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COST ALLOCATION PLANS & INDIRECT COST RATE

COST ALLOCATION PLANS & INDIRECT COST RATE. OVERVIEW. Cost Allocation Plans (CAPs) Indirect, Direct Cost and Administrative Cost Type of Rate and Direct Base Indirect Cost Rate Calculations Cognizant Agency and Submission Requirements Common IDC Findings.

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COST ALLOCATION PLANS & INDIRECT COST RATE

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  1. COST ALLOCATION PLANS& INDIRECT COST RATE

  2. OVERVIEW Cost Allocation Plans (CAPs) Indirect, Direct Cost and Administrative Cost Type of Rate and Direct Base Indirect Cost Rate Calculations Cognizant Agency and Submission Requirements Common IDC Findings

  3. WHAT ARE COST ALLOCATION PLANS AND INDIRECT COSTS RATES?

  4. Cost Allocation Plans Cost allocation plan is the documentation identifying, accumulating, and allocating or developing billing rates based on the allowable costs of services provided by a governmental unit on a centralized basis to its department and agencies. (2 CFR Part 200.9) enefiting activities.

  5. State-Wide Cost Allocation Plans (SWCAP) Mechanism for the state to identify, summarize, and allocate statewide indirect costs Allows state to charge cost of central services to federal awards Should submit annual SWCAP to U.S. Department of Health and Human Services

  6. Direct & Indirect Cost Definition Direct Costs – costs that can be identified specifically with a particular final cost objective, such as Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. (2 CFR 200.413a). Indirect Costs – cost incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. (2 CFR 200.56).

  7. Administrative Cost Definition Administrative Costs – costs of general services (such as salaries, fringe benefits, accounting, office supplies, contracting, etc.) Administrative costs can be direct or indirect.

  8. Difference between Indirect and Direct Costs Indirect “Administrative” Salary, Related Occupancy Expenses, Supplies & Communication Cost Policy Statement Direct “Program” Salaries, Space Costs for Program Activities, Travel and Equipment

  9. INDIRECT COSTS RATE AND BASE

  10. Types of Indirect Cost (IDC) Rates Final Rate Fixed Carry-Forward Provisional De Minimis

  11. Types of Indirect Cost (IDC) Rates (cont) De Minimis Rate – indirect cost rate of 10% of Modified Total Direct Cost (MTDC) for entities without negotiated for a rate. Never received a Federally-negotiated indirect cost rate for any federal awards. Less than $35 million in direct federal funding for the fiscal year requested.

  12. Types of Indirect Cost Base

  13. Base Used By DOJ/OJP • Total Direct Salaries and fringe benefits (Total Direct Labor) • Total Direct Salaries excluding fringe benefits • Modified Total Direct Cost (MTDC) all salaries and wages, fringe benefits, materials and supplies, services, travel and subawards (subgrants and subcontracts) and capital expenditures up to the first $25,000 of each.

  14. INDIRECT COSTS RATE CALCULATIONS

  15. Basic Formula • Total Costs = Direct Costs + Indirect Costs • Total Chargeable Costs = Direct Costs + Direct Cost Base x Indirect Cost Rate • Indirect Costs Rate % = All Indirect Cost / All Direct Cost x 100

  16. Indirect Costs Rate Calculation An indirect cost rate is simply a device for determining fairly and conveniently, within the boundaries of sound administrative principles, what proportion of indirect cost each program should bear. An indirect cost rate is the ratio, expressed as a percentage, of an indirect cost pool and some direct cost base. “Pool / Base = Rate”

  17. Fixed Carried-Forward Rate

  18. HOW TO USE INDIRECT COSTS RATE

  19. OJP Approved Budget • Total amount of federal award $181,818 ($200,000 / 1.0 + 0.10) • Approved indirect cost rate 10% • Total Chargeable Indirect Costs $18,182 ($200,000 / (1.0 + 0.10)) • Total amount of Federal award $200,000

  20. For Actual Expenditures • Actual direct costs $185,440 • Approved indirect cost rate 10% • Actual indirect costs incurred $18,544 ($185,440 x 10%) • Total chargeable indirect costs $18,182

  21. How to charge your federal project… • Calculate the actual indirect costs based on actual expenditures (at least quarterly) • The agency will make a journal entry to charge the indirect cost amount to each federal project as an expenditure

  22. COGNIZANT AGENCY AND SUBMISSION REQUIRMENTS

  23. The federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost rate proposals developed under 2 CFR Part 200.19. The cognizant agency negotiates on behalf of federal agencies and for non-profits, for-profits, and educational organizations. To obtain an indirect cost rate, a grantee must submit an indirect cost proposal to its cognizant agency and negotiate an indirect cost agreement. What is a Cognizant Agency?

  24. Cognizant AgencyCognizant agency is the agency that provides the largest amount of direct funds to a grantee over a certain period of time.

  25. What are the Submission Requirements For Cost Allocation and Indirect Costs Rate Plans? • Cost Allocation Plans and Indirect Cost Rates must be: • Developed and submitted within six months after the close of the entity’s fiscal year; • Submitted as required by the cognizant agency; • Inclusive of all units desiring to claim indirect costs; and • Maintained on file if submission is not required.

  26. Submitted Documentation should include: • Indirect Cost Certification • Organization chart • Cost Policy Statement • Audited Financial Reports (original sent to Federal Audit Clearinghouse) • Personnel Cost Worksheet (Non & For-Profit) or Signed Statewide Cost Allocation Plan (local Government) • Statement of Employee Benefit (Non & For Profit) or Fixed plus Carry Forward Calculation (local Government)

  27. Supporting Documentation (cont) • Indirect Cost Rate Proposal(s) reconciled with the financial reports or budget • A list of grants showing source, amounts, and relevant dates • Itemized calculation supported by financial statement in cost pool and direct cost bases • Supporting documents for all adjustments • All Miscellaneous & Other expenses items in indirect cost MUST be itemized

  28. Grantee Responsibilities • Grantees are responsible for ensuring that indirect costs are: • Allowable, Reasonable, and Necessary; • Treated consistently; • In compliance with Generally Accepted Accounting Principles; • Allocable to the federal program; • Proportional to benefit received; and • Adequately documented.

  29. Examples of Generally Unallowable Indirect Costs Include: Contributions Entertainment costs Fund raising Lobbying Professional service costs Public information service costs Bad Debts Legal Costs

  30. COMMON INDIRECT COST FINDINGS

  31. Common Indirect Cost Related Findings Not having a current, approved Cost Allocation Plans or Indirect Cost Rates. Using expired indirect cost rate. Inconsistency in charging costs as direct or indirect between federal awards. Costs that do not benefit the award are inappropriately allocated via the Indirect Cost Rate.

  32. What are some of the Concerns OJP have about Grantee Submissions of Indirect Cost Rate Proposals? Incomplete documentation. Indirect costs proposals do not provide sufficient detail to explain the functions and the benefits associated with the costs being allocated. Indirect cost proposal that is not reconcilable to a budget or a financial statement and contains no explanation of the difference.

  33. QUESTIONS AND ANSWERS

  34. Can the audit costs under 2 CFR Part 200 Subpart F be recovered?

  35. Yes, Subpart F allows audit costs to be recovered as either direct or indirect costs in accordance with applicable cost principles. However, there is no special appropriation for audit costs. To recover audit costs, the organization must build them into the specific grant/contract documents (if direct) or into the overhead proposal (if indirect).

  36. How many days do we have to submit a final indirect cost rate proposal (based on incurred costs)?

  37. All organizations must submit their final indirect cost rate proposals within 180 days (6 months) of the end of your organization’s fiscal year.

  38. What should a grantee do when an award does not provide for indirect cost reimbursement or provides for indirect costs at a rate lower than on the negotiation agreement?

  39. The decision to accept an award that does not pay indirect costs or pays indirect cost using a rate lower than what has been negotiated is a grantee decision.

  40. RESOURCES • Indirect Cost Submission Guidance- https://ojp.gov/funding/Apply/Resources/IndirectCosts.pdf • Indirect Cost Proposal Submissions- https://ojp.gov/funding/Apply/Resources/IndirectCosts.pdf • DOJ Financial Guide- http://ojp.gov/financialguide/DOJ/pdfs/2 015_DOJ_FinancialGuide.pdf

  41. Knowledge Assessment 1. Which one of the following is NOT the purpose of financial monitoring review? A. Ensure grantee’s accounting systems and record keeping are in compliance with Federal regulations B. Safeguard against fraud, waste, and abuse C. Penalize grantees for failing to follow federal guidelines D. Provide technical assistance E. Make recommendations for improvement

  42. Knowledge Assessment 2. What are the two types of financial monitoring reviews? A. Desk reviews and On-site reviews B. On-site reviews and Off-site reviews C. Audit plan and Desk review D. Audit plan and monitoring reviews

  43. Knowledge Assessment 3. If weakness were noted in your organization’s internal controls during a desk or on-site financial monitoring review, your organization will be required to develop a corrective action plan. • True • False

  44. Knowledge Assessment 4. All of the following, except one, are considered questioned cost. A. Unauthorized costs B. Unsupported costs C. Unreasonable costs D. Allowable costs

  45. Knowledge Assessment 5. How many days, from the end of its fiscal year, does a grant recipient have to submit a current indirect cost rate proposal? A. 360 days B. 2 months C. 180 days D. None of the above

  46. Knowledge Assessment 6. Time and attendance/activity reports are to be based on actual hours worked on the federal award. • True • False

  47. Knowledge Assessment 7. Fringe Benefits include all of the following, except? A. Federal Insurance Contributions (FICA) B. Health Insurance C. Retirement D. Membership at fitness club E. Workers’ compensation

  48. Knowledge Assessment 8. All contribution costs used to satisfy a matching or cost-sharing requirement must be documented by the recipient at the same level of detail as Federal funds. • True • False

  49. Knowledge Assessment 9. When conducting financial monitoring risk assessment, the final score is the result of? A. Risk score multiplied by risk weight B. Risk score multiplied by importance score C. Importance score multiplied relative value D. Importance score multiplied by risk weight

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