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Annex F: FAM Part 3 - Allowable Costs

CHAPTER 3-100

COST PRINCIPLES

3-100-00 What does this chapter do?

3-100-10 Where do these principles come from?

3-100-20 What costs are allowable?

3-100-30 What costs require OSMRE approval?

3-100-40 What costs are unallowable?

3-100-00 What does this chapter do?

This chapter explains the basic principles of allowable cost for all assistance agreements awarded 

by us, the Office of Surface Mining Reclamation and Enforcement (OSMRE). 

3-100-10 Where do these principles come from?

A. The Office of Management and Budget (OMB) has established principles for determining 

allowable costs for Federal assistance agreements. They publish the cost principles in 

three circulars according to the type of recipient organization. You can find more 

information about allowable costs in the Code of Federal Regulations (CFR) entitled 

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for 

Federal Awards at 2 CFR Part 200.

B. We include the appropriate cost principles by reference in each assistance agreement that 

we award. These cost principles apply to your activities as a recipient, and to any 

subrecipients or cost-type contractors who receive funds under your assistance 

agreement. You must cite the appropriate principles in the subgrant or contract award.

3-100-20 What costs are allowable?

A. You must follow the applicable OMB circular listed above. 

B. Costs we approve in your assistance agreement are allowable.

C. Generally, costs are allowable if they meet all of the following standards.

1. The costs must be necessary and reasonable for the proper and efficient execution 

of the project.

2. The costs must be in accordance with the assistance agreement and the most 

recent approved project budget.
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3. The costs must not be prohibited by Federal, state, or local statutes or regulations.

4. The costs must be applied consistently with your accounting procedures.

5. The costs must not be included as part of any other Federally financed program.

6. The costs must be net costs after deducting all applicable credits.

7. The costs must comply with any budgetary or other types of restrictions on 

expenses we have established.

8. The costs must be incurred and the work performed within the dates of the 

performance period. Pre-agreement or proposal costs may be allowable, but only 

if the assistance agreement specifically provides for them.

9. The costs must be fully documented. 

3-100-30 What costs require OSMRE approval?

A. The OMB cost circulars show that some costs, including equipment, are only allowable 

with our prior approval. If you included these costs in your application budget, our 

approval of your assistance agreement or amendment constitutes our approval of the 

costs. If these costs are not in your approved budget, you must request our approval 

before you incur the costs.

B. When you treat these costs as indirect costs (or, in the case of a state government, include 

them in a statewide cost allocation plan), we will consider that approval of your indirect 

cost rate or cost allocation plan by the cognizant Federal agency constitutes our approval 

of the costs. You do not have to request our specific approval.

3-100-40 What costs are unallowable?

A. You must apply the standards of the applicable OMB cost principles to determine 

whether a cost is unallowable. However, you must consider the specific circumstances in 

each case when you apply the cost principles.

B. The following list provides some examples of unallowable costs. 

1. Costs related to losses from uncollectible accounts, other claims, or any related 

costs. 

2. Costs related to payments to a contingency reserve or any similar provision for 

unforeseen events.
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3. Costs related to contributions and donations. 

4. Costs of amusements, social activities, and related incidental costs. 

5. Costs resulting from violation of, or failure to comply with, Federal, state and 

local laws and regulations, including fines, penalties, damages, attorney fees and 

litigation costs, and other settlements. These costs are also unallowable if they 

result from failure to comply with the terms of your assistance agreement or 

approved program.

6. Cost of general state or local government, including the following costs.

a. Salaries and expenses of the office of the governor of a state or the chief 

executive of a political subdivision.

b. Salaries and other expenses of the state legislature or similar local 

governmental bodies such as county supervisors, city councils, or school 

boards, whether incurred for purposes of legislation or executive direction

7. Costs related to interest on borrowed capital (however represented), bond 

discounts, cost of financing and refinancing operations, and related legal and 

professional fees, unless Federal legislation authorizes them.

8. Costs of certain influencing activities associated with obtaining a grant.

9. Costs of one assistance agreement that exceeded the total Federal funding 

available under that agreement cannot be charged to other assistance agreements.

10. Costs for individual memberships, such as bar association and professional 

engineering society dues and license fees are unallowable. However, costs for 

agency membership in civic, business, technical and professional organizations 

may be allowable if they are necessary for the assisted activity.