2 CFR 200.420 sets 3 requirements for organizations that receive federal grants and cooperative agreements. Applies when you build your application and budget, and to every cost you charge after award.
Every item of cost in the proposed budget must be tested against the specific selected-item rules of §§ 200.421 through 200.476 in addition to the general cost principles, and the same allowability treatment applies whether the item is charged as a direct or an indirect cost.
Any budget line item, direct or indirect, in a Federal award application
A cost item not expressly mentioned in the selected-items sections is not automatically allowable or unallowable; its allowability must be determined from the treatment of similar or related items of cost and the general principles of §§ 200.402 through 200.411, applying the § 200.403 basic criteria.
Budget contains a cost item with no matching selected-item section
Where the provisions of a specific Federal award conflict with the selected-item rules, the Federal award's provisions govern the allowability determination.
NOFO or award terms impose stricter or different cost rules than the Subpart E defaults
Upload the funding notice and your draft budget or narrative, and ask. Grantable answers from its compliance database of federal, agency and state rules, with citations.
(a) This section provides principles to be applied in establishing the allowability of certain items involved in determining cost, in addition to other requirements of this subpart. These principles apply whether or not a particular cost item is properly treated as a direct or indirect cost.
(b) The following sections are not intended to be a comprehensive list of potential items of cost encountered under Federal awards. Failure to mention a particular item of cost, including as an example in certain sections, is not intended to imply that it is either allowable or unallowable. When determining the allowability for an item of cost, each case should be based on the treatment provided for similar or related items of cost and based on the principles described in §§ 200.402 through 200.411. In case of a discrepancy between the provisions of a specific Federal award and the provisions below, the Federal award governs. Criteria outlined in § 200.403 must be applied in determining allowability.
Source: eCFR · checked Sep 17, 2026
Every item of cost in the proposed budget must be tested against the specific selected-item rules of §§ 200.421 through 200.476 in addition to the general cost principles, and the same allowability treatment applies whether the item is charged as a direct or an indirect cost. A cost item not expressly mentioned in the selected-items sections is not automatically allowable or unallowable; its allowability must be determined from the treatment of similar or related items of cost and the general principles of §§ 200.402 through 200.411, applying the § 200.403 basic criteria. Where the provisions of a specific Federal award conflict with the selected-item rules, the Federal award's provisions govern the allowability determination.
Any budget line item, direct or indirect, in a Federal award application. Budget contains a cost item with no matching selected-item section. NOFO or award terms impose stricter or different cost rules than the Subpart E defaults.
Plain-English summaries for information only, not legal advice. Always check the regulation text, your award terms and your agency’s guidance.