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6 <br /> o Whether the cost addresses project goals and objectives and is based on program <br /> data. <br /> A cost is reasonable if, in its nature and amount, it does not exceed that which would be <br /> incurred by a prudent person under the circumstances prevailing at the time the decision <br /> to incur the cost was made. For example, reasonable means that sound business practices <br /> were followed, and purchases were comparable to market prices. When determining <br /> reasonableness of a cost, consideration must be given to: <br /> o Whether the cost is a type generally recognized as ordinary and necessary for the <br /> operation of Orange County or the proper and efficient performance of the federal <br /> award. <br /> o The restraints or requirements imposed by factors, such as: sound business <br /> practices; arm's-length bargaining; federal, state, and other laws and regulations; <br /> and terms and conditions of the ARP/CSLFRF award. <br /> o Market prices for comparable goods or services for the geographic area. <br /> o Whether individuals concerned acted with prudence in the circumstances <br /> considering their responsibilities to Orange County, its employees, the public at <br /> large, and the federal government. <br /> o Whether Orange County significantly deviates from its established practices and <br /> policies regarding the incurrence of costs, which may unjustifiably increase the <br /> ARP/CSLFRF award's cost. <br /> 2. Be allocable to the ARP/CSLFRF federal award. A cost is allocable to the <br /> ARP/CSLFRF award if the goods or services involved are chargeable or assignable to the <br /> ARP/CSLFRF award in accordance with the relative benefit received. This means that <br /> the ARP/CSLFRF grant program derived a benefit in proportion to the funds charged to <br /> the program.For example, if 50 percent of a local government program officer's salary is <br /> paid with grant funds, then the local government must document that the program officer <br /> spent at least 50 percent of his/her time on the grant program. <br /> If a cost benefits two or more projects or activities in proportions that can be determined <br /> without undue effort or cost, the cost must be allocated to the projects based on the <br /> proportional benefit. If a cost benefits two or more projects or activities in proportions <br /> that cannot be determined because of the interrelationship of the work involved, then the <br /> costs may be allocated or transferred to benefitted projects on any reasonable documented <br /> basis. Where the purchase of equipment or other capital asset is specifically authorized by <br /> the ARP/CSLFRF, the costs are assignable to the Federal award regardless of the use that <br /> may be made of the equipment or other capital asset involved when no longer needed for <br /> the purpose for which it was originally required. <br /> 3. Be authorized and not prohibited under state or local laws or regulations. <br /> Cost Principles Policy 5 <br /> May 2022 <br />