Presented by
Ginger Baker
Eileen Campbell
Cost Principles for Educational Institutions found
in
2 CFR Part 220
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The Federal Government guidelines for calculating the facilities and
administrative rate using either Long Form or Short Form
methodologies.
Educational institutions that receive federal awards subject to A-21 of
less than $10 million are required to calculate their F&A cost rate
using a simplified method known as a short form (Section H).
Educational institutions that wish to be reimbursed for institutional
wide administrative and facility costs associated with federal
contracts and grants need to develop an F&A cost rate.
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Sets uniform standards of allocation
Sets uniform standards of allowability
Allows schools to identify full cost of federal
programs
Provides that the federal government bear its
fair share of total costs
Simplifies intergovernmental relations
Encourages consistent costing
The six “B’s” for costs:
 Be allowable
 Be allocable
 Be reasonable
 Be treated consistently
 Be necessary to perform the program
 Be permissible under the law
 The documentation prepared by an institution
in accordance with the federal cost principles in
OMB Circular A-21 to substantiate its claim for
the reimbursement of F&A costs.
 If you don’t want to be reimbursed for F&A costs,
you don’t have to prepare a proposal.
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The proposal should to be submitted six
months after the fiscal year end.
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The proposal needs to be reconciled to the
audited financial statements.
Needs to be clear explanation of adjustments
and reclassifications.
Base period normally coincides with fiscal year.
Short form institutions follow Section H of
OMB Circular A-21.
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The proposal and supporting documentation
becomes the basis for negotiating your
institution’s F&A rate.
Remember, this is your proposal and you must
defend it.
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Costs that are incurred for common or joint
objectives and therefore cannot be identified
readily and specifically with a particular
sponsored project, instructional activity or any
other institutional activity.
Often referred to as indirect or overhead costs.
Executive
Management
Building and Equipment
Depreciation/
Use Allowance
Budgeting
Accounting &
Financial
Management
Not directly
assignable
to any one
activity.
Payroll or
Purchasing
Repair & Maintenance
Human Resources
Utilities
 Advantages
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Relatively easy to prepare and negotiate
Uses institutional financial statements
Uses formula approach -1 pool and 1 base (OH)
Does not need a space study
Does not need a library allocation
Does not need a DCE calculation
Does not need sub-pooling for GA or O&M
Administration is not subject to the 26 point cap that
is imposed on long-form institutions
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Disadvantages
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Does not always result in optimizing F&A cost
recovery.
Establishes one rate for all sponsored activity, rather
than on and off campus rates and special rates where
appropriate.
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Download operating expenses
 Functional expenses need to be broken into salaries, fringe,
and other expenses
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Reconcile
 Expenses to the Financial Statements by NACUBO
functional category
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Decide on Distribution Basis
 MTDC
 Salaries and Wages
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Reclassify financial expenses
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Into the function groups and ultimately indirect cost pool
and direct cost base
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Exclude certain costs
MTDC exclusions
 Unallowable costs
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Make adjustments to ensure consistency
Calculate the rate
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Extract current fund operating expenses
Reconcile to expenditures reported in the notes
to the financial statements by NACUBO
category
Can take longer than you think
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Short form institutions need to reclassify their
financial expenses into the F&A function groups
and ultimately either the indirect cost pool or
direct cost base needed to compute the F&A rate
under the simplified method.
This initial review of expenses for F&A
classification purposes can be done at the
department, object code, or account level.
Reclassifications Include:
 Scrub Expenses
 Unallowable Activities
 Sponsored Accounts
 Catalogs, Commencement, and Convocations
 Department Paid Operations and
Maintenance
 Library
 Department Administration
 Specialized Service Facilities
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Auxiliary Assessments for Institutional
Support and/or Operations and Maintenance
Academic Support
Student Services Administration
Institutional Support
Exclusions Include:
 College Work Study
 Modified Total Direct Cost Exclusions
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Unallowable Expenses
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Capitalized Equipment
Subcontracts > $25K
Financial Aid
Long Term Facilities Rental
Patient Care Costs
Bad Debt
Entertainment
Cost of Goods Sold in Auxiliaries
Adjustments Include:
 Applicable Credits
 O&M Expenses
 Allowable Building Depreciation
 Allowable Equipment Depreciation
 Interest Expense
 Gain/Loss on Disposal of Depreciable Assets
Financial Statement Functional Category
Instruction
F&A Function Group
Department Administration
Instruction
Indirect or Direct
Indirect
Direct
Research
Department Administration
Research
Indirect
Direct
Public Service
Department Administration
Public Service
Indirect
Direct
Academic Support
Student Services Administration
Department Administration
Library
Specialized Service Facilities
Other Direct Costs
Other Direct Costs
Indirect
Indirect
Direct
Direct
Direct
Institutional Support
General Administration
Indirect
Operation and Maintenance of Plant
Operations and Maintenance of Plant
Indirect
Scholarships and Fellowships
Eliminated from Proposal
Auxiliary Enterprises
Auxiliary Enterprises
Direct
Building Depreciation
Indirect
Equipment Depreciation
Indirect
Interest Expense
Indirect
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Step 1. Develop the F&A cost pool:
- Administrative salaries/wages
- Associated fringe benefits
- Finance and accounting costs
- Supplies, materials and expenses
- Space related (O&M)
- Administrative travel
- Total pool costs
$350,000
75,000
25,000
17,000
27,000
6,000
$500,000
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Step 2. Develop the base costs:
Cost Objectives
- Federal NIH grants
- Federal NASA grants
- Ford Foundation grants
- State Contracts
- Other university subcontracts
- Endowment funded programs
- Total base costs
Direct S&W
$300,000
350,000
400,000
250,000
300,000
400,000
$2,000,000
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Step 3. Calculate the rate:
F&A cost pool
Direct cost base
$ 500,000
$2,000,000
= 25%
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Step 4. Apply the rate:
Federal NIH grants
$300,000
Federal NASA
350,000
Foundation grants
400,000
State contracts
250,000
Subcontracts
300,000
Endowment
400,000
Total reimbursement
x
x
x
x
x
x
25%
25%
25%
25%
25%
25%
= $75,000
= 87,500
= 100,000
= 62,500
= 75,000
= 100,000
$500,000
Resources:
DCA Short Form Sample:
http://rates.psc.gov/fms/dca
A-21:
http://www.whitehouse.gov/
omb/circulars_a021_2004
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Ginger Baker
Senior Manager
(702) 994-2999
[email protected]
Eileen Campbell
Manager
(435) 770-5225
[email protected]