1. 2015 Leadership Conference “All In: Achieving Results Together”
Cost Principles
2 CFR Part 200 Subpart E
Uniform Guidance
Presented by: Lynne Fairfax, Jennifer Finch and Susan Murray
Fiscal Workgroup, Office of Special Education Programs (OSEP)
July 28, 2015

2. Objectives:
Review requirements at 2 CFR Part 200 Subpart E – Cost Principles.
Identify issues related to cost principles.
Demonstrate effective use of the OMB uniform guidance to research cost principles.
Evaluate and apply concepts to determine allowability in real world examples.

3. 2 CFR Part 200
This guidance does not change or modify any existing statute or guidance otherwise based on any existing statute.

4. Fundamental Assumptions
IDEA Grantees assume responsibility for:
Administering IDEA grant funds efficiently and effectively.
Managing IDEA funds according to agreements, objectives, and terms of the award.
Using accounting practices that are consistent with Uniform Guidance cost principles.
Providing adequate documentation for costs charged to the award.

5. Grant awards made PRIOR to 12/26/14 Grant awards made AFTER 12/26/14
Key Changes
Grant awards made PRIOR to 12/26/14
Grant awards made AFTER 12/26/14
OMB Circulars A-21, A-87,
A-122
2FCR Parts 200, 225 and 230
Uniform Guidance
(32 CFR PART 200 Subpart E)

6. Key Changes Basic Standards for allowability remain the same.
Costs must be:
Necessary
Reasonable
Allocable
Documented

7. Time and Effort Flexible and Accountable
Historically, a key area of audit findings
New flexibility: “system of internal control” for documenting personnel compensation:
Requirements for personnel compensation are found at 2 CFR
Alternative accounting processes are allowable for sampling in- time distribution reporting
Federal agencies may approve alternative accounting methods for blended funds

8. Cost Principles: Notable Changes
The Uniform Guidance lists most prior approval requirements at 2 CFR These did not change.
New Requirement: Certifications required for fiscal reports, payment requests, and indirect cost proposals (2 CFR )
Family-friendly Flexibility: limited dependent care costs at conferences (2 CFR ) and travel (2 CFR )
Does not override the Department guidance regarding conferences
Clarification – Materials and supplies: direct charges
Computer equipment <$5,000 specifically treated as supply (2 CFR )

9. General Considerations in Determining Allowability:
Is the cost reasonable and necessary for the program?
Do sound business practices support the expenditure?
Is the expense in compliance with laws, regulations and grant terms?
To what extent is the expense allocable to the grant?
Is the price comparable to that of similar goods or services in the geographic area?

10. The OMB Uniform Guidance says:
What is “reasonable”?
The OMB Uniform Guidance says:
“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.”

11. Allocability
In addition to considerations of reasonableness and necessity, the Uniform Guidance also examines the allocability of expenditures.
“If a cost benefits two or more projects, activities, or programs in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit.” (2CFR § (d))

12. Allocability
Pertains to the degree to which a given cost is an allowable expenditure for the grant award.
Can range from:
0% if the program receives no benefit from the good/service to
100% if the program receives all the benefit from the good/service

13. Small Group Activity
Discuss the concept of allocability in your group.
Develop an example in which the concept of allocability was an important consideration.
Be prepared to share your examples and resolutions.

14. Things to Consider
Is the cost generally an allowable expense (not prohibited in the cost principles)?
Is the cost necessary for the performance of the grant project?
To what extent is the expense allocable to the grant?
Is there additional guidance to consider?
For equipment and supplies, does it exist elsewhere in the inventory?
Is there a less expensive alternative (or justification for selecting the more expensive option)?

15. Provisions for (55) Specific Items of Cost
Advertising and Public Relations
Advisory Councils
Audit Services
Collections of Improper Payments
Compensation for Personnel Services
Compensation for Fringe Benefits
Conferences
Employee Health and Welfare Costs
Entertainment
Equipment and Other Capital Expenditures
Maintenance and Repair Costs
Materials and Supplies Costs including Costs of Computing Devices
Rental Costs of Real Property and Equipment
Training and Education Costs
Travel Costs

16. Types of Costs
Direct Costs are costs that can be identified specifically with a program or cost objective:
Personnel working directly on a program objective
Supplies purchased for a specific program/project
Service contract supporting program/project goals

17. Types of Costs
Indirect Costs are those costs are typically not readily assignable to a specific program or project:
Facility operations/maintenance expenditures
Costs for general administrative services
Shared data and telecommunications expenses

18. Cognizant Agency (CA)
The agency that provides the most Federal funding to a grantee is the Cognizant Agency.
Grantees negotiate indirect cost rates with the CA.
All Federal awarding agencies accept these negotiated rates.
ED is usually the CA for State grantees.
ED is usually NOT the CA for most colleges and discretionary grants

19. Indirect Cost Rates Types of Indirect Cost Rates Provisional Final
Predetermined
Fixed
Use of Rates
Unrestricted
Restricted

20. Recap: Key Concepts Reasonable and Necessary Allocability
Selected Items of Cost
Direct v. Indirect

21. When does 2 CFR 200 become effective?
New and continuation grants awarded on or after
December 26, 2014
Audit and indirect cost changes take effect when the grantees’ next fiscal year, after December 24, 2014, starts
Funds carried over into a new fiscal year starting on or after December 26, 2014
Funds carried over into a continuation grant on or after December 26, 2014

22. Resources Technical Assistance for Ed Grantees
U.S. Department of Education Website: “Technical Assistance for ED Grantees – Uniform Guidance”
Technical Assistance for Ed Grantees
GRADS360
Grads 360 Fiscal Resources
questions to: