8. The Cost Principles:
      OMB Circular A-21

Fiscal Fundamentals   


Briefing Tools

Ask the Expert

Test your knowledge

Stanford Policy

* Fiscal Responsibilities
of PIs

* Cost Policy




Resources and Tools 

* Audit Survival Guide

Anyone authorizing the expenditure of federal funds needs to understand the cost principles contained in Circular A-21, published by the Federal Office of Management and Budget (OMB).

These principles govern costs that may be charged to the government by educational institutions either directly or indirectly. What is
OMB Circular A-21?

Stanford generally applies these same cost principles to non-federal funding as well, although in some cases non-federal sponsors define allowable/unallowable costs differently than federal sponsors.

Any cost being charged to a sponsor must satisfy the following criteria:
  1. The cost must be ALLOWABLE as defined by Circular A-21 and/or by the terms of your particular award (discussed further on the next page of this site).
  1. The cost must be ALLOCABLE, that is, the project which paid the expense must benefit from it.
  2. The expense must be REASONABLE, that is, the cost reflects what a "prudent person" might pay.

If costs are not allowable, allocable and reasonable, then they may NOT be charged to a sponsored project.

In addition, A-21 requires that costs be handled consistently across the University. This means, for example, that particular types of expenses may not be charged directly in one School or Department, and charged as an indirect cost somewhere else. The key to consistency is the application of Stanford policy. As long as you know and apply University policies, you do not need to be an expert on A-21. Stanford employs experts to assure that policy guidance reflects regulatory requirements.


Navigation Tools
to Page 1 to Previous
Feedback to next to index