§ 200.404 - Reasonable costs.

§ 200.404 Reasonable costs.

A cost is reasonable if , in its nature and amount, it does not exceed an amount that which would be incurred by a prudent person would incur under the circumstances prevailing at when the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining the reasonableness of a given cost, consideration must be given to the following:

(a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity recipient's or subrecipient's operation or the proper and efficient performance of the Federal award.;

(b) The restraints or requirements imposed by such factors as : sound business practices; arm's-length bargaining; Federal, stateState, local, tribal, and other laws and regulations; and terms and conditions of the Federal award.;

(c) Market prices for comparable goods or services costs for the geographic area.;

(d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entityrecipient or subrecipient, its employees, where applicable its students or membership (if applicable), the public at large, and the Federal Government.; and

(e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost.

[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75885, Dec. 19, 2014]

cost represents a deviation from the recipient's or subrecipient's established written policies and procedures for incurring costs.