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AC 150/5100-10A 4/13/76 Appendix 4 specifically approved by the Federal grantor agency. 3. Capital expenditures. The cost of facili- ties, equipment, other capital assets, and re- pairs which materially increase the value or useful life of capital assets is allowable when such procurement is specifically approved by the Federal grantor agency. When assets ac- quired with Federal grant funds are (a) sold, (b) no longer available for use in a federally sponsored program, or (c) used for purposes not authorized by the grantor agency, the Federal grantor agency's equity in the asset will be refunded in the same proportion as Federal participation in its cost. In case any assets are traded on new items, only the net cost of the newly acquired assets is allowable. 4. Insurance and indemnification. a. Costs of insurance required, or ap- proved and maintained pursuant to the grant agreement, is allowable. b. Costs of other insurance in connection with the general conduct of activities is allowable subject to the following limita- tions: (1) Types and extent and cost of cov- erage will be in accordance with general State or local government policy and sound business practice. (2) Costs of insurance or of contribu- tions to any reserve covering the risk of loss of, or damage to, Federal Government property is unallowable except to the ex- tent that the grantor agency has spe- cifically required or approved such costs. c. Contributions to a reserve for a self- insurance program approved by the Federal grantor agency are allowable to the extent that the type of coverage, extent of cover- age, and the rates and premiums would have been allowed had insurance been purchased to cover the risks. d. Actual losses which could have been covered by permissible insurance (through an approved self-insurance program or otherwise) arc unallowable unless expressly provided for in the grant agreement. How- ever, costs incurred because of losses not Page 10 covered under nominal deductible insurance coverage provided in keeping with sound management practice, and minor losses not covered by insurance, such as spoilage, breakage and disappearance of small hand tools which occur in the ordinary course of operations, are allowable. e. Indemnification includes securing the grantee against liabilities to third persons and other tosses not compensated by insur- ance or otherwise. The Government is obli- gated to indemnify the grantee only to the extent expressly provided for in the grant agreement, except as provided in d. above. 5. Management studies. The cost of man- agement studies to improve the effectiveness and efficiency of grant management for on- going programs is allowable except that the cost of studies performed by agencies other than the grantee department or outside con- sultants is allowable only when authorized by the Federal grantor agency. 6. Preagreement costs. Costs incurred prior to the effective date of the grant or contract, whether or not they would have been allowable thereunder if incurred after such date, are allowable when specifically provided for in the grant agreement. 7. Professional services. Cost of profes- sional services rendered by individuals or organizations not a part of the grantee depart- mentis allowable subject to such prior author- ization as may be required by the Federal grantor agency. 8. Proposal costs. Costs of preparing pro- posals on potential Federal Government grant agreements are allowable when specifically provided for in the grant agreement. D. Unallowable costs. 1. Bad debts. Any losses arising from un- collectible accounts and other claims, and re- lated costs, are unallowable. 2. Contingencies. Contributions to a con- tingency reserve or any similar provision for unforeseen events are unallowable. 3. Contributions and donations. Unallow- able. • • • •