3.13 Unallowable Costs
Unallowable Cost Categories
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Land Acquisition
Compensation of Federal Employees
Travel of Department of Justice (DOJ) Employees
Bonuses or Commissions
Prohibited and Controlled 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. See 2 C.F.R. ?? 200.439 (b)(1).
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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 Department of Justice (DOJ) Employees
You may not spend award funds on transportation, lodging, subsistence, and related travel expenses of awarding agency employees.
- DOJ 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 that are determined to be a profit, distribution of earnings, or fees are unallowable. See 2 C.F.R. ?? 200.430(g).
Some programs do not allow reimbursement for bonuses to employees.
Action Item
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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Prohibited and Controlled Equipment
This category of unallowable cost may include items that are prohibited from purchase, such as certain types of firearms and tracked armored vehicles. Other military-type equipment, such as tactical wheeled vehicles and explosives and pyrotechnics are considered “controlled” and are only allowable for purchase if a jurisdiction submits a detailed justification noting need for the equipment and documenting controls in place to prevent misuse (such as training and use protocols).
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Lobbying
You and your subrecipients must comply with the provisions in 2 C.F.R. ?? 200.450 (Lobbying), as appropriate. Also, see Chapter 2.1 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), (c) the enactment or modification of any pending Federal or state legislation by preparing, distributing, or using publicity or propaganda, or by urging members of the general public, or any segment thereof, to contribute to or participate in any mass demonstration, march, rally, fund raising drive, lobbying campaign or letter writing or telephone campaign, or (d) 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, 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 for purposes unallowable under the anti-lobbying rules; 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 U.S.C. ?? 1913, contains significant restrictions on the use of appropriated funding for lobbying.
- These anti-lobbying restrictions are 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 DOJ.
- 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 guidance.
- Any question(s) relating to the lobbying restrictions should be submitted in writing to the awarding agency???s ethics official (typically in the awarding agency???s Office of the General Counsel) through your program manager.
OVW Specific Tip
OVW has some programs with purpose areas that expressly authorize "developing and promoting state, local, or tribal legislation and policies that enhance best practices for responding to domestic violence, dating violence, sexual assault, and stalking." Grantees with questions on specific authorized activities should contact their grant 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. However, certain fundraising costs for the purposes of meeting the Federal program objectives may be allowable with prior approval of the DOJ awarding agency. See 2 C.F.R. ?? 200.442 for more details.
- The portion of a person's salary that covers time spent engaged in unallowable fundraising, and any indirect costs associated with those salaries, may not 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 as either direct or indirect costs against the award.
OVW Specific Tip
The Tribal Coalition program under OVW may allow for corporate formation costs to be charged directly to 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.
- This provision does not restrict the authority of Federal agencies to identify taxes where Federal participation is inappropriate.
- Taxes from which exemptions are available to the organization directly or which are available to the organization based on an exemption afforded the Federal government when the DOJ awarding agency makes available the exemption certificates are unallowable.
- Where the identification of the amount of unallowable taxes would require an inordinate amount of effort, the cognizant Federal agency for indirect costs may accept a reasonable approximation thereof.
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Other Unallowable Costs
Other categories of unallowable costs include:
- Entertainment, including amusement, diversion, social activities, and any associated costs (i.e. tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.?? Certain exceptions may apply when such costs have a programmatic purpose and have been approved by the awarding agency;
- Fines and penalties (except when incurred as a result of compliance with specific provisions of an award or contract, or with written approval from the awarding agency);
- Credit card fees;
- Passport charges;
- Tips;
- Bar charges/alcoholic beverages, and
- Membership fees to organizations whose primary activity is lobbying.
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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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