ODOT Local Public Agencies (LPA) Cost Recovery and Financial Audit Guidance

Transcription

1 ODOT Local Public Agencies (LPA) Cost Recovery and Financial Audit Guidance Definitions, Audit Authority, Cost Recovery Options and Financial Audit Guidance for LPAs Release Date: 05/01/15 Application: Unless and until revised by ODOT, this guidance is effective for actual costs incurred by LPAs on projects authorized by ODOT, for which the LPA Agreement was signed and executed on or after December 26, 2014 and must follow 2 CFR Part 200. For those LPA Agreements signed and executed before December 26, 2014, ODOT s Cost Recovery Guidance May 2014 will continue to apply. 1

2 SUBJECT: 2 CFR Part 200 Cost Recovery and Financial Audit Guidance I. DEFINITIONS As used in this Circular 1. 2 CFR Part 200 is the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards that establishes the principles and standards for determining costs for Federal awards carried out through grants, cost reimbursement contracts, and other agreements with State and Local governments. 2. Base refers to the accumulated direct costs (normally either total direct salaries and wages or total direct costs exclusive of any extraordinary or distorting expenditures) used to distribute indirect costs to individual Federal awards. The direct cost base selected should result in each award bearing a fair share of the indirect costs in reasonable relation to the benefits received from the costs. 3. Base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to activities performed in that period. The base period normally should coincide with the governmental unit's fiscal year, but in any event, shall be so selected as to avoid inequities in the allocation of costs. 4. Base Wage Amount is the amount of direct labor incurred less any overtime premium. 5. Code of Federal Regulations (CFR) is the codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the Federal Government. The CFR is divided into 50 titles that represent broad areas subject to Federal regulation. 6. Cognizant agency refers to the Federal agency responsible for negotiating and approving indirect cost rates for a government or non-profit organization on behalf of all Federal agencies that provide funds to that organization. The Cognizant agency for government or non-profit organizations is determined by calculating which Federal agency provides the most grant funding. 7. Cost Allocation Plan (CAP) summarizes, in writing, the methods and procedures that an organization uses to allocate costs to various programs, grants, contracts, and agreements. It includes, but is not limited to, a Statement of Direct Labor, Fringe Benefits, and General Overhead. As the LPAs are provided a fixed rate, based upon actual costs, the CAP must include actual costs expended, as well as support for the expenditures. 8. Direct costs refers to those costs that can be identified specifically with a particular final cost objective. Direct costs are attributable to one function or one project. Direct costs include both billable and non-billable costs. 9. Force Account Work as defined by 23 CFR , includes the direct performance of highway construction work by a State transportation department, a county, township, municipality, or other political subdivision that may be empowered to cooperate with the State transportation department in highway matters, a railroad, or a public utility company by use of labor, equipment, materials, and supplies furnished by them and used under their direct control. 10. Incurred cost audit is an examination, performed by ODOT, of the accounting records and source documents that support the submitted costs billed against Federal-aid contracts. The examination may include, but is not limited to, an assessment of the auditee s internal controls, timekeeping practices, and general operating policies. 11. Indirect costs as defined by 2 CFR Part 200, are those that have been incurred for common or joint purposes. These costs benefit more than one cost objective and cannot be readily identified with a particular final cost objective without effort disproportionate to the results achieved. 2

3 Typical examples of indirect costs include certain entity-wide central service costs, general administration of the grantee department or agency, accounting and personnel services performed within the grantee department or agency, depreciation or use allowances on buildings and equipment, and the costs of operating and maintaining facilities. 12. Indirect cost rate is a device for determining, in a reasonable manner, the proportion of indirect costs each program should bear. It is the ratio (expressed as a percentage) of the indirect costs to a direct cost base. 13. Indirect cost rate proposal means the documentation prepared by a governmental unit or subdivision thereof to substantiate its request for the establishment of an indirect cost rate. 14. Modified Total Direct Cost (MTDC) as defined by 2 CFR Part , means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. 15. Overtime Premium is the difference between an employee s standard hourly wage rate and the hourly wage rate paid for hours worked in excess of 40 per week or for hours worked in excess of 8 per day, dependent on the LPA s Overtime Policy or Union Agreement. For example, an employee with a standard hourly wage rate of $10 and a wage rate of $15 for hours worked in excess of 40 has overtime premium of $5 for each hour worked in excess of 40. Overtime premium is excluded from the fringe benefit and overhead rate calculations in each of the four recovery methods described in this guidance. 3

4 II. SCOPE This guidance details processes and procedures LPAs must follow to recover project costs and labor, fringe benefits and overhead costs associated with internal labor forces performing contract work on Federally-funded projects. The LPA can recover fringe and/or indirect expenses incurred on Federallyfunded projects through one of the four methods described below. Per 2 CFR Part , the method must be selected at the time of contract execution between the LPA and ODOT. The methodology selected by the LPA will apply to the entire life of the contract. This guidance also provides additional financial guidance for LPA projects. A. PROJECT COSTS RECOVERY OVERVIEW 1. FEDERAL REQUIREMENTS Federal Requirements must be met to be eligible for Cost Recovery. LPAs must identify the project as a Federal and/or State project for each bid and contract to ensure that all applicable requirements will be met. Pursuant to 23 CFR (b) and (e), form FHWA-1273 is to be physically incorporated into each Federal-aid highway construction contract and into each subcontract. The LPA must obtain the subcontracts to ensure that the language is included. The U.S. Department of Labor's (DOL) regulation at 29 CFR 5.5 requires the physical insertion of certain contract provisions in all contracts, which are reflected in form FHWA Form FHWA-1273 is a compilation of Federal provisions that are required to be inserted into Federally-funded contracts and subcontracts. The LPA must include the FHWA 1273 language in its bid documents and also in the contracts with contractors. Under 23 CFR (d), these required contract provisions apply to all work performed on the contract by the prime contractor's own organization and by all of the prime's subcontractors. If the required FHWA 1273 language is omitted, all project costs could be deemed ineligible for reimbursement per FHWA % LOCALLY-FUNDED WORK IN A FEDERAL/STATE PROJECT LPAs must clearly and separately identify the bid items that are specific to the 100% locallyfunded portion of the project. This identification and separation should be made in the bid documents, daily diaries, invoices, and other Project documents as applicable. LPAs must clearly and separately identify and track hours worked that are specific to the 100% locally-funded portion of the project on each daily diary, timesheet, and invoice. An LPA timesheet would need to identify the Project/PID and accumulate hours for the Federal project, and separately track hours for the LPA portion of the project. LPAs must pay for the allocable portion of any overriding project costs such as Premium Bid Bond, Insurance Premium, Traffic Maintenance, and Mobilization. Overriding projects costs are those costs that are attributable to both the 100% locally-funded work and the Federally/Statefunded work. There could be other overriding costs that are not specifically named in this guidance document, but the same allocation process would apply. 4

5 For example: 100% LOCALLY-FUNDED WORK IN A FEDERAL/STATE PROJECT EXAMPLE An LPA had the following bid costs totals: $120,000 LPA portion $180,000 Federal portion $300,000 Total Costs Also incurred: Premium Bid Bond $4,000; Insurance $500 The LPA portion of the project percentage is calculated as the LPA costs divided by the total costs: $120,000/$300,000 = 40% The Federal portion of the project percentage is calculated as the Federal costs divided by the total costs: $180,000/$300,000 = 60% The overriding costs are the Premium Bid Bond and Insurance = $4,500. The Allocated LPA cost is: $4,500 x.40 = $1,800* The Allocated Federal cost is: $4,500 x.60 = $2,700** * Paid 100% by LPA **Amount applied to Federal, State and Local share percentages. B. TIMEKEEPING REQUIREMENTS OF LPA 2 CFR Part 200 establishes the cost principles for Federal awards to non-federal entities. Note: For any labor cost to be eligible for reimbursement with Federal aid funds, the LPA must meet the timekeeping requirements outlined in 2 CFR Part 200. If an LPA has only provided summary time related to the Federal/State project in its invoices to ODOT, it is likely that a review of its time-tracking has not been completed, and will be necessary. Payment of past project invoices does not imply the LPA has a Federally-compliant time-tracking system. Timesheets must be completed for employees that work on: More than one Federal award, A Federal award and a non-federal award, An indirect cost activity and a direct cost activity, Two or more indirect activities which are allocated using different allocation bases, or An unallowable activity and a direct or indirect activity. Timesheets must meet the following standards: They must reflect an after the fact distribution of the actual activity of each employee, They must account for the total activity for which each employee is compensated, i. Exception - Salaried employees must track actual time worked. They must be prepared at least monthly and must coincide with one or more pay periods, and They must be signed and dated by the employee and supervisor. 5

6 To clarify, for any portion of an employee s time to be eligible for reimbursement on a Federal project, timesheets must be maintained for each employee for the duration of the project. The following detail is required: 1. The timesheets must document all paid hours, including all worked hours and all leave hours. The LPA must record all hours and maintain appropriate supporting documentation (electronic or paper) for the time worked, including the number of hours worked on each Local, State, and Federal project by day. The LPA must maintain detail for overtime and leave time, including holiday, sick, vacation, personal, etc. The LPA must maintain timesheets for each employee for which Federal or State reimbursement may be requested. Note: The LPA must maintain timesheets for each employee during the life of the project, not just for days or weeks when the employee is working on the project. 2. Timesheets must be signed and dated by both the employee and supervisor. The supervisor s signature is evidence of review and approval of both project and payroll hours. The supervisor must review and approve time tracked to projects. If changes are made to the timesheet, those changes must be approved in writing by both the employee and the supervisor. The supervisory review should take place with each payroll cycle, but, the review must occur no less frequently than monthly. If the LPA has a project time tracking system that is not integrated with the payroll system, the two systems must be reconciled each pay period. For example, if an employee s project hours for a week are recorded as 40 hours, then the payroll system also must show 40 hours of non-leave paid time. C. TIMEKEEPING BEST PRACTICES 1. Manual Timekeeping System. When a manual system is in place, procedures should provide for the accurate and complete recording of labor hours, as well as appropriate controls to ensure corrections to labor records are accurate and authorized. Generally, controls should be in place to ensure the following: Supervisory observation of employee arrival and departure to prevent improper clock-in/clock-out. Employee possession of timecard/timesheet. The employee completes the timecard/timesheet in ink, as work is performed. Only one timecard/timesheet is prepared per employee per pay period; timecards/timesheets are preprinted with employee name and identification number; and timecards/timesheets are submitted to the designated timekeeping office or are collected by an authorized person. Corrections are made in ink, initialed by the employee, properly authorized, and provide a sufficient and relevant explanation for the correction. The correct distribution of time by project numbers, contract number or name, or other identifier for a particular assignment. To ensure accuracy, a listing of project numbers and descriptions should be provided in writing to employees. 6

7 Employees and supervisors sign the timecards/timesheets in accordance with procedures, verifying the accuracy of the recorded effort. Project and payroll hours are reconciled. 2. Automated Timekeeping System. When an automated timekeeping system is in place, procedures should provide for the accurate and current recording of labor hours by authorized employees, as well as appropriate controls to ensure corrections to labor charges are accurate and authorized. Generally, controls should be in place to ensure the following: Only the employee uses his or her labor charging instrument to access the labor system. Changes are initialed, authorized, and dated by the employee and supervisor and include a description of the reason for the change. This may be done electronically. When an employee badge system is used, badge issuance must be sufficiently controlled so that no badge number is duplicated and badges are not issued to unauthorized personnel. Additionally, employees should be required to report lost badges promptly. Project and payroll hours are reconciled. 3. General Timekeeping Procedures. General timekeeping policies and procedures should be documented and require the following: Supervisors must approve and cosign all timecards. The supervisor is prohibited from completing an employee s timecard unless the employee is absent for a prolonged period of time on some form of authorized leave. The procedures should state that the nature of the work determines the proper distribution of time, not availability of funding, type of contract, or other factors. Direct labor hours must be assigned to the project or cost objective that caused the hours to be incurred. Procedures must be established to verify that the total labor hours reflected in labor distribution summaries agree with the total labor charges as entered into the timekeeping and payroll systems. The policy should state that accurate and complete preparation of timecards is a part of each employee s job. The policy also should state that careless or improper preparation of timecards may lead to disciplinary actions under company policies and/or applicable State and Federal statutes. When an elected official is providing labor costs for reimbursement, this official also must maintain accurate project and payroll time tracking. This timesheet should be approved by another public official or coworker to verify time charged to the projects. If an elected official is not required to work a 40 hour work week, his or her salary will be allocated over 2,080 hours to determine an hourly wage applicable for Federal and State reimbursement. Overtime must be tracked to the daily duties that caused the overtime hours to be worked, regardless of funding source. Overtime should not simply be charged daily to those projects that are reimbursed through Federal or State funding. 7

8 D. LABOR REIMBURSEMENT Per 2 CFR Part 200, charges to Federal awards for salaries and wages, whether treated as direct or indirect costs, will be based on payrolls documented in accordance with generally accepted practice of the governmental unit and approved by a responsible official(s) of the governmental unit. Employee labor costs submitted to ODOT for reimbursement must be calculated at the wage rate applicable to the payroll period the labor is worked. Example: Tom works for Ohio County and earns $28 per hour in 2012; and $30 per hour in The County submits Tom s 2012 labor hours to ODOT for reimbursement in Ohio County must use Tom s hourly wage of $28 from 2012 since that was the rate earned when the work was completed. Each employee s project time worked must be calculated at that employee s hourly wage. Averages of multiple employees wage rates may not be applied. Example: Ohio County submits labor reimbursement to ODOT for the following employees with hours worked and hourly wages earned: Employee Rate Hours Cost Smith, Tom $ $ Doe, Jane $ $ Duke, Larry $ $ Base Wage Amount $1, Reimbursement for base wages would be requested for $1,107.* This amount is the calculation of the actual hourly wage rate of each specific employee multiplied by the number of actual hours each employee worked on the project. *Note: The LPA s Approved Fringe rate, Cost Allocation rate or de minimis rate would also be applied. Time Tracking: Time should be tracked to a project at the smallest interval practicable, rather than tracking whole hours. E. COST RECOVERY METHODS LPA Agreement Section 15.1 Each LPA must select its Cost Recovery Method in the LPA Agreement, Section Per 2 CFR Part , every award must include the approved cost recovery method at the time of the award. 1. DIRECT LABOR ONLY. An LPA may elect to recover only its Direct Labor costs. This option provides no cost recovery for fringe benefit or overhead costs. An LPA that is not able to support its fringe or overhead costs may select this option. 2. MODIFIED TOTAL DIRECT COSTS (MTDC) PLUS THE DE MINIMIS RATE. Per 2 CFR Part , an LPA may recover a de minimis rate of 10 percent of the project s MTDC, (as defined in 2 CFR Part ), which includes direct salaries and wages, applicable fringe benefits using the LPA s approved fringe rate, along with other direct costs. The LPA may apply the de minimis rate to any or all of the MTDC. The fringe rate applied to direct labor must follow the Fringe Rate Approval process listed on page 11. Additionally, per 2 CFR Part , only those entities that have never received a negotiated indirect cost rate may select this option. Per 2 CFR Part 200 Appendix VII, any governmental department or agency unit that receives more than $35 million in direct Federal funding may not select this option for recovery. 3. DIRECT LABOR PLUS APPROVED FRINGE BENEFIT COSTS. An LPA may recover its direct labor, as well as its fringe costs using a documented approved fringe benefit rate (This is expected to be the method most frequently selected by LPAs in 2015.) This method would 8

9 follow the 2 CFR 200 requirements of the CAP as provided below, however, only Fringe Costs are included. ODOT has provided this option as many LPAs lack the technical capacity to develop an indirect cost rate in accordance with the Federal regulation. In providing this opportunity, ODOT will provide one average rate for each LPA using a defined process, and specific Fringe Rate form. For example: Previous Process for Individual Rates: Tom Tim Wages $45,000 $65,000 Rate 31% 47% Fringe Costs to Recover: $13,743 $30,251 9

10 2 CFR Part 200 Process: LPA NAME- Construction Inspection FRINGE RATE - CALCULATION FOR CY 2015 Wages paid for time worked: Actual City ODOT ODOT 2014 Expenses ADJUSTMENTS ADJUSTMENTS ALLOCABLE Total Labor $110,000 $110,000 Total base for fringe allocation $110,000 $0 $110,000 Fringe Benefits Holidays $5,455 $5,455 Sick Pay $3,845 $3,845 Vacation Pay $10,431 $10,431 Personal Business $0 Reimbursements $0 Overtime Premium Pay $0 Subtotal Fringe Benefit Wages $19,731 $0 $19,731 Total Labor less leave time/fringe = base wages $90,269 $90,269 Leave Benefits $19,731 $19,731 Other Fringe Benefits Retirement $12,000 $12,000 Health Insurance $10,521 $10,521 ental Insurance $1,035 $1,035 Vision Insurance $987 $987 Workers Comp $280 $280 Total Leave and Fringe Benefits $44,554 $0 $0 $44,554 Total Labor $90,269 $90,269 Fringe Rate 49.36% 49.36% The Approved Fringe Rate will allow the LPA to apply the same rate for all employees included in the plan. The LPA may submit its cost for the entire Engineer s Office/Department so that all employees cost are included and as employees change, the rate remains the same for the approved period. 10

11 To obtain an approved fringe rate that can be applied to the LPA s direct labor costs, the LPA will need to: Communicate with the District LPA Manager its desire to obtain an Approved Fringe Rate. Complete the 2015 Fringe Rate Form 1 and submit the form, along with cost support, to the Office of External Audits using the following address: dot.lpaquestions@dot.state.oh.us Upon receiving full cost support and the completed Fringe form, The Office of External Audits will review and provide feedback within four days. An approved Fringe rate will be provided for the LPA for use during a specified time period (i.e. calendar year). See additional instruction provided in Appendix A. The LPA will apply this rate to all direct labor costs incurred during the time period for which the rate applies. The LPA must submit a new rate request each year it elects to use the Approved Fringe Benefit option for calculating total labor costs on ODOT projects administered by either ODOT or the LPA. The LPA would not recover any overhead expenses under this method. The fringe benefit rate is applied to the total base wage amount. 4. DIRECT COST PLUS INDIRECT COSTS USING AN APPROVED CAP RATE. LPAs that choose to use the CAP method must prepare its CAP in accordance with 2 CFR Part 200 Appendix VII. To obtain an approved fringe rate that can be applied to the LPA s direct labor costs, the LPA will need to: Communicate with the District LPA Manager its desire to obtain an Approved CAP Rate. Complete the 2015 CAP Form 2 and submit the form, along with cost support, to the Office of External Audits using the following address: dot.lpaquestions@dot.state.oh.us Upon receiving full cost support and the completed CAP form, The Office of External Audits will review and provide feedback within four days. An approved CAP rate will be provided for the LPA for use during a specified time period (ie., calendar year). See additional instruction provided in Appendix A. The LPA will provide this rate to all direct labor costs incurred during the time period for which the rate applies. Per 2 CFR Part , any LPA that has a current indirect cost rate may apply for a one-time extension of the rates for a period of up to four years. If the extension is granted, the LPA may not request a rate review until the extension period ends. At the end of the 4-year extension, the LPA must prepare an updated CAP for review and approval Fringe Rate Form is found at: CAP Form is found at: 11

12 5. NO COST RECOVERY An LPA may elect to not recover any of its internal costs. The LPA selecting this option will not recover any labor, fringe or overhead costs incurred by the LPA. This option is often selected by those LPAs which do not keep Federally-compliant time-tracking. Additionally, for any LPA Agreements in which a Cost Recovery Method is not selected, the LPA will not be able to recover any of its internal costs. If an amended contract is executed to allow the LPA to select a Cost Recovery Method, labor, fringe and overhead costs incurred before the amended contract is executed are not eligible for recovery. F. FINANCIAL AUDIT GUIDANCE LPA PROJECTS This additional Financial Audit Guidance is provided to allow each LPA to be prepared for a financial audit, should one take place. 1. Responsible Person in Charge. Per 23 CFR Part , the local public agency is adequately staffed and suitably equipped to undertake and satisfactorily complete the work; and in those instances where a local public agency elects to use consultants for construction engineering services, the local public agency shall provide a full-time employee of the agency to be in responsible charge of the project. 2. Support for Third Party Payments. LPAs should request reimbursement from ODOT for work completed by a third-party, only after the LPA has made payment to the third-party vendor. The LPA should provide documentation for full payment to the vendor, to include the Federal, State, and Local shares. 3. Prime Contractor 30 Percent Tracking. LPAs must have support to show that the Prime Contractor will complete 30 percent of the original contract price. 23 CFR Part provides that Contracts for projects shall specify the minimum percentage of work that a contractor must perform with its own organization. This percentage shall not be less than 30 percent of the total original contract price. If an LPA selects a higher percentage, it is required to attain that percentage. LPAs must periodically require the Prime Contractor to provide documentation of its percent of completion of the project by its own forces. The LPA should continue to track this percentage throughout the project. Without ongoing tracking, there is no assurance that this requirement will be met. 4. List of Parties Excluded from Federal Procurement. Each LPA must create a procedure to comply with EPLS 3 requires that agencies shall establish procedures for the list of parties excluded from Federal Procurement or NonProcurement programs to ensure that they do not award assistance to listed parties in violation of the Executive Order. Agencies shall also establish procedures to provide for effective use and/or dissemination of the list to assure that their grantees and subgrantees (including contractors) at any tier do not make awards in violation of the nonprocurement debarment and suspension common rule. (this is the Federal requirement; the State requirement is the Unresolved Findings listing provided by the Auditor of State. 3 Replaced with the System for Award Management: 12

13 5. Bid Opening, Review and Award. Per 23 CFR Part , each LPA must create, document, and follow its own procedures for the following: a. The process of handling proposals and information; b. The review and evaluation of proposals; c. The submission, modification, revision and withdrawal of proposals; and d. The announcement of the successful offeror. 6. Daily Diaries. The LPA Manual Appendix C provides a document checklist for daily diaries. The daily diaries must be complete, up-to-date, available for review, and include: a. All work performed by the Contractor b. List of Equipment c. Project Personnel and hours worked d. Pay Quantities e. Test to ensure daily diary quantities match to invoiced quantities f. Measurements, Calculations g. Change order information/pricing for extra work h. Inspections i. Prevailing Wage Interviews, EEO, DBE Updates 7. Change Orders. The LPAs must have established written processes or policies in place for the review and approval of project change orders per the LPA Manual Participation Requirements. Per 23 CFR Part , LPAs must have all significant change orders approved by ODOT prior to the extra work being started. However, when emergency or unusual conditions justify, ODOT may give tentative advance approval orally to such changes or extra work and ratify such approval with formal approval as soon thereafter as practicable. Also per 23 CFR Part , for non-major changes and non-major extra work, formal approval is necessary but such approval may be given retroactively at the discretion of ODOT. 8. Project Invoices. The LPAs are responsible for accurate and complete project billing. The LPAs should reconcile the awarded project quantities and change orders and ensure that the invoiced quantities and costs reconcile to the awarded and change order quantities and costs. 9. CE Reimbursement. Whether the LPA or a Consultant provides construction inspection and project administration services, both are required to maintain time-keeping documentation per 2 CFR Part Final Inspection. The LPA must notify the ODOT District LPA Coordinator that the project is ready for final inspection. The LPA should not submit final project invoices until after LPA Coordinator has provided acceptance of the project. 11. Project Final Report. The LPA is responsible for providing the ODOT Final Project Report to the ODOT District LPA Coordinator within six months of the physical completion of the project. 13

14 12. Schedule of Federal Expenditures. The LPAs are required to have the financial statements audited. 4 The LPA is required to report all Federal funds received, or expended on its behalf, regardless to differences in the LPA expenditure date and ODOT reimbursement date. The LPA Agreement Section 15.2 provides specific requirements for the LPAs Financial Reporting requirements. 2 CFR Part provides the specific requirements for financial reporting as listed. a. The LPA is responsible for tracking any Federal and State funds expended to or on its behalf. b. The LPA is responsible for tracking these payments throughout the life of the project in order to ensure an accurate Schedule of Expenditures of Federal Award (hereinafter referred to as Schedule) is provided for FHWA s CFDA funding. c. The LPA must identify each ODOT PID and/or Project and the corresponding expenditures on its Schedule separately. d. Per 2 CFR , LPAs are responsible for ensuring funds related to this project are reported when the activity related to the Federal award occurs. e. The LPA is required to report its own expenditures, in addition to any expenditures made by ODOT for the project in the applicable Schedule when the expenditure was made. f. When a Schedule is not accurately reported for the project, the LPA will be required to make corrections to past, current, and possibly future Schedules and Audit Reports to ensure Federal funds are accurately reported in the correct fiscal year matching the project expenditure. 13. Consultant Indirect Rate. The LPAs should work with its District LPA Coordinator to obtain and apply the established ODOT Consultant Indirect Cost Rate as approved per 48 CFR Part 31. However, 23 CFR Part allows a lower indirect cost rate to be used if submitted by the consultant firm, however the consultant's offer of a lower indirect cost rate shall not be a condition of contract award. 14. FHWA-1273 Language. LPAs are responsible for ensuring that the full FHWA-1273 language is included in each Federal bid document and contract. Additionally, the LPA is required to ensure this language is included in all Prime-Subcontractor agreements. It is necessary for the LPA to obtain and review all the subcontracts to meet this requirement. 4 2 CFR 200 Part paragraph (c) requires the audit to be completed and submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period, unless a different period is specified in a program-specific audit guide. 14

15 Appendix A Submission Details for Fringe Rates or Cost Allocation Plan Rate 5 A. Cost Plan Submission Timeline Per 2 CFR Part 200, each LPA electing to use recover costs using the Fringe Rate or CAP rate is required to submit a plan to its cognizant agency (ODOT) annually. Indirect cost proposals must be developed and submitted within six months after the close of the governmental unit's fiscal year. ODOT will use the following submission due dates: 6 1. When using unaudited costs from the immediate prior calendar year financials, the LPA must submit its CAP no later than six months after its fiscal year end. 2. When using costs from the most recent (two years prior) audited fiscal year financial statements, the LPA must submit its CAP within one month of the audited financial statements being released by the AOS. Note: If the LPA does not have its financial audit completed within the timeframe prescribed by 2 CFR Part 200, the LPA must submit its cost allocation plan based upon non-audited financial statements within 6 months of the LPA s fiscal year from which the cost allocation plan is calculated. Upon completion of the financial statement audit, adjustments may be made to the cost allocation plan for any unallowable or unallocable costs. This could impact payments previously received by the LPA. (See further discussion in Section C.2.) B. Supporting Documentation Required Per 2 CFR Part 200 Appendix VII, LPAs must include the following with each CAP: 1. Rates proposed, including Subsidiary work sheets and other relevant data, cross referenced and reconciled to the financial data. Allocated central service costs will be supported by LPA policy or procedure disclosing the method used for calculation and application. 7 Both the direct costs and the indirect costs shall exclude capital expenditures and unallowable costs. However, unallowable costs must be included in the direct costs if they represent activities to which indirect costs are properly allocable. All costs included in the cost allocation plan must be from the same calendar year. All costs must be supported by actual expenditures. Any exceptions must be documented by the LPA and approval may be provided by the ODOT Office of External Audits. A copy of the financial data (financial statements, comprehensive annual financial report, executive budgets, accounting reports, etc.) upon which the rate is based. 5 Although Appendix A references the CAP Rate, A, the guidance will apply to both the CAP Rate and Fringe Rate, since the Fringe Rate is ideally a CAP that only includes fringe costs. 7 Allocated central service costs must be supported by a Central Services Cost Allocation plan which was developed in accordance with 2 CFR Part 200 Appendix V. 15

16 Adjustments resulting from the use of unaudited data will be recognized, where appropriate, by the cognizant agency. i. We realize that many LPAs will not be reporting costs for the entire LPA, such as a City or County. Many LPAs will instead submit costs for a specific department such as Engineering. As it can be difficult to tie one department s cost to the audited financial statements, rather than require cross-referencing financial statements, we will instead only require cost support from the LPAs financial system. This support can be provided in the form of a general ledger with full detail, or a detailed expenditure report that provides individual costs as well as summary data for cost accounts. The approximate amount of direct base costs incurred under Federal awards. These costs should be broken out between salaries, wages, and other direct costs. A chart showing the organizational structure of the agency during the period for which the proposal applies, along with a functional statement(s) noting the duties and/or responsibilities of all units that comprise the agency. Required certification. Each indirect cost rate proposal shall be accompanied by the certification form provided in Appendix B. Per 2 CFR Part 200, this certificate must be signed on behalf of the non-federal entity by an individual at an level no lower than vice president or chief financial officer of the non-federal entity that submits the proposal. C. Cost Allocation Plan Review and Approval LPAs must submit a CAP request each year they elect to use the Cost Allocation Plan Method for calculating total reimbursable costs on Federally-funded ODOT projects administered by either ODOT or the LPA. These requests will be reviewed by the ODOT Office of External Audits, as discussed below. 1. Submissions. Timely submission of cost allocation plans is essential, as LPAs will not be permitted to continue to apply a previous year s CAP rate. If the LPA does not file its Cost Allocation Plan by the due date, it may only be eligible for costs incurred after the Cost Allocation Plan approval. If the LPA does not provide all required detail, reconciled to supporting documentation, in its initial submission, the submission is not complete and ODOT s review and approval process will be delayed. 2. Review. The ODOT Office of External Audits will complete a review of the CAP which includes, but is not limited to, Reconciling the CAP to the underlying account records to include tracing allocated internal costs; Performing a comparative analysis, including comparisons of current year data to prior-year data; Sampling of select transactions to source documents; and Reviewing costs for allowability in accordance with 2 CFR Part 200 Subpart E and other Federal and State guidance. 3. Approval. The ODOT Office of External Audits will provide written approval to the LPA for use of the CAP rate during the specified period identified in the approval letter. CAPs will be approved for use for a one-year period. Dates of application will be provided in the approval letter. CAPs must be submitted and applied timely. For example: 16

17 i. Audited Financial Information. CAPs based on 2013 audited financial information generally would be applied in the 2015 LPA fiscal year (most often January through December). ii. Unaudited Financial Information. CAPs based on 2014 unaudited financial information generally would be applied in the 2015 LPA l fiscal year (most often January through December). The ODOT Office of External Audits may make adjustments to the CAP indirect cost rate, if necessary based on findings of the financial statement audit. These adjustments may be applied to payments already processed using the approved CAP rate. 17

18 LPA Cost Recovery Certification CERTIFICATE OF INDIRECT COSTS This is to certify that I have reviewed the indirect cost rate proposal submitted herewith and to the best of my knowledge and belief: (1) All costs included in this proposal ARE to establish billing or final indirect costs rates for are allowable in accordance with the requirements of the Federal award(s) to which they apply and the provisions of 2 CFR Part 200. Unallowable costs have been adjusted for in allocating costs as indicated in the indirect cost proposal (2) All costs included in this proposal are properly allocable to Federal awards on the basis of a beneficial or causal relationship between the expenses incurred and the agreements to which they are allocated in accordance with applicable requirements. Further, the same costs that have been treated as indirect costs have not been claimed as direct costs. Similar types of costs have been accounted for consistently and the Federal Government will be notified of any accounting changes that would affect the predetermined rate. I declare that the foregoing is true and correct. Governmental Unit: Rate Submitted: Signature: Name of Official: Title: Date of Execution: Approved Rate: ODOT Approval: Date of Approval: Date for Application: 18