6/5/2014. Cost Allocation Overview. Overview (continued) Overview. Overview (continued) Overview (continued)

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1 Cost Allocation Overview OHIO ASSOCIATION OF PUBLIC TREASURERS Public Finance Officer Training Institute June 2014 MAXIMUS Robert Fink, Sheri Smith, & Linda Hlebak Learning Objectives Cost Allocation Plan Knowledge, Uses and Implementation Overview Terminology and Definitions Uses of a Cost Allocation Plan What Affects Allocated Costs General Provisions Cost Principles Central Service Cost Allocation Plans Indirect Cost Proposals Submission Summary Summary and Recommendations Questions 1 2 Overview In December 2013, the U.S. Office of Management and Budget (OMB) issued the final guidance for Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in 2 CFR Part 200. The OMB guidance will streamline grants administration by creating uniform regulations for cost principles, administrative requirements, and audit requirements; and reduce administrative burden for non-federal entities receiving Federal awards. The final guidance supersedes and streamlines the requirements from several OMB Circulars, including OMB Circular A-87, Cost Principles for State and Local Governments, into one consolidated guidance ( Super- Circular ). Overview (continued) 2 CFR Part 200 supersedes the following OMB guidance documents: A-21, Cost Principles for Educational Institutions (2 CFR Part 220); A-87, Cost Principles for State, Local and Indian Tribal Governments (2 CFR Part 225); A-89, Federal Domestic Assistance Program Information ; A-102, Grant Awards and Cooperative Agreements with State and Local Governments ; A-110, Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations (2 CFR Part 215); A-122, Cost Principles for Non-Profit Organizations (2 CFR Part 230); A-133, Audits of States, Local Governments and Non-Profit Organizations 3 4 Overview (continued) Overview (continued) 2 CFR Part 200 is comprised of: The Standards set forth in 2 CFR Part 200 which affect administration of Federal awards issued by Federal agencies become effective once implemented by Federal agencies or when any future amendment to the Part becomes final. Federal agencies must implement policies and procedures applicable to Federal awards by promulgating a regulation to be effective by December 26, 2014 unless different provisions are required by statute or approved by OMB. Subpart A Acronyms and Definitions Subpart B General Provisions Subpart C Pre-Federal Award Requirements and Contents of Federal Awards Subpart D Post-Federal Award Requirements Subpart E Cost Principles Subpart F Audit Requirements Appendix I Full Text of Notice of Funding Opportunity Appendix II Contract Provisions for Non-Federal Entity Contracts Under Federal Awards Appendix III Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) Appendix IV Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations 5 6 1

2 Overview (continued) Appendix V State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans Appendix VI - Public Assistance Cost Allocation Plans Appendix VII States and Local Government and Indian Tribe Indirect Cost Proposals Appendix VIII Nonprofit Organizations Exempted From Subpart E Cost Principles of Part 200 Appendix IX Hospital Cost Principles Appendix X Data Collection Form (Form SF-SAC) Appendix XI - Compliance Supplement Cost Allocation Overview What is Cost Allocation? The Process of Distributing or Apportioning Indirect Costs to a Benefiting Cost Objective 7 8 Terminology and Definitions Terminology and Definitions Indirect Costs: Indirect Costs are overhead or administrative costs incurred for joint purposes that may not be identified with a single use without effort out of proportion to the benefit of that analysis. They must be allocated using an allocation basis. Direct Costs Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs Terminology and Definitions Cost objective: A cost objective may be a fund, department, organization, function, contract, grant, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost. Terminology and Definitions Indirect Cost Rate A device for determining in a reasonable manner the proportion of indirect costs each program should bear. Sheri Smith will discuss in more detail in her part of this presentation. A separate indirect cost rate(s) is usually necessary for each department or agency of the governmental unit claiming indirect costs under Federal awards. Indirect Cost Rate Proposal Indirect cost rate proposal means the documentation prepared by a non- Federal entity to substantiate its request for the establishment of an indirect cost rate. This will also be discussed later in our presentation

3 Uses of a Cost Allocation Plan Charge indirect costs to Federal or State grant programs and special taxing districts. What Affects Allocated Costs Total Expenditures ( Cost Pools ) Charge central service costs to enterprise, special revenue and internal service funds (supporting documentation for inter-fund transfers). Useful in budgeting process by identifying which departments are being served and the level of service provided. Useful in identifying costs shared between agencies such as buildings and/or services. Provides indirect cost analysis, which when combined with direct costs, is useful in determining fees-for-services. Increases in Total Indirect Costs generally result in increased Total Allocated Costs to all Grantees Reductions in Total Indirect Costs generally result in reduced Total Allocated Costs to all Grantees What Affects Allocated Costs Functional Distributions of Staff/Effort Re-organizations and modifications to staff/effort functions will generally have an impact on Allocated Costs Increased effort generally indicates higher allocation of cost to Grantees Reduced effort generally indicates reduced allocation of cost to Grantees Concurrent changes to Departmental Functions along with Changes in Total Expenditures may produce both increases and decreases depending on the change to the flow of costs What Affects Allocated Costs Variations in Usage (Consumption) of Central Service Departments Increased demand for Services may result in a greater proportionate share of Allocated Cost Reduced demand for Services may result in a smaller proportionate share of Allocated Cost However, a Department can reduce demand for a service and still be allocated more than a prior year if the total proportionate amount does not decrease by the same rate. May Reduce Usage but Still Pay More. (Converse is true as well) What Affects Allocated Costs Modifying Allocation Statistics Changes to better define the relationship between the type of Service and the benefit derived by the Grantee departments Accounting: Value vs. Number of Transactions Number of transactions - not value will often better correlate to the level of effort (i.e., it takes no more effort to process a $1 transaction vs. $100,000 transaction) Subpart B General Provisions Basic Principle: Cost Principles of this part establishes principles for determining the allowable costs incurred by non-federal entities under Federal awards. The principles are for the purpose of cost determination and are not intended to identify the circumstances or dictate the extent of Federal government participation in the financing of a particular program or project. The principles are designed to provide that Federal awards bear their fair share of cost recognized under these principles except where restricted or prohibited by statute

4 Subpart E Cost Principles Subpart E Cost Principles Indirect costs. Federal Agency Acceptance of Negotiated Indirect Cost Rates. The negotiated rates must be accepted by all Federal awarding agencies. What this means is that if an entity receives an approved indirect cost rate, all Federal awarding agencies must accept your entity approved rate. However, a Federal awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification Indirect costs. Federal Agency Acceptance of Negotiated Indirect Cost Rates (continued). Any non-federal entity that has never received a negotiated indirect cost rate, except for those non-federal entities described in Appendix VII to Part 200, paragraph (D)(1)(b) may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely Subpart E Cost Principles Indirect costs (continued). Federal Agency Acceptance of Negotiated Indirect Cost Rates (continued). Any non-federal entity that has a federally negotiated indirect cost rate may apply for a one-time extension of current negotiated indirect cost rate(s) for a period of up to four years. This extension will be subject to the review and approval of the cognizant agency for indirect costs. If an extension is granted, the non-federal entity may not request a rate review until the extension period ends. At the end of the 4-year extension, the non-federal entity must re-apply to negotiate a rate. Subpart E Cost Principles Cost allocation plans and indirect cost proposals. For state and local governments certain services, such as motor pools, computer centers, purchasing, accounting, etc., are provided to operating agencies on a centralized basis. Since Federal awards are performed within the individual operating agencies, there needs to be a process whereby these central service costs can be identified and assigned to benefitted activities on a reasonable and consistent basis. The central service cost allocation plan provides that process Subpart E Cost Principles Cost allocation plans and indirect cost proposals (continued). Individual governmental departments or agencies normally charge Federal awards for indirect costs through an indirect cost rate. A separate indirect cost rate(s) proposal for each agency is usually necessary to claim indirect costs under Federal awards. Indirect costs include: The indirect costs originating in each department or agency of the governmental unit carrying out Federal awards; and The costs of central services distributed through the central service cost allocation plan and not otherwise treated as direct costs. Subpart E Cost Principles Cost allocation plans and indirect cost proposals (continued). The requirements for the development and submission of central service cost allocation plans and indirect cost rate proposals are contained in appendices V and VII, respectively to 2 CFR Part

5 Subpart E Cost Principles Interagency service. The cost of services provided by one agency to another within the governmental unit may include allowable direct costs of the service plus a pro-rated share of indirect costs. A standard indirect cost allowance equal to ten percent of the direct salary and wage cost of providing the service (excluding overtime, shift premiums, and fringe benefits) may be used in lieu of determining the actual indirect costs of the service. These services do not include centralized services included in central service cost allocation plans as described in Appendix V to Part 200 State/Local Government Central Service Cost Allocation Plans. Subpart E Cost Principles General Provisions for Selected Items of Cost through provides principles to be applied in establishing the allowability of certain items involved in determining cost. 55 items of cost are specifically discussed in the Part. Failure to mention a particular item of cost is not intended to imply that it is either allowable or unallowable. The principles apply whether or not a particular item of cost is properly treated as a direct cost or an indirect cost. Encourage review of cost items to ensure costs claimed to Federal awards are allowable and properly documented pursuant to the Part Appendix V Central Service Cost Allocation Plans D. Submission Requirements. Each major local government is required to submit a plan to its Federal cognizant agency for indirect costs annually. Major local government means local government that receives more than $100 million in direct Federal awards subject to this Part. Appendix V Central Service Cost Allocation Plans D. Submission Requirements (continued). All other local governments claiming central service costs must develop a plan in accordance with the requirements described in this Part and maintain the plan and related supporting documentation for audit. These local governments are not required to submit their plans for Federal approval unless they are specifically requested to do so by the cognizant agency for indirect costs. Where a local government only receives funds as a subrecipient, the pass-through entity will be responsible for monitoring the sub-recipient's plan Appendix V Central Service Cost Allocation Plans D. Submission Requirements (continued). All central service cost allocation plans will be prepared and, when required, submitted within six months prior to the beginning of each of the governmental unit's fiscal years in which it proposes to claim central service costs. Extensions may be granted by the cognizant agency for indirect costs on a case-by-case basis. Appendix V Central Service Cost Allocation Plans F. Negotiation and Approval of Central Service Plans. Federal Cognizant Agency for Indirect Costs: Central service cost allocation plans - the cognizant agency responsible for review and approval is the Federal agency with the largest dollar value of total Federal awards with a governmental unit. For indirect cost rates and departmental indirect cost allocation plans, the cognizant agency is the Federal agency with the largest dollar value of direct Federal awards with a governmental unit or component, as appropriate. Once designated as the cognizant agency for indirect costs, the Federal agency must remain so for a period of five years

6 Appendix VII Indirect Cost Proposals Appendix VII Indirect Cost Proposals D. Submission Requirements A governmental department or agency unit that receives more than $35 million in direct Federal funding must submit its indirect cost rate proposal to its cognizant agency for indirect costs. Other governmental departments or agencies must develop an indirect cost proposal in accordance with the requirements of this Part and maintain the proposal and related supporting documentation for audit. These governmental departments or agencies are not required to submit their proposals unless they are specifically requested to do so by the cognizant agency for indirect costs. Where a non-federal entity only receives funds as a subrecipient, the pass-through entity will be responsible for negotiating and/or monitoring the subrecipient's indirect costs. D. Submission Requirements (continued) Indirect cost proposals must be developed (and, when required, submitted) within six months after the close of the governmental unit's fiscal year, unless an exception is approved by the cognizant agency for indirect costs. If the proposed central service cost allocation plan for the same period has not been approved by that time, the indirect cost proposal may be prepared including an amount for central services that is based on the latest federally-approved central service cost allocation plan. The difference between these central service amounts and the amounts ultimately approved will be compensated for by an adjustment in a subsequent period Submission Summary Central Services Plan Claiming central service costs to Federal awards? Yes - Must prepare a Central Services Cost Allocation Plan Receiving more than $100 million in direct Federal awards? Yes - Must submit Central Services Cost Allocation Plan to Federal cognizant agency for approval. No - Maintain the plan and related supporting documentation for audit. Not required to submit plan for Federal approval unless they are specifically requested to do so by the cognizant agency. Submission Summary Central Services Plan Government only receives funds as a sub-recipient? Yes - Pass-through entity will be responsible for negotiating and/or monitoring the sub-recipient's plan Submission Summary Indirect Cost Rates Department claiming indirect costs to Federal awards? Yes see next question Department receiving more than $35 million in direct Federal funding? Yes - Must prepare an Indirect Cost Rate Proposal and submit the Proposal to Federal cognizant agency for approval No see next question Submission Summary Indirect Cost Rates Department has previously received a federally negotiated indirect cost rate? Yes Must prepare an Indirect Cost Rate Proposal and maintain the proposal and related supporting documentation for audit. Not required to submit proposal for Federal approval unless they are specifically requested to do so by the Federal cognizant agency. No - May elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely

7 Submission Summary Indirect Cost Rates Department only receives funds as a sub-recipient? Yes - Pass-through entity will be responsible for negotiating and/or monitoring the sub-recipient's indirect costs. Summary and Recommendations Study the new rules. The Super-Circular is the most expansive grant reform since the Single Audit Act of Make sure that your costs are reasonable and allowable - study the new items of costs. Consult with your auditors and consultants on an on-going basis to ensure compliance with the regulations. Relationships matter - Start the dialogue with your federal cognizant agency early on in the process. Review your procurement policies - more restrictions on sole sourcing. Work with your state and local agencies to develop the best strategy for meeting the new requirements Questions? Cost Allocation Plan/ Indirect Cost Rate Proposal Process OHIO ASSOCIATION OF PUBLIC TREASURERS Public Finance Officer Training Institute June 2014 MAXIMUS Robert Fink, Sheri Smith, & Linda Hlebak The Cost Allocation Plan/Indirect Cost Rate Proposal (CAP/ICRP) Process includes: Data Collection Data Collection Identification of Individual Costs Allocation Methods Certifications ICRP Calculations ICRP Submission and Negotiations ICRP Approvals Table of Organization Chart of Accounts Annual Expenditure Report Space Cost Rent and/or Building Use Equipment Inventory Narratives Allocation Basis Statistics

8 Table of Organization and Chart of Accounts Local Government A thorough review of the organizational structure will provide insight in order to identify direct costs, indirect costs and those costs that may be disallowed/excluded. Departments Serving Departments or "Central Service Departments" Departments Serving the Public or "Grantees" The costs associated with departments that serve the Public are considered to be direct costs for cost allocation purposes. The costs associated with departments that serve other departments (central service departments) are considered to be indirect for cost allocation purposes. Individual costs within each department may be considered to be disallowed or excluded by federal regulations. These costs include pass-through funds, lobbying costs, capital outlay, debt service, judgments and other extraordinary expenditures. Finance/Acctg Budget & Mgmt Personnel Facilities Mgmt Purchasing Info Services City Attorney City Manager Other Central Service Departments Indirect Costs Police/Fire/EMS Building Dept Parks & Rec Plan & Zoning Water & Sewer Solid Waste Library Social Services Other "Direct" Departments Direct Costs Annual Expenditures This report will be the basis for allocating all central service costs identifying Space Cost and Equipment Inventory In addition to the costs reported in the annual expenditure report, cost adjustments will be made to the cost allocation plan to record and allocate the cost of the use of space and equipment by the agency. Indirect costs direct costs disallowed/excluded costs Allocation Basis Statistics As central service departments and activities are identified, the appropriate basis for allocating these costs to other departments will also be identified. Data and statistics for these allocations will be provided by the agency. Some of the statistics requested may be FTEs (full-time equivalent staff) by department and square footage of occupied space by department. Other statistics may be generated from data already provided, such as the number of purchase orders and accounting transactions by department. Narratives A narrative will be provided for each department that describes what functions are performed by the department and how the costs for each activity performed by the department are being allocated

9 Recap Allocation Methods All costs have been identified as: Direct, Indirect or Disallowed/Excluded Central Service/Indirect Costs have been: Single Step-Down Double Step-Down identified and allocated Single Step-Down Allocation Method Allocates each central service to the departments listed sequentially below the service being allocated, then closes out After it has allocated its own costs out to other departments, it will not receive any allocated costs from other central services MaxCars - Cost Allocation Module SAMPLE COST PLAN ACTUAL 2013 Version City of Sample, Ohio Cost Allocation Plan for the Fiscal Year Ended June 30, 2013 Schedule.4 - Detail Activity Allocations For Department INFORMATION TECHNOLOGY Activity - IT Allocation Receiving Department Units Allocation Percentage Gross Allocation Direct Billed Allocation Step 1 Total Allocation ,000 25,000 25,000 ACCOUNTING HUMAN RESOURCES ,000 15,000 15,000 PURCHASING PUBLIC SAFETY ,000 10,000 10,000 PUBLIC SAFETY ,000 20,000 20,000 PUBLIC WORKS ,000 5,000 5,000 UTILITIES ,000 25,000 25,000 SubTotal , , ,000 Total , , ,000 INFORMATION TECHNOLOGY cost of $100,000 Allocation Basis: PERCENTAGE OF IT SUPPORT BY DEPARTMENT Allocation Source: INFORMATION TECHNOLOGY DEPARTMENT Allocation Sequence Single Step-Down Method MaxCars - Cost Allocation Module SAMPLE COST PLAN ACTUAL 2013 Version Results of original allocation: City of Sample, Ohio Cost Allocation Plan for the Fiscal Year Ended June 30, 2013 Schedule.4 - Detail Activity Allocations For Department ACCOUNTING Central Service Departments Total Cost Accounting Human Resources Purchasing Parks Public Safety Public Works Utilities Total Activity - ACCOUNTING Receiving Department Allocation Units Allocation Percentage Gross Allocation Direct Billed Allocation Step 1 Total Allocation HUMAN RESOURCES % 13,158 13,158 13,158 Information Technology $ 100,000 $ 25,000 $ 15,000 $ 10,000 $ 20,000 $ 5,000 $ 25,000 $ 100,000 PURCHASING % 19,737 19,737 19,737 PARKS & RECREATION % 19,737 19,737 19,737 PUBLIC SAFETY % 19,737 19,737 19,737 Accounting $ 100,000 $ 13,158 $ 19,737 $ 19,737 $ 19,737 $ 26,315 $ 26,316 $ 125,000 PUBLIC WORKS % 26,316 26,316 26,316 UTILITIES % 26,316 26,316 26,316 SubTotal % 125, , ,000 Human Resources $ 100,000 $ 7,120 $ 21,360 $ 35,599 $ 35,599 $ 28,480 $ 128,158 Total % 125, , ,000 Purchasing $ 100,000 $ 16,101 $ 24,151 $ 56,353 $ 40,252 $ 136,857 Allocation Basis: PERCENTAGE OF TRANSACTIONS BY DEPARTMENT $ 400,000 $ 57,198 $ 99,487 $ 123,267 $ 120,048 $ 400,000 Allocation Source: ACCOUNTING 100% less 5% identified to INFORMATION TECHNOLOGY which has closed out

10 Move Information Technology allocation from first to last: Double Step-Down Allocation Method Central Service Departments Total Cost Human Resources Purchasing IT Parks Public Safety Public Works Utilities Total Accounting $ 100,000 $ 10,000 $ 15,000 $ 5,000 $ 15,000 $ 15,000 $ 20,000 $ 20,000 $ 100,000 Allows each central service department to allocate to any other central service department in the first step down, regardless of the sequencing order of allocation Human Resources $ 100,000 $ 5,789 $ 5,789 $ 17,368 $ 28,949 $ 28,947 $ 23,158 $ 110,000 Purchasing $ 100,000 $ 6,711 $ 13,421 $ 20,132 $ 46,972 $ 33,553 $ 120,789 Information Technology $ 100,000 $ 47,000 $ 11,750 $ 58,750 $ 117,500 During the second step down, the central service department allocates only to the departments sequentially below the service being allocated, then closes out $ 300,000 $ 45,789 $ 111,081 $ 107,669 $ 135,461 $ 400, MaxCars - Cost Allocation Module SAMPLE COST PLAN ACTUAL 2013 Version City of Sample, Ohio Cost Allocation Plan City of Sample, Ohio Cost Allocation Plan for the Fiscal Year Ended June 30, 2013 Schedule.4 - Detail Activity Allocations For Department ACCOUNTING Activity - IT for the Fiscal Year Ended June 30, 2013 Schedule.4 - Detail Activity Allocations For Department INFORMATION TECHNOLOGY Activity - ACCOUNTING Receiving Department Allocation Units Allocation Percentage Gross Allocation Direct Billed Allocation Step 1 Allocation Step 2 Total Allocation HUMAN RESOURCES % 10,000 10,000 4,066 14,066 PURCHASING % 15,000 15,000 6,098 21,098 INFORMATION TECHNOLOGY % 5,000 5,000 2,033 7,033 PARKS & RECREATION % 15,000 15,000 6,098 21,098 PUBLIC SAFETY % 15,000 15,000 6,098 21,098 PUBLIC WORKS % 20,000 20,000 8,132 28,132 UTILITIES % 20,000 20,000 8,131 28,131 SubTotal % 100, ,000 40, ,656 Total % 100, ,000 40, ,656 ACCOUNTING % 29,131 29,131-29,131 HUMAN RESOURCES % 17,479 17,479-17,479 PURCHASING % 11,653 11,653-11,653 PUBLIC SAFETY % 23,305 23,305 1,820 25,125 PUBLIC WORKS % 5,826 5, ,281 UTILITIES % 29,131 29,131 2,276 31,407 SubTotal % 116, ,525 4, ,076 Total % 116, ,525 4, ,076 Allocation Basis: PERCENTAGE OF TRANSACTIONS BY DEPARTMENT Allocation Source: ACCOUNTING ACCOUNTING cost of $100,000 2 nd allocation step allows for the re-allocation of costs received from HUMAN RESOURCES, PURCHASING and INFORMATION TECHNOLOGY Allocation Basis: PERCENTAGE OF IT SUPPORTS BY DEPARTMENT Allocation Source: INFORMATION TECHNOLOGY DEPARTMENT 100% allocation; no reduction in statistic required due to closed central services IT Cost $100,000 Plus allocations from: ACCOUNTING 5,000 HUMAN RESOURCES 5,500 PURCHASING 6,025 Total $116,525 2 nd allocation step allows for the re-allocation of costs received from ACCOUNTING, HUMAN RESOURCES and PURCHASING Results of Double Step-Down Allocation Method Comparison of Three Examples of Cost Allocation Methods Central Service Departments Total Cost Accounting Human Resources Purchasing IT Parks Public Safety Public Works Utilities Total Example 1 Example 2 Example 3 Accounting $ 100,000 $ 14,066 $ 21,098 $ 7,033 $ 21,098 $ 21,098 $ 28,132 $ 28,131 $ 140,656 Parks $ 57,198 $ 45,789 $ 56,135 Human Resources $ 100,000 $ 5,500 $ - $ 6,951 $ 6,951 $ 20,853 $ 34,756 $ 34,755 $ 27,804 $ 137,570 Public Safety $ 99,487 $ 111,081 $ 102,254 Public Works $ 123,267 $ 107,669 $ 118,810 Purchasing $ 100,000 $ 6,025 $ 6,025 $ 7,092 $ 14,184 $ 21,275 $ 49,642 $ 35,459 $ 139,702 Utilities $ 120,048 $ 135,461 $ 122,801 Information Technology $ 100,000 $ 29,131 $ 17,479 $ 11,653 $ - $ - $ 25,125 $ 6,281 $ 31,407 $ 121,076 Total $ 400,000 $ 400,000 $ 400,000 $ 300,000 $ 56,135 $ 102,254 $ 118,810 $ 122,801 $ 400,

11 Indirect Cost Rate Proposals The cost allocation plan has identified indirect, direct and disallowed/excluded costs. An Indirect Cost Rate is calculated by dividing the Indirect Cost Pool by the Direct Cost Base. This calculation generates a ratio, which is expressed as a percentage. The Indirect Cost Pool consists of all allowable indirect costs as identified in the cost allocation plan. Calculations, Negotiations, Approvals MAXIMUS Consulting Services, Inc. The Direct Cost Base can be Salary and Wage (S&W) Total Direct Cost (TDC) Modified Total Direct Cost (MTDC) Once calculated, submitted and approved, the rate is applied to the base to recover indirect costs. 62 Sample Costs Total Costs Indirect Costs Direct Payroll Direct Other Disallowed Department Direct Costs Department A 76,552,672 37,747,486 38,685, ,000 Department B 121,782,971 30,384,319 90,148,652 1,250,000 Department C 4,834, ,158 4,707,329 10,000 Subtotal Direct Costs 203,170,130-68,248, ,541,167 1,380,000 Department Indirect Costs Information Technology 4,939,951 4,929, ,000 Accounting 1,267,616 1,252,616 15,000 Human Resources 1,852,909 1,842,909 10,000 Purchasing 859, ,461 20,000 - Subtotal Indirect Costs 8,919,937 8,864, ,000 Total Costs 212,090,067 8,864,937 68,248, ,541,167 1,435,000 Sample Calculations Salary and Wage Base (S&W) Total Indirect Costs / Direct Payroll Costs = Rate $8,864,937 / $68,248,963 = 12.99% Total Direct Cost Base (TDC) Total Indirect Costs / Total Direct Costs = Rate $8,864,937 / $203,170,130 = 4.36% Modified Total Direct Cost (MTDC) Total Indirect Costs / Modified Total Direct Costs = Rate $8,864,937 / ($68,248,963+$133,541,167) = 4.39% Single Rate or Multiple Rates Types of Rates Single Rate - applies to all departments within the agency Multiple Rates individual departments within the agency may have its own separate rate* Fixed Rate with Carryforward Provisional/Final Rate Predetermined Rate *Usually used if the individual departmental rates vary greatly

12 Fixed with Carryforward Provisional/Final Rate A rate is calculated using Fiscal Year 2013 actual costs. This rate will be used in Fiscal Year (FY 2013 CAP/ICRP is prepared and approved in FY 2014 to be used in FY 2015) At the end of FY 2015, direct and indirect costs are compared to the FY 2013 costs. The amount that should have been recovered is calculated and compared to the amount that was actually recovered. The over or under recovery is carried forward in calculating the rate to be used in FY This rate structure works well when costs are fairly stable from year to year. An advantage is that there is no need to retroactively make adjustments to grants. However, this is a more complex calculation than the use of other rate types. Rates are approved provisionally for use in FY 2015 based on FY 2013 costs When FY 2015 costs are known, a final rate calculation is proposed Once approved, the final rate is retroactively applied to FY 2013 grants The over or under recover is reported as an adjustment to final grant cost May require a payback in some cases This rate works well when costs are unstable or changing. However, the grantee may need to make retroactive adjustments and possibly paybacks if necessary. An advantage is that the calculation is less complex Predetermined Rate The indirect cost rate is calculated based on FY 2013 actual costs This rate is applied to a specific current or future year(s). Except under very unusual circumstances, a predetermined rate is not subject to adjustment The advantages of the predetermined rate is that no carryforward is calculated, and the rate is a known factor for a specific period of time, which aids in budgeting and financial planning. However, in some years the recoveries may be more or less than they would have been using a more accurate and current rate calculation. Certificate of Indirect Costs The local government will be asked to sign a Certificate of Indirect Costs, which will be included in the ICRP that is submitted to the cognizant agency. Certifications include: That the local government has reviewed the CAP/ICRP Costs are allowable in accordance with OBM Circular A-87 No costs are identified as both direct and indirect It must be signed by someone at the level of the Chief Financial Officer or above ICRP Negotiations Submit to Cognizant Agency Components of indirect costs What costs are in the base What base is being used Must be accepted by all federal awarding agencies ICRP Approvals Rate Agreement Must be signed by local government and returned to cognizant agency Will be signed by cognizant agency and returned to local government Recover costs using the approved rate and the approved base May be limits

13 Questions? DETERMINATION OF ELECTION EXPENSES OHIO ASSOCIATION OF PUBLIC TREASURERS Public Finance Officer Training Institute June 2014 MAXIMUS Robert Fink, Sheri Smith, & Linda Hlebak 73 LEARNING OBJECTIVES BACKGROUND WHAT COSTS ARE INCLUDED? HOW IS YOUR SHARE DETERMINED? WHEN IS THE BEST TIME FROM A COST STANDPOINT TO PLACE A LEVY ON THE BALLOT? BACKGROUND ORC gives the rules for charging Political Subdivisions for the cost of conducting Elections There are THREE main types of Elections 1. Primary and General Elections in an Odd Numbered Year 2. Primary and General Elections in an Even Numbered year. 3. Special Elections not held on the day of a Primary or General Election in any year Odd-Year Elections Primary Election in May, General Election in November Special Elections February & August Other dates are possible if you are a Chartered City or Village Your County may not have a Primary Election - the May Election then becomes a Special Election Most Cities and all Townships, Villages and School Boards have an Election in November of the Odd Year. EVEN-YEAR ELECTIONS Primary in May for Governor s Election, in March for Presidential Election Always a County-wide Primary Election in evennumbered years. General Election in November Municipalities, Townships and School Boards do not normally have candidates on the ballot in the even year

14 SPECIAL ELECTIONS For our purposes a Special Election is any Election held on a day other than a Primary or General Election. There are usually no candidates on the ballot in a Special Election. Special Elections are allowed in February and August. There is no February Election in Presidential Election Years due to the March Primary. What Costs are included in the Election Charges It depends on which type of Election is being held. For Primary and General Elections in EVEN numbered years, subdivisions placing an issue on the ballot are only charged for ballots and advertising. For all other Elections, all costs, as described in ORC shall be charged What Costs are included in the Election Charges Odd-year & Special Elections The largest cost for most Elections is the cost of Poll workers or Precinct Election Officials. Each Precinct must have at least FOUR workers. These workers must be paid at least minimum wage for 14 hours. The Presiding Judge receives an additional $10.00 for travel. This results in a minimum cost of $430 per precinct. What Costs are included in the Election Charges Odd-year & Special Elections If your County has paper ballots, the cost of ballot printing is usually the next highest cost. This cost is dependent on the number of ballots needed, the printer chosen and whether the County can set up and print the ballots themselves. Even in Counties that use Machines, paper ballots must still be printed for absentee and provisional voting What Costs are included in the Election Charges Odd-year & Special Elections Overtime for Regular Employees Compensation of Seasonal Workers Vendor Contracts for programming, delivery, printing or other services Absentee balloting expenses Polling location rental Polling place supplies Legal Advertising and all other expenses related to the conduct of the Election. How are the costs apportioned to Political Subdivisions The Cost of Legal Advertising for issues is directly assigned to the Political Subdivision voting on the issue. This cost is charged to the subdivision even if the issue was placed on the ballot through a citizen petition. All of the remaining costs are totaled and divided by the total number of precincts to get a cost-per-precinct

15 How are the costs apportioned to Political Subdivisions Apportioning costs The remaining cost are prorated to the subdivisions and are dependent on three factors. The calculated cost per precinct. The number of precincts in the Political Subdivision. The number of Political Subdivisions with candidates or issues on the ballot in each precinct or part-precinct For Example: If Township A has 10 precincts and the Cost-per-precinct is $1,000. The Township will owe $10,000. However if School District B lies within the Township and has 6 precincts with an issue on the ballot at the same time, the costs will be divided. The Township will pay (6*(1000/2) )+ (4*1000) or $7,000 and the School District would pay (6*(1000/2)) or the remaining $3,000. As you can see, the total cost is the same, it is now split between the two subdivisions with issues on the ballot Sample of apportioned costs Rules that affect your costs Nine different PSD s Split Precincts The number of precincts or part-precincts in your political subdivision. Precinct lines are drawn by the Board of Elections and may cause your District to lie in more precincts than another similarly sized District. This can be due to the physical geography of your district and whether it overlaps County, Municipal or Township lines. If even only one of your voters lives in a precinct, you are apportioned an equal share of the costs Rules that affect your costs The splitting of costs is NOT related to the number of offices or issues your subdivision has on the ballot. If your subdivision has Candidates on the ballot, you are not charged additional costs (other than Legal Advertising) for an issue also on the ballot. If your issue requires additional postings or printing, you will be charged for the additional costs. (For Example: Maps for a Zoning Issue) Rules that affect your costs There are a lot of Special Districts that may not be considered part of your District. These include: Library Districts Fire Districts Ambulance Districts Police Districts Health Districts Road Districts Cemetery Districts

16 Best time to place an Issue on the Ballot From a Cost Perspective The least expensive option is to place an issue on the ballot during an Even-Year Primary or General Election The next best option is in November of the Odd-Year as you are most likely already paying for an election of candidates. The Primary and General Elections (May & November) usually have more political subdivisions with something on the ballot. This will maximize the sharing of costs. Worst time to place an Issue on the Ballot Special Elections in February and August usually only have a couple of items on the ballot. Political Subdivisions holding elections on these days usually bear the entire cost for all precincts in their subdivision. This includes the full cost of any split precincts Questions? Contact Information Please Direct Any Questions, Comments, or Suggestions to: Robert Fink at robertfink@maximus.com Sheri L. Smith at sherilsmith@maximus.com Linda Hlebak at lindahlebak@maximus.com Thank You for Your Participation!