1. 2017 CALACT Spring Conference & Expo
Presentation Supplement OMB Guidance: An Overview of the “Super Circular”
April 24, 2016
Presented at the:
2017 CALACT Spring Conference & Expo
Olympic Valley, CA
Presented by
Richard Garrity
RLS & Associates, Inc. . .

2. Key TERMS & Definitions
Appendix A
Key TERMS & Definitions

3. Key Definitions NEW – Budget
Budget Means the Financial Plan for the Project or Program That the Federal Awarding Agency or Pass-through Entity Approves During the Federal Award Process or in Subsequent Amendments to the Federal Award
It May Include the Federal and Non-Federal Share or Only the Federal Share, as Determined by the Federal Awarding Agency or Pass-through Entity
Note that Budget refers to a Financial Plan, not just the line item spreadsheet. 6

4. Key Definitions NEW – Capital Asset
Capital Assets Means Tangible or Intangible Assets Used In Operations Having a Useful Life of More Than One Year Which Are Capitalized in Accordance With GAAP
Note that Budget refers to a Financial Plan, not just the line item spreadsheet. 6

5. Key Definitions NEW – Capital Asset Capital Assets Include:
Land, Buildings (Facilities), Equipment, and Intellectual Property (Including Software) Whether Acquired by Purchase, Construction, Manufacture, Lease-Purchase, Exchange, or Through Capital Leases
Additions, Improvements, Modifications, Replacements, Rearrangements, Reinstallations, Renovations or Alterations to Capital Assets that Materially Increase Their Value or Useful Life (Not Ordinary Repairs And Maintenance)
Note: Exception, by Legislation, in Transit Law permits maintenance to be reimbursed at the capital ratio, but it does not make maintenance a capital asset 6

6. Key Definitions NEW – Closeout
Closeout Means the Process by Which the Federal Awarding Agency or Pass-Through Entity Determines That All Applicable Administrative Actions and All Required Work of the Federal Award Have Been Completed 6

7. Key Definitions NEW – Cognizant Agency for Indirect Cost
Cognizant Agency for Indirect Costs Means the Federal Agency Responsible for Reviewing, Negotiating, and Approving Cost Allocation Plans or Indirect Cost Proposals
The Cognizant Agency for Indirect Cost is Not Necessarily the Same as the Cognizant Agency For Audit
In recipient/subrecipient arrangements, the recipient may serve as the cognizant agency for indirect costs. Cognizant agency for Audit is either: (a) named by OMB; or (b) determined by agency that provides the most Federal funds to the subrecipient. 6

8. Key Definitions NEW – Cognizant Agency for Indirect Cost
Cognizant Agency for Indirect Costs Means the Federal Agency Responsible for Reviewing, Negotiating, and Approving Cost Allocation Plans or Indirect Cost Proposals
The Cognizant Agency for Indirect Cost is Not Necessarily the Same as the Cognizant Agency For Audit
In recipient/subrecipient arrangements, the recipient may serve as the cognizant agency for indirect costs. Cognizant agency for Audit is either: (a) named by OMB; or (b) determined by agency that provides the most Federal funds to the subrecipient. 6

9. Key Definitions NEW – Computing Devices
Computing Devices Means Machines Used to Acquire, Store, Analyze, Process, and Publish Data and Other Information Electronically, Including Accessories (or “Peripherals”) for Printing, Transmitting and Receiving, or Storing Electronic Information
A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level established by the non-Federal entity for financial statement purposes or $5,000, regardless of the length of its useful life. 6

10. Key Definitions NEW – Computing Devices
Computing Devices Means Machines Used to Acquire, Store, Analyze, Process, and Publish Data and Other Information Electronically, Including Accessories (or “Peripherals”) for Printing, Transmitting and Receiving, or Storing Electronic Information
A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level established by the non-Federal entity for financial statement purposes or $5,000, regardless of the length of its useful life. 6

11. Key Definitions NEW – Contractor
Super Circular Makes Clear Distinction Between A Third Party Contract Relationship and a Pass-Through Relationship
Contract Means a Legal Instrument by Which A Non-Federal Entity Purchases Property or Services Needed to Carry Out the Project or Program Under a Federal Award
In even if a “contract” exists between a primary recipient and lower tier pass-through subrecipient, the lower tier entity is not considered a contractor. 6

12. Key Definitions NEW – Cooperative Audit Resolution
Means the Use of Audit Follow-Up Techniques Which Promote Prompt Corrective Action By Improving Communication, Fostering Collaboration, Promoting Trust, and Developing An Understanding Between the Federal Agency and the Non-Federal Entity
Emphasize the need to resolve audit findings due to new Risk Assessment in grant awards 6

13. Key Definitions NEW – Cooperative Audit Resolution
This Approach is Based Upon:
A Strong Commitment by Federal Agency and Non-Federal Entity Leadership to Program Integrity
Federal Agencies Strengthening Partnerships and Working Cooperatively With Non-Federal Entities and Their Auditors
Non-Federal Entities and Their Auditors Working Cooperatively With Federal Agencies . 6

14. Key Definitions NEW – Cooperative Audit Resolution
This Approach is Based Upon:
A Focus on Current Conditions and Corrective Action
Federal Agencies Offering Appropriate Relief for Past Noncompliance When Audits Show Prompt Corrective Action Has Occurred
Federal Agency Leadership Sending a Clear Message That Continued Failure to Correct Conditions Identified By Audits Which Are Likely to Cause Improper Payments, Fraud, Waste, or Abuse Is Unacceptable and Will Result In Sanctions 6

15. Key Definitions NEW – Federal Audit Clearinghouse
FAC Means the Clearinghouse Designated By OMB as the Repository of Record Where Non-Federal Entities Are Required to Transmit the Reporting Packages Required By Subpart F— Audit Requirements 6

16. Key Definitions NEW – Federal Interest Federal Interest Means
The Federal Share of Total Project Costs
Current Fair Market Value of The Property, Improvements, or Both, To the Extent the Costs of Acquiring or Improving the Property Were Included as Project Costs 6

17. Key Definitions NEW – Internal Controls
Internal Controls Means a Process, Implemented by a Non-Federal Entity, Designed to Provide Reasonable Assurance Regarding the Achievement of Objectives in the Following Categories:
Effectiveness and Efficiency of Operations
Reliability of Reporting for Internal and External Use
Compliance With Applicable Laws and Regulations
Note the new emphasis on recipient/subrecipient management of internal control – not waiting for the once/year assessment by auditors. 6

18. Key Definitions NEW – Micro-Purchase
Micro-Purchase Means a Purchase of Supplies or Services Using Simplified Acquisition Procedures, the Aggregate Amount of Which Does Not Exceed The Micro-Purchase Threshold
The Micro-purchase Threshold Is Set by the Federal Acquisition Regulation at 48 CFR Subpart 2.1
Current Threshold: $3,500
Recommend that every purchasing policy recognized micro-purchases. Note that this has been a part of FTA F for some time. 6

19. Key Definitions NEW – Total Modified Direct Costs
MTDC Means All Direct Salaries and Wages, Applicable Fringe Benefits, Materials and Supplies, Services, Travel, and Subawards and Subcontracts Up to the First $25,000 of Each Subaward
MTDC Excludes Equipment, Capital Expenditures, Rental Costs, Tuition Remission, Scholarships and Fellowships, Participant Support Costs, and the Portion of Each Subaward/Subcontract In Excess of $25,000 6

20. Key Definitions NEW – Supplies
Supplies Means All Tangible Personal Property Other Than Those Defined as Equipment
A Computing Device is a Supply If The Acquisition Cost is Less than the Capitalization Level Established by the Non-Federal Entity for Financial Statement Purposes or $5,000, Regardless of the Length of Its Useful Life 6

21. Cost Allocation & Indirect Cost Rate Proposals
Appendix B
Cost Allocation & Indirect Cost Rate Proposals

22. Confusion on Cost Allocation
The Term “Cost Allocation” Has Been Used to Describe a Wide Range of Allocation Needs Among Public Transit Operators
In Transit, “Cost Allocation” Can Refer to a Series of Distinct Management/Accounting Practices
Each Cost Allocation Problem Requires a Separate Methodology, Typically Referred to As “Cost Allocation” 6

23. Types of Cost Allocation
Financial Based Cost Allocation
Service Based Cost Allocation Plans 6

24. Financial Based Cost Allocation #1
Central Services Cost Allocation Plan
A Publicly Sponsored Transit Program Benefits from the Services of Other Governmental Units and Desires to Claim Costs Incurred by these Units Under its Various Federal Awards
The Public Entity or Governmental Unit Must Prepare a “Central Services Cost Allocation Plan” 6

25. Fundamental Financial Management for Rural Transit Operators
CSCAP Preparation
Instructor’s Manual

26. Financial Based Cost Allocation #2
Indirect Cost Allocation Plan
An Entity (Public or Private Nonprofit) Provides Multiple Program Services
Certain Overhead and Administrative Costs Incurred by the Entity Benefit All Programs and Services, Including Transit
The Agency Seeks to Recoup These Costs in Their Billings to Various Federal Agencies
The Entity Requires an Approved “Indirect Cost Allocation Rate” in Order for Such Costs to be Reimbursable by the Federal Government” 6

27. Service Based Cost Allocation
Allocate Costs to Various Types/Modes/Services
Charter Cost Allocation
Local Match Allocation Plan 6

28. Service Based Cost Allocation #1
A Public Transit Agency Coordinates Service With Various Human Service Agencies In The Area
The Transit Provider Has A Policy That Public Transit Funds Cannot Be Used To Subsidize Human Service Agency Client Transportation
The Transit Agency Needs A “Fully Allocated Cost Analysis” To Determine How To Price Contract Services 6

29. Service Based Cost Allocation #2
A Transit Agency Provides Charter Service in Accordance with 49 CFR part 604
The Transit Agency Must Demonstrate That it Fully Recovers the Cost of Charter Service
The Agency Requires a “Charter Service Allocation Plan” 6

30. Service Based Cost Allocation #3
A Regional Transit Authority Provides Service Over a Multi-Jurisdictional Service Area
Each Participating Local Entity Must Share Responsibility for Funding a Portion of the Local Share
The Authority Must Allocate Local Funding Needs In An Equitable Manner To All Participating Jurisdictions 6

31. Multiple Cost Allocation Plans
Some Public Transportation Projects May Require Multiple Types of Cost Allocation
Central Service Cost Allocation Plan
Indirect Cost Allocation Plan
Service Based Cost Allocation Plan 6

32. Multiple Cost Allocation Plans
Fundamental Financial Management
for Rural Transit Operators
Multiple Cost Allocation Plans
Instructor’s Manual

33. Methods Simplified Method Multiple Allocation Base Method
Special Indirect Cost Rates
New, de minimis Rate
For Entities That Have Never Sought An Indirect Cost Rate with the Federal Government, a New Process is Permitted
An Automatic Ten Percent Rate May Be Used
No Indirect Cost Rate Proposal is Required 6

34. Simplified Methods
Where a Governmental Unit's Department or Agency Has Only One Major Function, or Where All Its Major Functions Benefit From The Indirect Costs To Approximately The Same Degree, the Allocation of Indirect Costs and the Computation of An Indirect Cost Rate May Be Accomplished Through Simplified Allocation Procedures
This Method Works For Smaller Units Quite Well 6

35. Simplified Methods
Both the Direct Costs and the Indirect Costs Must Exclude Capital Expenditures and Unallowable Costs
Unallowable Costs Must Be Included in the Direct Costs if They Represent Activities Which Indirect Costs Are Properly Allocable 6

36. Simplified Methods Distribution Base Options
Modified Total Direct Costs (MTDC)
Excludes Capital Expenditures and Other Distorting Items, Such As Pass-through Funds, Subcontracts In Excess of $25,000, Participant Support Costs, etc.
Direct Salaries and Wages (S&W)
Another Base Which Results In an Equitable Distribution
Usually, the First Two Methods are Used 6

37. Multiple Allocation Methods
Where a Non-Federal Entity's Indirect Costs Benefit Its Major Functions in Varying Degrees, Such Costs Must Be Accumulated Into Separate Cost Groupings. Each Grouping Must Then Be Allocated Individually To Benefitted Functions By Means of a Base Which Best Measures the Relative Benefits
This Method Usually Appropriate for Larger, More Complex, Public Entities 6

38. Documentation in ICRP
Indirect Cost Rate Proposals (ICRP)Need Not Be Complex
Generally Derived on Existing Data
Computation of Rate
Subsidiary Worksheets
Other Relevant Data 6

39. Documentation in ICRP Documentation Required
Cross-Reference of Rate Computations to Financial Data
Comprehensive Annual Financial Report (CAFR)
Audit
Other Financial Data
Financial Data is Typically Audited Data
If Unaudited Data is Used, Adjustments Will Be Required in a Subsequent Proposal 6

40. Documentation in ICRP Documentation Required
Direct Base Costs Incurred in Federal Grant Awards
Schedule Must Distinguish Between Salaries & Wages (S&W) and Other Direct Costs
Organizational Chart
Also Include a Narrative Description of the Functional Responsibilities of all Units that Comprise the Governmental Unit
One-Time Submission Unless Organizational Structure Changes 6

41. Documentation in ICRP Documentation Required Required Certification
Every Submittal Must Contain a Certification that is a Verbatim Recital of the “Certificate of Indirect Costs” Found in Appendix VII to 2 CFR part 200 6

42. Submission
Submission Should be Made to the Cognizant Agency for Indirect Costs
This is the Entity Responsible for the Following in Indirect Cost Rate Proposals:
Review
Negotiation
Approval 6

43. Cognizant Agency for Indirect Costs
Public Entities That Receive More Than $35,000,000 Must Submit Its Indirect Cost Rate Proposal to the Cognizant Agency for Indirect Costs
Other Public Entities Develop Indirect Cost Rate Proposals, Use the Rates, and Maintain All Proposal Documentation On File
Submit Upon Request 6

44. Cognizant Agency for Indirect Costs
KEY Element For Pass-Through Entity and Subrecipients
Where a Non-Federal Entity Only Receives Funds As a Subrecipient, the Pass-through Entity Will Be Responsible For Negotiating and/or Monitoring the Subrecipient's Indirect Costs
NCDOT = Pass-Through Entity 6

45. Implementation
Upon Approval, the Rate is Typically Applied for a One-Year Period Coinciding to the Entity’s Fiscal Year
The New Super Circular Provides New Authority That Enables Indirect Cost Rates to Be Applied for Longer Than One Year 6

46. Implementation
Any Non-Federal Entity That Has a Federally Negotiated Indirect Cost Rate May Apply For a One-Time Extension of a Current Negotiated Indirect Cost Rates For a Period of Up To Four Years 6

47. ICRP Preparation Evaluate Your Current Chart of Accounts
Use of a Standardized Chart of Accounts Is Essential to Indirect Cost Allocation
Modify or Expand the Chart of Accounts to Meet Needs
Ensure that Salaries and Wages are Captured Separately From Other Expenses
Ensure that Funds/Programs/Activities in Your Accounting Software Are Sufficiently Robust to Segregate, Accumulate, and Allocate Direct Expenses to the Benefitting Activity
Accumulate Unallowable Expenses Separate 6

48. ICRP Preparation Technical Guidance
The Best Guidance, and the Document Most Recommended, Remains a Publication Produced by the U.S. Department of Health and Human Services Almost Two Decades Ago
Still Widely Available for Download at: 6

49. ICRP Preparation Technical Guidance
The Best Guidance, and the Document Most Recommended, Remains a Publication Produced by the U.S. Department of Health and Human Services Almost Two Decades Ago
Still Widely Available for Download at: 6

50. Fundamental Financial Management for Rural Transit Operators
ICRP Preparation
This is the cover to the HHS publication: Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government: A Guide For State, Local and Indian Tribal Governments.
Instructor’s Manual

51. Types of Rates Final Rate Fixed Rate Predetermined Rate
Provisional Rate
Distribute Handout – Types of Rates 6

52. Fundamental Financial Management for Rural Transit Operators
ICRP Preparation
Instructor’s Manual