Which type of expense is typically considered unallowable?

Fines related to non-compliance with regulations are typically classified as unallowable expenses because they arise from violations of laws or regulations. Regulations governing allowable costs in federal grants and contracts state that expenses must be reasonable, allocable, and consistent with the terms of the agreement. Fines represent penalties imposed for non-compliance and do not contribute positively to the project’s objectives. Since they are punitive in nature and do not directly support the delivery of project outcomes, they are excluded from reimbursable costs.

In contrast, necessary utilities for project completion, materials purchased for a project, and salaries of staff involved in project management are generally considered allowable expenses, as they are essential to carrying out the objectives outlined in project plans and agreements. Allowable expenses are usually related to the direct costs necessary for project execution, provided that they conform to the necessary guidelines and restrictions.