- What the 2 CFR 200 Cost Principles Actually Require
- The 2026 OMB Proposed Rule: What Changes for Allowability
- Allowable vs Unallowable Costs: Current Guidance vs the 2026 Proposal
- Cost Principles: Direct Answers to Common Questions
- Implications for Research Administrators and Institutions
- What Happens Next
On 29 May 2026, the US Office of Management and Budget (OMB), joined by federal award-making agencies, published a proposed rule in the Federal Register substantially rewriting 2 CFR Part 200 — the government-wide Uniform Guidance governing federal grants and cooperative agreements. Inside that broader overhaul sits a narrower, technical change: a rewrite of the 2 CFR 200 cost principles in Subpart E, the section that decides which costs a university, hospital, non-profit, or state agency may lawfully charge to a federal award. For research administrators, the operative question is not whether reporting formats change — it is whether costs an institution has always treated as allowable will still be allowable after the proposed effective date of 1 October 2026.
What the 2 CFR 200 Cost Principles Actually Require
Subpart E of 2 CFR Part 200 sets out the framework recipients must apply when deciding whether a cost can be charged — directly or indirectly — to a federal award. Under §200.403 and related sections, a cost is only allowable if it is:
- Reasonable — it does not exceed what a prudent person would incur under the same circumstances, judged against market prices, sound business practice, and award terms.
- Allocable — it is incurred specifically for the award, or benefits the award and other work in proportions that can be reasonably estimated.
- Consistently treated — like costs must be treated alike across federally and non-federally funded activities.
- Conforming — the cost must comply with limitations in Subpart E itself, in agency-specific implementations such as 2 CFR Part 300 (HHS’s codification of the Uniform Guidance), or in the award’s terms.
Subpart E also lists over 50 “selected items of cost” — from advertising to travel, equipment, and compensation — each with its own rule. This is the list the 2026 proposed rule edits most directly.
The 2026 OMB Proposed Rule: What Changes for Allowability
OMB frames the May 2026 proposal around three objectives: improving transparency, accountability, and oversight of federal funds; clarifying the regulatory status of the 2 CFR text as an OMB rule; and reducing recipient burden. In Subpart E, these goals pull in different directions — some provisions loosen documentation, others tighten what can be charged at all. Comments are due 13 July 2026, ahead of a proposed effective date of 1 October 2026, the start of federal fiscal year 2027.
The most consequential Subpart E changes in the current draft include:
- Publication costs would become unallowable unless required by statute or approved in advance by the awarding agency case-by-case.
- Advertising and public relations costs would become presumptively unallowable, narrowing existing exceptions for recruitment and procurement.
- Conference attendance costs would only be allowable where expressly approved by the agency and written into award terms.
- Fundraising and investment management costs would require prior written agency approval rather than the current general prohibition with narrow carve-outs.
- Fixed-amount awards and subawards would be eliminated; OMB argues they “limit transparency and hinder effective oversight” versus cost-reimbursement structures.
- A related change to §200.300 (Statutory and National Policy Requirements) would bar federal funds from being used to “fund, promote, encourage, subsidize, or facilitate” DEI or DEIA policies found to violate federal anti-discrimination law — adjacent to, but legally distinct from, the Subpart E allowability tests.
Despite Executive Order 14332 directing OMB to curb indirect cost recovery on discretionary grants, the proposal does not alter the indirect-cost-rate negotiation system: FY2026 appropriations riders required specified agencies to keep applying negotiated rates as they stood in FY2024. That leaves the 15% de minimis indirect cost rate — raised from 10% in the October 2024 revision, alongside a $10,000 equipment threshold (up from $5,000) and a $1,000,000 Single Audit threshold (up from $750,000) — unchanged for now.
Allowable vs Unallowable Costs: Current Guidance vs the 2026 Proposal
The table below summarises how treatment shifts for the categories most affected by the 2026 draft. Treat this as directional, not final — the rule remains open for comment and can change before any effective date.
| Cost category | Current treatment (2024 Uniform Guidance) | Proposed treatment (2026 draft rule) |
|---|---|---|
| Publication costs | Generally allowable as a direct or indirect cost | Unallowable unless statute-required or agency pre-approved |
| Advertising / public relations | Allowable for specified purposes (recruitment, procurement, outreach) | Presumptively unallowable; narrow exceptions only |
| Conference attendance | Allowable if reasonable, necessary, and documented | Allowable only with express prior agency approval in award terms |
| Fundraising / investment management | Generally unallowable, with limited carve-outs | Requires prior written agency approval |
| Fixed-amount awards | Available as alternative to cost-reimbursement awards | Eliminated on transparency grounds |
| Indirect cost (de minimis) rate | 15%; agencies barred from imposing a lower rate absent statute | Unchanged pending FY2026 appropriations riders |
Cost Principles: Direct Answers to Common Questions
What are the 4 cost principles?
The four cost principles applicable to sponsored awards under 2 CFR 200 are that costs must be reasonable, allocable, allowable, and consistently treated. These tests apply not only to federal funds but also to any cost share or in-kind contribution tied to the award.
What are the three elements of 2 CFR Part 200?
2 CFR Part 200 combines three components in one regulation: Uniform Administrative Requirements for pre- and post-award management, Cost Principles in Subpart E governing allowability, and Audit Requirements in Subpart F, which sets the Single Audit threshold and reporting obligations.
What is the 2 CFR 200 standard?
2 CFR Part 200, commonly called the Uniform Guidance, is the OMB-issued, government-wide rulebook for federal financial assistance. It prescribes how awards are made, how recipients must account for funds, how costs must be treated, and when audits are required — applied across nearly all federal grant-making agencies.
Under what circumstances does 2 CFR 200 consider a cost reasonable?
A cost is reasonable if it does not exceed what a prudent person would incur under the same circumstances at the time the spending decision was made. Reviewers weigh market prices, sound business practice, award terms, and deviation from established institutional policy.
Implications for Research Administrators and Institutions
Institutions should not wait for a final rule to begin preparing:
- Audit PI-facing guidance. Flag any internal policy or budget template that assumes automatic allowability of conference travel, publication charges, or advertising spend before 1 October 2026.
- Submit comments by 13 July 2026. The 45-day comment period is the main channel through which universities, hospitals, and non-profits — often via associations such as COGR, NCURA, or SRAI — can flag unintended compliance burdens before finalisation.
- Distinguish Subpart E from §200.300. The DEI/DEIA restriction sits in statutory and national policy requirements, not the cost-allowability tests in Subpart E, and follows a different legal standard and appeal pathway.
These distinctions matter for the broader research administration compliance function, where allowability determinations increasingly intersect with award terms, indirect cost negotiation, and audit preparation. Grant-compliance terminology used throughout this analysis — allowability, allocability, de minimis rate — is catalogued alongside related research-integrity and funding terms in the CASRAI Dictionary.
What Happens Next
The 2 CFR 200 cost principles have changed before — the October 2024 revision raised the de minimis indirect cost rate and equipment threshold — and they are set to change again. What distinguishes the 2026 proposal is its narrower target: rather than adjusting thresholds, it tightens the allowability tests themselves for specific cost categories, shifting several from “generally allowable” to “allowable only with prior written agency approval.” Until the comment period closes and OMB issues a final rule, institutions should treat the current Subpart E text as controlling while building the internal review processes the proposal will likely require. For most research offices, the practical impact will be measured in how many budget lines now need agency sign-off before they can be spent.