Indirect cost calculations

1. Indirect cost calculations Fiscal Year 2015 Rates

2. 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

4. 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.

5. What are Indirect Costs? Central accounting function

6. What are Direct Costs? Costs that are incurred specifically for one activity and can be identified specifically with that activity.

7. What are Direct Costs? Special ed teacher salary

8. What are Excluded Costs? Costs that require minimal administrative support.

9. What are excluded Costs? Capital outlay

10. What are unallowed Costs? Items for which federal funds cannot be used.

11. What are unallowed Costs? Fines and penalties

12. Indirect Cost Rate The indirect cost rate is a device for determining what portion of allowable general administrative expenses each federal grant should bear

13. Indirect Cost Rate FORMULA: indirect costs x 90% direct costs + unallowed costs

14. Indirect Cost Rate • Audited AFR is used for the calculations • Expenditures must be classified properly! • FY 13 is used to calculate FY 15 rates

15. 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

16. 1. Apply the ratesJuly 1 – june 30 Rates must be applied the same way they are calculated

17. 1. Apply the ratesJuly 1 – june 30 If you used the FY 13 rate for Jul, Aug, or Sept 2013 you must correct any overcharge • Calculate the indirect costs using the FY 14 rate for those months • Reduce future indirect costs in FY 14 to correct the total charged

18. 2. KBE must approve the rates • Agreement is between USDE and KDE • Local boards should recognize the rate but approval is not required

19. 3. 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

20. HOW DO I KNOW WHAT ADJUSTMENTS TO MAKE? • Results of your calculation must comply with OMB Circular A-87 http://www.whitehouse.gov/omb/circulars_a087_2004

21. Sample adjustments • Unallowed costs per A-87 • Donations and contributions • Employee health and welfare costs • Coding Errors not Material to the AFR

22. HOW DO I make ADJUSTMENTs? • “Instructions for Indirect Cost Adjustments for Calculating Indirect Cost Rates” • KDE website

23. HOW DO I make ADJUSTMENTs? • 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”

24. What if I have no ADJUSTMENTs? • You must log into the system anyway • Check box

25. What if I need to adjust again? • No problem • Simply repeat the process

26. certification • By completing the adjustment form: • Certify accuracy

27. When do I need to do this? Window for adjustments will be open March 7 – March 28

28. resources • OMB Circular A-87 • Cost Allocation Guide for State and Local Governments (USDE) • KDE website • Rate calculations • Summary guidance • Archived video