1. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures (Ver. 1)1 SECRETARIAT FOR ADMINISTRATION AND FINANCE SEPTEMBER 2007 Ver. 2 ICR 101 Indirect Cost Recovery (ICR) Policy and Procedures

2. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures2 I Overview

3. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures3 What is ICR? Indirect cost recovery is about project management. Its about full costing of all project resources, allowing proper identification of hidden or omitted costs. Its a mechanism to partially recover GS/OAS costs incurred in the administration of grants (incremental costs of human resources, audits, financial transactions, office space, procurement, etc). Well established organizations must recognize the full cost of their activities to enable informed decisions, and must partially recover these costs. ICR is not a new concept; its an industry standard in the public sector.

4. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures4 What is ICR? (continued...) For example, PAHO has an average ICR rate or Program Support Cost (PSC) of 13%. Other examples: United Nations and World Bank. But what do these three organizations have in common with the OAS? They are all international public organizations with common mandates that are financed through both Regular (e.g. quotas) and Specific Funds (e.g. voluntary contributions).

5. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures5 Why do these organizations need to recover indirect costs if they count with a Regular Fund? Most Regular Fund budgets partially cover indirect costs (e.g. basic operational costs and infrastructure). However, these organizations have increasing mandates financed through Specific Funds, with limited or no increase in their Regular Fund budgets. This means that incremental Specific Funds have a heavy impact on static Regular Fund budgets. Thus, a mechanism to partially recover the incremental costs on basic operations and infrastructure is needed.

6. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures6 How does this translate to the OAS?

7. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures7 How does this translate to the OAS? (continued...) The OAS conducted an institutional study of indirect costs for fiscal year 2005, independent of source of financing. The study concluded that the institutional indirect cost to execute $1 was approximately $0.50. In other words, at the OAS, approximately $0.50 is spent in indirect costs for every $1 executed in direct costs. Thus, the ICR rate to recover indirect costs in full would have to be approximately 50%; however, this is unrealistic to attain.

8. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures8 How does this translate to the OAS? (continued...) The new OAS ICR policy aims to recover some of these costs by establishing a mandatory minimum of 11% ICR rate. By recovering at least 11% in indirect costs, the impact on basic operations and infrastructure is reduced from current 50%. Ideally, all of this recovery needs to be in cash rather than in-kind. Prior approval for accepting in-kind indirect contributions (as ICR) from SAF and DPCE is required.

9. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures9 How is the ICR allocated? For 2007-08, ICR collected will de allocated as follows: Technical Areas (indirect costs) ICR = Central Administration (indirect costs) Regular Fund Reimbursement ($2.5 million) ++ FAQ: What is the allocation percentage to each one? Answer: There is no definite percentage. All areas have to prepare justified indirect cost requirements. FAQ: Why pay back the Regular Fund? Answer: To partially reimburse the Regular Fund for basic operational costs and infrastructure provided.

10. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures10 II ICR Policy Details

11. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures11 There are no major operational changes: Primary Dependencies continue negotiating agreements with donors, including ICR. Indirect costs incurred within the General Secretariat will continue to be covered. The new policy is based on: Article 80 of General Standards, Executive Order 07-01, and Administrative memo (to be issued shortly). ICR Policy details

12. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures12 ICR Policy details (continued…) Specific Fund contributions must include a provision for ICR. Agreements with Member states require 11% minimum ICR Agreements with all other donors require 12% minimum ICR Exemptions may be found under Article 80 of the General Standards. Interest income will be credited to the ICR Service Account, unless otherwise specified in the donor agreement. Donor in-kind contributions (indirect cost only) may be accepted to defray indirect costs.

13. Committee on Administrative Matters (CAM) Established through Administrative Memorandum ICR Policy. Entrusted to oversee the ICR application as established in the ICR Policy. Presided by SAF and integrated with representatives from DPCE, OIG and designated administrative personnel from Primary Dependencies. CAM, through SAF, will submit all recommendations regarding coverage of indirect costs to the Chief of Staff for approval. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures13

14. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures14 Accounting for ICR in OASES All ICR collections are centrally recorded in a new service account: Fund 610. An Unprogrammed AWARD/PROJECT is established to record ICR revenue from donors contributions. An award is created for each primary dependency. A project is created for each secondary dependency. ICR is allocated to these awards/projects based on agreed-upon indirect costs. Indirect costs are disassociated from individual ICR collections. The purpose is to assure that eligible indirect costs are covered. Primary Dependency (PD): executive Secretariats of the OAS. Secondary Dependency (SD): departments or offices under the Primary Dependencies.

15. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures15 ICR allocation process ICR allocation will be based on: Availability and projections of Specific Funds. Indirect cost requirements within the General Secretariat (central administration and technical areas). $2.5M Regular Fund Program-Budget 2007 requirement.

16. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures16 ICR allocation process LEGEND Budget template provided by SAF Approval by... SAFSecretariat for Administration and Finance CAMCommittee on Administrative Matters PDPrimary Dependency (eg. Multidimensional Security, Secretariat for Political Affairs) SDSecondary Dependency (eg. CICAD) PD SD prepares semi-annual requirement of indirect cost Jul – Dec 07 PD reviews and approves requirements prepared by each SP CAM CAM compiles and analyzes PDs requirements CAM oversees application of ICR policy. Submits ICR utilization to Chief of Staff CAM SAF allocates ICR to dependencies within ICR Service Account

17. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures17 Summarized ICR cycle

18. Advantages of the new ICR policy After the transition period (end of 2008), the new ICR policy will allow GS/OAS to: Move towards a refined costing system. Better identify and measure costs. Focus on individual activities. Allow better classification of costs. Transparency and accountability. Move towards Results Based Activity 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures18

19. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures19 ANNEXES Glossary and FAQs

20. Glossary Direct Costs: costs that can be attributed to a particular activity with a high degree of accuracy. Indirect Costs: costs that are incurred for a common purpose which cannot be easily attributed to a particular activity. Indirect Cost Recovery (ICR): recovery of costs that cannot be directly linked to specific projects, although incurred by the General Secretariat in the administration of contributions/grants and within the Central Administration. 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures20

21. Annex A Difference between direct and indirect costs 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures21

22. Annex A (continued...) Difference between direct and indirect costs 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures22

23. Annex B Interest accreditation 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures23

24. Annex C In-kind contributions 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures24

25. Annex D ICR calculation in project budgets 2/11/2014OAS Indirect Cost Recovery (ICR) Policy and Procedures25