Notes on Allowability of B&P Costs

The difference between Fundraising and B&P:
Fund raising (or "fundraising") costs are unallowable as charges to federal assistance awards, see 2 CFR 200.442 Fund raising and investment management costs. However, Proposal (often termed Bid & Proposal, or B&P) costs are allowed as indirect charges to federal awards, see 2 CFR 200.460 Proposal costs.

So what’s the difference? Read the citations above. But the following rule of thumb is reasonably accurate without over-simplifying the distinction.

• It’s fundraising when you ask for unrestricted gifts (donations, etc.).

• It’s B&P when you ask for restricted awards (propose specific projects, etc.).

Why make the distinction?
The primary reason to make this distinction is to enable the organization to recover B&P costs allocable to its federal awards via appropriate indirect cost allocation. Allocating B&P costs to program services (instead of lumping them together with fund raising) also provides a more accurate report of the true costs of both program operations and fund raising.

Whether or not this distinction extends to the reporting of fund raising expenses on the IRS Form 990 may be open to interpretation. So if you make this distinction for cost recovery purposes under federal (and other) awards, you may still decide to report your B&P expenses as fund raising on the 990.

Is this new?
Prior to the implementation of 2 CFR 200, the allowability of B&P costs for reimbursement under federal awards was unclear. Some would have argued that B&P costs are fund raising costs and are therefore unallowable. But many (including auditors) followed the precedent in the acquisition regulations—FAR, cf. 48 CFR part 31.205-18(c) and AIDAR, cf. 48 CFR part 731.771—and took the position that B&P costs are allowable for indirect allocation to federal assistance awards.

With the advent of 2 CFR 200, we have a clear statement by the OMB regarding the allowability of B&P costs for allocation to federal assistance awards. See 2 CFR 200.460 Proposal costs.

This gives us both a clear definition of the term and an unequivocal statement that these costs are allowable as indirect (F&A) costs, when allocated in the accounting period (FY) in which they are incurred.

See also 2 CFR 200.56 Indirect (facilities & administrative (F&A)) costs.

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