Office of School Finance - WVDE

Indirect Costs - Defined Costs not readily identifiable with a specific federal project Costs are incurred for the joint benefit of more than one project

Direct costs - defined Costs that are readily identifiable to a specific project Costs are charged directly to the project Cannot be considered indirect if they are charged directly

Unallowed costs - defined Costs that are not allowed to be charged to a federal project OMB Circular A-87 provides a complete listing of unallowed costs Examples include: Marketing Losses from uncollectible accounts

Indirect Cost Plan - defined A simplified means to determine the fair share of indirect costs that each federal project must bear

Obtaining an indirect cost rate A rate must be determined each year Plan developed by WVDE, approved by USDE The rate is based on actual expenditures two years earlier (FY 11 rate based on FY 09 actual) Plan includes an adjustment between estimated and actual indirect costs two years later Simplified, the indirect cost rate = indirect costs unallowed costs + direct costs

You receive restricted and unrestricted indirect cost rates Process is web-based CSBO is the contact person for determining the rates

Two rates – which do I use? Restricted rate – use for federal projects that contain the supplement but not supplant provision (that is MOST projects) Unrestricted rate – use for all other federal projects (example: child nutrition)

How do I use the rate? For budgeting purposes: Total amount of federal award $200,000 Approved indirect cost rate 2.23% Budgeted direct costs $195,637 ($200,000 / ( )) Budgeted indirect costs $ 4,363 ($195,637 * )

For actual expenditures: Actual direct costs$185,440 Approved indirect cost rate 2.23% Indirect costs charged to the project $4,135 ($185,440 x )

Be careful when you apply the rate You may not apply the indirect cost rate to all actual expenditures: You cannot apply the rate to capital outlay Equipment, buildings, land, building improvements which exceed $5,000 Some grants have a limit on total indirect cost Title III – 2% of the grant Carl Perkins – 5% of the grant

Be careful about the time period The approved rate for FY11 is to be used for ACTUAL expenditures from July 1, 2010 through June 30, 2011 Actual expenditures do not include outstanding encumbrances at year end

How does the federal project get charged? Calculate the actual indirect costs based on actual expenditures at least quarterly The CSBO will make a journal entry to charge the indirect cost amount to each federal project as an expenditure

Which projects are charged indirect costs? All Federal projects are charged the appropriate indirect cost rate, including ARRA and SFSF State projects are not subject to indirect costs %

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