Cost Allocation 101 Uniform Guidance vs. OMB Circulars Prior to the - PowerPoint PPT Presentation

Cost Allocation 101

Uniform Guidance vs. OMB Circulars • Prior to the Uniform Guidance, • Designed for DOL-ETA direct requirements governing cost principles, administrative recipients and their subrecipients requirements and single audit for funds awarded on or after requirements were found in eight December 26, 2014. separate OMB Circulars. • Covers the responsibilities of DOL • In addition to the Uniform Guidance, grant recipients that act as pass- recipients and subrecipients of a DOL through entities who provide a The Uniform Guidance can be found at award must adhere to 2 CFR 2900 subaward or subawards to a http://www.doleta.gov/grants/resources.cfm found at www.ecfr.gov. subrecipient. • Adopted on December 19, 2014, includes a limited number of exceptions • Contains consolidated grant approved by OMB to ensure consistency with existing policy and procedures. management requirements for the first time in many years. • Expanded at 2 CFR 2900.2, the exceptions definition of non-Federal entity includes for-profit or commercial and foreign entities. • Located online at www.ecfr.gov. • Grant recipients and subrecipients of DOL funds that are commercial or for-profit entities or foreign entities must adhere to 2 CFR 200 and 2 CFR 2900.

Purpose and Introduction This course introduces information and the pitfalls in cost allocation if not handled properly: Difference New de minimis Key provisions in between direct and rate for the Uniform indirect costs and recovering Guidance on cost the appropriate indirect costs allocation bases for allocating them Avoid frequent New requirement mistakes that for identifying Cost allocation might result in components of process improper indirect cost pools allocation of costs

Course Topics SECTION 1: Terms and Definitions SECTION 2: Cost Allocation Principles SECTION 3: Cost Allocation Requirements SECTION 4: Payroll Distribution Documentation Standards

Course Objectives At the end of this course, you should be able to: • Define cost allocation terms, including the 10% de minimis rate. • Identify cost allocation requirements, including what the difference is between direct cost and indirect costs. • Understand cost allocation principles found in the Uniform Guidance. • Identify appropriate bases for allocating costs. • Identify changes to the documentation standard for distributing personnel expenses.

SECTION 1: Terms and Definitions

Cost Allocation 2 CFR 200.4 Allocation The process of assigning a cost, or a group of costs, to one or more cost objective(s), in reasonable proportion to the benefit provided or other equitable relationship . May entail assigning a cost(s) directly to a final cost objective or through one or more intermediate cost objectives .

Allocable Costs 2 CFR 200.405 Allowability = Allocability A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Allocable Costs

Criteria for Meeting Allocable Costs 2 CFR 200.405 Are incurred specifically for the Federal award. Benefit both the Federal award and other work of the non-Federal entity. Can be distributed in proportions that may be approximated using reasonable methods. Are necessary to the overall operation of non-Federal entity.

Cost Objectives 200.28 • A program, function, activity, award, organizational subdivision, contract, or work Cost unit for which cost data are desired. Objective • Used to accumulate indirect or service- center costs that are subsequently allocated 200.60 to one or more indirect cost pools or final Intermediate cost objectives Cost • Example: WIOA One- stop’s facilities costs Objective (rent, utilities, repairs and maintenance costs, etc.) 200.44 • Both direct and indirect costs are allocated to it. Final • One of the final accumulation points: an Cost award, internal project, other direct activity. • Example: WIOA Adult program award. Objective

Cost Pooling Direct charge costs to a final cost objective when possible. For any type of cost or grouping When that is not possible or of similar costs not readily practical, use an intermediate identified with a single final cost cost objective (cost pool) objective Ultimately allocated to final cost objectives in proportion to the relative benefits received Limited to shared direct and (Example: WIOA Adult, indirect costs Dislocated Workers, Youth programs) All costs in the pool must be Only actual, not budgeted, costs allowable costs for all the cost may be pooled when being objectives to which the pooled charged to awards costs will subsequently be allocated

Cost Allocation Methods Cost Allocation Plan Indirect Cost Rate (CAP) (ICR) Indirect and Direct Costs Negotiated Rate Indirect Costs must be approved by a Federal De minimis Rate cognizant agency Approval to allocate and Frequently referred to as charge Indirect Costs overhead costs using a CAP Direct Shared Costs must ICR or de minimis rate is be reviewed by One-Stop needed to recover indirect partners costs

Infrastructure Funding Agreement WIOA Infrastructure Shared Costs Costs and Services

Types of Costs in WIOA Both direct and indirect costs may include both program and administrative costs, which are defined in WIOA. Direct and Admin Indirect Program Costs

Direct Costs 2 CFR 200.413  Can be identified with a particular final cost objective, such as a Federal award, or other internally or externally funded activity.  Can be directly assigned to such activities relatively easily and with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs.

Examples of Direct Costs Costs that are directly charged to a single program: Square footage of space occupied by the case manager Salary for a case manager working on a Communications devices, single such as a cell phone used program… by the case manager Supplies used by the case manager

Examples of Direct Shared Costs Costs that benefit more than one program are shared costs across all the programs: The salary for a case manager who works with adult, dislocated workers, and youth participants would have his/her costs directly charged to a case management cost pool and later allocated across the programs. Square footage of space occupied by the case manager Other Communications devices, Shared Cost such as a cell phone Examples: Supplies used by the case manager

Modified Total Direct Costs MTDCs are: • The base used for a de minimis ICR. • May be used as a base in an approved ICR. • Actual salaries, wages, fringe benefits, materials and supplies, services, or travel. • Subawards up to the first $25,000 of each subaward.

Modified Total Direct Costs MTDC Exclusions: • Equipment, capital expenditures, patient care. • Rental costs, tuition, and participant support costs. • Portion of each subaward in excess of $25,000. • Other items may be excluded by the Federal cost cognizant agency.  NOTE: Voucher payments or other forms of payment that are not governed by a grant or subcontract. An organization does not need Federal approval or the approval of the pass-through entity in order to use a de minimis rate to charge indirect costs to Federally funded grants…however, both the pass-through entity or DOL will have to be notified of the non- Federal entity’s intent to do so.

Indirect (F&A) Costs Defined 2 CFR 200.56 Indirect (Facilities & Administrative) costs • Incurred for a common or joint purpose benefitting more than one cost objective, and are not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. • To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. • Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.

Indirect (F&A) Costs 200.414 Indirect (F&A) Costs Facilities Administration • Depreciation on • General administration buildings, equipment and general expenses such as the director’s and capital improvements office, accounting, • Interest on debt personnel and all other associated with certain types of expenditures buildings, equipment not listed specifically and capital under one of the improvements subcategories of • Operations and Facilities. maintenance expenses.

Indirect Costs 2 CFR 414 • Administration and facilities costs incurred in support of multiple programs, but not a specific program cost. • Originate either within the recipient organization or department or another department that supports the overall organizational operations. • Are charged back to the program through an approved indirect cost rate.

Indirect Costs Examples Salaries for executive director, accountants, personnel staff, etc. Square footage of space occupied by indirect staff Supplies used by indirect staff Communications devices used by indirect staff