A Plain Language Guidance Document

Understanding how to classify and charge software costs under federal grants can be challenging. This plain-language tool helps grant recipients and subrecipients determine whether a software cost is allowable, whether it can be direct charged, and whether prior approval is needed.

The tool outlines the key differences between capital software purchases and software-as-a-service (SaaS), summarizes Uniform Guidance requirements, and provides a side-by-side comparison table of cost treatment scenarios. It is designed for fiscal staff, program managers, and compliance professionals seeking clear answers—without having to parse complex CFR citations.

This tool includes:
PDF guidance document
Plain-language overview of software cost classifications
Side-by-side comparison of cost treatment under Uniform Guidance
References to relevant sections of 2 CFR Part 200
Tips for applying the rules in real-world situations

Misclassifying software costs can result in disallowed costs or audit findings. This tool helps grant recipients avoid compliance issues by providing clarity on how to treat software purchases, licenses, subscriptions, and custom development costs. It promotes consistent, defensible practices aligned with federal regulations, saving time and reducing risk.