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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: h mcgee@vlsllp.com. INTRODUCTION. Topics to be covered:

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direct benefits of an indirect cost rate

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: hmcgee@vlsllp.com

introduction
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
nature of indirect costs
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
benefit of having an approved indirect cost rate
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

mandated cost reimbursement
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
mandated cost reimbursements
MANDATED COST REIMBURSEMENTS

Types of Reimbursements allowed by the State Controller’s Office:

  • Default rate 7%
  • Indirect cost rate for state FAM-29C mandates calculation
  • Federally approved rate Varies
reimbursement of indirect costs for federal grants
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

types of indirect cost rates
TYPES OF INDIRECT COST RATES

Provisional Rate

Final Rate

Predetermined Rate

Fixed Rate with Carry-forward Provision

selecting the type of rate that is right for your district
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?
proposal documents
PROPOSAL DOCUMENTS

Certificate of Supplemental American Recovery and Reinvestment Act (ARRA) Indirect Costs

Indirect Cost Proposal (ICP) Checklist

Indirect Cost Proposal

supporting documentation
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

where to submit proposals
WHERE TO SUBMIT PROPOSALS

Cognizant agency for reviewing and approving indirect cost rates:

  • Department of Health & Human Services
  • Department of Defense
due dates and coverage of proposals
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
guidelines for preparing indirect cost proposals
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

simplified method
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
indirect proposal format simplified method
INDIRECT PROPOSAL FORMAT – SIMPLIFIED METHOD

Classification of expenditures

Reclassifications

Adjustments

Calculation of rate

fringe benefits
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
treatment of fixed assets
TREATMENT OF FIXED ASSETS

Exclusion of capital outlay expenditures

Depreciation or use allocation allowance

resource documents
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