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Nuts and Bolts of A-87 or 2 CFR 225

Nuts and Bolts of A-87 or 2 CFR 225. Cost Principles for State, Local, and Indian Tribal Governments. Johnny Alexander, Oregon Department of Transportation Audit Services 503 986-3691 johnny.d.alexander@odot.state.or.us. This is from A-133

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Nuts and Bolts of A-87 or 2 CFR 225

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  1. Nuts and Bolts of A-87 or 2 CFR 225 Cost Principles for State, Local, and Indian Tribal Governments

  2. Johnny Alexander, Oregon Department of Transportation Audit Services • 503 986-3691 • johnny.d.alexander@odot.state.or.us

  3. This is from A-133 • Subpart D--Federal Agencies and Pass-Through Entities§___.400 Responsibilities. • (a) Cognizant agency for audit responsibilities. Recipients expending more than $25 million ($50 million for fiscal years ending after December 31,2003) a year in Federal awards shall have a cognizant agency for audit. The designated cognizant agency for audit shall be the Federal awarding agency that provides the predominant amount of direct funding to a recipient unless OMB makes a specific cognizant agency for audit assignment.

  4. Does that definition have anything to do with you developing an Indirect Cost Rate Proposal?

  5. Cognizant Agency • A-87, Attachment A, paragraph B.6. defines “cognizant agency” as the Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals developed under A-87 on behalf of all Federal agencies. OMB publishes a listing of cognizant agencies (Federal Register, 51 FR 552, January 6, 1986). References to cognizant agency in this section should not be confused with the cognizant Federal agency for audit responsibilities, which is defined in OMB Circular A-133, Subpart D. §____.400(a). Source: page 3-B-2, A-133 Compliance Supplement http://www.whitehouse.gov/omb/assets/omb/circulars/a133_compliance/06/pt3.pdf

  6. The applicability of the cost principles flows through to the subrecipient. EXAMPLE The State of Macedonia receives a Federal award: A-87 applies Macedonia subawards funds to Meerkat County: A-87 applies Meerkat County subawards funds to ProYouth, a nonprofit: A-122 applies

  7. The list of Oregon cognizant agency assignments for cost allocation under 2 CFR 225 Counties: • HHS as cognizant Federal agency - Clackamas, Coos, Douglas, Jackson, Lane, Linn, Marion, Washington.  Cities: • HUD as cognizant, Eugene, Portland • DOT as cognizant, Salem Source: Federal Register, Vol. 51, number 3/Monday January 6, 1986/Notices page 560

  8. “Those State departments and local units of government not listed should deal with the Federal agency providing them with the most funds.” • Source: Federal Register, Vol. 51, number 3/Monday January 6, 1986/Notices page 552

  9. Any questions about the differences in cognizant federal audit agency and the differences in what that means for A 133 and A 87?

  10. The Top 10 Things You Will Not Hear When Completing an Indirect Cost Allocation Plan • Let’s throw a party, the Feds are paying for it. 9. Our Rate is too high. 8. Don’t forget to throw the harassment lawsuit into the indirect cost pool. 7. We can charge whatever rate we want. The Feds don’t care. 6. Indirect costs mean more money for us.

  11. The Top 10 Things You Will Not Hear When Completing an Indirect Cost Allocation Plan 5. Are you sure we have enough paper in this ICAP? 4. Lets use a Provisional Rate. 3. It’s June 1 and the ICAP is due by July 1. No sweat. 2. Do you think we can bill this 2 martini lunch to our indirect costs? 1. THIS IS EASY!!!

  12. Why would you develop an indirect cost allocation plan?

  13. Why would you not develop an indirect cost allocation plan?

  14. Survey of State DOT’s about ICAP’s, updated May 2009 • 21 have approved plan • 25 have no plans to do a plan • General reasons for not having plan Yields no new money Reduces construction money Not worth the time and effort

  15. Still want to do one?

  16. Collect resources • 2 CFR 225 (A 87) • Cognizant agency policies • State management plans • State laws/policies • 49 CFR Part 18 – Common Rule – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments

  17. Composition of Costs • Total Cost = (Direct Cost + Indirect Cost) – (Credits) • Direct Cost • Indirect Cost • Definitions are in 2 CFR 225

  18. The process

  19. 2 CFR 225 – Appendix C • Central Service Cost Allocation Plan – a document that describes the process whereby central services costs can be identified and assigned to benefited activities on a reasonable and consistent basis. • How to Source: ASMB C-10 • http://rates.psc.gov/fms/dca/asmb%20c-10.pdf

  20. Billed Central Services means central services billed on an individual fee-for-service or similar basis. Typical examples include computer services, transportation services, insurance and fringe benefits.

  21. Allocated central services means services that benefit programs but are not billed on a fee-for service or similar basis. These cost are allocated on some reasonable basis and normally include general accounting, personnel administration or purchasing.

  22. Central Service Cost Allocation Audit Services Purchasing No. of Employees No. of Transactions No. of POs No. of Audit Hours Accounting Personnel Highways Planning Transit Aeronautics

  23. The central services cost allocation plan will include all central service costs that will be claimed and will be documented in the Section E plan. • Cost of central services omitted from the plan will not be $REIMBURSED$.

  24. Next • Appendix E – Indirect Cost Rate Proposals

  25. Indirect costs are normally charged to Federal awards by the use of an indirect cost rate. This appendix lists the requirements for indirect cost rate proposals. • How to Source: ASMB C-10 • http://rates.psc.gov/fms/dca/asmb%20c-10.pdf

  26. Indirect costs are those that have been incurred for common or joint purposes. • Indirect cost include cost identified above as well as costs identified in the Central Services Plan (Appendix C) and not otherwise treated as a direct cost DO NOT DOUBLE BILL OR TRY TO PLACE THE SAME COSTS IN 2 PLACES

  27. Formula for rate looks like this Identified Indirect Cost Direct Cost Base = % rate

  28. Where a local government only receives funds as a subrecipient, the primary recipient will be responsible for negotiating indirect cost rates and/or monitoring the sub-recipient’s plan.

  29. Documents and Sources • 2 CFR 225 - • http://www.whitehouse.gov/omb/fedreg/2005/083105_a87.pdf • Implementation Guide for OMB Circular A-87 - • http://rates.psc.gov/fms/dca/asmb%20c-10.pdf • 49 CFR Part 18 Common Rule - • http://www.dot.gov/ost/m60/grant/49cfr18.htm

  30. Quick Sample

  31. Questions?

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