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3. 2 What is ICRP? Indirect Cost Rate Proposal The documentation prepared by a governmental unit in accordance with OMB Circular A-87 to substantiate its request for the establishment of an indirect cost rate.

4. 3 Why do we prepare ICRP? n Comply with the State’s Full Cost Recovery Policy to recover full costs whenever goods or services are provided for others. n Comply with Senate Bill 45 requiring all non-reimbursement Capital Outlay Support projects to include the functional indirect costs as part of project costs.

5. 4 What are Full Costs? n DIRECT COSTS:  Identifiable with a specific cost objective. INDIRECT COSTS:  Not identifiable with a specific cost objective.  Not assignable to specific cost objective without disproportionate expense.

6. 5 n Program Functional Rate n Administration Rate The Department utilizes Indirect Cost Rates to charge individual projects for their fair share of Indirect costs. How are indirect costs assessed to projects ?

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8. 7 What is the Program Functional Rate? Total Indirect Cost ---------------------------------- = Functional Rate Direct Labor Examples of indirect costs: n Non-project Management & Supervision n Non-project Travel & Per Diem Non-project Training

9. 8 PROGRAM FUNCTIONAL RATE Calculation: Indirect Cost Pool Program Functional INDIRECT LABOR & OE ---------------------------------- = Functional Rate Base 44.70% Capital Outlay Support Program Functional DIRECT LABOR (Rate effective from 07-01-07 to 06-30-08) Component: Indirect EAs n Off-the-Top EAs with Distribution to multiple programs

10. 9 What is the Administration Rate? Total Indirect Cost ---------------------------------- = Administration Rate Direct Labor Examples: n Audits n Accounting Personnel

11. 10 ADMINISTRATION RATE Component: n General Administration n Legal Services n Professional & Technical Services n Building & Equipment depreciation n Bond Interest Expense Central Service Costs (SWCAP & ProRata)

12. 11 ADMINISTRATION RATE The Administration Rate is computed in two steps: Calculation: STEP #1 Total Administration costs are prorated to Department’s major programs. STEP #2 Prorated Administration Costs are divided by the program Direct Labor Indirect Cost Pool Administration LABOR & OE ------------------------------------- = Administration Rate Base 27.87% = Program 20.xx Program Functional DIRECT LABOR (Rate effective from 07-01-07 to 06-30-08)

13. 12 Both Rates Are Added Together For Billing e.g. Capital Outlay Support (rates effective from 07-01-07 to 06-30-08 business month) PROGRAM FUNCTIONAL RATE 44.70% ADMINISTRATION RATE + 27.87% ------------- * Billing Rate 72.57%

14. 13 How are indirect costs assessed to Reimbursed Projects? Indirect Cost Assessment on a Reimbursement project: Project Direct Labor cost =$ 3,500.00 Apply Payroll Reserve Rate = x 61.30% Loaded Labor ($3,500 plus 61.30%) = $ 5,645.50 Apply Indirect Cost Rate = x 72.57% Indirect Cost Assessment ($5,645.50 times 72.57%) = $4,096.94 Indirect cost assessment posted to project as O.E.costs: Project EA FS Program Object Indirect Cost Assessment $$$$$$ R 20.10.$$$ 093 $4,096.94

15. 14 How are indirect costs assessed to SB45 Projects? Indirect Cost Assessment on a SB45 project: Project Direct Labor cost =$ 3,500.00 Apply Payroll Reserve Rate = x 61.30% Loaded Labor ($3,500 plus 61.30%) = $ 5,645.50 Apply Indirect Cost Rate = x 44.70% Indirect Cost Assessment ($5,645.50 times 44.70%) = $2,523.54 Indirect Assessment posted to project as O.E.costs: Project EA FS Program Object Indirect Cost Assessment $$$$$$ T 20.10.$$$ 193 $ 2,523.54

16. 15 Who is impacted by ICRP? Resource Managers and Project Managers:  Projection and budget estimates  Planning and allocating resources  Project management.

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