Research Topic

Cost Principles


The University of Illinois at Urbana-Champaign has a responsibility to ensure that costs incurred on sponsored projects are in compliance with federal regulations, sponsor policy, award terms and conditions, and university policy. Follow the link below for complete policy and procedures. 

OBFS Section 16—Cost Principles


Getting Started

For a cost to be allowable, it must be:

  • Necessary and reasonable
  • Allocable
  • Consistently treated
  • Conformed to any limitations or exclusions set forth in federal guidance
  • Adequately documented

Questions to ask about allowable costs:

Reasonable & Necessary

Would a prudent person consider the cost to be ordinary and necessary?


Costs must be charged in accordance with relative benefit received..

Consistent Treatment

"Like" costs must be treated consistently, as either direct or indirect.

Types of Allowable Costs

Three types of allowable costs:

Unallowable costs are those items of expense that are not allowable as either a direct charge to a sponsored project or as an F&A cost.

Cost Allowability Pyramid - Federal regulations base; Federal terms and conditions second from bottom; Agency Policies, terms and conditions next; Program requirements next; Award on top.  Two circles for university policies and public laws on sides.


Related Documents and Resources

Related Policies