Allowable & Unallowable Costs
The table below lists categories, examples, and conditions of allowable and unallowable costs.  In the 
Notes & Restrictions column, ? indicates an allowable cost; ?, unallowable.  The table shows only the 
most commonly referred to restrictions, and should not be considered a complete list.  For more 
information, refer to circulars published by the Office of Management and Budget (OMB), or contact 
your local procurement office or State Grant Administrator.
NOTE:  Allowable costs are allowable only to the extent that 
they do not exceed the program’s funding limit.

Cost Category
Examples
Notes & Restrictions
Advertising
?	Radio, television, and newspaper 
ads
?	Direct mail campaigns
When incurred for:
?	Recruitment of personnel
?	Procurement of goods and services
?	Promotion of the governmental unit
Alcoholic Beverages

?	Unallowable
Audit Services
?	Case or project reviews
?	Project inspections
Provided that the audits:
?	Comply with the provisions of the 
Single Audit Act (see OMB Circular 
A-133)
OR
?	Are otherwise required and/or 
approved by FEMA
Bad Debts
?	Uncollectible funds
?	Losses arising from uncollectible 
amounts and other claims and related 
costs
Bonding Costs
?	Costs associated with attaining 
surety bonds for employees and 
officials
?	Provided that bonding is in 
accordance with sound business 
practice
Budgeting Costs
?	Development
?	Preparation
?	Presentation
?	Execution
?	Allowable
Communications
?	Telephone
?	Mail and messenger service
?	Allowable
Compensation
?	Wages and salaries
?	Fringe benefits
?	Provided that compensation is 
reasonable for the services provided
Disbursing Services
?	Costs associated with the accounts 
payable function
?	Allowable
Donated Services
Services volunteered by:
?	Technical personnel
?	Consultants
?	Skilled and unskilled labor
?	The values of donated services are 
unallowable as either direct or 
indirect costs.  However, they may be 
used to meet cost sharing or matching 
requirements.
Equipment and Other 
Capital Expenditures
?	The net invoice price of 
equipment, including 
modifications, attachments, or 
accessories
?	Ancillary charges, including taxes 
and freight
Non-expendable items of equipment 
having a useful life of more than 1 
year and costing $5,000 or more.  
(Items of equipment costing less than 
$5,000 are considered supplies.)
General Government 
Expenses
?	Salaries and expenses of the 
Office of the Governor and/or 
State legislatures, tribal councils, 
or other local governmental bodies
?	Costs associated with government 
services normally provided to the 
general public (e.g. fire and 
police)
?	Unallowable
Legal Expenses
?	Professional and/or support staff 
time
?	Filing fees
?	Legal expenses required for program 
administration
?	Legal expenses for prosecutions of 
claims against the Federal 
Government
Maintenance, 
Operation, and Repairs
?	Utilities
?	Insurance
?	Security
?	Janitorial services
?	Equipment repairs
Allowable if they:
?	Keep property in efficient operating 
condition
?	Do not add to the permanent value of 
the property
?	Are not included in rental charges for 
space
Materials and Supplies
?	Stationery
?	General office supplies
?	Items of equipment costing less 
than $5,000
Allowable after deducting:
?	Cash and/or trade discounts
?	Rebates
?	Other allowances
Motor Pools
?	Maintenance
?	Inspection
?	Repair services
?	If charged to the program at a 
mileage or fixed rate
Public Relations
Activities directed toward:
?	Maintaining the image of the 
governmental unit
?	Promoting understanding and 
favorable relations with the public
?	Legal or Public Notices
When:
?	Incurred to communicate with the 
public and press pertaining to the 
specific program
?	Necessary to conduct general liaison 
with the news media and government 
public affairs officers to keep the 
public informed
?	Incurred solely to promote the 
governmental unit
Training
?	Employee training
?	To the extent that the training is 
required for sub-grant related 
activities
Travel
?	Transportation
?	Lodging
?	Subsistence
Provided that:
?	Employees are traveling on official 
business
?	The costs do not exceed the amount 
normally allowed by the agency in its 
regular operations


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Tool III-1, Allowable & Unallowable Costs
Tool III-1, Allowable & Unallowable Costs
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