NECESSARY
Costs must be necessary. This means costs must be essential to fulfill regulatory requirements for proper and efficient administration of the Program.
ACTIVITY
Select which cost is necessary for the proper and efficient administration of the program.
Fresh Apples
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Necessary
Coffee
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Not Necessary
(even when it feels like it!)
REASONABLE
Costs must be reasonable. This means that the type and amount of costs must not exceed what a prudent person would pay in the same circumstances.
ACTIVITY
Let’s say you need to buy a new stove for one of your affiliated centers. You are looking around for stoves and find one on clearance at your local hardware store that is $600 when they are usually $850 and you also find one with all the bells and whistles for $1,500. Which of these is the reasonable cost?
$600
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CORRECT!
Wow! What a great deal. As long as all of the other allowability cost factors check out, you can get this one!
$1,500
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INCORRECT
Let’s proceed with caution before we buy this stove. It is almost 2 times the average price of a regular stove. This may not be allowable since it does not appear to be within a reasonable price range a prudent person would pay.