Proposed Reforms to Cost Principles Update

1. A-21 Task Force Proposed Reforms to Cost Principles Update

2. Proposed Reforms • The new circular is set up in Sub-chapters • A. General provisions • B-E. Pre & post award requirements (A-102 & 110) • F. Cost principles (A-21, 87 & 122) • G. Single audit and audit follow up (A-133 & 50) • H. Appendices I through XII

3. ProposedReform Idea # 1 • Cost principles consolidated in new document under Sub-chapter F and Appendices IV through X. • Sub-chapter F is titled “Cost Principles” and includes: • General provisions • Basic considerations • Direct and F&A costs • Special consideration the state, local and Indian tribal governments • Special considerations for Institutions of Higher Education • Selected items of cost

4. Proposed Reform Idea # 1 F&A cost identification and assignment and rate determination for educational institutions contained in Appendix IV

5. Proposed Reform Idea # 3 • Effort Reporting – Still required, Section C-10 • Specific eliminated examples. • Standards for documentation: S&W charges to federal awards based on documented payrolls approved by responsible official. • Payroll system will: • Be incorporated into the official records of the institution • Reasonably reflect activity being compensated • Include compensation for federal and all other activities

6. Proposed Reform Idea # 3 • Effort Reporting • S&W must be supported by certification (electronically or paper) • Certified reports reflecting the distribution of charges within the payroll of each employee (professional or nonprofessional) whose compensation is charged in whole or in part directly to a federal award must be maintained unless a substitute system is approved

7. Proposed Reform Idea # 3 • Effort Reporting • Certified reports must provide after-the-fact certification of the conformance of payroll charges of each employee unless a mutually satisfactory alternative is approved by the awarding agency. • Certifications will not exceed more than 12 months. • Budget estimates do not qualify as support, but may be used for interim accounting purposes provided that: • System provides for reasonable approximations of effort • Significant changes are entered into the payroll system in a timely manner. Short term changes not an issue. • Budget estimates are revised at least quarterly to reflect significantly changed circumstances

8. Proposed Reform Idea # 3 • Effort Reporting • New paragraphs of note: • Special considerations-special considerations in determining allowability of compensation will be given to any changes in compensation policy resulting in a substantial increase in its employee’s level of compensation (particularly when the change was concurrent with an increase in the ratio of federal awards to other activities or changes in federal policy.

9. Proposed Reform Idea # 5 • Charging Directly Allocable Administrative Costs • Generally should be treated as indirect costs, but may be direct if meets all the following: • Admin/clerical services are integral to a project or activity • Individuals can be specifically identified with the project or activity • Such costs are explicitly in the budget, and • The costs are not also recovered as indirect costs • No mention of “major project”

10. Proposed Reform Idea # 6 • Certain Computer Devices • Wording added to define computing devices under “Materials and Supplies Costs, Including Computing Devices” • Wording added: C-31 (4) “In the specific case of computing devices, charging as a direct cost is allowable for devices that are essential and allocable, but not solely dedicated to the performance of the award.” • No wording indicating it had to be separately budgeted as a line item

11. ProposedReform Idea # 11 • Printed “Help Wanted” Advertising • Reform would update the cost principles to reflect the media currently used for this purpose