cost allocation/indirect costs
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Cost Allocation/Indirect Costs. November 2 nd 2009. Sound Check. Audio is via phone- at 1-800-621-7432 Pass Code: 7320616 Close any boxes you don’t need. Move Q&A box so that slides are visible. AGENDA. Back to Basics Emerging Cost Allocation Issues - PowerPoint PPT PresentationTRANSCRIPT
Cost Allocation/Indirect Costs Cost Allocation/Indirect Costs
November 2nd 2009
Audio is via phone- Audio is via phone- at 1-800-621-7432at 1-800-621-7432
Pass Code: 7320616Pass Code: 7320616
Close any boxes you don’t need.Close any boxes you don’t need.
Move Q&A box so that slides are visible.Move Q&A box so that slides are visible.
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AGENDAAGENDA
Back to Basics
Emerging Cost Allocation Issues
Indirect Cost Group Operations
Questions
Back to BasicsBack to Basics
Total Cost of Federal Awards
Direct
Indirect
Back to BasicsBack to Basics
What are Direct Costs?
Costs that can be specifically identified with a particular cost objective.
• Program Salaries• Space Costs for Program Activities• Travel• Equipment
Back to BasicsBack to Basics
What are Indirect Costs?
Costs incurred for common or joint purposes, benefiting more than one cost objective, and are not readily assignable to a specific cost objective.
• Administrative Salaries• Related Occupancy Expenses• Supplies• Communication
Back to BasicsBack to Basics
What is an Indirect Cost Rate?
Ratio of the Indirect Costs to a Direct Cost Base:
• Indirect Costs ($100)
• Direct Costs ($1,000)
• $100/$1,000 = 10%
Back to BasicsBack to Basics
Executive Administration
Executive Administration
AccountingAccounting HumanResources
HumanResources ProgramsPrograms
U.S. Departmentof Education
U.S. Departmentof Education
USDAUSDA
Non-FederalNon-Federal
Back to BasicsBack to Basics
What should be the result?
• Allowable costs in the pool calculation
• Allocation of indirect costs to benefiting activities/programs
• Distribution of indirect costs is fair and equitable
Back to BasicsBack to Basics
Next Steps?
• Indirect Cost Rate Proposal is submitted to Cognizant Federal
Agency• Proposal & documentation are
reviewed• Negotiated Indirect Cost Rate
Agreement (NICRA) is executed• Documentation requirement of OMB
Circular is met• Management information is
generated
Emerging Cost Allocation IssuesEmerging Cost Allocation Issues
1. American Recovery and Reinvestment Act (ARRA) Funds
2. Unused Leave Payments
3. Subaward Treatment
4. Time Distribution
5. Retirement Incentives
Emerging Cost Allocation IssuesEmerging Cost Allocation Issues
6. Subrecipient Oversight
7. Restricted Indirect Cost Rates
8. Treatment of Equipment
9. Administrative Cost Limitations
10. Cost Allocation Audit Findings
ARRA - OMB MemorandumARRA - OMB Memorandum
Memo 09-18, dated 5/11/09
Allows flexibility – use of “estimated” Central Services Costs
NTE 0.5% of total ARRA funds
Administrative costs related to carrying out ARRA programs
ARRA - OMB Memorandum – ARRA - OMB Memorandum – cont’d.cont’d.
Requirements - oversight, reporting and audit requirements
Reported at “State-wide” level
Allocated to governmental units
Supplemental SWCAP submitted to HHS/DCA
ARRA - GuidanceARRA - Guidance
HHS FAQ’s
OMB guidance / Clarifying guidance
Technical assistance from ED
ARRA - Impact on SEAs & SAsARRA - Impact on SEAs & SAs
Allocated amounts from SWCAP to SEAs/SAs
Supplemental Indirect Cost Rate for ARRA programs
Regular Indirect Cost Rate for all programs
ARRA - Impact on SEAs & SA-ARRA - Impact on SEAs & SA-cont’d.cont’d.
Evaluate impact of additional funding from ARRA
Include appropriate expenditures in the base (in accordance with agreement)
Fixed Rates – Determine the effect on later fiscal years
Predetermined Rates
ARRA - Impact on SubrecipientsARRA - Impact on Subrecipients ARRA funding impact
Include appropriate expenditures in the base (in accordance with agreement)
Fixed Rates – Determine effect on later fiscal years
Predetermined Rates
SWCAP (may or may not be an issue)
ARRA - Fixed Rate ConsiderationsARRA - Fixed Rate Considerations
FY 2010 FY 2012 FY 2014 (Based on 2008) (Based on 2010) (Based on 2012)
(C) Fixed Rate (A / B) 7.9% 9.2% 5.3%
(B) Direct Base 44,000,000 50,000,000 69,000,000
Pool:Departmental 3,200,000 4,000,000 4,975,455Central Services 280,000 250,000Carry Forward 0 325,455 (1,338,673)
------------- ------------- -------------(A) Total Pool 3,480,000 4,575,455 3,636,782
Actual Costs:
(D) Direct Base 50,000,000 69,000,000
Departmental 4,000,000 4,400,000Central Services 280,000 250,000Carry Forward 0 325,455
------------- -------------(E) Total Pool 4,280,000 4,975,455
Carry Forward Adjustment:
Recovered = Fixed Rate (C) XActual Base (D) = (F)
(F) Recovered Indirect Costs 3,954,545 6,314,127(E) Actual Indirect Costs 4,280,000 4,975,455
-------------- --------------(G) (Over)/Under Recovery 325,455 (1,338,673)
XYZ State Department of Education
Fixed Rate with Carry-Forward Adjustment
Affect on RateCalculation
SignificantChange!!
Significant Over Recovery
ARRA - Fixed Rate ConsiderationsARRA - Fixed Rate Considerations
FY 2010 FY 2012 FY 2014 (Based on 2008) (Based on 2010) (Based on 2012)
(C) Fixed Rate (A / B) 7.9% 7.3% 7.2%
(B) Direct Base 44,000,000 70,000,000 69,000,000
Pool:Departmental 3,200,000 4,500,000 4,975,455Central Services 280,000 250,000Carry Forward 0 325,455 (27,494)
------------- ------------- -------------(A) Total Pool 3,480,000 5,075,455 4,947,961
Actual Costs:
(D) Direct Base 50,000,000 69,000,000
Departmental 4,000,000 4,400,000Central Services 280,000 250,000Carry Forward 0 325,455
------------- -------------(E) Total Pool 4,280,000 4,975,455
Carry Forward Adjustment:
Recovered = Fixed Rate (C) XActual Base (D) = (F)
(F) Recovered Indirect Costs 3,954,545 5,002,948(E) Actual Indirect Costs 4,280,000 4,975,455
-------------- --------------(G) (Over)/Under Recovery 325,455 (27,494)
Fixed Rate with Carry-Forward Adjustment
XYZ State Department of Education
StableRateCalculation
ARRA - Do’sARRA - Do’s
Monitor impact on Indirect Cost Rates
Adjust billings
Call/email questions & concerns
Request technical assistance
Unused Leave PaymentsUnused Leave Payments
• OMB Circular A- 87, Attachment B, 8.d.(3), states in part:
“Payments for unused leave when an employee retires or terminates employment are allowable in the year of payment provided they are allocated as a general administrative expense to all activities of the governmental unit or component.”
• Payments cannot be charged directly to federal programs.
Unused Leave PaymentsUnused Leave Payments
• Important language included on rate agreements
• Ensure appropriate treatment in rate calculation
• Ensure appropriate treatment in rate application
Subaward TreatmentSubaward Treatment
• Federal policy on $25,000 amount
• Consider subgrants and subcontracts
• To exclude or not to exclude – case by case basis
• Simplify
Time DistributionTime Distribution
• OMB Circular A- 87, Attachment B, 8.h.Support of Salaries & Wages
• Based on payroll documentation
• Charges to a single Federal award“Semi-annual Certification”
• Charges to multiple cost objectives“Personnel Activity Reports (PARs)”
Time Distribution - PARsTime Distribution - PARs
• More than one Federal award
• A Federal award and a non-Federal award
• An indirect cost activity and a direct cost activity
• Two or more indirect activities which are allocated using different allocation bases
• An unallowable activity and a direct or indirect cost activity
Retirement IncentivesRetirement Incentives
• All costs associated with the event
• Buyouts, Special Severance Packages, Early-Outs (abnormal costs)
• C-10 outlines guidance/criteria for allowability and allocability
• OMB Circular A-87 requires prior approval
Subrecipient OversightSubrecipient Oversight
Prime Recipient’s considerations:
• Rate calculation & application
• Emerging cost issues & treatment
• Impact of funding changes on rates
• Audit issues
Restricted Indirect Cost RatesRestricted Indirect Cost Rates
• Programs with Supplement-not-Supplant requirement
• Listing of “Restricted” programs on website
• Grantees must use the Restricted Rate to recover indirect costs
Treatment of EquipmentTreatment of Equipment
• Determine capitalization threshold
• Cost of equipment cannot be included in rate calculation
• Consistency must be observed
• Rate cannot be applied to the cost of equipment
Administrative Cost LimitationsAdministrative Cost Limitations
• Programmatic limitation on costs
• Must consider direct & indirect charges
• Two-step calculation
• ARRA Funds – same treatment
Cost Allocation Audit FindingsCost Allocation Audit Findings
• Unused Leave
• Retirement Incentives
• Normal Severance Pay
• Monitoring
• Indirect Cost Rate Calculations
Indirect Cost Group OperationsIndirect Cost Group Operations
• Review/Approve Indirect Cost Rates
• Resolve Cost Allocation issues in audits
• Provide assistance on Cost Allocation policies
• Provide training on Cost Allocation
Organizational StructureOrganizational Structure
Office of theChief Financial
Officer
Post AuditGroup
Indirect CostGroup
Contracts andAcquisitions
Management
Financial Improvementand Post Audit
Operations
Internal ControlEvaluation
Group
ExecutiveOffice
FinancialManagementOperations
GeneralAccounting
Group
AccountsPayableGroup
AccountsReceivable
Group
Reporting and Analysis
Group
ProgramContracts
Group
OperationsContracts
Group
EducationSciences
Group
Performanceand Logistics
Group
INDIRECT COST GROUP
Mary Gougisha Director
Katrina McDonald Management Analyst
Brandi Jefferson Office Automation Clerk
Paul Brickman Cost Negotiator
Nelda Barnes Cost Negotiator
David Gause Cost Negotiator
Hanan Hardy Cost Negotiator
Frances Outland Cost Negotiator
Richard Koris Cost Negotiator
Phillip Luster Cost Negotiator
John Masaitis Deputy Director
Vacant Cost Negotiator
Team 2
Team 1
Useful WebsitesUseful WebsitesOMB Circulars
http://www.whitehouse.gov/omb/circulars/
ED’s Indirect Cost Group Website
http://www.ed.gov/about/offices/list/ocfo/fipao/icgindex.html
EDGAR
http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html
HHS - C-10 & Other Reference Information
http://rates.psc.gov/
Contact InformationContact Information
U.S. Department of EducationU.S. Department of EducationOCFO / FIPAO / ICGOCFO / FIPAO / ICGAttn: Mary Gougisha, Room 21H1Attn: Mary Gougisha, Room 21H1830 First Street, NE830 First Street, NEWashington, DC 20202-4450Washington, DC 20202-4450
Phone: (202) 377-3835Phone: (202) 377-3835Email: [email protected] Email: [email protected]
Questions
Answers