations

Purchases must be made in conformance with federal and sponsor regulations and institutional policies and procedures. The federal regulations that apply to grant costs incurred by TMCC are located in the Code of Federal Regulations at 2 CFR 200. Most of TMCC’s sponsored awards are subject to these regulations.

The regulations are in 5 subparts:

  • Subpart A: Acronyms and Definitions
  • Subpart B: General Provisions – key item in this part is regulation concerning conflict of interest
  • Subpart C: Pre-Federal Award Requirements and Contents of Federal Awards
    • Use of agreements
    • Federal agency review of merit
    • Federal awarding agency review of applicant risk
    • Application requirements
  • Subpart D: Post Federal Award Requirements
    • Standards for Financial and Program Management
    • Property Standards
    • Procurement Standards
    • Performance and Financial Monitoring and Reporting
    • Subrecipient Monitoring and Management
    • Record Retention and Access
    • Remedies for Noncompliance
    • Closeout
    • Post-Closeout Adjustments and Continuing Responsibilities
    • Collection of Amounts Due
  • Subpart E: Cost Principles
    • General Provisions
    • Basic Considerations
    • Direct and Indirect (F&A Costs)
    • Special Considerations for Institutions of Higher Education
    • General Provisions for Selected Items of Costs
  • Subpart F: Audit Requirements
    • Audits
    • Auditees
    • Federal Agencies
    • Auditors
    • Management Decisions


The College must be consistent in assigning costs to cost objectives. Salary, operating and tuition are examples of cost objectives. The College may charge costs as either direct costs or F&A costs, depending on their identifiable benefit to a particular project. When costs are for a similar circumstance, the federal government expects the College to treat the costs consistently regardless of the source of funding. For example, if the College cannot use state funds to pay the fringe for a work-study student then the fringe is also unallowable on a grant account.

The last principle is that purchases not included as a cost in any other federally supported award (unless specifically authorized by statute).