Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
I.
General Information
Office of Management and Budget (OMB) Circular A-87 was published in the Federal Register on
May 17, 1995 with current revisions. It provides that federal programs shall bear their fair share of
indirect costs except when legislation explicitly restricts reimbursement of such costs. Local
education agencies (LEAs) are required to have an approved indirect cost allocation plan and indirect
cost rate in effect in order to recover any indirect costs related to federal grants and contracts.
If a LEA does not wish to recover indirect costs for federal grants and contracts, it is not required to
do so.
OMB Circular A-87 establishes uniform principles for determining and distributing costs of federal
grants and contracts. Department of Education publication, “Indirect Cost Determination Guidance
for State and Local Government Agencies”, is used by state education agencies as the guide for the
cost principles and procedures for establishing cost allocation plans and indirect cost rates for grants
and contracts issued by the federal government.
II. Definitions
a. Indirect cost rate is simply a device for determining in a reasonable manner, the proportion of
indirect costs each program should bear. It is the ratio of the total indirect costs to a direct
cost base, exclusive of specific extraordinary or unallowable expenses due to legislation or
administrative restriction, such as capital outlay. The cost of the office of the superintendent
of schools and board of education are unallowable costs as applied to a federal grant but are
included as direct costs when computing indirect cost rates. The costs are the actual
expenditures of the LEA recorded and reported in accordance with the Oregon Program
Budgeting and Accounting Manual (PBAM).
b. Indirect costs are those costs that are not readily identified with the activities funded by the
federal grant or contract but are never the less incurred for the joint benefit of all activities of
the organization. Indirect costs are of a more general nature and are incurred for the benefit
of several activities. Accounting, auditing, payroll, personnel, budgeting, purchasing, and
operation and maintenance of plant are examples of services that typically benefit several
activities and programs. Appropriate costs of these services may be attributed to the federal
program by means of an indirect cost allocation plan. In theory, all costs should be charged
as direct costs, but where practical limitations and considerations of efficiency preclude such
an approach, an indirect cost allocation plan is an acceptable alternative.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
Using OMB Circular A-87 and the 2008 PBAM as a guide, the following functions are identified as
indirect with certain adjustments noted later
Indirect Functions
Expenditures in Funds:
100 General Fund
200 Special Revenue Funds
500 Enterprise Funds
700 Trust and Agency Funds
Categorized by object:
1%% Salaries
117 Unused Leave
2%% Associated Payroll Costs
270
Post Retirement Health
3%% Purchased Services
380
Non-instructional Prof. & Tech. Services
410
Consumable Supplies and Materials
420
Textbooks
440
Periodicals
460
Non-consumable Supplies
470
Computer Software
480
Computer hardware
640
Dues and Fees
660
Depreciation
* Direction of = The Director, Head of the section, and/or support for these positions
Categorized in Functions:
2310 Board of Education Services
2320 Executive Administration Services
2510 Direction of Business Support Services*
2520 Fiscal Services
2570 Internal Services
2610 Direction of Central Support Services
2630 Information Services
2640 Staff Services
2660 Technology Services
2670 Records Management Services
2690 Other Support Services - Central
The above fund, function and object combinations are possible options pertinent to the Indirect
Cost Pool designation. (Example, Function 2310 and object 1%%, would be considered
unallowed costs, however the 2310 function and 380 object are Indirect cost pool. That is why
the function 2310 is listed above.) Please review the Indirect Rate Classification Matrix for full
listing of combinations.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
c.
Direct costs are those costs that can be identified specifically with a particular cost objective. A
direct cost is one that is incurred specifically for one activity, such as board of education services.
Using OMB Circular A-87 and the 2008 PBAM as a guide, the following funds and functions are
identified as direct costs with certain adjustments noted later:
Direct Functions
Expenditures by Fund
Categorized in Functions:
100 200 500 700
1000
Instruction
Y
Y
Y
Y
2100
Support Services - Students
Y
Y
Y
Y
2200
Support Services - Instructional Staff
Y
Y
Y
Y
2310
Board of Education Services
Y
Y
Y
Y
2320
Executive Administration Services
N
Y
Y
Y
2400
School Administration
Y
Y
Y
Y
2510
Direction of Business Support Services
N
Y
Y
Y
2520
Fiscal Services
Y
Y
Y
Y
2540
Operation and Maintenance of Plant Services
Y
Y
Y
Y
2550
Student Transportation Services
Y
Y
Y
Y
2570
Internal Services
Y
Y
Y
Y
2610
Direction of Central Support Services
Y
Y
Y
Y
2620
Planning; Research; Dev.; Evaluation Services
Y
Y
Y
Y
2630
Information Services
Y
Y
Y
Y
2640
Staff Services
Y
Y
Y
Y
2660
Technology Services
Y
Y
Y
Y
2670
Records Management Services
Y
Y
Y
Y
2690
Other Support Services - Central
Y
Y
Y
Y
2700
Supplemental Retirement Program
Y
Y
Y
Y
3100
Food Services
Y
Y
Y
Y
3200
Other Enterprise Services
Y
Y
Y
Y
3300
Community Services
Y
Y
Y
Y
3500
Custody and Care of Children Services
Y
Y
Y
Y
* Direction of = The Director, Head of the section, and/or support for these positions
In addition to Objects:
1%%
Salaries
2%%
Associated Payroll Costs
3%%
Purchased Services
410
Consumable Supplies and Materials
420
Textbooks
440
Periodicals
460
Non-consumable Supplies
470
Computer Software
480
Computer hardware
640
Dues and Fees
660
Depreciation
The above fund, function and object combinations are possible options pertinent to the Direct
Cost (base) designation. Please review the Indirect Rate Classification Matrix for full listing of
combinations.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
d. Excluded costs are those that generally are one-time in nature or tend to distort normal annual
operating expenses. Also excludable are funds that are passed through to another governmental
agency which provides educational programming and inter-fund operating transfers. Using OMB
A-87 and the 2008 PBAM as a guide, the following funds, objects and functions are excluded
costs with certain exceptions noted later.
Excluded Costs
All expenditures in Funds:
300
Debt Service Funds
400
600
Capital Projects Funds
Internal Service Funds
That are categorized in Functions:
2310
Board of Education Services
5200
Transfers of Funds
5300
Apportionment of Funds by ESD
5400
PERS UAL Payment
In addition, expenditures in Funds:
100 General Fund
200 Special Revenue Funds
500 Enterprise Funds
700 Trust and Agency Funds
and/or Objects:
380
Non-instructional Prof. & Tech. Services
410
Consumable Supplies and Materials
450
Food Services
610
Redemption of Principal
620
Interest
680
PERS UAL Payment
690
Grant Indirect Charges
700
Transfers
800
Other Uses of Funds
The above fund, function and object combinations are possible options pertinent to the Excluded
Cost designation. Please review the Indirect Rate Classification Matrix for full listing of
combinations.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
e. Unallowable costs are those costs that are unacceptable as applied to federal grants and
contracts whether applied directly to a grant or indirectly through the indirect cost rate.
Unallowable costs include the following.
i. Bad Debts
ii. Contingencies
iii. Contributions and donations
iv. Entertainment
v. Fines and Penalties
vi. The office of the chief executive of the LEA
vii. Interest and other financial costs
viii. Lobbying.
ix. Under recovery of cost under grant agreements
Using OMB A-87 Attachment A3.B and the 2008 PBAM as a guide, the following funds, objects
and functions are unallowed costs with certain exceptions noted later.
Unallowed Costs
Expenditures in Funds:
100
General Fund
200
Special Revenue Funds
500
Enterprise Funds
700
Trust and Agency Funds
and/or Objects
430
Library Books
500
Capital Outlay
650
Insurance and Judgments
670
Taxes and Licenses
Categorized in Functions:
2320
Executive Administration Services
4000
Facilities Acquisition & Construction
5100
Debt Service
6%%%
Contingencies
Unappropriated Ending Fund Balances
7%%%
The above fund, function and object combinations are possible options pertinent to the Unallowed
Cost (base) designation. Please review the Indirect Rate Classification Matrix for full listing of
combinations.
f.
A restricted indirect cost rate is used for federal programs that limit full recovery of indirect costs
and that allow supplementing, but in no case supplanting, of state and local funds. This has been
interpreted to mean that only selective administration costs, not maintenance and operation of
plant costs or the costs associated with the Superintendent, Deputy Superintendent and heads of
sections, are eligible to be included as indirect costs. These items are included as direct cost
when calculating this type of rate.
III. Limitation of Recovery of Indirect Cost
a. Some of the major federal educational programs that are administered through the Oregon
Department of Education limit full recovery of indirect cost. All have legislation that allows
supplementing but not supplanting of state and local funds. The restricted rate applies to these
programs.
b. Recovery of indirect costs is subject to the availability of funds. If a combination of direct and
indirect costs exceeds the funds available, the LEA will not be able to recover the total cost.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
c.
Costs must be treated consistently. Normally, administrative/support types of costs (indirect) are
reimbursed through the development and application of an approved restricted indirect cost rate.
The federal cost principles in OMB A-87 followed in rate development identify the allowable costs
that may be included, require that these costs meet the test of reasonableness and stipulate that
they be accorded consistent treatment in this calculation. The principle of consistency basically
requires that a type of cost and all other comparable types of cost or services be treated either as
indirect costs and reimbursed through the application of the rate, or charged as a direct cost to
benefiting programs. Therefore, if any of the indirect cost that have been included in the rate
development have been approved and allowed as a direct charge against a federal award, these
costs and those for comparable-type services cannot be treated as indirect costs. They must
instead be included in the direct cost base.
If any cost or groups of costs are treated inconsistently, the rate developed cannot be applied nor
indirect costs reimbursed unless appropriate adjustment is made to the indirect cost pool and
base to achieve consistency. For example, if a federal project provided that the cost of
accounting/bookkeeping were to be reimbursed as a direct charge to the award and the indirect
cost rate included other LEA accounting/bookkeeping costs in the indirect cost pool, the rate
cannot be applied, because costs were not accorded consistent treatment. A certification must
be provided that all costs meet the requirements. It is to be submitted along with any adjustments
to the preliminary indirect cost rate.
d. The indirect cost rate can only be applied against direct cost. Capital objects, pass through funds
and other costs that are excluded from the rate computations must be subtracted from the grant
base before applying the rate.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
IV. Time Period
Expenditures from the second preceding fiscal year are to be used for the indirect cost allocation
plan. For example, expenditures for school year 2007-08 (fiscal year 2008) are used to compute the
indirect cost rate for school year 2009-10.
ICRS Yearly Table
LEA
Data used to
school year
Fiscal Year
DBI Data
calculated Indirect
2002-03
FY03
begin 7-1-2002
FY2001
2003-04
FY04
begin 7-1-2003
FY2002
2004-05
FY05
begin 7-1-2004
FY2003
2005-06
FY06
begin 7-1-2005
FY2004
2006-07
FY07
begin 7-1-2006
FY2005
2007-08
FY08
begin 7-1-2007
FY2006
2008-09
FY09
begin 7-1-2008
FY2007
2009-10
FY10
begin 7-1-2009
FY2008
2010-11
FY11
begin 7-1-2010
FY2009
2011-12
FY12
begin 7-1-2011
FY2010
2012-13
FY13
begin 7-1-2012
FY2011
2013-14
FY14
begin 7-1-2013
FY2012
2014-15
FY15
begin 7-1-2014
FY2013
2015-16
FY16
begin 7-1-2015
FY2014
2016-17
FY17
begin 7-1-2016
FY2015
2017-18
FY18
begin 7-1-2017
FY2016
2018-19
FY19
begin 7-1-2018
FY2017
2019-20
FY20
begin 7-1-2019
FY2018
2020-21
FY21
begin 7-1-2020
FY2019
2021-22
FY22
begin 7-1-2021
FY2020
2022-23
FY23
begin 7-1-2022
FY2021
2023-24
FY24
begin 7-1-2023
FY2022
2024-25
FY25
begin 7-1-2024
FY2023
2025-26
FY26
begin 7-1-2025
FY2024
2026-27
FY27
begin 7-1-2026
FY2025
2027-28
FY28
begin 7-1-2027
FY2026
2028-29
FY29
begin 7-1-2028
FY2027
2029-30
FY30
begin 7-1-2029
FY2028
2030-31
FY31
begin 7-1-2030
FY2029
2031-32
FY32
begin 7-1-2031
FY2030
2032-33
FY33
begin 7-1-2032
FY2031
2033-34
FY34
begin 7-1-2033
FY2032
2034-35
FY35
begin 7-1-2034
FY2033
2035-36
FY36
begin 7-1-2035
FY2034
2036-37
FY37
begin 7-1-2036
FY2035
2037-38
FY38
begin 7-1-2037
FY2036
NOTE: FY data goes back two years previous.
For 2010-2011 school year should be using the odd years for carry
forward calculation, using FY2005, FY2007, FY2009.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
V. Indirect Cost Rate Formula
Oregon has not been using the fixed with carry-forward rate for indirect costs appropriately, per the
U.S. Education Department site visit in August 2008. Therefore, ODE implemented new Indirect Rate
templates (provided by USED) to begin using as for the 2010-2011 school year indirect rates. ODE
will only be calculating a restricted rate for LEAs in the state. This is the type of rate used for
supplementing (non-supplanting) grants.
The formula for computing restricted indirect cost rates is as follows:
Restricted Indirect Cost Rate =
Indirect Cost Pool
Direct Costs + Unallowed Costs
Excluded costs are removed from the computation totals. However, they are listed on the preliminary
rate detail sheet sent to LEAs in April/May of each year.
VI. Budgeting Indirect Cost Funds in Federal Program Applications
When budgeting indirect costs, LEAs should use the most recently approved rate at the time the
project is submitted for federal program approval. The rate(s) applied later to the final claim must be
the approved rates for the fiscal year in which the expenditure was actually made. A budget
correction may be necessary in some cases. Contact the appropriate ODE grant manager with any
questions regarding budgetary items.
Example 1: School District A was awarded a $200,000 Part B IDEA subgrant for the period July 1,
2007 to June 30, 2008. The district’s approved restricted indirect rate for FY 2007-08 is 4.5 percent.
Indirect costs would be budgeted as shown below in Example 1.
Example 1
Grant Award
Capital Outlay
Net Amount of Subgrant
$
$
$
Indirect cost rate
Document1
200,000
(5,000)
195,000
4.5%
Direct Costs
($195,000 / (1+.045)
$
186,603
Indirect Costs
(Direct costs * 4.5%)
$
8,397
Check:
Capital Outlay
Direct Costs
Indirect Costs
Total Amount of Grant
$
$
$
$
5,000
186,603
8,397
200,000
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
VII. Applying Indirect Cost Rate to Federal Grants
The indirect cost should be applied to the final claim. The approved rate(s) should be multiplied by
the amount of direct cost expense. The rate cannot be applied to the type of costs that were
excluded in the rate computation.
If the expenditure on the federal grant covers more than one fiscal year (July 1 through June 30), it
will be necessary to apply more than one rate.
Example 2: A school district was awarded a discretionary subgrant of $34,848 for the period October
1, 2003 through September 30, 2004. The district’s approved restricted indirect rate for FY 2003-04
is 4.0 percent and for FY 2004-05 is 4.6 percent. A final claim of expenditures for the project is
illustrated as follows below:
Example 2
Budget
Expenditures for Period
10/1/03 1/1/04 to 4/1/04 to 7/1/04 to
to
3/30/04
6/30/04
9/30/04
15,500
6,200
6,000
1,000
5,000
$ 33,700
4,000
1,600
2,000
50
4,000
$ 11,650
5,000
2,000
2,000
200
1,000
$ 10,200
3,000
1,200
1,000
500
$ 5,700
3,000
1,200
1,000
200
$ 5,400
28,700
7,650
9,200
5,700
5,400
Unspent
Total
Balance at
Expenditures
9/30/04
Direct Costs
Instructional Salaries
Fringe Benefits
Supplies
Travel
Equipment
Total Costs
Direct Cost Base
Approved Rate
Indirect Costs
Total Subgrant
4.0%
4.0%
4.0%
4.0%
4.6%
1,148
306
368
228
248
$ 34,848
$ 11,956
$ 10,568
$ 5,928
$ 5,648
$
15,000
6,000
6,000
950
5,000
32,950
$
27,950
750
1,150
$
34,100
(2)
$
VIII. Indirect Cost Rate Adjustments
Indirect cost rates were computed based on information taken from the annual expenditure data
included in the Database for Education submittals. The PBAM classifications allow expenditures to
be classified as indirect, direct, unallowed or excluded, with the exceptions noted below. All reported
amounts in the categories listed below have been considered direct in the rate computation, but could
be considered indirect cost depending on the type of expenditure. LEAs will need to use the website
for the Indirect Rate Certification System for submitting adjustments to ODE. There are two
categories of adjustments – mandatory and optional. The use of optional adjustments should be
weighed against the cost benefit of time spent preparing them.
Annually the adjustments that are categorized as mandatory and/or optional may change. Therefore,
it is the responsibility of the institutions (LEAs and ESDs) in Oregon to verify the adjustments
necessary for the given year with ODE.
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500
200
50
750
748
Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
Described below are the known areas in which adjustments could be made to the indirect cost plan.
Justification shall be provided on the ICR Certification website regarding what the cost is and why the
LEA is including the adjustment. In the event an additional adjustment is made by the LEA, ODE will
review the justification and either deny or accept the adjustment based on the LEA Indirect Cost Plan and
other federal resources pertaining to indirect rate calculations.
Some Standard Adjustments are listed below in no particular order or category:
Unused/Terminal Leave: Terminal leave – expenditures associated with the departure of an employee
such as the payoff of sick or vacation leave - is considered an indirect cost with the exception of
terminal leave for the Superintendent, Deputy Superintendent and heads of sections and support staff
that report to these staff. In these cases, it should be placed in the base.
Contract Amounts in Excess of $25,000: Only the first $25,000 of any given contract is allowable as a
direct or indirect cost. Any amounts above $25,000 on a per-contract basis must be excluded from
the indirect cost rate calculations.
General Management Costs:
The principles of OMB Circular A-87 and 34 CFR 76.565-569 exclude the Superintendent, Deputy
Superintendent, Head of Sections (includes support for these positions) and Board of Education costs
from indirect consideration. Some leniency for small school district administrators who, on a day to
day basis, perform such functions identified in the plan as indirect, provided the time and effort
documented for these activities are sufficient to pass an audit, this determination comes from
discussion through ODE as the cognizant agency.
Costs associated with activities that are not for department level management are not considered
general management costs. Therefore, in a restricted rate setting, indirect costs are purged to
include only “organization-wide” general management costs at the grantee level (e.g., bookkeeping,
accounting, payroll, auditing, procurement, and personnel). The general management costs are
refined again to exclude costs of the Chief Financial Officers, their immediate officers, component
officers and related costs. Related costs include applicable fringe benefits, travel, space costs and
other associated costs. Occupancy and Space maintenance costs are described at 34 CFR 76.568
are included in the direct costs base (denominator) for the restricted rate determination. These costs
are then reclassified from indirect to the base account as unallowed costs.
Insurance and Judgments
District liability insurance, district property insurance and fidelity bond premiums and worker’s
compensation may be classified as indirect cost. Adjustments may also be made for unemployment
compensation for employees or former employees whose costs were associated with the functions
identified as indirect in this plan. You may not include judgments against the district in the indirect
cost pool.
IX. Certification by Agency Official
The federal government requires this certification before rates can be approved/finalized for any local
education agency. LEAs will certify electronically through the District Web Page after they submit the
mandatory adjustments and complete the sub award listing. The authorized agency, ODE, then
reviews, calculates carry forward and finalizes the annual rates. An electronic email sends back to
the LEA business manager, through the generic business manager email system, with a full listing of
accepted and/or denied adjustments and includes finalized approved rate by the ODE.
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Oregon Department of Education
Local Education Agency
2010-11 Indirect Cost Plan
X. Retention of Records and Documentation for Audit
The provisions of 34 CFR part 74, Subpart D, require that financial records, supporting documents,
statistical data and other pertinent records be kept for a period of three years beginning with the last
day of the fiscal year covered by the plan.
XI. Deadline
All Indirect Rate Certifications shall be completed prior to April 1 of the next odd or even year of the
school year in which the rate is applied. For example, the due date for submission of indirect cost
rate adjustments for school year 2009-2010 (even) is by April 1, 2011 and for school year 2010-2011
(odd) the due date is April 1, 2012.
XII. ODE Contact Person
If there are any questions on indirect cost, please contact:
Kristy Hartsell, Fiscal Analyst III
Oregon Department of Education
Office of Finance and Administration
255 Capitol Street NE
Salem, OR 97310-0203
Telephone: (503) 947-5619
Email: kristy.hartsell@state.or.us.
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