21 Jan 40 09 Cost Determination Guidelines PR&F site Washington State University

When conditions in paragraph and of this section are met, non-Federal entities are not required to establish records to support the allowability of claimed costs in addition to records already required or maintained. Also, when conditions in paragraphs and of this section are met, the absence of time logs, calendars, or similar records will not serve as a basis for disallowing costs by contesting estimates of lobbying time spent by employees during a calendar month. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs must https://simple-accounting.org/ be treated as a direct cost and must be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance. Costs of insurance or of contributions to any reserve covering the risk of loss of, or damage to, Federal Government property are unallowable except to the extent that the Federal awarding agency has specifically required or approved such costs. Although not necessary to meet fluctuations in workload, they were necessary when acquired and are now idle because of changes in program requirements, efforts to achieve more economical operations, reorganization, termination, or other causes which could not have been reasonably foreseen.

Actual cost data shall be used when such data can be determined for both ownership and operations costs for each piece of equipment, or groups of similar serial or series equipment, from the contractor’s accounting records. When such costs cannot be so determined, the contracting agency may specify the use of a particular schedule of predetermined rates or any part thereof to determine ownership and operating costs of construction equipment (see subdivisions and of this section).

Subpart 31.6 – Contracts with State, Local, and Federally Recognized Indian Tribal Governments

Indirect Costs are costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To provide guidance for determining allowable costs on federally sponsored awards and ensure compliance with the Uniform Guidance. Consistency– Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or facilities and administrative (F&A) costs, and the method used to estimate, record, and report costs must be consistent as well. A cost is consistent when like expenses are treated in the same manner under like circumstances.

Fringe benefits include, but are not limited to, the cost of vacations, sick leave, holidays, military leave, employee insurance, and supplemental unemployment benefit plans. Except as provided otherwise in subpart 31.2, the costs of fringe benefits are allowable to the extent that they are reasonable and are required by law, employer-employee agreement, or an established policy of the contractor. The UG requires that certain expenses be treated as Facilities and Administrative Costs (also known as F&A, indirect costs, or overhead) and paid for through the recovery of indirect costs. Examples of these costs include clerical and administrative salaries, hosting, subscriptions, books, membership dues, postage, office supplies, and telecommunications. In order to qualify as a direct charge on a sponsored project, costs normally considered F&A must be charged in a timely manner and must be consistent with established institutional policies and practices. Fringe benefits are allowances and services provided by employers to their employees as compensation in addition to regular salaries and wages.

Allowable Costs and Cost Principles

It usually performs management, supervisory, or administrative functions, and may also perform service functions in support of the operations of the various segments. An organization which has intermediate levels, such as groups, may have several home offices which report to a common home office. Compensation for personal services means all remuneration paid currently or accrued, in whatever form and whether paid immediately or deferred, for services rendered by employees to the contractor. Allocable – a cost incurred specifically for the program, or several activities but can be distributed between them in Reasonable proportion to benefits received, and is clearly necessary to the program. Certain Allowable non-sponsored expenses may be Unallowable for purposes of the F&A Cost Proposal. Examples include fines/penalties, commencement expenses, and fund-raising activities.

Certain cost principles in this subpart incorporate the measurement, assignment, and allocability rules of selected CAS and limit the allowability of costs to the amounts determined using the criteria in those selected standards. Only those CAS or portions of standards specifically made applicable by the cost principles in this subpart are mandatory unless the contract is CAS-covered . Business units that are not otherwise subject to these standards under a CAS clause are subject to the selected standards only for the purpose of determining allowability of costs on Government contracts. Including the selected standards in the cost principles does not subject the business unit to any other CAS rules and regulations. The applicability of the CAS rules and regulations is determined by the CAS clause, if any, in the contract and the requirements of the standards themselves. Actuarial cost method means a technique which uses actuarial assumptions to measure the present value of future pension benefits and pension plan administrative expenses, and that assigns the cost of such benefits and expenses to cost accounting periods. The actuarial cost method includes the asset valuation method used to determine the actuarial value of the assets of a pension plan.

Special Considerations for States, Local Governments and Indian Tribes

If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, the costs may be allocated on any reasonable documented basis. Where the purchase of equipment is specifically authorized under a Federal Sponsored Award, the costs are assignable to the Federal award regardless of the use that may be made of the equipment or other capital asset involved when no longer needed for the purpose for which it was originally required. When a contractor seeks reimbursement for indirect costs, total lobbying costs shall be separately identified in the indirect cost rate proposal, and thereafter treated as other unallowable activity costs. Fringe benefits are allowances and services provided by the contractor to its employees as compensation in addition to regular wages and salaries.

The cost principles also identify those charges that typically cannot be charged to sponsored awards and are considered Unallowable expenses. They are still subject to all regular costing requirements (e.g., allocability, reasonableness, allowable by terms of the award, incurred within award period). Where the non-Federal entity uses employment agencies, costs not in excess of standard commercial rates for such services are allowable. Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements and alterations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the Federal awarding agency or pass-through entity.

How do I Determine Cost Allocability?

The cost of items reasonably usable on the non-Federal entity’s other work must not be allowable unless the non-Federal entity submits evidence that it would not retain such items at cost without sustaining a loss. In deciding whether such items are reasonably usable on other work of the non-Federal entity, the Federal awarding agency should consider the non-Federal entity’s plans and orders for current and scheduled activity. Contemporaneous purchases of common items by the non-Federal entity must be regarded as evidence that such items are reasonably usable on the non-Federal entity’s other work. Any acceptance of common items as allocable to the terminated portion of the Federal award must be limited to the extent that the quantities of such items on hand, in transit, and on order are in excess of the reasonable quantitative requirements of other work. The costs of each service must consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration over/under-applied costs of the previous period.

Costs of promotional items and memorabilia, including models, gifts, and souvenirs. Costs of travel to the new location, as discussed in paragraph of this subsection . Costs of finding a new home, such as advance trips by the employee or the spouse, or both, to locate living quarters, and temporary lodging during the transition period for the employee and members of the employee’s immediate family. Other costs in connection with the filing and prosecution of a United States patent application where title or royalty-free license is to be conveyed to the Government. Registry and transfer charges resulting from changes in ownership of securities issued by the contractor. Existing procedures should be utilized to resolve in advance any significant questions or disagreements concerning the interpretation or application of this subsection. Costs allowed for business interruption or other similar insurance shall be limited to exclude coverage of profit.

Federal Cost Principles

Accrued benefit cost method means an actuarial cost method under which units of benefits are assigned to each cost accounting period and are valued as they accrue; i.e., based on the services performed by each employee in the period involved. The measure of normal cost under this method for each cost accounting period is the present value of the units of benefit deemed to be credited to employees for service in that period. The measure of the actuarial accrued liability at a plan’s inception date is the present value of the units of benefit credited to employees for service prior to that date. (This method is also known as the unit credit cost method without salary projection.). “Direct costs” are those that can be identified specifically with a particular sponsored project or other internally or externally funded activity. In contrast, “indirect costs,” or facilities and administrative (F&A) costs, are those, such as building operations and maintenance, administrative personnel and systems, and other similar costs, which benefit many activities.

• The gain recognized for contract costing purposes shall be limited to the difference between the acquisition cost of the asset and its undepreciated balance.
• These services do not include centralized services included in central service cost allocation plans as described in Appendix V to Part 200.
• The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable.
• A Federal awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph of this section.
• We review contracts for sponsored projects applying regulatory, statutory and organizational knowledge to balance the university’s mission, the sponsor’s objectives, and the investigator’s intellectual pursuits.
• Job means a homogeneous cluster of work tasks, the completion of which serves an enduring purpose for the organization.

Bid and proposal (B&P) costs means the costs incurred in preparing, submitting, and supporting bids and proposals on potential Government or non-Government contracts. The term does not include the costs of effort sponsored by a grant or cooperative agreement, or required in the performance of a contract. Costs of idle capacity are costs of doing business and are a factor in the normal fluctuations of usage or overhead rates from period to period. Such costs are allowable provided the capacity is necessary or was originally reasonable and is not subject to reduction or elimination by subletting, renting, or sale, in accordance with sound business, economics, or security practices. Widespread idle capacity throughout an entire plant or among a group of assets having substantially the same function may be idle facilities. Contributions by the contractor to an employee organization, including funds from vending machine receipts or similar sources, are allowable only to the extent that the contractor demonstrates that an equivalent amount of the costs incurred by the employee organization would be allowable if directly incurred by the contractor.. Depreciation on a contractor’s plant, equipment, and other capital facilities is an allowable contract cost, subject to the limitations contained in this cost principle.

Where approved by the Federal cognizant agency for indirect costs, these plans are acceptable as an alternative to the requirements of paragraph of this section. For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph if approved by the cognizant agency for indirect cost. Such systems may include, but Guiding Cost Principles are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. The certificate must be signed on behalf of the non-Federal entity by an individual at a level no lower than vice president or chief financial officer of the non-Federal entity that submits the proposal. There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system.

Interest applicable to the excess amounts paid in the aggregate during the period of noncompliance must also be determined and collected in accordance with applicable Federal agency regulations. In reviewing, negotiating and approving cost allocation plans or indirect cost proposals, the cognizant agency for indirect costs should generally assure that the non-Federal entity is applying these cost accounting principles on a consistent basis during their review and negotiation of indirect cost proposals. Where wide variations exist in the treatment of a given cost item by the non-Federal entity, the reasonableness and equity of such treatments should be fully considered. See the definition of indirect (facilities & administrative (F&A)) costs in § 200.1 of this part. Under some circumstances, a direct expense may benefit two or more sponsored awards or activities. When the cost’s proportional benefit towards each sponsored award and/or activity can be determined without undue effort or cost, then the cost should be allocated based on the proportional benefit.