Federal Transit Administration
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Federal Transit Administration Direct and Indirect Cost Essentials
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Federal Transit Administration. Direct and Indirect Cost Essentials. Hierarchy of Laws & Regulations. Federal U.S. Constitution Legislation/US Code Presidential Executive Orders Federal Agency Regulations: Code of Federal Regulations (CFR) OMB Circulars Agency Circulars - PowerPoint PPT Presentation
Transcript of Federal Transit Administration
Federal Transit Administration
Direct and Indirect Cost
Essentials
Hierarchy of Laws & RegulationsFederal1. U.S. Constitution2. Legislation/US Code3. Presidential Executive Orders4. Federal Agency Regulations: • Code of Federal Regulations (CFR)• OMB Circulars• Agency Circulars5. Stewardship Agreements, Grant
Agreements
State
Local
Governing Regulations for Indirect Costs
• Common Rule – 49 CFR Part 18• 49 CFR Part 19• OMB Circular A-122• 2 CFR 225 (Formerly OMB A-87)• FTA Circular 6100.1D• FAR Part 31
Common Rule – 49 CFR Part 18
Uniform Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments
49 CFR Part 19
Uniform Administrative Requirements For Grants And Agreements With Institutions Of Higher Education, Hospitals, And Other Non-Profit
Organizations
OMB Circular A-122
Cost Principles for Non-Profit Organizations
2 CFR 225
Cost Principles for State, Local and Indian Tribal Governments
FTA Circular 6100.1DChapter V
Financial Management Requirements
FAR Part 31
Contract Cost Principles and Procedures
In accordance with 2 CFR 225
Costs must be:
1. Allowable
2. Allocable
3. Reasonable
Reasonable Costs
A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
Allocable Costs
A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received.
Allowable Costs
• Necessary and Reasonable
• Authorized or not prohibited
• Conform to any limitation or exclusion
• Be consistent with policies and regulations
• Be treated consistently through GAAP
• Not be included as a cost of any other federally financed program
• Be net of all applicable credits
Allowability of Costs
Examples
• Advisory councils. Costs incurred by advisory councils or committees are allowable as a direct cost where authorized by the Federal awarding agency or as an indirect cost where allocable to Federal awards.
• Alcoholic beverages. Costs of alcoholic beverages are unallowable.
Definitions from 2 CFR 225 Appendix B
Financial Management System
Appropriate internal controls• Consistent handling of costs• Appropriate documentation: Cancelled
checks, paid bills, payrolls, time and attendance records, etc.
• Efficient and Economical Operations• Cost control: Expenditure levels,
appropriate assignment of cost• Safeguard assets• Accuracy in reporting
Direct Costs
Direct Costs are those that can be identified specifically with a final cost objective
Indirect (Allocated) Costs
Indirect costs are those: (a) incurred for a common or joint purpose benefitting more than one cost objective, and (b) not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved.
Indirect Cost Allocation Plan
• Written Plan Description
• Signed Certification
• Schedule of costs
Example – Schedule of CostsDirect Costs Indirect Costs
Unallowable Costs Total Costs
Labor 200,000$ 40,000$ 5,000$ 245,000$
Fringes 120,000 2,500 122,500
Total Labor Cost 200,000 160,000 7,500 367,500
Rent 25,000 25,000 Office Supplies 6,000 6,000 500 12,500 Utilities 5,000 5,000 Telephone 500 2,500 3,000 Travel 3,000 5,000 2,000 10,000
Total Non-Labor 9,500 43,500 2,500 55,500
Total Costs 209,500 203,500 10,000 423,000
OH Rate = Total Indirect Cost / Direct Labor Cost = $203,500 / $200,000 = 101.75%
Need for an ICAP
In accordance with 2 CFR 225 – you can only be reimbursed for indirect costs if you have an approved ICAP.
An ICAP is not needed for an entity that only bills direct costs – but remember – allocated costs are indirect costs.
Features/Aspects of an ICAP
• Basis is clearly identified (usually direct labor)
• Same basis used to calculate the rate is also used to bill indirect cost
• Same basis is applied consistently to all indirect costs
• The calculations are organization-wide; should tie to Single Audit expenditure figures.
Types of Cost Allocation Plans
Fixed Rate with carry forward• Calculated rate based on prior-period incurred
costs• Adjusted after-the-fact via a carry forward of the
variance
Predetermined Rate
Provisional Rate
Final Rate
Contact Information
Mary Ann Roder [email protected]
Scott Olson [email protected]
George Delgado [email protected]
