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OMB Circular A-21

OMB Circular A-21. Cost Principles for Educational Institutions. Purpose: Gives instruction to federal agencies affected by the circulars; federal agencies are required to implement by passing requirements on to institutions. Effect : Sets minimum standards applicable to institutions.

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OMB Circular A-21

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  1. OMB Circular A-21 Cost Principles for Educational Institutions

  2. Purpose: Gives instruction to federal agencies affected by the circulars; federal agencies are required to implement by passing requirements on to institutions. Effect: Sets minimum standards applicable to institutions

  3. Responsibility for compliance to standards set by OMB A-21belongs to: • Principal Investigator • Office of Sponsored Projects, and • Other Administrative Offices • Payroll • Purchasing • Property Control • Risk Management and Insurance • Counsel’s Office • Any office dealing with a Sponsored Project

  4. What the Cost Principles Do • Requires a cost to: Be allowable Be allocable Be reasonable (prudent person test) Be treated consistently Be necessary to perform the program Be permissible under the law

  5. Section J of OMB A-21: provides specific rules on cost allowability. • Sub-sections 1 through 54: provides principles to be applied in establishing the allowability of costs. • Specifies approval requirements, documentation and other provisions, for some costs. • Determination of allowability in each caseshould be based on the treatment provided for similar or related items of cost. • When there is a discrepancy between the provisions of a sponsored agreement and the provisions, the agreement should govern.

  6. How is allowability determined? Allowable: Under the agreement, regulations, and public laws Reasonable: A prudent person would have purchased this item and paid this price Allocable: They can be assigned to the activity on some reasonable basis Consistently Treated: Like costs must be treated same in like circumstances

  7. If a cost cannot meet the criteria listed in the previous slide, it is unallowable, no matter what it is for.

  8. EXAMPLES of Unallowable Costs:cannot be charged against Federal agreements, used as cost sharing (match) or used as part of Indirect (F&A) costbaseUnallowable Activities (something you do) -organized fund raising -lobbying -general public relations& alumni activities -student activities -managing investments solely to enhance income

  9. Unallowable Objects (something you buy, or a line item)-advertising -alcoholic beverages -entertainment -fines & penalties -moving costs if employee resigns within twelve months -certain recruitment costs

  10. OMB A-21 Constantly Changes-to tighten rules on allowability and allocation of costs.-to promote greater standardization in treatment of costs.OSP assists in identifying what costs are allowable, or unallowable under A-21.

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