Software Expenses on Sponsored Awards

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Commercial software is usually considered general purpose and therefore not allowable as a direct cost on a sponsored project. However, there are times when the purchase of specialized software may be made as a direct charge given adequate justification based on project needs and given sponsor approval. When these conditions are met, software expenses may be charged as either expendable supplies or as a capital expenditure.

Expendable Supplies

In many cases when software is allowed as a direct cost on a sponsored project, the costs should be budgeted under ‘Materials’ or ‘Other Direct Costs,’ and are subject to F&A. For example,

  • Software with an acquisition cost less than $5,000.
  • Software that includes individual user licenses that aggregate to $5,000 or greater (e.g., 500 licenses at $100 each).
  • Software that is leased (i.e., not owned by the University) through a yearly license. This includes annual licensing costs that aggregate to $5,000 or greater.

Capital Expenditures

When a software license is obtained in which the University has a contractual right to take possession of the software, the software purchase may be budgeted as a capital expenditure and excluded from F&A if the following conditions are met:

  • The acquisition cost has a per unit fair market value of $5,000 or more, the software has a useful life greater than one year, and CSU retains ownership of the software and has the ability to sell, transfer, license, or rent the asset to another party or asset arises from a contractual or legal right.

For more on software purchases as direct costs and on software fabrication, consult FPI 4-11 – http://busfin.colostate.edu/Forms/FRP/Capital_CP/FPI_4-11_Software_and_Internally_Developed_Software.pdf#zoom=100

Blog post by Jenn Alvarez, Research Administrator, Office of Sponsored Programs