1. Deborah Moberly DOI Interior Business Center September 2016

2. 2 Criteria General Principles for Determining Allowable Costs Reasonable, Allowable, Allocable and Unallowable Costs Indirect Cost Rates Proposal Submissions & Timelines Web Site Tools

3. 3 Title 2: Grants and Agreements Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart A – Acronyms and Definitions Subpart B – General Provisions Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards Subpart D – Post Federal Award Requirements Subpart E – Cost Principles Subpart F – Audit Requirements Appendix VII – State/Local Governments and Indian Tribe Indirect Cost Proposals

4. 4 A means to identify general and administrative overhead Recovery is limited by Federal law and regulation Costs are grouped into: Costs that directly benefit individual programs or activities (direct) Costs that support all programs or activities (indirect)

5. 5 Costs that can be identified specifically with a final cost objective such as a specific activity, program or grant (direct program costs) Can benefit more than one program but can be easily allocated to the funding sources that benefit (direct allocation costs) Are approved for payment by the Federal grant officer or their representative

6. Extraordinary or distorting expenditures Pass-through Funds Capital Expenditures Major Subcontracts – include only the first $25,000 6

7. 7 Incurred for common or joint objectives and cannot be readily identified with a particular final cost objective or funding source Necessary to the general operation of the government Approved by the cognizant agency’s cost negotiator through an indirect cost rate or direct cost allocation plan

8. 8 Accounting Audit* Human Resources Director & Receptionist Payroll Communications Rent* Utilities Bank Charges Insurance General Liability, Fidelity Bond, etc. Salaries Fringe Benefits Office Supplies Purchases Travel Depreciation** Printing/Copying Equipment Lease/ Repair Minor Equipment

9. 9 Generally, a cost is allowable if it is:  Reasonable and necessary for the performance of the Federal Award  Allocable to the Federal Award  Conform to any limitation or exclusions set forth in Part 200 or in the Federal award as to type or amount of cost items  Consistent with policies and procedures that apply to all activities

10. 10 Generally a costs is allowable if it is:  Accorded consistent treatment  Determined in accordance with Generally Accepted Accounting Principles (GAAP)  Not included as a cost or used to meet cost sharing or matching requirements of any other federally-funded program  Adequately documented

11. 11 A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The type of cost generally recognized as ordinary and necessary for operation Sound business practices, arm’s length bargaining, complies with laws, regulations and Federal Award Market prices for comparable goods or services Was prudence under the circumstances exercised Not a significant deviation from established practices

12. 12 A cost is allocable to a particular cost objective, activity or program in accordance with the relative benefits received Allocable costs can be indirect or direct when: Incurred specifically for the grant/contract = Direct Necessary to the overall operation of the organization and a direct relationship to any particular cost objective cannot be shown = Indirect Benefits both the grant/contract and other cost objectives and it can be distributed among objectives in reasonable proportion to the benefits received = Direct cost allocation

13. 13 Computer purchased for the sole use of the XXX Program Director (Directly allocable to XXX Program) Computer purchased for the Payroll Clerk (Indirectly allocable to all programs)

14. 14 A cost is unallowable if it: Does not meet the criteria listed in OMB Circular Part 200 to be allowable Is specifically identified in OMB Circular Part 200 or the grant/contract as being unallowable

15. 15 Capital expenditures Entertainment Alcoholic beverages Governmental costs Lobbying Fundraising Public relations/ advertising Interest and financing Losses on other contracts Contributions and donations Bad debts Fines and penalties Defense of fraud proceedings

16. Unallowable costs should be included in the base when the activity: Includes salaries of personnel, Occupies space, and Benefits from the organization’s indirect costs 16

17. 17 The decision to treat a cost as direct or indirect depends on the treatment of that cost within the grantee’s accounting system Costs should be consistently treated as direct or indirect and not duplicated

18. 18 Department Administration Finance/ Payroll Human Resources Direct Programs, Grants and Activities such as: DOI Grants Other Federal Programs/Grants Other non-Federal Programs Indirect S/W, Supplies, Space Pool Program S/W, Supplies, Space Base

19. 19 Rule #1: Direct charge whenever possible The more costs charged directly through specific identification or direct allocation, the lower the indirect cost rate Any method of distribution can be used if it results in an equitable distribution of costs based on “benefits received”

20. 20 Direct Allocation Method Multiple Allocation Base Method Special Indirect Cost Rates Simplified Allocation Method

21. 21 Any method of distribution can be used if it represents a fair measure of cost benefit and will result in an equitable distribution of costs. Organizational Structure Accounting system Availability of the Base data Correlation of the Base to the Cost Center Additional Effort and Cost

22. 22 More Than One Indirect Cost Rate All programs do not benefit to the same degree, i.e. pass-through funds Indirect costs allocated to direct cost objectives based on various distribution bases

23. 23 All programs benefit from indirect costs to the same degree Costs are classified as either direct or indirect Total allowable indirect costs are divided by an equitable distribution base to establish an indirect cost rate used to distribute indirect costs to individual awards

24. 24 Rent Human Resources Payroll INDIRECT POOL Grant A Grant B Non-federal Program

25. 25 Indirect Cost Rate Costs are classified by placing them into categories such as administration, program, or some other category as prescribed by statute Identify Indirect Cost Pool Determine Direct Cost Base Calculate Rate Pool = Rate Base

26. 26 Salaries$90,000 Fringe 30,000 Rent 10,000 Consultants 6,000 Travel 5,000 Supplies 3,000 Communications 2,000 Miscellaneous 4,000 Total Indirect Pool $150,000

27. 27 The base includes all programs and grants receiving benefits from indirect pool regardless of the funding source (i.e., Federal, state, or private donations) Select the base which results in an allocation of indirect costs according to benefits received

28. 28 Modified Total Direct Costs – excludes capital expenditures and other distorting items, such as pass-through funds, major subcontracts, etc. (MTDC) Direct salaries & wages, including fringe (SWF) Direct salaries & wages, excluding fringe (S&W)

29. 29 Directly identified with grant (s): Four Project Managers $200,000 Four Field Assistants 100,000 Fringes 75,000 Total Direct SW&F Base $375,000

30. 30 Other Direct Costs identified with grant (s) plus Salaries, Wages & Fringes Rent $250,000 Travel 70,000 Communications 20,000 Support Services 100,000 Supplies 50,000 Miscellaneous 135,000 Total Other Direct Costs$625,000 Add Salaries, Wages and Fringes 375,000 Modified Total Direct Cost Base $1,000,000

31. 31 Modified Total Direct Cost Base Indirect Cost Pool $150,000 = 15% Total Direct Cost Base $1,000,000 Salaries, Wages & Fringes Base Indirect Cost Pool $150,000 = 40% Direct SW&F$375,000

32. 32 Direct Salaries Base Grant A $200,000 times rate 40% IDC Recovery $80,000 Grant B $175,000 times rate 40% IDC Recovery $70,000 Total Recovered $150,000 Total Direct Cost Base Grant A $400,000 times rate 15% IDC Recovery $60,000 Grant B $600,000 times rate 15% IDC Recovery $90,000 Total Recovered $150,000

33. 33 Provisional Temporary estimated rate pending final rate Used for funding, interim reimbursement and reporting on awards Final Based on actual costs Used to close-out contracts Pre-determined Estimated based on stable historical rate Cannot be used if grantee has Federal contracts Fixed with Carryforward Includes a “carryforward” amount, which increases or decreases the future indirect cost pool and rate to reflect your under- recovery or over-recovery of indirect costs

34. De Minimus 10% rate – 200.414(f) Never received a negotiated indirect cost rate Applied to modified total direct cost base May be used indefinitely Rate Extensions – 200.414(g) One-time extension of a current negotiated rate Rate must be a Final or Pre-determined rate Extension for 1 to 4 years 34

35. 35 Fixed Carryforward Rate Provisional / Final 2016 Final Rate: within 6 months after fiscal year- end, rate is based on actual expenditures 2018 Provisional Rate: Negotiated 6 months prior to beginning of the fiscal year The 2018 fixed with carryforward rate proposal is due within 6 months of the end of the 2016 fiscal year FY 2016 Actual Expenditures 2018 FCF Rate

36. Proposal receipt Processing assessment Initial documentation review First-in/first-out queue Negotiation Approved and sent for signature by entity official Entity signed agreement returned to IBC for issuance 36

37. Part 200.203(a)(4) Must have: Approved federally recognized indirect cost rate OR A rate negotiated between the sub recipient and the pass-through entity and the sub recipient OR If qualified, the 10% de minimus rate 37

38. 38 Tools for Processing Indirect Cost Proposals Completeness Checklist Indirect Cost and Lobbying Certifications Sample Proposals Templates Links to other helpful Web sites http://www.doi.gov/ibc/services/Indirect_Cost_Serv ices/insular_areas.cfm

39. New Address: 650 Capitol Mall, Suite 7-400 Sacramento, CA 95814 Phone: 916-930-3803 Fax: 916-930-3804 39