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This guide provides guidance on indirect cost calculations for all fiscal years, as delegated by the Office of Management and Budget (OMB) Circular A-87. It includes information on total costs for funds 1, 2, and 51, as well as explanations of indirect costs, direct costs, unallowed costs, and the indirect cost rate formula.
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Indirect cost calculations Fiscal Year #### Rates—provides guidance for all fiscal years
Authority • Office of Management and Budget (OMB) – Circular A-87 • US Department of Education • Delegates authority for rate determination to states • Delegation agreement renews every five years
What are Indirect Costs? Costs of a general nature which are not readily identifiable with the activities of the grant but are incurred for the joint benefit of those activities and other activities or programs of the organization.
What are Indirect Costs? Cont. Central accounting function
What are Direct Costs? Costs that are incurred specifically for one activity and can be identified specifically with that activity.
What are excluded Costs? Capital outlay
What are unallowed Costs? Items for which federal funds cannot be used.
What are unallowed Costs? Cont. Fines and penalties
Indirect Cost Rate The indirect cost rate is a device for determining what portion of allowable general administrative expenses each federal grant should bear
Indirect Cost Rate Formula FORMULA: indirect costs x 90% direct costs + unallowed costs
Indirect Cost Rate calculations • Audited AFR is used for the calculations • Expenditures must be classified properly! • FY 18 is used to calculate FY 19 rates
Federal review • Federal review of rate methodology going on now • Errors already found: • Apply the rates from July 1 – June 30 • KBE must approve • Adjustment opportunity • More changes could be required
1. Adjustment opportunity • Impossible to get every district calculation correct simply by applying the account structure • Districts must review and certify the rates by affirming adjustment amounts, if any
2. KBE must approve the rates • Agreement is between USDE and KDE • Local boards should recognize the rate but approval is not required
3. Apply the rates July 1 – June 30 Rates must be applied the same way they are calculated
3. Apply the rates July 1 – June 30 cont. If you used the FY 17 rate for Jul, Aug, or Sept 2017 you must correct any overcharge • Calculate the indirect costs using the FY 18 rate for those months • Reduce future indirect costs in FY 18 to correct the total charged
HOW DO I KNOW WHAT ADJUSTMENTS TO MAKE? Results of your calculation must comply with OMB 2 CFR 200 web link
Sample adjustments • Unallowed costs per 2 CFR 200 • Donations and contributions • Employee health and welfare costs • Coding Errors not Material to the AFR
HOW DO I MAKE ADJUSTMENTS? • “Instructions for Indirect Cost Adjustments for Calculating Indirect Cost Rates” • KDE website
HOW DO I MAKE ADJUSTMENTS? CONT. • Log onto SEEK system • “Financial Forms & Tools” • “Indirect Cost Adjustments” • Enter adjustment amounts • Positive number will subtract the amount • Negative number will add the amount • “Save”
WHAT IF I HAVE NO ADJUSTMENTS? • You must log into the system anyway • Check box
What if I need to adjust again? • No problem • Simply repeat the process
CERTIFICATION • By completing the adjustment form: • Certify accuracy
When do I need to do this? Window for adjustments will be open April 1 – May 1
RESOURCES • 2 CFR 200 • Cost Allocation Guide for State and Local Governments (USDE) • KDE website • Rate calculations • Summary guidance
