Grants Budget & Allowable Cost Checker

Formula

Total Request = (Allowable Direct Costs) + (Allowable Direct × Indirect Rate)

Federal grants (Uniform Guidance) strictly define what you can charge. Charging unallowable costs leads to audits and clawbacks. This tool helps segregate costs before you submit.

Worked Examples

Example 1: Segregating One Unallowable Line Item

Problem:A university research budget contains $100,000 of salaries and $1,000 of alcohol purchased for a project reception. The negotiated indirect rate is 50%. What can be requested?

Solution:Classify first: Salaries $100,000 - allowable Alcoholic beverages $1,000 - expressly unallowable under 2 CFR 200.423 Build the request: Allowable direct costs = $100,000 Indirect = $100,000 x 50% = $50,000 Total Request = $100,000 + $50,000 = $150,000 The compounding penalty most budgets miss: an unallowable cost left in the base does not just cost you its own value, it also carries indirect. Had the $1,000 stayed in, the disallowance on audit would be $1,000 direct plus $500 of indirect claimed on it - $1,500 clawed back from a $1,000 mistake. The alcohol must be paid from non-federal funds and excluded from the base entirely.

Result:$150,000 requested. The $1,000 of alcohol is paid from institutional funds - leaving it in would have exposed $1,500 on audit.

Example 2: Building the MTDC Base Correctly

Problem:A project budget holds $180,000 salaries, $54,000 fringe, $12,000 supplies, $40,000 equipment, $30,000 participant support and a $120,000 subaward. The negotiated rate is 42% of Modified Total Direct Cost. What is the indirect recovery?

Solution:Total direct costs: $180,000 + $54,000 + $12,000 + $40,000 + $30,000 + $120,000 = $436,000 MTDC excludes capital and pass-through items. Remove: Equipment: $40,000 Participant support: $30,000 Subaward above the first $50,000: $120,000 - $50,000 = $70,000 MTDC base = $436,000 - $40,000 - $30,000 - $70,000 = $296,000 Indirect = $296,000 x 42% = $124,320 Total Request = $436,000 + $124,320 = $560,320 The effective rate is far lower than the headline: $124,320 / $436,000 = 28.5% of total direct costs, not 42%. That gap is the most common budgeting error in federal proposals. A budget written by applying 42% to total direct costs would over-request by $58,800 and be cut in review.

Result:MTDC base $296,000, indirect $124,320, total request $560,320 - an effective 28.5% against a 42% headline rate.

Example 3: De Minimis Rate Versus a Negotiated Rate

Problem:A first-time applicant with no federally negotiated indirect cost rate agreement uses the de minimis rate instead. On the same $296,000 MTDC base, what does that cost them?

Solution:The 2024 revision of 2 CFR 200 raised the de minimis indirect cost rate to 15% of MTDC, up from the 10% that had applied since the Uniform Guidance took effect. De minimis recovery: $296,000 x 15% = $44,400 Against a negotiated 42% rate: $296,000 x 42% = $124,320 Shortfall = $124,320 - $44,400 = $79,920, or 64% less indirect recovery on an identical project. What this means in practice: the de minimis rate exists so that small and first-time applicants can budget indirect costs without first negotiating an agreement, and it requires no documentation. But $79,920 per project is a strong argument for negotiating a rate with your cognizant agency once you run more than one or two federal awards. Note also that the de minimis rate applies to MTDC only - it cannot be applied to the full dir

Result:$44,400 at the 15% de minimis rate versus $124,320 negotiated - a $79,920 (64%) shortfall on the same project.

Frequently Asked Questions

What is MTDC?

Modified Total Direct Costs. It's the base for indirects. It excludes Equipment, Capital Expenditures, Rental costs, Tuition, and the portion of subcontracts >$25k.

Can I charge lunch?

Only if it's a working meeting with a formal agenda and necessary for the project continuity. Simply eating while working doesn't count.

What is the De Minimis rate?

10%. Any organization without a negotiated rate can claim 10% indirect costs automatically.

What happens if I charge an unallowable cost?

If audited, you must pay it back with interest. Frequent violations lead to debarment (banned from future grants).

Is equipment indirect?

No, Equipment (>$5k, >1yr life) is a Direct Cost (Capital), but it is usually excluded from the Indirect Cost calculation base.

What is 'Effort Reporting'?

Certifying that the time charged to the grant matches the time actually worked. A huge compliance burden.

Are visa fees allowable?

Generally yes, for short-term visas directly related to the project. Long-term immigration fees are usually not.

Does this apply to private foundations?

Private foundations (Gates, Ford) have their own rules, but often mirror federal allowability logic.

Background & Theory

Common Unallowable Costs

Alcohol: Almost never allowed.
Lobbying: Strictly forbidden.
First Class Travel: Only economy is allowed (Fly America Act).
Bad Debts: Cannot charge the government for other people not paying you.

Indirect Costs (F&A)

Facilities and Administration (Overhead). This covers lights, rent, and HR. Rates vary from 10% (de minimis) to 60%+ for major research universities. You apply this rate only to the Modified Total Direct Costs (MTDC), excluding things like Equipment >$5k or Tuition.

Cost Sharing

Some grants require "matching funds". You must prove you are chipping in 20% of the project cost using non-federal money.

History

Uniform Guidance (2 CFR 200)

In 2013, the US Office of Management and Budget (OMB) consolidated circulars into the "Uniform Guidance" (Super Circular). This set the standard for what costs the government will pay for. Key principle: Costs must be "Reasonable, Allocable, and Allowable".

The Cost of Compliance

Universities and Non-profits spend millions on compliance officers to prevent "unallowable" charges. A famous Stanford University scandal in the 90s involving a yacht charged to research overhead led to tighter scrutiny on Indirect Costs.