23 C.F.R. § 420.113 – What costs are eligible?

(a) Costs will be eligible for FHWA participation provided that the costs:
1. (1) Are for work performed for activities eligible under the section of title 23, U.S.C., applicable to the class of funds used for the activities;
2. (2) Are verifiable from the State DOT's or the subrecipient's records;
3. (3) Are necessary and reasonable for proper and efficient accomplishment of project objectives and meet the other criteria for allowable costs in the applicable cost principles cited in 49 CFR 18.22;
4. (4) Are included in the approved budget, or amendment thereto; and
5. (5) Were not incurred prior to FHWA authorization.
(b) Indirect costs of State DOTs and their subrecipients are allowable if supported by a cost allocation plan and indirect cost proposal prepared, submitted (if required), and approved by the cognizant or oversight agency in accordance with the OMB requirements applicable to the State DOT or subrecipient specified in 49 CFR 18.22(b).