4.1 Cost Principles

1. Cost Principles for Direct Costs

Stanford policy and federal regulations such as the Uniform Guidance state fundamental principles of research administration.

An expense qualifies as a direct cost to a sponsored project only when it meets the following four principles.

  1. Allowable: Allowable and unallowable costs are defined by federal regulations and in the terms of specific awards

  2. Allocable: Only those costs that BENEFIT a project may be charged to that project

  3. Reasonable: Costs must reflect what a prudent person would pay

  4. Consistent: Costs must be handled consistently across the university by following Stanford policy 


Everyone that authorizes expenses at Stanford for any purpose must confirm prior to approving a transaction that the expenditures are:

  1. reasonable and necessary
  2. consistent with established Stanford policy and practices, as well as a sponsor's terms & conditions
  3. applicable to the work of Stanford, which includes; instruction, research, and public service 

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2. Example

Professor Smart has been invited to present a paper at a conference in Seattle. There are no prohibitions against travel on the award, so Professor Smart’s travel costs are allowable per the terms of this award and federal regulations.

At the conference, Professor Smart has dinner with a colleague and orders wine. The cost of the wine (plus tax and tip) is an unallowable cost (as identified in A-21), and that part of the bill may not be charged to the government. Stanford can reimburse Professor Smart for this portion of her dinner expense, but the money must come from non-sponsored funds.

This conference focuses on the research activity funded by Professor Smart's grant. The expense of this trip will benefit the project and is therefore an allocable cost. 

In cases like this, when Professor Smart submits her expense reports for reimbursement, she should include the conference agenda or other documentation to support the relationship between the travel and the project which paid for it.

Professor Smart was feeling rather good after her presentation and decided to celebrate in a big way. She brings back receipts showing that the cost of her final dinner in Seattle, exclusive of the wine, was $150 per person. Even though the trip was allowable and allocable, that cost is not reasonable.

Sponsors reserve the right to decide whether a prudent person would have paid this amount. If not, the expense may not be charged to the government. Since Stanford also has an "actual and reasonable" requirement for travel expenses Professor Smart is probably not eligible for full reimbursement of this expense from Stanford either. Consistency is achieved by Professor Smart following Stanford Policy

The key to consistency is the application of Stanford Policy.

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