2. Washington, D.C. - August 2008 USDOL/VETS Competitive Grantees Training Conference Presented by Victor M. Lopez Chief, Division of Cost Determination/OAMS/BOC/OASAM 202-693-4106 – lopez.victor@dol.gov Allowable/Unallowable Costs Per OMB Circular A-122

3. Web address for DOL’s Division of Cost Determination http://www.dol.gov/oasam/programs/ boc/costdeterminationguide/main.htm http://www.dol.gov/oasam/programs/ boc/costdeterminationguide/main.htm The site contains links to OMB Circulars, the FAR, and other information on documenting indirect cost proposals.

5. What we will cover: Structure of OMB Circular A-122 (2 CFR 230) - non-profit cost principles. Definition of Allowable Costs and Unallowable Costs. Selected items of Cost; Attachment B. We will cover 38 specific items of costs out of 52, and a short quiz. Answers to your questions. Note: Recommend reviewing the entire Attachment B for any follow-up questions, available at: http://www.whitehouse.gov/omb/circulars/a122/a122_2004.html http://www.whitehouse.gov/omb/circulars/a122/a122_2004.html

6. Attachment A : General Principles Attachment B : Selected Items of Cost Attachment C: Non Profits not subject to this Circular. Structure of A-122 (2 CFR Part 230)

7. To be Allowable, costs must*: Be reasonable and allocable Conform to any limitations or exclusions set forth in the cost principles or the award Be consistent with policies and procedures afforded all activities of the organization Be accorded consistent treatment Be determined in accordance with GAAP Not be against the law Not already be included in a cost sharing or matching requirement Be net of applicable credits Be adequately documented. * Attachment A, OMB Circular A-122 – For Federal Cost Reimbursement.

8. Unallowable Costs are those: Specifically identified in the grant/contract as being unallowable. Specifically identified in Circular A- 122, as being unallowable. Does not meet the criteria listed in Circular A-122 to be allowable.

9. Sample Unallowable Costs  Alcoholic Beverages  Bad Debts  Contingency provisions  Fines and Penalties  Lobbying Costs  Fund Raising Costs  Entertainment  Social Memberships  Fundraising Costs  Interest on borrowed capital

10. Attachment B; Introduction These principles apply whether a cost is treated as direct or indirect. Failure to mention a particular item of cost is not intended to imply that it is unallowable; rather, determination as to allowability in each case should be based on the treatment or principles provided for similar or related items of cost.

11. Advertising & Public Relations (1 of 3) Allowable Advertising Recruitment of personnel required for performance of Federal award Procurement of goods & services for the performance of the award Disposal of scrap or surplus acquired in the performance of award Continued

12. Allowable Public Relations Costs are specifically required by award Costs of communicating with the press pertaining to accomplishments which resulted from the performance of an award Cost of keeping the public informed on matters of public concern... such as notices of contract/grant awards... etc. Advertising & Public Relations (2 of 3) Continued

13. Specifically unallowable: Costs of promotional items, memorabilia, gifts and souvenirs Costs of advertising and public relations designed solely to promote the organization Advertising & Public Relations (3 of 3)

14. Alcoholic Beverages Costs of alcoholic beverages are unallowable!

15. Audit Costs and Related Services Audits required by, and performed in accordance with, the Single Audit Act, as implemented Circular A-133 are allowable. Other audit costs are allowable if included in an indirect cost rate proposal, or if specifically approved by the awarding agency as a direct cost. The cost of agreed-upon procedures engagements to monitor sub-recipients who are exempted from A-133 are allowable.

16. Bad Debts Bad debts, including losses (whether actual or estimated) arising from uncollectible accounts and other claims, related collection costs, and related legal costs, are unallowable

17. Communication Costs incurred for telephone services, local and long distance telephone calls, telegrams, postage, messenger, electronic or computer transmittal services and the like are allowable.

18. Compensation for Personal Services (1 of 3) Includes all compensation paid currently or accrued by the organization during the period of the award. Compensation costs are allowable when: Reasonable Consistent/Allocable Adequately documented Continued

19. Fringe benefits Generally allowable. They also need to be reasonable. Includes expenses such as, Annual Leave, Sick Leave, Holiday, Social Security, Workers Comp., Pension, UI, etc. Employer contributions are allowable when paid in accord with established written policies. Compensation for Personal Services (2 of 3) Continued

20. Support of salaries and wages Personnel Activity Reports (PARs or Time Distribution Reports) Must reflect after-the-fact determination of activity (not budget estimates). Must account for total activity for which employee is compensated. Must be signed by the employee or responsible supervisor. Must be prepared at least monthly and coincide with one or more pay periods. Compensation for Personal Services (3 of 3)

21. Contributions to a contingency reserve, or any similar provision, made for events the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening are unallowable. Exceptions might be self-insurance, pension funds and reserves for normal severance pay. Contingency Provisions

22. Depreciation and Use Allowances (1 of 4) Costs are allowable. A combination of the two methods may not be used in connection with a single class of fixed assets (e.g., buildings, office equipment, computer equipment) Computation of use allowance or depreciation shall be based on acquisition cost. Acquisition cost of a donated asset shall be the fair market value at the time of donation. Continued

23. Computation of use allowance or depreciation will exclude: Cost of land Any portion donated by Federal Government Any matching portion Maximum use allowance Buildings and improvements = 2% of acquisition cost Equipment = 6 2/3% of acquisition cost Depreciation and Use Allowances (2 of 4) Continued

24. Where depreciation method is followed: Use straight-line, or Document clear evidence that the expected consumption of the asset will be significantly greater or lesser in the early portions of its useful life and use another depreciation method “Componentization” of buildings is permitted for purposes of depreciation or the entire building may be treated as a single asset. Depreciation and Use Allowances (3 of 4) Continued

25. Adequate property records must be maintained under either method Physical inventories must be taken at least once every two years Depreciation and Use Allowances (4 of 4) Property Ledger

26. Contributions or donations rendered, including cash, property, and services, made by the organization, regardless of the recipient, are unallowable Donations and Contributions (1 of 2) Continued

27. Donations and Contributions (2 of 2) The value of donated services, goods, or space received is not reimbursable either as a direct or indirect cost. However, the value of donated services, goods or space may be used to meet cost sharing or matching requirements. Continued Donated services received:

28. Employee Morale, Health & Welfare Costs Examples - In-house publications, health clinics, recreational activities, etc. Costs are allowable if: In accord with established practice Reasonable Equitably distributed to all activities Offset by income earned

29. Entertainment Costs of entertainment, including amusement, diversion and social activities and costs relating to these activities such as tickets, meals, lodging, rentals, transportation and gratuities are unallowable.

30. Equipment & Other Capital Expenditures (1 of 2) Equipment - an article of non expendable, tangible personal property having a useful life of more than one year and an acquisition cost equal to or greater than the lesser of: - The organization’s financial statement capitalization level or - $5,000 Capital Expenditures – expenses for the acquisition cost of capital assets or expenses for improvements that materially increase the value of the capital asset. Continued

31. Equipment and Capital Expenditures are Unallowable as indirect costs. Prior approval from the awarding agency must be obtained to direct charge. Equipment & Other Capital Expenditures (2 of 2)

32. Federal Marshal Fines and Penalties Costs of failures to comply with Federal, state, or local laws are unallowable. Allowable if incurred as a result of compliance with specific provisions of an award or instructions in writing from the awarding agency.

33. Fund Raising and Investment Management Costs Fund raising and similar expenses incurred to solely to raise capital or obtain contributions are unallowable Costs of investment counsel & staff and similar expenses are unallowable Fund raising and investment activities shall be allocated an appropriate share of indirect costs

34. Goods or Services for Personal Use Unallowable regardless of whether the cost is reported as taxable income. Federal Marshal IRS

35. Housing and Personal Living Expenses Unallowable as an indirect cost or fringe benefit regardless of whether it is reported by the employee as taxable income. Allowable as direct if necessary and approved by the awarding agency.

36. Idle Facilities and Idle Capacity Unallowable except to the extent that: They are necessary to meet fluctuations in workload or Were necessary at one point and because of unforeseen changes are no longer necessary (under this exception, costs of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year)

37. Insurance and Indemnification (1 of 2) Insurance required or approved pursuant to an award is allowable. Insurance carried by the organization in general conduct of business is allowable subject to the following limitations: Reasonable coverages Cost of insurance on officers must represent additional compensation and the organization may not be identified as the beneficiary Other miscellaneous items Continued

38. Indemnification includes securing the organization against liabilities to third parties and other loss or damage, not compensated by insurance. The Federal government is obligated to indemnify the organization only to the extent expressly provided in the award. Insurance and Indemnification (2 of 2)

39. Interest Generally unallowable. See item #23 of the Circular for more details.

40. Labor Relations Costs Costs of maintaining satisfactory relations with employees, including labor management committees, employee publications and other related activities are allowable.

41. Unallowable: Attempts to influence election outcomes Contributing to political causes Attempts to influence Federal or State legislation through virtually any communicative device Legislative liaison activities when performed in support of unallowable lobbying Lobbying (1 of 3) Continued

42. Allowable: Providing a technical presentation on a topic directly related to the performance of an award Any activity specifically authorized by statute to be accomplished with funds under the award Lobbying (2 of 3) Continued

43. Indirect Cost Proposals (ICP) must separately identify lobbying costs and treat them as unallowable Nonprofits must provide a “Lobbying Certification” with their annual ICP Organizations shall maintain adequate records to demonstrate the determination of costs as allowable or unallowable in accord with Circular A-122. Lobbying (3 of 3)

44. Maintenance and Repairs Costs necessary to keep buildings and equipment in efficient operating condition are allowable. Costs which add to the permanent value or appreciably prolong the life of the asset shall be treated as capital expenditures.

45. Materials and Supplies (1 of 2) M/S costs necessary to carry out a Federal award are allowable M/S must be charged at their actual prices, net of applicable credits M/S costs may be allowable as direct or indirect Continued

46. Only materials and supplies actually used for the performance of a Federal award may be charged as direct costs. Where federally-donated or furnished materials are used in performing the Federal award, such materials will be used without charge. Materials and Supplies (2 of 2)

47. Meetings and Conferences Costs of meetings and conferences, the primary purpose of which is the dissemination of technical information, are allowable Costs include meals, transportation, rental of facilities, speakers’ fees, and other items incidental to the meeting or conference Caveat – Entertainment & Participant support costs

48. Memberships, Subscriptions and Professional Activity Costs (1 of 2) Membership in business, technical and professional organizations are allowable Subscriptions to business, technical and professional periodicals are allowable Costs of memberships in civic or community organizations are allowable with prior approval by the cognizant Federal agency. Continued Members Only

49. Memberships in country, social, or dining clubs are unallowable. Memberships, Subscriptions and Professional Activity Costs (2 of 2)

50. Organization Costs All costs of organization or reorganization are unallowable except with prior approval of the awarding agency.

51. Participant Support Costs These costs include stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia, or training projects and are allowable as direct costs with the prior approval of the awarding agency. Participant Express

52. Pre-agreement Costs Pre-award costs are costs incurred prior to the effective date of the award directly pursuant to the negotiation of the award. Such costs are allowable only to the extent that they would have been allowable if incurred after the effective date of the award and only with the written approval of the awarding agency.

53. Professional Service Costs Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-profit organization, are generally allowable if reasonable and not contingent on recovery of costs from the Federal government.

54. Publication and Printing Generally allowable and include page charges in professional publications. Allocate as indirect if not identifiable with a particular cost objective.

55. Recruiting Generally, advertising and associated costs incurred for recruitment of staff are allowable but They must meet the test of reasonableness and They must conform with established practices of the organization Help Wanted

56. Rental Costs Rental costs are generally allowable if reasonable. See item # 43 of the Circular for more details. Office Space For Rent Phone 634-5789

57. Taxes Taxes are generally allowable except for: Taxes from which exemptions are available Special assessments on land which represent capital improvements and Federal income taxes Applicable credits(offsets to taxes) must be taken where appropriate. I. R. S. I. R. S.

58. Termination Costs applicable to Sponsored Agreements Termination of awards generally give rise to costs which would not have arisen had the award not been terminated. Reasonable and customary costs of terminating an award are generally allowable. Review additional details in the Circular # 48. Closed -- Funding Terminated Continued

59. Training Costs Generally, training and education costs related to employee development, such as, workshops, textbooks, classes, etc. are allowable Pi R

60. Transportation Allowable as direct if provided for in the award Allowable as indirect for equitable distribution to all benefiting activities

61. Travel Expenses for transportation, lodging, subsistence, and related items incurred by employees on official business are allowable. Such costs may be charged on an actual basis, per diem or mileage basis or a combination, but must be consistent with those normally allowed by the organization.

62. Trustees Travel and subsistence of trustees (or directors) are allowable, noting restrictions for travel costs (#51).

63. Quiz Let’s see if you did! Did you get it?

64. True or False If a specific item of cost is not mentioned in Attachment B, the implication is that the cost is unallowable. False Attachment B (Opening paragraph)

65. Costs of advertising and public relations designed solely to promote the non-profit organization are unallowable. True 1.f.(4) True or False

66. “Mixed” drinks containing alcohol are allowable. False 3. Alcoholic Beverages

67. True or False Audit costs charged included in the indirect cost pool are not allowable. False 4.b.

68. True or False Legal costs associated with the collection of bad debts, are allowable as indirect costs. False 5.

69. True or False Personal Activity Reports (PARs) must reflect an after-the-fact determination of the actual activity of each employee. Budget estimates do not qualify as support for charges to awards. True 8.m.(2)(a)

70. True or False The value of donated services is not reimbursable either as a direct or indirect cost. True 12.b.(1)

71. True or False Costs of employee information publications (health, counseling, recreational, etc.) in accord with established practice or custom are allowable. True 13.a. Employee Morale

72. True or False Cost of entertainment, including amusement diversion and social activities are allowable as long as the governmental unit has a written "no smoking" policy. False 14.

73. True or False Costs of idle facilities are allowable if they are necessary to meet fluctuations in workload. True 21.b.(1)

74. True or False Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-profit organization’s own funds, however represented, are unallowable. True 23.a.

75. True or False Costs incurred for necessary maintenance, repair, or upkeep of buildings and equipment which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. True 27.

76. True or False Costs of meetings and conferences, the primary purpose of which is the dissemination of technical information, are allowable. True 29.

77. True or False Employee memberships in “golf clubs” in certain regions of the country are allowable. False 30.d.

78. True or False Participant support costs may be charged as indirect if they are allocated equitably to all programs. False 33. (Awarding agency prior approval is required.)

79. True or False Allowable publication and printing costs not identifiable with a particular cost objective should be allocated as indirect costs to all benefiting activities of the non-profit organization. True 38.b.

80. True or False Training costs for an accountant to attend an art class are allowable even if the artistic abilities gained are not used in conjunction with the accountant’s employment. False 49.b.

81. True or False Where identification with the materials received cannot readily be made, transportation costs may not be charged as an indirect cost, even if the organization follows a consistent, equitable procedure in this respect. False 50.

82. True or False If travel costs are paid to relocate a newly recruited employee who is hired and decides to quit the job 6 months later due to winning a lottery, the organization will be required to refund or credit such recruitment/relocation costs to the Federal government. True 41.d.

83. Questions??

84. Time to say goodbye