DEPARTMENT OF HEALTH & HUMAN SERVICES DIVISION OF COST ALLOCATION

1. DEPARTMENT OF HEALTH & HUMAN SERVICESDIVISION OF COST ALLOCATION INDIRECT COST RATES AND COST ALLOCATION PLANS Presenters: Steven J. Zuraf, Branch Chief for Colleges/Universities, Non-Profits & Hospitals Robbin Powell, Senior Negotiator, Colleges/Universities, Non-Profits & Hospitals DCA – AHEC Technical Assistance Meeting DCA – AHEC Technical Assistance Meeting

2. Division of Cost Allocation • Who We Are • What We Do • Results of Our Work • How We Can Serve • Regulations/Guidelines • Questions/Answers DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

3. WHO WE ARE DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting DCA – AHEC Technical Assistance Meeting

4. MISSION • To Negotiate fair and reasonable indirect cost rates and cost allocation plans with grantees receiving Federal awards. • To Provide technical assistance and training on cost policies and business practices to Federal and grantee customers. DCA – HUD Presentation DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

5. OUR CUSTOMERS • All Federal Agencies • Grantee Organizations > State/Local Governments &State Departments > Colleges/Universities > Non-profit Organizations > Hospitals We serve over 3,000 Grantees DCA – HUD Presentation DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

6. WHAT WE DO We have unique authority to negotiate rates and plans on behalf of all Federal agencies. • Indirect Cost (Facilities & Administrative) Rates • State/Local Cost Allocation Plans • Central Service • Public Assistance • Fringe Benefit Rates • Patient Care Rates for Hospitals • Audit Resolution • Disclosure Statement Approval DCA – HUD Presentation DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

7. RESULTS OF OUR WORK PROPOSALS NEGOTIATED AND RATE AGREEMENTS ISSUED (FY ’10): • Educational Institutions 491 • Hospitals 150 • State & Local Govts 441 • Non-Profits 1,400 • Total 2,482 • A cost savings results when we negotiate a rate or plan that is less then the amount proposed by the grantee. - FY 2010 - $761,520,000 • When circumstances warrant, we obtain cash refunds as a result of negotiations. - FY 2010 - $53,848,618 DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

8. THE PROCESS • Grantee obtains notice of Grant Award specifying reimbursement of indirect costs. • Grantee submits proposal to DCA if claiming indirect or allocated costs (Financial Statement, Rate Calculation, and other supporting documents). • DCA performs desk review to check for allowability/allocability of costs and reasonableness. • Additional information may be requested in support of review by negotiator. • Negotiations are conducted to arrive at an agreement on a rate or plan. • The agreement allows grantee to claim and Government to reimburse approved rates or costs. DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

9. REGULATIONS/GUIDELINES • OMB Circulars • 2 CFR 220 [A-21] Colleges and Universities • 2 CFR 230 [A-122] Non-Profits • 2 CFR 225 [A-87] State and Local Governments • 2 CFR 215 [ A-110] Administrative Requirements • OMB Circular A-133 http://www.whitehouse.gov/omb/circulars/ • DCA Information (Including Staff Review Guides Applicable Cost Principles & Related Documentsavailable at: http://rates.psc.gov/ DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

10. REGULATIONS/GUIDELINES • OMB Circular (A-122) or 2 CFR Part 220 Requirement: • Costs must be reasonable, allowable and allocable, and necessary for the operation of the institution and performance of sponsored awards activity. • Whether or not the individuals concerned acted with due diligence in accumulating costs to be charged to sponsored awards. • The extent to which actions taken with respect to the incurrence of the cost are consistent with established institutional policies and practices DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

11. FAQs What Are Indirect Costs? • Indirect costs [IDC] represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the organization. • IDC are those that have been incurred for common or joint objective. Such as: DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

12. FAQs • Salaries of fiscal personnel [Including paid absences] • Rent [Could be direct or indirect] • Depreciation • Operations & maintenance • Utilities • Travel • Consultant services • Equipment repairs • Materials etc • Etc NOTE: IDC cannot be charged directly to a cost objective, but must be allocated on an equitable distribution base. They are generally distributed through the development and application of an indirect cost rate. DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

13. FAQs How are indirect costs different from direct costs? • Direct costs are those that can be identified specifically with a particular final cost objective, i.e., a particular award, project, service, or other direct activity of an organization. • Certain activities are not allowable as charges to Federal awards [e.g. fund raising] – however, even though these costs are unallowable for purposes of computing charges to Federal awards, they nonetheless must be treated as direct costs for purposes of determining IDC rates and be allocated their share of the organizations IDC. DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

14. FAQs How are indirect cost rates calculated? • Total indirect costs divided by Direct costs = Indirect cost rate. • For purpose of rate calculation, grantee may elect to use a direct cost denominator/base of salaries, salaries and benefits, or total direct costs (exlcuding capital expenditures and portion of subawards exceeding $25,000). What is an indirect cost rate agreement? • The Rate Agreement is issued once the negotiator has completed the review and evaluation process and has negotiated an IDC rate. • The Rate Agreement stipulates the type of rate negotiated; effective period; allocation base; equipment threshold; treatment of fringe benefits and other terms and conditions. DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

15. FAQs TYPES OF RATES: • PROVISIONAL RATE > Temporary rate subject to change based on actual data. Used to set initial rate for new grantees. Grantee will adjust rate upward/downward / rebudget. • PREDETERMINED RATE > Permanent rate not subject to change. Used to set multiple year rates C/U preferred • FINAL RATE > Permanent rate not subject to change. Negotiated annually. DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting

16. FAQs ADDITIONAL QUESTIONS/DISCUSSION DCA – HUD Presentation DCA – AHEC Technical Assistance Meeting