DIRECT BENEFITS OF AN INDIRECT COST RATE

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DIRECT BENEFITS OF AN
INDIRECT COST RATE
CCIA FALL CONFERENCE 2012
OCTOBER 4, 2012
Heather McGee
Senior Manager, Audit Services Division
Vicenti, Lloyd & Stutzman LLP
Telephone: (626) 857-7300 x292
Email: [email protected]
INTRODUCTION
Topics to be covered:
 General information on the nature of indirect
costs and indirect cost rates
 Benefits of having a federally approved indirect
cost rate
 Process of applying for an approved indirect
cost rate
 Guidelines for preparing an indirect cost
proposal
2
NATURE OF INDIRECT COSTS
Costs that are incurred for common or joint objectives
Cannot be readily identified with a particular project or
activity
Examples




Costs of operating and maintaining facilities, equipment
and grounds
Depreciation or use allocation
General and departmental administration
Library expenses
3
BENEFIT OF HAVING AN APPROVED
INDIRECT COST RATE
Ability to recover a portion of District’s
administrative costs for grants and mandated cost
programs
Leveraging tool when negotiating a grant
Provides an indication of the District’s indirect
contribution to any grant or special program
Assists in the budget process for a grant
4
MANDATED COST REIMBURSEMENT
State of California allows reimbursement for 16 different
programs.
Most common claims for Community Colleges are:
 Collective Bargaining
 Enrollment Fee Collection & Waivers
 Health Elimination Fee
 Mandate Reimbursement Process I & II
5
MANDATED COST REIMBURSEMENTS
Types of Reimbursements allowed by the State
Controller’s Office:

Default rate
7%

Indirect cost rate for state
mandates
FAM-29C
calculation

Federally approved rate
Varies
6
REIMBURSEMENT OF INDIRECT COSTS
FOR FEDERAL GRANTS
Training Grants
Limit of 8% with or without
approved rate
Research and Development Grants
Varies by grant but typically
will allow reimbursement at
the approved rate
7
TYPES OF INDIRECT COST RATES
Provisional Rate
Final Rate
Predetermined Rate
Fixed Rate with Carry-forward Provision
8
SELECTING THE TYPE OF RATE THAT IS
RIGHT FOR YOUR DISTRICT
Factors to consider when choosing the type of rate



Is the rate adjustable?
Will a retroactive adjustment be necessary?
Is the District able to close projects in a timely manner?
9
PROPOSAL DOCUMENTS
Certificate of Supplemental American Recovery and
Reinvestment Act (ARRA) Indirect Costs
Indirect Cost Proposal (ICP) Checklist
Indirect Cost Proposal
10
SUPPORTING DOCUMENTATION
Independently audited financial statements
District’s financial statements (CCFS-311)
Reconciliation of any differences between expenditures
reported per audit and per CCFS-311
Fringe benefit information
11
WHERE TO SUBMIT PROPOSALS
Cognizant agency for reviewing and approving indirect
cost rates:


Department of Health & Human Services
Department of Defense
12
DUE DATES AND COVERAGE OF
PROPOSALS
First-time application
 Immediately after notification of award
 No later than 3 months after effective date
Previously established rate
 Within 6 months after the close of each fiscal year
Failure to submit timely proposals
 Time extensions are available
13
GUIDELINES FOR PREPARING INDIRECT
COST PROPOSALS
OMB Circular A-21
 Cost Principles for Educational Institutions

Methods of calculating indirect cost rates
◦ Simplified Method: Federal funding* less than $10
million in Federal expenditures.
◦ Long Form Method: Federal funding $10 million or
greater in Federal expenditures.
*Determination excludes Student Financial Aid funding
14
SIMPLIFIED METHOD
Segregate total salaries and wages from other current
expenditures (both restricted and unrestricted general fund)
Analyze current expenditures
 Allowable vs. nonallowable
 Make necessary reclassifications and adjustments
 Segregate institution’s allowable indirect costs from its
direct costs
 Establish a direct salary and wage base
 Compute indirect cost rate
15
INDIRECT PROPOSAL FORMAT –
SIMPLIFIED METHOD
Classification of expenditures
Reclassifications
Adjustments
Calculation of rate
16
FRINGE BENEFITS
Information submitted with indirect cost proposal
Listing of fringe benefits
 Copy of fringe benefit policy
 Description of method(s) used to budget and charge
fringe benefits to sponsored agreements
 Funding practices for a “defined benefit” pension plan
 Institutions computation of a fringe benefit rate

17
TREATMENT OF FIXED ASSETS
Exclusion of capital outlay expenditures
Depreciation or use allocation allowance
18
RESOURCE DOCUMENTS





OMB Circular A-21: Cost Principles for Education
Institutions
Indirect Cost Determination, Guidance for State and
Local Government Agencies, U.S. Department of
Education
OMB Circular A-87, Selected Items of Cost
A Guide for Colleges and Universities, Cost Principles
and Procedures for Establishing Indirect Cost and Other
Rates for Grants and Contracts with the Department of
Health and Human Services (Appendix E contains a
sample calculation using the Simplified Method)
Mandated Cost Manual for Schools, State Controller’s
Office
19
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