2 CFR 200 Subpart E (§§200.400–200.475) is the Uniform Guidance section that decides whether a specific cost can be charged to a federal grant. Every cost must first clear six general criteria under §200.403 — necessary, reasonable, allocable, consistent, GAAP-conforming, and documented — before Subpart E’s selected-items-of-cost list addresses categories like travel, entertainment, and memberships.
2 CFR 200, Subpart E (§§200.400–200.475) is the section of the Uniform Guidance that decides, cost by cost, what a US institution can and cannot charge to a federal grant or cooperative agreement. Subpart A through D set up the administrative machinery around an award — pre-award requirements, post-award standards, general provisions — but Subpart E is where the actual dollar-and-cents compliance questions get answered: is this specific expense allowable, and if so, on which award and under what conditions. It is the subpart cited most often in an audit finding, and the one a sponsored-programs office or a principal investigator’s business office reaches for first when a specific cost looks questionable.
This page goes one level deeper than CASRAI’s general Uniform Guidance (2 CFR 200) overview, which introduces Subpart E’s core allowability/allocability/reasonableness framework alongside the rest of the regulation’s structure. Here, the focus is Subpart E specifically: how direct and indirect costs are distinguished under it, and how its “selected items of cost” sections (§200.420–200.475) work — the long, specific list of individual cost categories the regulation addresses one by one, from advertising to travel.
The general allowability framework, in brief
Every cost charged to a federal award has to clear the general criteria at §200.403 before anything more specific applies: it must be necessary and reasonable, allocable to the award, consistent with how the institution treats like costs in like circumstances, conforming to any GAAP and award-specific limitations, not double-counted toward a cost-sharing requirement elsewhere, and adequately documented. Two of those criteria — reasonableness (§200.404) and allocability (§200.405) — have their own dedicated CASRAI treatment: see the Uniform Guidance guide for reasonableness, and the allocability dictionary term for the three-condition test that governs how a cost gets assigned to a specific award. This page doesn’t repeat that ground; it builds on it.
The consistency criterion is worth pulling out on its own, because it is the one most likely to trip up a research administrator who has otherwise cleared reasonableness and allocability. §200.403(d) requires that a cost be treated consistently as either a direct cost or an indirect (F&A) cost across the institution as a whole — an institution cannot charge a given type of cost (say, a department administrator’s salary) directly to one federal award while recovering an identical cost through its indirect cost rate on another. This consistency requirement is what makes an institution’s cost accounting practices and its Disclosure Statement (DS-2), where required, load-bearing documents — they are the institution’s own written record of which treatment it has committed to, and an auditor checks actual charging practice against that record, not against Subpart E’s text alone.
Direct costs vs. indirect (F&A) costs under Subpart E
Subpart E draws its cost-type distinction at §200.413 (direct costs) and §200.414 (indirect, or facilities-and-administrative, costs).
- Direct costs (§200.413) are costs that can be identified specifically with a particular final cost objective — a specific award, project, or other internally or externally funded activity — or that can be directly assigned to such an activity relatively easily with a high degree of accuracy. Salaries of project personnel working on the award, materials and supplies consumed by the project, and travel to a project-related site are typical direct costs. See direct costs and, for the personnel-specific version of this question, personnel cost (grant), which covers how effort certification under §200.430 ties salary charges to work actually performed.
- Indirect costs (§200.414) are costs incurred for common or joint objectives that cannot be readily identified with a single final cost objective — general administration, facilities operation and maintenance, and departmental administration are the classic categories. These are recovered through a negotiated indirect cost rate agreement (a NICRA) rather than charged line-by-line. See F&A rate for how that negotiated rate is set, MTDC for the base it’s typically applied against, and the de minimis rate for the fallback available to organizations without a negotiated rate.
The line between the two is not about what a cost is in the abstract — it’s about whether, for a given institution and a given award, the cost can practically and consistently be traced to that one award. That is exactly why the consistency criterion above matters: the same category of cost (administrative salary, for example) can legitimately be a direct cost on one type of project and an indirect cost institution-wide, but not both at the same institution for the same circumstances at the same time.
The “selected items of cost” sections (§200.420–200.475)
The bulk of Subpart E, by section count, is a long catalog running from §200.421 through §200.475 that addresses specific, individually named categories of cost — advertising, alcoholic beverages, bad debts, entertainment, fines and penalties, lobbying, memberships, travel, and dozens more. §200.420 sets out the general purpose and test governing the whole catalog: these sections exist to establish the allowability of particular cost items, they apply regardless of whether a given item is treated as a direct or indirect cost, the list is explicitly not comprehensive, and the omission of any particular cost item does not imply either that it is allowable or unallowable — an item not specifically addressed still has to be evaluated against the general criteria at §200.403 and the principles used for similar or related items elsewhere in the catalog. Where a specific federal award’s own terms and conditions address a cost item differently than Subpart E does, the award terms govern.
A research administrator doesn’t need to memorize all fifty-plus sections, but a handful come up constantly enough to be worth knowing by name:
Generally unallowable, few or no exceptions
- Alcoholic beverages (§200.423) — unallowable, with no general exception.
- Bad debts (§200.426) — unallowable, including related collection costs and legal fees.
- Entertainment costs (§200.438) — unallowable except where a specific entertainment cost has a clear and direct programmatic purpose and is authorized in the approved budget or has prior written approval from the federal awarding agency.
- Fines, penalties, damages, and other settlements (§200.441) — unallowable except where incurred as a result of complying with specific award provisions, or with prior written approval of the federal awarding agency.
- Lobbying costs (§200.450) — unallowable, tracking the separate restrictions in the Byrd Anti-Lobbying Amendment.
- Fund-raising and investment management costs (§200.442) — generally unallowable, though investment counsel costs incurred to enhance income from investments are allowable when associated with pension, self-insurance, or other funds that include federal participation.
- Contributions and donations (§200.434) — unallowable as a cost by the recipient, whether cash or in-kind (the value of donated items received, rather than given, is a separate question governed elsewhere).
Allowable, but only within specific limits
- Advertising and public relations (§200.421) — allowable only for a defined set of purposes: recruitment of personnel, procurement of goods and services, disposal of scrap or surplus materials, and required program outreach and similar informational purposes. Advertising and public relations designed solely to promote the institution itself, and costs of promotional items and memorabilia, are unallowable.
- Memberships, subscriptions, and professional activity costs (§200.454) — allowable for the institution’s or an employee’s membership in a professional or technical organization, but membership in a civic, community, social, or dining club or organization, and costs of any activity to influence legislation, is unallowable.
- Travel costs (§200.474) — allowable when they represent actual, reasonable, and necessary charges incurred for official business travel, generally limited to commercial coach airfare and, for federal employee travel, capped in line with the Federal Travel Regulations; see travel cost (grant) for the fuller treatment.
- Compensation for personal services (§200.430) and fringe benefits (§200.431) — allowable subject to reasonableness, consistent institutional compensation policy, and (per §200.430) documented support for the actual work performed; see personnel cost (grant).
- Pre-award costs (§200.458) — allowable only with the prior written approval of the federal awarding agency, and generally limited to costs incurred within 90 calendar days before the award’s effective start date (a shorter or longer period may be authorized where the agency specifically approves it).
- Participant support costs (§200.456) — allowable direct costs for items such as stipends, subsistence, and travel for participants (not employees) in a conference, training, or similar activity funded under the award, and — because of §200.1’s MTDC definition — excluded entirely from the MTDC base, so no indirect-cost rate is applied against them.
This is a representative sample, not the complete list — when a cost isn’t one of the categories above, the right first step is checking whether §200.420–475 addresses it directly by name before falling back to the general §200.403 criteria.
Why Subpart E is where audit findings concentrate
“Allowable costs / cost principles” is one of the compliance-requirement types the annual OMB Compliance Supplement makes available for federal awarding agencies to select when scoping a Single Audit under Subpart F — agencies choose which of the requirement types apply to a given major program each year, but allowable costs is one of the most consistently tested, because it maps directly onto Subpart E and is comparatively easy for an auditor to sample and verify against source documentation (an invoice, a travel receipt, a time-and-effort record). A cost that fails the general criteria, falls into one of the specifically unallowable categories above, or is charged inconsistently with the institution’s own disclosed accounting practice is exactly the kind of finding a Single Audit is built to surface; see Single Audit (US) for how that audit process itself works.
Frequently asked questions
What sections make up 2 CFR 200 Subpart E?
Subpart E runs from §200.400 through §200.475. The first several sections (§200.400–200.414) set out the general framework — purpose, general provisions, the allowability/reasonableness/allocability criteria, and the direct-cost/indirect-cost distinction. §200.415–200.419 cover related administrative requirements (certifications, indirect cost rate determination procedures, cost accounting standards). §200.420 through §200.475 is the “selected items of cost” catalog addressing dozens of specifically named cost categories one by one.
Is Subpart E the same thing as “cost principles”?
Yes — “Cost Principles” is Subpart E’s formal heading within 2 CFR Part 200, and research administrators use the two terms interchangeably. It replaced the separate cost-principle circulars that predated Uniform Guidance: OMB Circular A-21 for institutions of higher education, A-87 for state, local, and tribal governments, and A-122 for nonprofits.
Does an unallowable cost under Subpart E mean the institution can’t spend the money at all?
No — it means the cost can’t be charged to that federal award. An institution can still incur the expense using non-federal, unrestricted, or other appropriately sourced funds; Subpart E governs what’s chargeable to federal awards specifically, not what an institution is permitted to spend money on in general.
If a cost isn’t listed in §200.421–200.475, is it automatically allowable?
No. §200.420 explicitly states that omission of a particular item from the selected-items list does not imply it is either allowable or unallowable. An unlisted cost still has to satisfy the general §200.403 criteria, and is typically evaluated by analogy to how similar, listed cost items are treated.
Can a federal award’s own terms override Subpart E’s cost principles?
An award’s specific terms and conditions can impose additional restrictions or, in some cases, address a cost item differently than Subpart E’s general treatment — the specific award language controls where it conflicts with the general regulatory default. This is why reviewing an award’s notice of award and terms and conditions alongside 2 CFR 200 itself, rather than relying on the regulation alone, is standard sponsored-programs practice.
