The Federal Government has mandated in OMB Circular A-21 for Cost Principles for Educational Institutions that certain expenses may not be charged to Federal grants and contracts as an indirect cost. The cost principles in A-21 provide the general accounting “rules” for colleges and universities. These principles define those costs that are allowable and allocable to the Federal Government. Since all University of Utah expenses in Business Unit 01 are analyzed and sorted into pools to calculate the University’s F&A rate charged to contracts and grants, it is essential that ALL university expenses be properly identified as either allowable or unallowable by means of the A/U Chartfield code. By definition, expenses charged directly to Contracts and Grants (Fund 5000) are allowable and therefore the A/U Chartfield for Fund 5000 transactions should be left blank. 

Expenses that are not allowed for reimbursement by the Federal Government are NOT necessarily prohibited and may be appropriate business expenses permitted by the University. In fact, unallowable costs may be essential University of Utah expenses which may be incurred. However, such costs must be coded as unallowable, under A-21 rules, by placing a “0” in the A/U chartfield, to ensure that they may be readily identified and not be used to calculate the University’s indirect costs. 

A-21 defines some functions as unallowable. Fund-raising, for example, although it is an essential University of Utah process, is an unallowable function for Federal reimbursement. That means that Federal funds may not be used to pay ANY of the University of Utah’s fund-raising expenses. In addition, A-21 also identifies some items, i.e., specific types of costs, as unallowable. Alcoholic beverages, for example, are an unallowable item. Regardless of the function with which they are associated, the Federal Government will not reimburse their cost. 

In some instances, it is the purpose of an expense that determines whether it is allowable or unallowable. For example, paper may be purchased as an appropriate business expense either for instruction or for a funding raising event. However, fund raising costs (as mentioned before) are not allowable to be included in the indirect cost expenditure pool. Therefore, the transaction to record the purchase of paper for a fund raising event should be coded with a “0” in the A/U chartfield. The transaction to record the purchase of paper for instruction should be “1”. 


Use only for Business Unit 01. For Business Units 02 & 04 the A/U chartfield should always be left blank 

The A/U chartfield is valid for expenses only (Accounts 50000 – 69999). 


1 = Allowable Costs 

0 = Unallowable Costs 

Please place a “1” in the A/U chartfield to identify allowable costs and “0” to identify unallowable costs.

Examples of Expenses Excluded by OMB Circular A-21 include: 

  • Advertising costs that are not for recruitment of personnel, for procurement of goods and services, for disposal of surplus property or required by the sponsored agreement
  • Alcoholic Beverages
  • Alumni Costs
  • Bad Debts and related costs
  • Vehicles provided to University Officers
  • Civil defense costs for local projects not on University premises
  • Commencement and convocation costs
  • Contingency contribution to a contingency reserve
  • Donations and contributions
  • Entertainment costs
  • Expenditures that violate University policy
  • Fines and penalties
  • First Class air travel
  • Fund raising costs
  • Goods and services for personal use, i.e., gifts, flowers, drinks, food, etc.
  • Housing and personal living expenses
  • Insurance against defects
  • Interest paid to other University departments
  • Legal costs that the University loses or settles out of court
  • Lobbying costs
  • Losses on other sponsored agreements
  • Malpractice insurance for physicians
  • Membership costs in any country, social or dining club
  • Public relations costs that are not specifically required by the sponsored agreement
  • Relocation costs for new employees who voluntarily resign within twelve months
  • Selling and marketing costs of University products
  • Severance costs in excess of that allowed by University policies and procedures
  • Socials and parties which do not meet University policies and procedures
  • Student activity costs
  • Travel and subsistence costs for Trustees and Regents
  • Unreasonable expenses

Please remember whenever you order supplies, authorize the payment of salaries, reimburse a student, fill out an expense report or do any of the many tasks involving University of Utah finances, you are providing basic financial data to the University. The University uses this information to manage its budget and to recover indirect costs, called Facilities & Administrative (F&A) costs by the Federal Government, on sponsored projects. To do your part correctly, you need to know:

  • whether an expense is allowable for reimbursement by the Federal Government or not, and
  • how to assign a correct A/U chartfield to your expenses.

Since indirect cost recovery goes into the University’s operating budget as unrestricted funding, our ability to recover those costs affects everyone at the University of Utah