Federal Cost Principles

What are the uniform administrative requirements, cost principles and audit requirements for Federal awards (2 CFR Part 200) and why are they important?

Federal cost principles are regulations that help recipients and subrecipients determine eligible costs for specific activities identified in grant agreements and contracts and outlines financial management requirements including audits. The purpose of 2 CFR part 200 is to streamline the Federal government’s guidance on administrative requirements, cost principles, and audit requirements to more effectively focus Federal resources on improving performance and outcomes, while ensuring the financial integrity of taxpayer dollars in partnership with non-Federal stakeholders.

Looking for definitions of the common CoC and ESG Program terms referenced throughout the Virtual Binders?

Virtual Binders Glossary

The uniform guidance supersedes, consolidates, and streamlines requirements from eight Office of Management and Budget (OMB) Circulars. The uniform guidance also removed: 2 CFR parts 215, 220, 225, and 230. HUD amended 24 CFR parts 84 and 85, which had codified OMB Circulars superseded by 2 CFR part 200, by removing all substantive provisions and including a saving provision that provides Federal awards made prior to December 26, 2014, will continue to be governed by parts 84 or 85 as codified in the 2013 edition of the Code of Federal Regulations (CFR) or as provided under the terms of the Federal award. For more information, see Notice SD-2015-01: Transition to 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Final Guidance.

Recipients and subrecipients should ensure they are using the appropriate OMB Circular guidance and complying with local and state laws.

What rules should I consider when spending Federal funds?

To be allowable under Federal awards, costs must be:

  • Necessary and reasonable to carry out the award
  • Allocable to the award-funded activities
  • Authorized (or not prohibited) under state or local laws
  • In conformance with OMB guidance
  • Consistent with state and local government activities
  • Treated consistently
  • Consistent with generally accepted accounting practices
  • Not used for cost sharing or matching requirements of any other Federal award (unless specifically allowed by OMB)
  • Adequately documented