Finance Chapter: Cost Recovery and Invoicing

Transcription

1 Finance Chapter: Cost Recovery and Invoicing Last Revised: 2/2019

2 Table of Contents Definitions... 2 LPA Agreements and Cost Recovery % Locally Funded Work in a Federal/State Project... 4 LPA Timekeeping Guidance... 5 General Timekeeping Procedures... 7 Labor Reimbursement... 7 Establishing an ODOT Approved Fringe Rate... 8 De Minimis Rate Establishing an ODOT Approved Indirect Cost Rate Timetable of Rate Approval and Applicability Required Supporting Documentation Fringe and Cost Allocation Plan Review and Approval Indirect Cost Rate Approved by a Cognizant Federal Agency Invoicing Appendix A Invoicing Procedures for LPAs Appendix B Invoicing Procedures for District Construction Monitors FINANCE CHAPTER REVISED: 8/2018 1

3 This chapter details processes and procedures Local Public Agencies (LPAs) must follow to recover project costs, as well as direct labor, fringe benefits, and indirect costs associated with the use of internal labor forces performing work on federally funded projects. The purpose of this chapter is to ensure that cost recovery methods are transparent, efficient, effective and consistent with Federal regulations and requirements. The LPA can recover direct, fringe and/or indirect costs incurred on federally funded projects through one of four cost recovery methods described later in the chapter. A method of cost recovery must be selected at the time the agreement is signed between the LPA and ODOT, and the methodology selected by the LPA will apply to the entire life of the construction contract. Definitions 1. Direct Labor 1 base wage labor that can be identified or assigned to a specific project or work order. It is labor that is specifically spent on the project, rather than administration, maintenance, and other support services. 2. Fringe Benefits 2 a paid benefit to the employee in addition to their salary or wages. It may take the form of paid time off (vacation, sick, etc.), health insurance, pension plans, use of a company car, etc. 3. Indirect Costs 3 costs that are required to operate and maintain general business/office functions but that cannot be directly identified with a specific project. Indirect costs include utilities, supplies, rent, repairs, telephone bills, legal fees, taxes, asset depreciation, etc. 4. De Minimis 4 additional 10% that can be applied to the base wage amount (modified total direct cost or MTDC) or base wage amount plus the approved fringe rate, in place of an approved indirect cost rate, when requesting reimbursement for labor. 5. Cognizant Agency 5 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 is the Federal agency with the largest dollar value of direct Federal awards to a government unit or component. 1 2CFR Direct costs and 2CFR Compensation personal services 2 2CFR Compensation fringe benefits 3 2CFR Indirect (F&A) costs 4 2CFR Indirect (F&A) costs and 2CFR Modified Total Direct Cost (MTDC) 5 2CFR Cognizant agency for indirect costs and Appendix V to Part 200 State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans FINANCE CHAPTER REVISED: 8/2018 2

4 6. Safe Harbor an overhead cost recovery method that was unique to the State of Ohio, it allowed Ohio LPAs to recover a fringe rate of 30% of direct labor costs and an indirect rate of 38% of the direct labor plus fringe costs; Safe Harbor is no longer a viable cost recovery selection with the implementation of 2CFR Part 200. LPA Agreements and Cost Recovery An original LPA agreement signed prior to December 26, 2014 will be eligible to utilize Safe Harbor as a cost recovery option. Any modification to the agreement made after this date will not hinder the LPA s ability to choose Safe Harbor as a cost recovery method. All original LPA agreements signed on or after December 26, 2014 can no longer utilize Safe Harbor and will have to select one of the cost recovery options in section 15.1 of the LPA agreement, outlined below. 1. No cost recovery of any LPA direct labor, fringe benefits, or overhead costs: The LPA may elect not to seek recovery for any labor costs, direct or indirect. 2. Direct Labor plus indirect costs determined using the Federal De Minimis Indirect Cost Rate: An LPA may elect to recover its direct labor and 10% De Minimis. 3. Direct Labor plus Approved Fringe Benefit Costs (fringe benefits only) plus indirect costs determined using the Federal De Minimis Indirect Cost Rate: An LPA may elect to recover its direct labor plus applicable fringe benefit costs (determined by establishing a fringe rate, which is discussed further in the chapter) plus 10% De Minimis. 4. Direct Labor plus approved fringe benefit costs plus indirect costs calculated using the LPA s ODOT approved indirect cost rate: An LPA may elect to recover its direct labor, applicable fringe benefit costs, and applicable indirect costs (determined by establishing a fringe rate and an indirect cost rate, which is discussed further in the chapter). The cost recovery method selected is only applicable to the LPA signing the agreement. For example, if an LPA were hiring a consultant in lieu of using their own labor forces, they would select no cost recovery of any LPA direct labor, fringe benefits, or indirect costs as their recovery option on the agreement. Since the agreement pertains only to the LPA, this does not prevent the LPA from still seeking reimbursement for any consultant costs incurred on the project. A cost recovery option must be made at the time the agreement is signed between ODOT and the LPA. Only one method of cost recovery may be selected by the LPA. However, the LPA may elect to amend the agreement and select an alternative cost recovery method than the one originally selected. FINANCE CHAPTER REVISED: 8/2018 3

5 If the LPA chooses to amend their cost recovery selection, it must be done prior to the Plans, Specifications, and Estimates (PS&E) package being submitted to ODOT s Office of Local Programs by the ODOT district office. No changes to the cost recovery method selected can be made after the PS&E has been submitted to the Office of Local Programs. This ensures that the selected cost recovery method is not changed mid-project and provides consistency in the process across the state. 100% Locally Funded Work in a Federal/State Project If a project contains 100% locally funded items, the LPA must clearly and separately identify those items at the time of bid. This identification and separation should be made in the bid documents, daily diaries, invoices, and other project documents as applicable. LPAs must pay for their share (the allocable portion) of any overriding project costs. These are costs that are attributable to the entire project and should be applied to both the 100% locally funded work and the federally/state funded work. Overriding project costs can be, but are not limited to, Premium Bid Bond, Insurance Premium, Traffic Maintenance, and Mobilization. An LPA had the following bid costs totals: 100% Locally Funded Work in a Federal/State Project Example $120, % LPA portion $4,000 premium bid bond costs $180,000 Federally eligible portion $500 insurance costs $300,000 Total project costs $4,500 Total overriding project costs The 100% LPA portion of the project percentage is calculated as the 100% LPA costs divided by the total project costs: $120,000/$300,000 = 40% The Federally eligible portion of the project percentage is calculated as the federally eligible costs divided by the total project costs: $180,000/$300,000 = 60% The allocated overriding costs for the 100% LPA portion is: $4,500 x 40% = $1,800. This amount would be paid 100% by the LPA since it s attributable to the 100% LPA portion of the project. The allocated overriding costs for the federally eligible portion is: $4,500 x 60% = $2,700. This amount would be applied to the federal, state, and local share percentages. For example, if the percentage split was 80% federal/20% local, then the local would be responsible for paying for $2,700 x 20% = $540 and the rest would be paid with Federal funds. LPAs must also allocate labor to the 100% locally funded portion of the project. If it becomes too cumbersome based on the type and amount of work being done for the LPA to clearly and FINANCE CHAPTER REVISED: 8/2018 4

6 separately identify and track hours that are specific to the 100% locally funded portion of the project, the allocation process used for the overriding project costs may be applied to the labor as well. 100% Locally Funded Labor Example In the example on the previous page, the 100% LPA portion comprised of 40% of the project costs and the Federally eligible portion consisted of 60%. If the LPA incurred $30,000 in direct labor during the project, the costs would be allocated the same way as the overriding project costs. The allocated direct labor costs for the 100% LPA portion is: $30,000 x 40% = $12,000. This amount would be paid 100% by the LPA since it s attributable to the 100% LPA portion of the project. The allocated direct labor costs for the Federally eligible portion is: $30,000 x 60% = $18,000. This amount would be applied to the federal, state, and local share percentages. For example, if the percentage split was 80% federal/20% local, then the local would be responsible for paying for $18,000 x 20% = $3,600 and the rest would be paid with Federal funds. LPA Timekeeping Guidance Any LPA seeking reimbursement for their labor on a project containing Federal funds must adhere to the requirements outlined in this chapter. Time must be tracked for the entire length of the project and should reflect all activity that occurred during that time for the employee. Activities entered on the timesheets should correlate to entries made on a daily work report. Timesheets should account for the total activity for which the employee is compensated. Therefore, if an employee has accounted for 80 hours on their timesheet, then the employee should have received payroll compensation for 80 hours. Salaried employees who work on a project containing Federal funds must track the actual time worked to account for their project activity. 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 should also show 40 hours of non-leave paid time. Timesheets should include the printed name of the employee and the supervisor, as well as the signature of the employee and the supervisor and the dates of those signatures. A supervisory signature is not required on the time sheet of an elected official. If changes are made to the timesheet, those changes must be approved by the employee and the supervisor. This can be done by simply initialing and dating the changes. It is ideal that the supervisor review the timesheets each pay period, but, at a minimum, monthly. FINANCE CHAPTER REVISED: 8/2018 5

7 If an LPA is seeking any form of cost recovery, all hours must be tracked on the timesheet from the pay period the employee started working on the project through the duration of the project. This ensures that ODOT is not being erroneously charged for overtime or leave time. However, the level of detail required on the timesheets will be determined by the cost recovery method selected on the agreement. No Cost Recovery of any Labor If an LPA chooses not to recovery any labor costs (direct, fringe, or indirect), no timesheets or approved timekeeping system is required. Direct Labor Only or Direct Labor plus De Minimis The most basic cost recovery methods are direct labor only or direct labor plus de minimis. These cost recovery methods require less stringent timekeeping detail on the employee timesheets. While the hours worked on projects should be detailed out so they can be accurately charged to the project, indirect labor hours (e.g., administrative office work) do not have to reflect specific activity detail. Unlike the other cost recovery options, time could be charged to categories such as Office or Miscellaneous as long as the project specific hours are being tracked and the timesheet reconciles with payroll records. Fringe Rate Those LPAs who have an ODOT approved indirect rate and are wishing to seek reimbursement for Direct Labor, Fringe, and de minimis should follow the same level of detail in their timekeeping that is required for Direct Labor Only or Direct Labor plus De Minimis. Indirect Cost Rate Those LPAs who have an ODOT approved indirect rate and are wishing to seek reimbursement for labor would be required to detail their employees activity on the timesheets. Since this cost recovery method allows the LPA to recover direct and indirect time, as well as fringe benefits, the activities would have to be clearly identified on the timesheet so it is easily determinable how many hours are direct project labor costs and how many are indirect costs. Fringe and indirect costs should only be applied to employees who receive benefits. Some employees who might not receive benefits may include, but are not limited to, contract employees (consultants), interns, and temporary employees. FINANCE CHAPTER REVISED: 8/2018 6

8 General Timekeeping Procedures Whether the LPA has a manual or automated timekeeping system, written procedures should be in place to provide for accurate and complete recording of labor hours. Appropriate controls to ensure corrections to labor records are accurate and authorized should be in place as well. General timekeeping procedures should require the following: Supervisor must approve all timecards on a regular basis. Ideally, the approvals should be performed every pay period, but should be done at least monthly. Elected officials, such as county engineers, do not require a supervisor signature on their timesheet. The supervisor is prohibited from completing an employee s timecard unless the employee is absent for a prolonged period of time. Procedures should be established to verify the total labor hours reflected in labor distribution summaries agree with the total labor charges as entered into the timekeeping and payroll systems. When an elected official is providing labor costs for reimbursement, the official must also maintain accurate project and payroll time tracking. If an elected official is not required to work a 40 hour work week, their salary will be allocated over 2,080 hours to determine an hourly wage applicable for federal and state reimbursement. For example, if a county engineer has a salary of $65,000 per year, their hourly wage would be determined by $65,000 / 2,080, for an hourly rate of $ Overtime must be tracked to the daily duties that produced the overtime hours to be worked, regardless of funding source. Overtime should not be simply charged daily to those projects that are reimbursed through federal or state funding. An LPA seeking any type of cost recovery for their inspection costs must submit a sample of timesheets to their District LPA Manager with their participation requirements review form prior to any invoicing for reimbursement of inspection costs. The District LPA Manager will forward the timesheets to ODOT s Office of Local Programs for review and approval. Labor Reimbursement When seeking reimbursement for labor, employee costs must be calculated at the wage rate applicable to the payroll period the labor was 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 of pay earned when the work was completed. FINANCE CHAPTER REVISED: 8/2018 7

9 Also, the cost for 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 Worked Total 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, approved ODOT indirect rate, or de minimis rate could also be applied to the base wage amount. Establishing an ODOT Approved Fringe Rate An LPA may recover its direct labor, as well as its fringe costs, using a documented approved fringe benefit rate. ODOT will permit one average rate for each LPA using a defined process and a specific fringe rate form. The average fringe rate will apply to all employees charging time to a project and seeking federal and/or state reimbursement. 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 fringe rate form (located at: es-lpa.aspx) and submit the form, along with the supporting documentation for costs, to the Office of External Audits using the following address: Michael.Miller@dot.ohio.gov. A checklist of required items can be found in the corresponding tab at the bottom of the spreadsheet. Upon receiving the fringe rate form and supporting documentation, the Office of External Audits will perform a review. If further documentation is required, the Office of External Audits will contact the LPA and request the needed documentation. FINANCE CHAPTER REVISED: 8/2018 8

10 Once all supporting documentation is received and reviewed, the Office of External Audits will provide an approved fringe rate for the LPA to use for the applicable fiscal year The LPA will apply this rate to all direct labor costs incurred during the fiscal year for which the rate applies. An LPA that administers more than one project a year could apply their approved fringe rate to multiple projects. Each project would utilize the same fringe rate during the applicable fiscal year to recover indirect costs. [LPA Name] - Construction Inspection FRINGE RATE - CALCULATION FOR CY 2015 Wages paid for time w orked: Actual LPA ODOT Costs 2014 Expenses ADJUSTMENTS ADJUSTMENTS ALLOCABLE Direct Labor Indirect Labor Labor (w hen not detailed by LPA as either Direct or Indirect) 110,000 $ 110,000 Overtime Premium Pay Disaster Overtime Total base for fringe allocation $ 110,000 $ 110,000 Fringe Benefits Holiday $ 5,455 $ 5,455 Sick $ 3,845 $ 3,845 Vacation $ 10,431 $ 10,431 Personal Overtime Premium Pay Subtotal Leave Benefits $ 19,731 $ 19,731 If Leave Costs are included in Labor costs (cell C15) - enter Leave Costs from C23 in cell C24 $ (19,731) $ (19,731) Total Labor (less leave time/fringe) = base wages $ 90,269 $ 90,269 Other Fringe Benefits Retirement $ 12,000 $ 12,000 Health Insurance $ 10,521 $ 10,521 Vision Insurance $ 987 $ 987 Dental Insurance $ 1,035 $ 1,035 Workers Compensation $ 280 $ 280 Total Fringe Costs (Leave and Other Benefits) $ 44,554 $ 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. FINANCE CHAPTER REVISED: 8/2018 9

11 Example: In the example in the labor reimbursement section, our base wage amount was $1,107. Now that a fringe rate has been established, Ohio County would seek reimbursement from ODOT for the direct labor plus their fringe benefits. Base Wage Amount $1, Fringe Rate 49.36% Fringe Benefits Amount $ Base Wage + Fringe Benefits $1, The total amount of reimbursement Ohio County would seek from ODOT would be $1,653.42, which is the direct labor plus fringe benefit costs. The fringe benefits rate is applied to the total base wage amount. The LPA can also recover the 10% de minimis or apply an approved indirect cost rate, discussed later in this section. 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 the LPA or ODOT (if the LPA is administering a specific phase that includes funds eligible for reimbursement). Once an LPA has a rate established, they may elect for a one-time extension for up to four (4) additional years. The LPA will need notify the Office of External Audits that it wishes to extend its rate. However, once this is done, the LPA cannot request a new rate before the extension period is expires and the LPA must renegotiate a new rate between each extension request. De Minimis Rate The De Minimis Rate allows the LPAs to be reimbursed an additional 10% of their direct labor and fringe benefit costs. The LPA does not have to apply for a De Minimis rate. They simply have to select a cost recovery option that allows de minimis to be applied to their base labor and, if applicable, fringe benefits, and have an approved timekeeping system. Example 1: Ohio County is seeking cost recovery on its direct labor only but wishes to apply de minimis and has selected the appropriate cost recovery method on its agreement. From the earlier example, we know Ohio County s base wage is $1,107. Base Wage Amount $1, % De Minimis $ Base Wage + De Minimis $1, Ohio County would seek reimbursement in the amount of $1, from ODOT for its base wages plus the 10% de minimis. FINANCE CHAPTER REVISED: 8/

12 Example 2: Ohio County is seeking cost recovery on its direct labor plus fringe benefits. They have an approved fringe rate of 49.36%. They wish to apply the 10% de minimis to their labor and fringe costs and have selected the appropriate cost recovery method on their agreement. From the earlier example, we know that Ohio County s base wage is $1,107 and their fringe amount is $ Base Wage Amount $1, Fringe Benefits Amount $ Base Wage + Fringe Benefit $1, % De Minimis $ Base Wage + Fringe Benefits + De Minimis $1, Ohio County would seek reimbursement in the amount of $1, from ODOT for its base wages plus fringe benefits plus the 10% de minimis. Establishing an ODOT Approved Indirect Cost Rate An LPA may recover its direct labor, as well as its fringe benefit and indirect costs, using a documented ODOT approved indirect cost rate. ODOT will provide one average rate for each LPA using a defined process and an indirect rate form. The average indirect cost rate will apply to all employees charging time to a project and seeking federal and/or state reimbursement. While utilizing the approved indirect cost rate does provide the maximum reimbursement, it does require significantly more effort and documentation to obtain. To obtain an approved ODOT indirect cost 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 indirect cost rate. Complete the CAP (cost allocation plan) rate form (located at: es-lpa.aspx) and submit the form, along with cost support, to the Office of External Audits using the following address: Michael.Miller@dot.ohio.gov. A checklist of required items can be found with the form. Upon receiving the CAP rate form and supporting documentation, the Office of External Audits will review. If further documentation is required, the Office of External Audits will contact the LPA and request the remaining documentation. Once all supporting documentation is received and reviewed, the Office of External Audits will provide an approved indirect cost rate for the LPA to use during a specified time period (i.e., calendar year). The LPA will apply this rate to all direct labor costs incurred during the time period for which the rate applies. FINANCE CHAPTER REVISED: 8/

13 An LPA who administers more than one project a year could apply their CAP rate to multiple projects. Each project would utilize the same CAP rate during the applicable period to recover labor costs. LPA NAME- Construction Inspection - (Agreement Option #4) CAP RATE - CALCULATION FOR CY 2015 Wages paid for time worked: Actual LPA Note for ODOT Note for Costs 2014 Expenses ADJUSTMENTS Adj. ADJUSTMENTS Adj. ALLOCABLE Direct Labor $ 85,000 $ 85,000 Indirect Labor 25,000 $ 25,000 Total base for fringe allocation $ 110,000 $ 110,000 Fringe Benefits Holiday $ 5,455 $ 5,455 Sick $ 3,845 $ 3,845 Vacation $ 10,431 $ 10,431 Subtotal Leave Benefits $ 19,731 $ 19,731 Other Fringe Benefits Retirement $ 12,000 $ 12,000 Health Insurance $ 10,521 $ 10,521 Vision Insurance $ 987 $ 987 Dental Insurance $ 1,035 $ 1,035 Workers Compensation $ 280 $ 280 Total Fringe Costs (Leave and Other Benefits) $ 44,554 $ 44,554 Indirect Costs Office Supplies 4,789 $ 4,789 Electricity 13,528 $ 13,528 Gas 8,768 $ 8,768 Water 6,734 $ 6,734 Phone 9,201 $ 9,201 Salaries Indirect $ 25,000 $ 25,000 Fringe (Indirect Salaries x fringe rate) $ 10,126 $ 10,126 TOTAL INDIRECT COSTS $ 78,146 $ 78,146 Fringe Benefit Cost Rate Comp Fringe Benefit Costs / $ 44,554 $ 44,554 TOTAL (Direct & Indirect) Labor C $ 110,000 $ 110,000 = Fringe Benefit Cost Rate 40.50% 40.50% Indirect Cost Rate Computation Indirect Costs / $ 78,146 $ 78,146 DIRECT Labor Costs $ 85,000 $ 85,000 = Indirect Cost Rate 91.94% 91.94% Total CAP Rate to apply to Direct Labor % % The approved CAP rate will allow the LPA to apply the same rate for all employees included in the plan. FINANCE CHAPTER REVISED: 8/

14 Example: In the example in the labor reimbursement section, our base wage amount was $1,107. Ohio County will seek reimbursement from ODOT for the direct labor plus the fringe benefits and indirect costs in the form of an established indirect rate. Base Wage Amount $1, CAP Rate % Fringe Benefits + Indirect Costs Amount $1, Base Wage + Fringe & Indirect Costs $2, The total amount of reimbursement Ohio County would seek from ODOT would be $2,573.11, which is the direct labor plus fringe benefit and indirect costs. The total CAP rate is applied to the total base wage amount. The LPA must submit a new rate request each year it elects to use the indirect cost rate option for calculating total labor costs on ODOT projects administered by either the LPA or ODOT (if the LPA is administering a specific phase that includes funds eligible for reimbursement). Once an indirect cost rate has a been established, the LPA may elect for a one-time extension of up to four (4) additional fiscal years. If the LPA wants to extend its rate, they will need to submit a request to the Office of External Audits. However, once an extension is approved, the LPA cannot obtain a new rate until the extension period expires. The LPA must renegotiate a new rate between each extension request. Timetable of Rate Approval and Applicability All fringe and/or indirect cost rates proposed by the LPA must be based on audited prior year actual costs. The ODOT approved rates will apply for a period of one year, which will directly align with the fiscal year of the LPA. A sample schedule of effective rate periods can be found in the following table. Fiscal Year End of LPA s Audited Cost Data Due Date for Submission of Fringe and/or Indirect Cost Proposal Applicable Fiscal Year for Approved Fringe and/or Indirect Cost Rate December 31, 2015 June 30, 2016 Jan-Dec, 2017 December 31, 2016 June 30, 2017 Jan-Dec, 2018 December 31, 2017 June 30, 2018 Jan-Dec, 2019 December 31, 2018 June 30, 2019 Jan-Dec, 2020 December 31, 2019 June 30, 2020 Jan-Dec, 2021 An LPA that requests a rate for their Fiscal Year 2019 would submit their 2017 costs by June 30, This gives the Office of External Audits six (6) months to review prior to the rate taking effect. FINANCE CHAPTER REVISED: 8/

15 Ideally, the rate would be approved prior to the applicable fiscal year s beginning. However, if for some reason this did not occur, the rate would still apply to the entire fiscal year, regardless of when in that year it was approved. An LPA could then submit a request for reimbursement of the related unbilled employee labor costs during the time the rate was applicable. The eligible labor during a specific rate period will be determined by pay period end date. If an LPA has an approved rate from January to December, 2018, it would apply that rate to all labor pay periods ending within that timeframe. Any days worked in a pay period ending in 2019 would have the approved 2019 rate applied, regardless of if any of those days were worked in This simplified method eliminates the need to split time within pay periods to determine the applicable rate. Example: Ohio County has established a fringe rate of 49.36% to be applied from January 1, 2017 to December 31, They have also received an approved fringe rate of 51.32% to be applied from January 1, 2018 to December 31, The county worked on a project at the end of the year for four weeks, which spanned across two pay periods. Pay Period Begin Date Pay Period End Date Applicable Rate 12/10/ /23/ % 12/24/2017 1/6/ % Even though some of the days worked the last two weeks were in 2017, the county would apply the approved 2018 rate to the labor during that time period because the pay period end date occurred in Required Supporting Documentation All data entered into the CAP rate form or the Fringe rate form must be supported with sufficient documentation. Documentation should adhere to the following: Subsidiary worksheets and other relevant data, cross references and reconciled to the financial data. Both the direct costs and the indirect costs should exclude capital expenditures and unallowable costs. However, unallowable costs should be included in the direct costs if they represent activities to which indirect costs are properly allocable. All costs and documentation must be from the same calendar year. For example, if the LPA is applying for a rate in 2019, the costs and supporting documentation must be entirely comprised of 2017 data, not a combination of 2017 and 2018 data. All costs must be supported by actual expenditures, not budgeted amounts. FINANCE CHAPTER REVISED: 8/

16 A copy of the financial data (e.g., financial statements, comprehensive annual financial report, accounting reports, etc.) upon which the rate is based should be submitted as part of the documentation. The documentation provided to support the costs entered on the Fringe rate form or the CAP rate form should equal the amounts entered on the form. It should be clear and reasonable where the amounts came from and how they were determined. All supporting documentation should be identified and labeled so that it is easily determinable as to which corresponding figure it relates to. Many LPAs will not be reporting costs for the entire LPA, such as a city or county. Rather, the majority of LPAs will instead submit costs for a specific department, such as engineering. It can be difficult to tie one department s cost to the audited financial statements of the entire LPA. Therefore, we will only need cost support from the LPA s 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 costs by accounts. System generated documentation is the preferred method to verify the validity and accuracy of the amounts reflected on the rate forms. However, if it is not feasible to obtain system generated documentation for any reason (e.g., current method of accounting does not support this process; becomes too administratively burdensome to gather required data from various offices and will miss opportunity for labor reimbursement, only including employees who actually work on projects and the system cannot delineate individual employee data, etc.), then the documentation submitted should be verified and signed off by an individual who holds a position of fiscal responsibility (i.e., the LPA s Fiscal Agent, such as the city or county auditor). Included in the documentation should be a chart (system generated or manually created) showing the organizational structure of the agency during the period for which the submitted documentation applies. For example, if the documentation supplied to establish the fringe or CAP rate is from 2017, the organizational chart provided should reflect the staffing during The chart should include a job title or functional statement that describes the duties and/or responsibilities of all units that comprise the agency for which the rate is being requested. A signed LPA cost recovery certification must also be included with the submission of the supporting documentation. The certification should be signed by a representative from the LPA (i.e., the engineer). It does not hold the LPA to the rate submitted, but is merely a way for the LPA to state that the costs and rate are true to the best of the LPA representative s knowledge. FINANCE CHAPTER REVISED: 8/

17 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 to establish fringe benefit or final indirect cost rates are allowable in accordance with the requirements of the Federal award(s) to which they apply and the provisions of Subpart E Cost Principles of 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. Name of Governmental Unit Fringe Rate Submitted Indirect Cost Rate Submitted Fiscal Period of Application Signature Typed Name of Official Official s Title Date of Execution ODOT Approval: Fringe Rate Approved Indirect Cost Rate Approved Fiscal Period of Application Signature Typed Name of Official Official s Title Date of Execution FINANCE CHAPTER REVISED: 8/

18 Fringe and Cost Allocation Plan Review and Approval LPAs must submit a fringe or CAP rate request each year they elect to use the fringe rate or CAP rate method for calculating total reimbursable costs on federally funded ODOT projects administered by either the LPA or ODOT (if the LPA is administering a specific phase that includes funds eligible for reimbursement). Timely submission of rate requests is essential, as LPAs will not be permitted to apply a previous year s rate unless an extension has been requested and granted. ODOT s Office of External Audits will complete a review of the rate request. This includes, but is not limited to: Reconciling the rate 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 eligibility in accordance with Federal and State guidance. ODOT s Office of External Audits will provide written approval to the LPA for use of the fringe or CAP rate during the specified fiscal year identified in the approval letter. The rates will be approved for the applicable fiscal year, unless the LPA is granted a rate extension, as previously discussed in the guidance. The fiscal year to which the rate will be applicable will be provided in the approval letter. Indirect Cost Rate Approved by a Cognizant Federal Agency To simplify relations between Federal agencies and their awarding agencies, a cognizant agency concept was established. This allows a single Federal agency to negotiate and approve indirect cost rates for a government or non-profit organization on behalf of all Federal agencies that provide funds to that organization. For example, if the U.S. Department of Health and Human Services (HHS) was the cognizant agency for Ohio County, they could approve an indirect cost rate for the county. All other Federal agencies who award funds to Ohio County, such as FHWA, would recognize the rate approved by HHS as the indirect cost rate for Ohio County. As such, ODOT will recognize an indirect cost rate approved by a cognizant agency, on condition that documentation of the approved indirect cost rate is provided to ODOT to confirm the rate. The Office of Management and Budget published a list of cognizant agency assignments for some State agencies, cities and counties on January 6, It has not since been updated and should be considered the most recent list. FINANCE CHAPTER REVISED: 8/

19 The list can be found in the Federal Register, Volume 51, Number 3 on page 552 (51 FR 552) or by going to the following link: Those LPAs that are not on the published list should consider their cognizant agency to be the Federal agency that grants them the most funds. In general, unless other arrangements are agreed to by the concerned Federal agencies, the cognizant agency for review and approval of the indirect cost rate is the Federal agency with the largest dollar value of total Federal awards with a governmental unit. Once designated as the cognizant agency for indirect costs, the Federal agency must remain so for a period of five years. Invoicing Contractor Invoices Contractor invoices shall not be processed without a baseline schedule approved by the LPA. The Construction Project Engineer (CPE) shall have the responsibility to make sure the Contractor receives prompt payment for all completed and accepted items of work. After an item of work is completed, but before payment is made, a detailed inspection is necessary to determine the quantities of the various items of work performed. The basis of payment for any item of work details that the unit bid price is full compensation for certain work and/or materials essential to that item. As such, this work and/or material will not be measured or paid for under any other item of work. The CPE shall approve all invoices prior to payment and before requesting reimbursement by ODOT. The payment should be made to the Contractor within thirty (30) days of receiving the Contractor s invoice after the completion of the work per the Ohio Revised Code Section To assure prompt payment, the measurement of quantities and the recording for payment should be performed on a daily basis as the items of work are completed and accepted. Located at the end of this chapter are LPA invoicing procedures (Appendix A) and ODOT invoicing procedures (Appendix B). The CPE is responsible for preparing documentation to support payment for work performed by the Contractor by measurement of completed and accepted quantities of work. The documentation shall provide validation that the quantity for payment has been determined in accordance with contract requirements with necessary measurements, calculations, weight tickets, etc., and that the work was done in close conformity to the plans and specifications. The CPE is responsible for ensuring that costs submitted for work performed are allowable, allocable and reasonable. At a minimum, costs must be: Incurred subsequent to FHWA authorization of the project Supported through adequate and sufficient source documentation FINANCE CHAPTER REVISED: 8/

20 Eligible for reimbursement Necessary for the project In accordance with all laws, regulations and sponsored agreements Net of applicable credits Invoicing for LPA Labor Cost Recovery Those LPAs seeking reimbursement for their labor cost recovery shall invoice ODOT at a minimum, on a semiannual basis. Invoicing ODOT monthly or quarterly is considered a best practice and the preferred frequency, but not required. The LPA shall approve all invoices prior to requesting reimbursement by ODOT. All reimbursement requests shall have sufficient documentation to support the hours billed to the project. If an LPA has already established an approved fringe and/or indirect rate and had their timecards approved, they will not need to submit each timesheet with their invoice. A summary of the time spent on the project would suffice. The summary should include dates of work, employee name, number of hours worked, employees base rate of pay, and a total charged to the project during the specified period being invoiced. Likewise, if an LPA has had their timesheets approved by ODOT for direct labor plus de minimis, they can submit a summary with their invoice as well. Proper internal controls should be in place to ensure the summary is accurate. While an LPA does not have to submit each timesheet with the invoice, the timesheets should be kept on file with the LPA and made available upon the request of ODOT. District LPA Construction Monitors shall perform spot checks of the LPA s timesheets to ensure continued adherence to all federal and state regulations. The spot checks should occur at least once for every Federal-aid project. Both the LPA and the District LPA Construction Monitor shall submit the Local Let Invoice Checklist with every invoice submitted for contract and labor cost recovery. The LPA will provide the project information and review their section of the checklist to ensure that all information is correct. The District LPA Construction Monitor will then review their section prior to submitting to ODOT Central Office Finance for payment. The checklist is in addition to the LPA Invoice Cover Sheet. FINANCE CHAPTER REVISED: 8/

21 FINANCE CHAPTER REVISED: 8/

22 LPA invoicing procedures (Appendix A) and District invoicing procedures (Appendix B) can be found at the end of this chapter. LPAs are encouraged to refer to 2CFR200 Subpart E Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; 2CFR Costs Incurred by States and Local Governments; 2CFR200 Subparts B, C, and D, regarding grant requirements, discussion of costs, and appropriate accounting treatment. FINANCE CHAPTER REVISED: 8/

23 Appendix A Invoicing Procedures for LPAs There are two types of invoicing that can take place with a Local-let project: 1) Reimbursement to the LPA, and/or, 2) Direct third-party payments on-behalf-of the LPA. We will discuss each option separately. Reimbursement to the LPA 1. Work is performed by the contractor and/or the consultant. 2. Contractor and/or consultant submits an invoice to the LPA. 3. LPA verifies that the information on the contractor s and/or the consultant s invoice (including quantities and hours worked) is accurate, in agreement with the LPA Federal Project Agreement, and segregated by funding source. 4. LPA pays the contractor and/or consultant within 30 days of receiving the contractor s and/or consultant s invoice after the completion of the work per the Ohio Revised Code Section LPA prepares Local Let Summary & Payable Invoice (cover sheet) on the LPA s letterhead, a. The template for the cover sheet is prepared and provided to the LPA by the ODOT District LPA coordinator, b. Any 100% Local portions of the invoice must be segregated on the cover sheet and removed prior to calculating ODOT s reimbursable amount, c. Reimbursable amount must be properly calculated, d. Cover sheet must be signed and dated by the LPA, PLEASE NOTE: i. When signing the cover sheet the LPA is certifying that the work shown on the invoice has been performed, and in no way represents any degree of duplication of payments that have or will be received, This includes but is not limited to, payments: 1. from ODOT on this or any other encumbrance, 2. from ODOT for a SIB loan, 3. from OPWC for Issue II monies, or 4. any other grant or loan from any other source, ii. If this is the final invoice cover sheet, cover sheet must be initialed on the final invoice line by the LPA, iii. Total invoices cannot exceed the encumbered amount without contacting the District LPA Coordinator, iv. Total invoices cannot exceed the maximum for the project, v. If the ODOT maximum is reached prior to the completion of the project, progressive invoices for $0 will continue to be submitted to the District Construction Monitor, but the District will not forward these invoices for $0 to ODOT Central Office - Capital Projects, although it is necessary to send the final invoice for $0 showing the total project costs to ODOT Central Office Federal Projects, FINANCE CHAPTER REVISED: 8/

24 e. LPA submits 1 invoice with the original cover sheet, checklist and all supporting documentation, including proof of payment to contractor, via to the District Construction Monitor. 6. District Construction Monitor reviews the checklist, cover sheet and all supporting documentation, a. If there are problems with the cover sheet, or supporting documentation, it may be returned to the LPA for correction or additional information, b. If approved, the District Construction Monitor and/or LPA Manager will submit the original cover sheet with back-up documentation to ODOT Central Office - Capital Projects for payment processing, and maintain one copy for the District. Direct Third-Party Payments On-Behalf-Of the LPA 1. Work is performed by the contractor and/or consultant. 2. Contractor and/or consultant submits an invoice to the LPA. 3. LPA verifies that the information on the contractor s and/or consultant s invoice (including quantities of hours worked) is accurate, and segregated by funding source. 4. If the contract is not 100% paid by ODOT, the LPA pays the contractor and/or consultant their applicable calculated amount within 30 days of receiving the contractor s and/or consultant s invoice after the completion of the work per the Ohio Revised Code Section LPA prepares Local Let Summary & Payable Invoice (cover sheet) on the LPA s letterhead, a. The template for the cover sheet is prepared and provided to the LPA by the ODOT District LPA coordinator, b. Any 100% Local portions of the invoice must be segregated on the cover sheet and removed prior to calculating ODOT s reimbursable amount, c. Reimbursable amount must be properly calculated, d. Cover sheet must be signed and dated by the LPA, PLEASE NOTE: i. When signing the cover sheet the LPA is certifying that the work shown on the invoice has been performed, and in no way represents any degree of duplication of payments that have or will be received, This includes but is not limited to, payments: 1. from ODOT on this or any other encumbrance, 2. from ODOT for a SIB loan, 3. from OPWC for Issue II monies, or 4. any other grant or loan from any other source, ii. If this is the final invoice cover sheet, cover sheet must be initialed on the final invoice line by the LPA, iii. Total invoices cannot exceed the encumbered amount without contacting the District LPA Coordinator, iv. Total invoices cannot exceed the maximum for the project, v. If the ODOT maximum is reached prior to the completion of the project, progressive invoices for $0 will continue to be submitted to the District Construction Monitor, but the District will not forward these invoices for FINANCE CHAPTER REVISED: 8/

25 $0 to ODOT Central Office - Capital Projects, although it is necessary to send the final invoice for $0 showing the total project costs to ODOT Central Office Federal Projects, e. LPA submits 1 invoice with the original cover sheet, checklist and all supporting documentation via to the District Construction Monitor. i. PLEASE NOTE: To ensure that the LPA is properly accounting for direct third-party payments made on-behalf-of the LPA, the LPA s Engineering Department should make a copy of the aforementioned documentation and submit it to the LPA s fiscal office (e.g. County Auditor, Finance Director, etc.) to be recorded as a memo receipt and memo expenditure in the LPA s general ledger, 1. If this is not done, the LPA may be cited by the independent auditors for violating Auditor of State of Ohio Bulletin District Construction Monitor reviews the cover sheet, checklist and all supporting documentation, a. If there are problems with the cover sheet, or supporting documentation, it may be returned to the LPA for correction or additional information, b. If approved, the District Construction Monitor and/or LPA Manager will submit the original cover sheet with back-up documentation to ODOT Central Office - Capital Projects for payment processing and maintain one copy for the District. FINANCE CHAPTER REVISED: 8/

26 Appendix B Invoicing Procedures for District Construction Monitors 1. Invoice is received from the LPA including: a. One (1) signed original Local-Let Summary & Payable Invoice cover sheet (required for ODOT Central Office) or a PDF copy of signed original Local-Let Summary & Payable Invoice (cover sheet) via with complete back-up documentation b. Local Let Invoice Checklist c. DBE Tracking Report (when required). d. time stamp is official time when information is received at District e. PLEASE NOTE: Date Stamps and/or timestamp protects the District and Central Office from LPAs, contractors, and/or consultants claiming interest payments due to ODOT payment processing in excess of 30 days per Ohio Revised Code Section when LPA has not submitted complete information in a timely manner. 2. Verify that cover sheet is on LPA s Letterhead. 3. Verify that cover sheet Remit To field is filled out properly (whether ODOT is to pay the LPA or the contractor and/or consultant directly on-behalf-of the LPA). 4. Verify that cover sheet / Invoice No. numbers are consecutive. 5. Verify that Project identification information is filled out and is correct. 6. Verify that percentages on invoice match Memorandum of Funds sheet (e.g., 80%/20%). 7. Confirm that the cover sheet shows the contractor and/or consultants Amount Due This Invoice at 100%, then the calculated amounts for the federal and local Amount Due This Invoice. 8. Ensure money is available on encumbrance through either the ODOT Appropriation Accounting (AA) System or Ellis View Encumbrance Requests page. See directions at the end of this Appendix for utilizing ODOT s AA System. 9. Determine if there is a DBE goal (this should be received from the District LPA Coordinator, and noted in the project file), a. If there is a DBE goal on project send copy of tracking sheet to DBE Coordinator, b. If the DBE status is determined to be correct by the DBE Coordinator, sign and return before invoice is forwarded for further processing. 10. Verify that back-up documentation ties to contractor and/or consultant invoice, a. Verify that 100% amount on cover sheet ties to contractor and/or consultant invoice and back-up documentation, i. PLEASE NOTE: Construction Engineering Costs back-up must show dates, times, and employee pay rates by individual employee for Engineering & Inspection costs, b. If retainage was originally withheld, it must be in accordance with Ohio Revised Sections , , and i. PLEASE NOTE: Retainage cannot be paid to the LPA and then be held by the LPA until final invoice. If retainage is paid to the LPA, the LPA must then release it to the contractor. FINANCE CHAPTER REVISED: 8/