Indirect Cost Rate Proposal and Master Schedule of Fees 1 PRESENTATION BY: COUNTY OF FRESNO AUDITOR-CONTROLLER AUGUST 20, 2013
Background 2 Cost Accounting principles for local governments are codified in Title 2 Section 225 of the Code of Federal Regulations (2 CFR 225) - Supersedes Office of Management and Budget (OMB) Circular A-87 Purpose: Establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments
Contents of 2 CFR 225 1. Body of 2 CFR 225 Provides basic information about establishing principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. 3 2. Appendix A: General Principles for Determining Allowable Costs Provides guidance in determining what costs are allowed to be claimed against grants, cost reimbursement contracts, and other agreements with state and local governments. 3. Appendix B: Selected Items of Cost Provides guidance on the application of principles in establishing allowability or unallowability of certain items of cost.
Contents of 2 CFR 225 (cont d) 4. Appendix C: State/Local-Wide Central Service Cost Allocation Plans Provides guidance on the allocation of cost to federal awards via cost allocation plans. 4 5. Appendix D: Public Assistance Cost Allocation Plans Provides guidelines for state agency administering or supervising the administration of one or more public assistance programs. Public assistance agencies should use Appendix D and not Appendix E. 6. Appendix E: State and Local Indirect Cost Rate Proposals Provides guidance on the allocation of indirect costs to federal awards using an indirect cost rate.
Indirect Cost Rate Proposal (ICRP) 1. Indirect Cost Rate Proposal: The documentation prepared by a governmental unit or subdivision thereof to substantiate its request for the establishment of an indirect cost rate. 2. Indirect Cost Rate: Device for determining in a reasonable manner the proportion of indirect costs each program should bear Ratio: Indirect Costs / Direct Cost Base 3. Indirect Cost Base (3 options): a. Direct Salaries and Wages b. Total Direct Costs c. Modified Total Direct Costs (MTDC) -Total direct costs less deductions for equipment, subcontract costs over $25,000, and participant support cost 5 The base selected should result in each award bearing a fair share of indirect costs in reasonable relation to the benefits received
Indirect Cost Rate Proposal (ICRP) (cont d) 4. Time Frame: - Proposals are generally to be developed and submitted, if required, within six (6) months after close of governmental unit s fiscal year. - For the County of Fresno, ICRP s are required to be approved prior to mandate submission in February of each year 5. ICRP Default Rate: - The default rate for ICRP s is 10%. The default rate becomes effective when a department does not submit an updated ICRP Proposal by February of each year. - ICRP rates become effective when reviewed by the ACTTC department 6 6. Financial Data: - Departments are to use prior fiscal year actual costs to prepare the ICRP rate
Indirect Cost Rate Proposal (ICRP) Classifications of Cost and related terms 1. Direct Costs Those costs that can be specifically identified with a particular cost objective Examples of Direct Costs*: - Salaries and benefits of applicable employees - Services and supplies - Equipment and capital expenditures - Travel expenses *Appendix B of 2 CFR 225 provides guidance in classifying costs 7 2. Indirect Costs Those costs incurred for common or joint purposes, benefitting more than one cost objective not easily assignable to a benefitted cost objective without efforts disproportionate to the results achieved Examples of Indirect Costs: - Department salaries and benefits not identified as direct costs - County-wide cost allocation plan charges
Indirect Cost Rate Proposal (ICRP) Classifications of Cost and related terms 8 3. Cost Objective A function, organizational subdivision, contract, grant, or other activity for which cost data are needed and for which costs are incurred
Four Categories of Cost: 1. Salaries & Benefits Costs 2. Services & Supplies Costs 3. Capital Expenditures 4. Cost Plan Costs ICRP Worksheet 9 - Departments use Prior Year actual financial information to complete the ICRP s (For example: ICRP rate for FY 2013-14, the rate is effective upon approval in February 2014 and is based upon FY 2012-13 actuals)
ICRP Rate Development Process Step 1: Departments enter total actual expenditures from prior fiscal year for each cost category Step 2: Review expenditure accounts in each cost category and remove unallowable costs (Appendix B) Step 3: Classify remaining costs in expenditure accounts in each cost category as either direct or indirect Step 4: Divide Total Allowable Indirect Costs by Total Allowable Direct Salaries & Wages to arrive at the Indirect Cost Rate (ICRP Rate) 10
Indirect Cost Rate Proposal (ICRP) Allowable Costs To be allowable under federal awards, costs must meet the following general criteria: 11 a. Be necessary and reasonable for proper and efficient performance and administration of federal awards. b. Be allocable to federal awards under the provisions of OMB Circular A-87 (2 CFR 225). c. Be authorized or not prohibited under state or local laws or regulations d. Conform to any limitations or exclusions set forth in the cost principles of A-87, federal laws, terms and conditions of the federal award, or other governing regulations as to types or amounts of cost items.
Indirect Cost Rate Proposal (ICRP) Allowable Costs (cont d) 12 e. Be consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the governmental unit. f. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to a federal award as an indirect cost. g. Be in accordance with generally accepted accounting principles unless excluded by Circular A-87 (2 CFR 225). h. Not included as a cost or used to meet cost sharing or matching requirements of any other federal award in either the current or a prior period except as provided by federal law or regulation. i. Be net of all applicable credits. j. Be adequately documented.
Master Schedule of Fees Local Authority 13 1. County Ordinance 4.44.020 Fees, charges, and recovered costs to be charged and collected for the rendering of specified services by the various county departments shall be set forth on a master schedule Fees and rates sufficient to recover all applicable county costs shall be charged for all services and supplies provided by county departments, except when otherwise directed by state law or Board of Supervisors order 2. Fresno County Board of Supervisors Administrative Policy #20 All fees and rates affecting the public shall be included or cross-referenced in a Master Schedule of Fees, Charges, and Cost Recovery adopted by the Board of Supervisors 3. Fresno County Management Directive 1200 Charges for County Services Provides directives for computation of rates and fees and inclusion in the Master Schedule of Fees
Master Schedule of Fees State Authority 14 1. California Government Code 54985 Board of Supervisors has the authority to increase or decrease a fee to recover the cost of providing any product or service or enforcing any regulation for which the fee or charge is levied. 2. California Government Code 54981 Board of Supervisors may contract with another agency to provide municipal services or functions within the territory of the contracting agency for valuable consideration (GC 54982) 3. California Constitution Article XIIIB County is still subject to the fee review procedures required by Article XIIIB of the California Constitution
Master Schedule of Fees Example of Hourly Rate Calculation 15 Assume Department X wants to develop an hourly rate for Position G with the following information: Total available hours: 2,080 Nonproductive hours: 425 Salary and Wages: $57,915 ICRP Rate (assumed): 17.23% Calculation: Productive Hours: 2,080-425 = 1,655 hours Hourly Rate: $57,915 / 1,655 = $34.99/hour ICRP Hourly Rate: $34.99 * 17.23% = $ 6.03/hour MSF Hourly Rate: $34.99 + $6.03 = $41.02/hour
Master Schedule of Fees 16 1. Management Directive 1222.3 Fees and rates not adopted by ordinance should be included in the Master Schedule of Fees, Charges, and Recovered Costs. This includes fees set by: - Statute - Resolution 2. Master Schedule of Fees (electronic access) http://www.co.fresno.ca.us/departments.aspx?id=118
Master Schedule of Fees 17 Questions???