Example: tourism industry

Cost Principles: Allowable Costs Uniform Guidance 2 CFR 200

cost Principles: Allowable Costs Uniform Guidance 2 CFR 200 Carlos M Rodr guez Rivera Director Marcos O P rez Beauchamp Compliance OfficerOffice for Research Compliance & IntegrityUniversity of Puerto RicoSession normsPut your phone into silent, mute or vibrate modeQuestions related to a topic could be made during the presentationQuestion on a specific case will be answer at the end of the presentationTraining Materials will be available at: Introduction 2 CFR 200 overview Basic Concepts cost Principles Applicability cost Principles Applied on the Job Common Problems Questionable Costs Management Practice Session Practice Session Discussion Q&AObjectives for the day Determine which regulation apply under a given circumstance Understand the reach of the cost principles Learn to manage specific cost allowability issues Understand how to apply cost principles to the different stages of a federal a

Questions related to a topic could be made during the ... is allowable or unallowable. Judgement should be ... §200.471 Termination costs. §200.472 Training and education costs. §200.473 Transportation costs. §200.474 Travel costs. §200.475 Trustees.

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Transcription of Cost Principles: Allowable Costs Uniform Guidance 2 CFR 200

1 cost Principles: Allowable Costs Uniform Guidance 2 CFR 200 Carlos M Rodr guez Rivera Director Marcos O P rez Beauchamp Compliance OfficerOffice for Research Compliance & IntegrityUniversity of Puerto RicoSession normsPut your phone into silent, mute or vibrate modeQuestions related to a topic could be made during the presentationQuestion on a specific case will be answer at the end of the presentationTraining Materials will be available at: Introduction 2 CFR 200 overview Basic Concepts cost Principles Applicability cost Principles Applied on the Job Common Problems Questionable Costs Management Practice Session Practice Session Discussion Q&AObjectives for the day Determine which regulation apply under a given circumstance Understand the reach of the cost principles Learn to manage specific cost allowability issues Understand how to apply cost principles to the different stages of a federal agreement Regulation: 2 CFR 200 Consolidates 8 OMB circulars Effective since December 26th, 2014 Applies to.

2 State Governments Higher Education Institutions Tribal Governments Local Governments Non for Profit bin/text idx?tpl=/ecfrbrowse/Title02 (Searchable indexed html) 2014 title2 vol1/pdf/CFR 2014 title2 vol1 (PDF)2 CFR 200 SummaryAreaCircularEntityCost Principles2 CFR 225 (OMB A-87)State, local and tribal governments2 CFR 220 (OMB A-21)Higher Education Institutions2 CFR 230 (OMB A-122)Non for Profit Institutions2 CFR 200 SummaryAreaCircularEntityAdministrative Requirements2 CFR 215 (OMB A-110)Educational Institutions, Hospitals and non for profit InstitutionsOMB A-102 State and local governmentAuditsOMB A-133 State and local government, Educational Institutions.

3 Non for Profit InstitutionsOMB A-50 FederalCFDAOMB Circular A-89 Federal2 CFR 200 Subparts Subpart A Acronyms and Definitions Subpart B General Provisions Subpart C Pre Federal Award Requirements and Contents of Federal Awards Subpart D Post Federal Award Requirements Subpart E cost Principles Subpart F Audit RequirementsBasic Concepts Reasonableness Allocability Conformance Allowability Composition of Costs Direct cost Indirect cost Applicable CreditsMUST= REQUIREDSHOULD= Best practice or recommendedReasonableness Reasonable costsA cost is reasonable if, in its nature and amount, it doesnot exceed that which would be incurred by aprudentperson under the circumstances prevailing at the timethe decision was made to incur the cost .

4 Ordinary and necessaryfor the operation of the non Federal entity or the proper and efficient performanceof the Federal (cont) Requirements sound business practices arm's length bargaining Follow federal, state, local, tribal, and other laws andregulations Follow terms and conditions of the Federal award Market prices for comparable goods or services for thegeographic area Prudence Evaluate deviations from established practices and policiesAllocability Allocable cost is allocable to a particular Federal award or othercost objective if the goods or services involved arechargeable orassignableto that Federal award or costobjective inaccordance with relative (cont)Tests for allocability.

5 Is incurred specificallyfor the Federal award cost benefits both sponsored agreement & other work in proportions that can be approximated by reasonable methods Is necessaryto the overall operation of institution and is deemed to be assignable in part to sponsored projects No shifting of costsfrom one fund to another to cover cost overruns, avoid restrictions on agreement or for reasons of convenienceConformanceTest for allowability conformance deals with limitationsand exclusions as contained in theterms and conditionsof award, including those in the cost principlesvariesbythetypeofactivity,the type of recipient,andothercharacteristics of individual where otherwise authorized by statute, Costs must meet thefollowing general criteria in order to be Allowable under Federalawards.

6 Conform to any limitations orexclusions Consistent treatment betweendirect and indirect Costs GAAP (except governments) Cannotbeusedascostshare Beadequately documented Necessary, Reasonableand Allocable Be consistentwith policiesand procedures that applyuniformlytobothfederally financed andother activitiesof thenon Federal entityProcurement Decision Making ProcessREASONABLED etermining AllowabilityApproved Grant BudgetProject DescriptionNECESSARY / CONFORMG rant ObjectivesFinancial / Inventory RecordsALLOCABLEIf equipment A is listed on:If equipment A has gone through the:If equipment A has links to the grant Project in the:ALLOWABLEIf equipment A is: NECESSARY, REASONABLE,ALLOCABLEand CONFORMS grant term & condition then it is:All conditions for allowability must be met.

7 A cost allocable to an award is not necessarily reasonableExample:Buy a sport car to transport food A reasonable cost may not be allocable to an award Example:The purchase of a Xerox machine A cost may be reasonable and allocable but does not conforms to award terms and conditions or defined as unallowed in the regulationExample:Lobbying Costs Oh, but is budgeted, therefore allowed! it doesn t matter NIH Grants Policy Statement: The fact that a proposed cost is awarded as requested by an applicant does notindicate a determination of allowability. NSF Award and Administration Guide:It is thegrantee organization that isultimatelyresponsiblefor ensuring that all Costs charged to NSF awards meet therequirements of the cost principles contained in 2 CFR 200,Subpart E, grant terms and conditions, and any otherspecific are Costs under a Federal Agreement?

8 Composition of costsTotal cost The total cost of a Federal award is the sum of the Allowable direct and allocable indirect Costs less any applicable cost = Direct + Indirect CreditsDirect Direct Costs . Can beidentified specifically with a particular finalcost objective,such as a Federal award, or otherinternally or externally funded activity, or that Can be directly assigned to such activities relativelyeasily with ahigh degree of accuracyIndirect (F&A) Indirect (F&A) Costs Indirect (F&A) Costs means those Costs incurred for acommon or joint purpose benefiting more thanone cost objective, Not readily assignableto the cost objectivesspecifically benefitted, Indirect (F&A)

9 cost poolsmust be distributed tobenefitted cost objectiveson bases that willproduce anequitable resultin consideration ofrelative benefits Credits Applicable creditsRefer to those receipts or reduction of expenditure typetransactions that offset or reduce expense items allocableto the Federal award as direct or indirect (F&A) : Insurance refunds or rebates Adjustments of overpayments or erroneous charges Purchase discounts Rebates or allowances Recoveries or indemnities on lossesDirect or Indirect (F&A) Classification of Costs . There isno universal rulefor classifying certain Costs aseither direct or indirect (F&A) A cost may be direct with respect to some specificservice or function, but indirect with respect to theFederal award or other final cost or Indirect (F&A)(Cont.)

10 Item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) Context is importantConsistent Treatment Factors affecting allowability of Costs ."(d) A cost may not be assigned to a Federal award as adirect cost if any other cost incurred for the samepurpose in like circumstances has been allocated to theFederal award as an indirect cost ."Direct / Indirect Decision TreeDoes the cost result in a direct benefit to the grant?Is it necessary to the overall operation of the organization?Rethink whether the cost is allowableCan it can be easily and accurately traced to the grant?