1. 2015 Leadership Conference “All In: Achieving Results Together”
Cost Principles
Part C
Charlie Kniseley, Debra Jennings, Hillary Tabor
U.S. Department of Education, OSEP, MSIP

2. Uniform Guidance Purpose What it is replacing
Organization of the guidance
Where to find the cost principles
(2 CFR §§ )

3. Cost Principles: Agenda
Identify types of monitoring activities and grant issues related to cost principles.
Examine effective use of the OMB uniform guidance to research cost principles.
Evaluate and apply concepts to determine allowability in real world examples.

4. Cost Principles: Fundamental Assumptions
IDEA Grantees assume responsibility for:
Administering IDEA grant funds efficiently and effectively.
Managing IDEA funds according to agreements, objectives, and terms of the award.
Using accounting practices that are consistent with Uniform Guidance cost principles.
Providing adequate documentation for costs charged to the award.

5. Cost Principles: Purpose
To provide clarification about how Federal funds may be used to help to ensure that Federal funds are used in a manner that is compliant with Federal requirements

6. Cost Principles: Small Group Discussion
What costs do you typically charge under the IDEA Part C grant?
How do you determine whether a specific cost is allowable under the IDEA Part C grant?
What do you do when you have questions about the allowability of a cost under the IDEA Part C grant?

7. Cost Principles: General Considerations
Allowability:
Is the cost reasonable and necessary for the program?
Do sound business practices support the expenditure?
Is the expense in compliance with laws, regulations and grant terms?
To what extent is the expense allocable to the grant?
Is the price comparable to that of similar goods or services in the geographic area?

8. Cost Principles: What is “reasonable”?
The OMB Uniform Guidance says: “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” (2 CFR § )

9. Cost Principles: Brainstorming Activity
What characteristics do you associate with a “prudent” person?
What are some circumstances that might affect the price of a given item or service?

10. Cost Principles: Allocability
In addition to considerations of reasonableness and necessity, the Uniform Guidance also examines the allocability of expenditures.
“If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit.”
(2 CFR § (d))

11. Cost Principles: Allocability (cont’d)
Allocability is the degree to which a given cost is an allowable expenditure for the grant award.
Can range from:
0%, if the program receives no benefit from the good/service. to
100%, if the program receives all the benefit from the good/service.

12. Cost Principles: Small Group Activity
Discuss the concept of allocability at your table.
Discuss an example, either from work or personal experience, in which the concept of allocability was an important consideration.

13. Cost Principles: Considerations
Is the cost generally an allowable expense (not prohibited in the cost principles)?
Is the cost necessary for the performance of the grant project?
To what extent is the expense allocable to the grant?

14. Cost Principles: Considerations (cont’d)
Is the cost reflected/aligned in the program’s approved grant budget?
For equipment and supplies, does it exist elsewhere in the grantee’s inventory?
Is there a less expensive alternative (or justification for selecting the more expensive option)?

15. Cost Principles (2 CFR §§200.421-200.430)
Provisions for (55) Specific Items of Cost
Advertising and Public Relations
Bonding Costs
Collections of Improper Payments
Advisory Councils*
Alcoholic Beverages
Commencement and Convocation Costs
Alumni Activities
Compensation for Personnel Services*
Audit Services*
Bad Debt .

16. Cost Principles (2 CFR §§200.431-200.440)
Compensation for Fringe Benefits*
Defense and Prosecution of Criminal and Civil Proceedings, Claims, Appeals, and Patent Infringements.*
Depreciation
Conferences*
Employee Health and Welfare Costs
Contingency Provisions*
Contributions and Donations
Entertainment*
Equipment and Other Capital Expenditures*
Exchange Rates

17. Cost Principles (2 CFR §§200.441-200.450)
Fines, Penalties and Other Settlements*
Goods or Services for Personal Use
Fund Raising and Investment Costs
Idle Facilities and Idle Capacity
Gains and Losses on Disposition of Depreciable Assets
Insurance and Indemnification
Intellectual Property*
General Costs of Government*
Interest
Lobbying

18. Cost Principles (2 CFR §§200.451-200.460)
Memberships, Subscriptions, and Professional Activities Costs*
Losses on Other Awards or Contracts
Maintenance and Repair Costs*
Organization Costs
Participant Support Costs
Materials and Supplies Costs, Including Costs of Computing Devices
Plant and Security Costs
Pre-Award Costs*
Professional Service Costs*
Proposal Costs

19. Cost Principles (2 CFR §§200.461-200.470)
Publication and Printing Costs
Scholarships and Student Aid Costs
Rearrangement and Reconversion Costs*
Selling and Marketing Costs
Recruiting Costs*
Specialized Service Facilities
Relocation Costs of Employees
Student Activities Costs*
Rental Costs of Real Property and Equipment*
Taxes

20. Cost Principles (2 CFR §§200.471-200.475)
Termination Costs
Training and Education Costs*
Transportation Costs
Travel Costs*
Trustees

21. Cost Principles: Small Group Activity
Given examples of requests related to the cost principles, determine the allowability of the respective costs using these guiding questions:
Which selected item(s) applies to the example?
Is the cost in the example allowable, unallowable, or allowable under certain circumstances?
Do you need more information in order to make a determination (and if so, what information would be helpful)?

22. Cost Principles: Types of Costs
Direct Costs are costs that can be identified specifically with a program or cost objective:
Personnel working directly on a program objective
Supplies purchased for a specific program/project
Service contract supporting program/project goals
Indirect Costs are those costs are typically not readily assignable to a specific program or project:
Facility operations/maintenance expenditures
Costs for general administrative services
Shared data and telecommunications expenses

23. Cost Principles: Cognizant Agency (CA)
The agency that provides the most Federal funding to a grantee is the Cognizant Agency.
Grantees negotiate indirect cost rates with the CA.
All Federal awarding agencies accept these negotiated rates.
ED is usually the CA for State grantees.
ED is usually NOT the CA for most colleges and discretionary grants

24. Cost Principles: Indirect Cost Rates
Types of Indirect Cost Rates
Provisional
Final
Predetermined
Fixed
Use of Rates
Unrestricted
Restricted

25. Cost Principles: Key Concepts
Reasonable and Necessary
Allocability
Selected Items of Cost
State Contact Considerations
Direct v. Indirect

26. Cost Principles: Questions