> **PREPARING THE APPLICATION BUDGET:**
>
> **WHAT COSTS CANNOT BE COVERED BY THE GRANT?**

The first limitation has already been discussed: *No costs can be
covered by the grant unless they are directly related to the purposes
established by Congress in the appropriations language for your grant*.

Government-wide and Department of Education (ED) regulations also serve
to limit the uses to which a Congressionally-directed grant can be put.
The government-wide regulations come from the Office of Management and
Budget (OMB). Explanations of OMB regulations are written in documents
called "circulars." The Department of Education's regulations governing
these awards are contained in the Education Department General
Administrative Regulations (EDGAR).

The most relevant regulations and circulars include:

-   [Office of Management and Budget]{.underline}:

-   **OMB Circular A-21:** *Cost Principles for Educational
    Institutions*

-   **OMB Circular A-122:** *Cost Principles for Nonprofit
    Organizations*

-   **OMB Circular A-87:** *Cost Principles for State, Local and Indian
    Tribal Governments*

-   **OMB Circular A-133:** *Audits of States, Local Governments, and
    Non-Profit Organizations*

-   **Federal Acquisition Regulation (FAR) or 48 CFR Part 31.2**: *Cost
    Principles applicable to For-profit Institutions.*

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-   OMB Circulars can be accessed at:
    <http://www.whitehouse.gov/OMB/circulars/index.html>

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-   [Department of Education]{.underline}: The Education Department
    General Administrative Regulations (EDGAR) apply to all grants
    funded through the Department; a few are cited below along with
    their location in the Code of Federal Regulations (CFR) and include:

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-   **34 CFR Part 74:** *Administration of Grants with Institutions of
    Higher Education, Hospitals, and Other Non-Profit Organizations;*

-   **34 CFR Part 75:** *Direct Grant Programs*

-   **34 CFR Part 76:** *State-Administered Programs*

-   **34 CFR Part 77:** *Definitions That Apply to Department
    Regulations*

-   **34 CFR Part 79:** *Intergovernmental Review of Department of
    Education Programs and Activities*

-   **34 CFR Part 80:** *Uniform Administrative Requirements for Grants
    and Cooperative Agreements to States and Local Governments*

-   **34 CFR Part 81:** *General Education Provisions Act*

-   **34 CFR Part 82:** *New Restrictions on Lobbying*

-   **34 CFR Part 85:** *Government-wide Debarment and Suspension and
    Governmentwide Requirements for Drug-Free Workplace*

-   **34 CFR Part 86:** *Drug and Alcohol Abuse Prevention*

-   **34 CFR Part 97:** *Protection of Human Subjects*

-   **34 CFR Part 98:** *Student Rights in Research, Experimental
    Programs, and Testing*

-   **34 CFR Part 99:** *Family Educational Rights and Privacy*

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-   The EDGAR regulations and bulletins can be accessed at:
    [http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html](http://ocfo.ed.gov/grntinfo/edgar/html)
    and <http://www.ed.gov/policy/fund/guid/gposbul/gposbul.html>

## [Prior Approval Requirements]{.underline}

As a condition of this award, as indicated by Attachment Z to the Grant
Award Notification (GAN), **the grantee is required to obtain ED
approval** (34 CFR Part 74-86) before undertaking any one of the
following administrative actions during the budget period specified for
this award:

**1) Pre-award costs (EDGAR, 34 CFR Part 75.263):**

-   Project expenses incurred before Departmental approval of your
    application may be reimbursed from the grant award if incurred
    within 90 days before the beginning of your grant period with
    approval from your program officer. As noted above, recipients whose
    application materials are submitted by March 31, 2008, can expect a
    beginning date for their projects of approximately May 2008. In such
    a case, a program officer will have to approve the submitted
    pre-award expenses incurred during the months of February, March,
    and April before being reimbursed from the grant award. There is,
    however, no guarantee that a particular application will be
    processed within a certain length of time as processing speed will
    depend largely on the date of submission and how closely the
    application conforms to the requirements noted in these materials.
    *Applicant institutions therefore incur pre-award costs at their own
    risk.*

## 2) No-cost extensions 

-   All requests to extend the project period of the grant beyond the
    project period end date specified in the most recent Grant Award
    Notification (GAN).

**3) Budget Transfers**

For awards greater then \$100,000, grantees will seek prior approval for
cumulative transfers among direct-cost budget categories that exceed 10
percent of the approved budget.

**[Other Restrictions]{.underline}**

Without attempting to present an exhaustive list, the following sections
identify some common restrictions:

-   [Acquisition of real property; construction (34 CFR Part
    75.533)]{.underline}: Recipients of Congressionally-directed grants
    may not use any portion of their awards to purchase real property or
    for construction. "Construction" has been held to include both
    design (e.g., architectural or engineering design fees) and actual
    construction or remodeling. The Department will make no distinction
    between "major" and "minor" construction or remodeling; both are
    considered unallowable costs. As a general example, in the case of
    re-wiring needed to support new technologies, the grant award can
    pay the electrician for the re-wiring work but not the persons who
    repair the wall that the electrician has damaged in the re-wiring
    process.

-   [Use of funds for religion prohibited (34 CFR Part
    75.532)]{.underline}

-   [Entertainment costs]{.underline} (OMB Circular A-21): are not
    allowable.

-   [Fund raising (OMB Circular A-21) and Lobbying (34 CFR Part
    82.100)]{.underline}: Costs of organized fund raising incurred to
    raise capital or obtain contributions are not allowable. In
    addition, no portion of a Congressionally-directed grant may be used
    to pay anyone for "influencing or attempting to influence" a member
    of Congress or the Executive Branch to award funds for this project
    or any other project. Note that this prohibition includes not only
    paid outside lobbyists, but also employees of the recipient
    institution. *Examples:* No project funds may be used for lobbyists'
    fees or travel costs incurred in seeking this or a successor
    Congressionally-directed grant, or in other fund-raising activities.
    A person whose salary is 100 percent supported by the Congressional
    award may not spend *any* time on lobbying activities or
    fund-raising. A person whose salary is 75 percent supported by the
    Congressional award may spend the 25 percent of their time not
    supported with federal grant funds on lobbying activities or fund
    raising.

-   Other regulations prohibit the use of grant funds for
    [alcohol]{.underline}, [international travel]{.underline}
    (prohibited unless the appropriations language specifically notes an
    international emphasis to the award), and other various and sundry
    items. The regulations also explain how organizations will be
    required to account for their expenses under the grant award, and
    should be reviewed by all parties responsible for preparing the
    application and conducting grant activities.

If in doubt about whether a particular expense can be covered by the
grant, include it in your budget and offer reasons why that expense is
needed for the successful accomplishment of the goals set by Congress
for the award. A Department program officer will contact the project
director if changes are necessary.

Feb 2008