1. Office of School Finance - WVDE Indirect costs

2. Indirect Costs - Defined • Costs not readily identifiable with a specific federal project • Costs are incurred for the joint benefit of more than one project

3. Direct costs - defined • Costs that are readily identifiable to a specific project • Costs are charged directly to the project • Cannot be considered indirect if they are charged directly

4. Unallowed costs - defined • Costs that are not allowed to be charged to a federal project • OMB Circular A-87 provides a complete listing of unallowed costs • Examples include: • Marketing • Losses from uncollectible accounts

5. Indirect Cost Plan - defined • A simplified means to determine the fair share of indirect costs that each federal project must bear

6. Obtaining an indirect cost rate • A rate must be determined each year • Plan developed by WVDE, approved by USDE • The rate is based on actual expenditures two years earlier (FY 11 rate based on FY 09 actual) • Plan includes an adjustment between estimated and actual indirect costs two years later • Simplified, the indirect cost rate = indirect costs unallowed costs + direct costs

7. You receive restricted and unrestricted indirect cost rates • Process is web-based • CSBO is the contact person for determining the rates

8. Two rates – which do I use? • Restricted rate – use for federal projects that contain the “supplement but not supplant” provision (that is MOST projects) • Unrestricted rate – use for all other federal projects (example: child nutrition)

9. How do I use the rate? • For budgeting purposes: • Total amount of federal award $200,000 • Approved indirect cost rate 2.23% • Budgeted direct costs $195,637 ($200,000 / (1.0 + 0.0223)) • Budgeted indirect costs $ 4,363 ($195,637 * 0.0223)

10. For actual expenditures: • Actual direct costs $185,440 • Approved indirect cost rate 2.23% • Indirect costs charged to the project $4,135 ($185,440 x 0.0223)

11. Be careful when you apply the rate • You may not apply the indirect cost rate to all actual expenditures: • You cannot apply the rate to capital outlay • Equipment, buildings, land, building improvements which exceed $5,000 • Some grants have a limit on total indirect cost • Title III – 2% of the grant • Carl Perkins – 5% of the grant

12. Be careful about the time period • The approved rate for FY11 is to be used for ACTUAL expenditures from July 1, 2010 through June 30, 2011 • Actual expenditures do not include outstanding encumbrances at year end

13. How does the federal project get charged? • Calculate the actual indirect costs based on actual expenditures at least quarterly • The CSBO will make a journal entry to charge the indirect cost amount to each federal project as an expenditure

14. Which projects are charged indirect costs? • All Federal projects are charged the appropriate indirect cost rate, including ARRA and SFSF • State projects are not subject to indirect costs %

15. Your Questions