1. Mission of the Office of Migrant Education To provide excellent leadership, technical assistance, and financial support to improve the educational opportunities and academic success of migrant children, youth, agricultural workers, fishers, and their families. Cost Principles Marketplace ALL ITEMS! ONLY A PENNY!

2. Mission of the Office of Migrant Education To provide excellent leadership, technical assistance, and financial support to improve the educational opportunities and academic success of migrant children, youth, agricultural workers, fishers, and their families. Overview of the Cost Principles Tara Ramsey Office of Migrant Education 2

3. Statutory & Regulatory References Cost Principles OMB Circular A-21 for Educational Organizations (2 CFR Part 220) OMB Circular A-122 for Non-Profit organizations (2 CFR Part 230) 3

4. What this Presentation is! An overview and general discussion of: Cost Principle Regulation Determining Specific Costs Specific Items of Costs Difference of Costs for IHEs and NPOs Highlights from the following Resources The Cost Principles (2 CFR) for IHEs (Part 220) and NPOs (Part 230) 4

5. What this Presentation isn’t Not law or regulation Not a comprehensive representation of the statutes and regulations Not an adequate summary of laws and regulations from which to run your project 5

6. The Objectives Familiarize you with the specific items of cost that you may find in the Cost Principles Allow you to name at least three to five specific items of cost that are allowable and unallowable, based on your knowledge of the Cost Principles Learn how to research your own questions about specific items of cost

7. Reminder: What are the basic considerations of cost? Reasonable AllowableAllocable 7

8. What Specific items of Cost in the Cost Principles? Non-Profit Organizations 2 CFR Part 230  Appendix B – Items 1 - 52 Educational Institutions 2 CFR Part 220  Appendix A – Item J » 1 - 54 8

9. Specific Items Not Discussed  Bad debts  Bonding costs  Contingency provisions  Depreciation/use allowances  Gains and losses on depreciable assets  Idle facilities and idle capacity  Insurance and indemnification  Interest  Lobbying  Page charges in professional journals  Patent costs  Plant and homeland security  Reconversion  Relocation  Royalties and other costs for use of patents and copyrights  Specialized service facilities  Taxes  Losses on other sponsored agreements

10.  Advertising/PR Advertising/PR  Advisory Councils Advisory Councils  Alcoholic beverages Alcoholic beverages  Alumni/ae activities Alumni/ae activities  Audits Audits  Commencement Commencement  Communication Communication  Compensation for personal services Compensation for personal services  Defense/ prosecution of criminal/civil proceedings Defense/ prosecution of criminal/civil proceedings  Deans of faculty and Graduate Schools Deans of faculty and Graduate Schools  Donations/ Contributions Donations/ Contributions  Employee morale, health, and welfare Employee morale, health, and welfare  EntertainmentEntertainment  Equipment and other capital expenditures Equipment and other capital expenditures  Fines and penalties Fines and penalties  Fundraising Fundraising  Goods or services for personal use Goods or services for personal use  Housing and personal living expenses Housing and personal living expenses  Labor relations Labor relations  Maintenance and repair Maintenance and repair  Materials and supplies Materials and supplies  Meetings and conferences Meetings and conferences  Memberships, subscriptions, and professional activity Memberships, subscriptions, and professional activity  Organization Cost Organization Cost  Participant support Participant support  Pre-agreement Pre-agreement  Professional services Professional services  Proposal Costs Proposal Costs  Publication and printing Publication and printing  Rearrangement and alteration Rearrangement and alteration  Recruiting Recruiting  Rent buildings and equipment Rent buildings and equipment  Scholarships and Student Aid Costs Scholarships and Student Aid Costs  Selling and marketing Selling and marketing  Student Activity Costs Student Activity Costs  Termination costs Termination costs  Training costs Training costs  Transportation costs Transportation costs  Travel costs Travel costs  Trustees Trustees 10

11. 1. Advertising 2 CFR Part 230 Non-Profit Allowable costs: Recruitment of personnel required for the performance of obligations arising under award; Procurement of goods/services for the performance of award; Disposal of scrap/surplus materials acquired in the performance of award except when NPOs are reimbursed for disposal costs at a predetermined amount; Other specific purposes necessary to meet the requirements of award. 2 CFR Part 220 IHE 11

12. Public Relations (under Advertising) 2 CFR Part 230 Non-Profit Allowable costs: Required by the Federal award. Communicating with the public & press pertaining to specific activities/accomplishments which result from performance of Federal awards (these costs are considered necessary as part of the outreach effort for the Federal award). Conducting general liaison with news media & government public relations officers, to the extent that such activities are limited to communication & liaison necessary keep the public informed on matters of public concern, such as notices of Federal contract/grant awards, financial matters, etc. 2 CFR Part 220 IHE 12

13. Advertising & Public Relations Cost 2 CFR Part 230 Non-Profit Unallowable: All costs other than as specified in this section. Meetings, conventions, convocations/other events related to other activities of the NPOs, including: Displays, demonstrations, & exhibits; Meeting rooms, hospitality suites, & other special facilities used in conjunction with shows & other special events; Salaries & wages of employees engaged in setting up & displaying exhibits, making demonstrations, & providing briefings; and Promotional items & memorabilia, including models, gifts, & souvenirs. Items designed solely to promote the NPO. 2 CFR Part 220 IHE 13

14. 2. Advisory Councils 2 CFR Part 230 Non-Profit Allowable as a direct cost where authorized by the Federal awarding agency/ as an indirect cost where allocable to Federal awards. 2 CFR Part 220 IHE 14

15. 3. Alcoholic Beverages 2 CFR Part 230 Non-Profit Costs of alcoholic beverages are unallowable. 2 CFR Part 220 IHE 15

16. 4. Alumni/ae Activities 2 CFR Part 230 Non-Profit2 CFR Part 220 IHE Costs incurred for, / in support of, alumni/ae activities & similar services are unallowable. 16

17. 5.4. Audit costs & related services 2 CFR Part 230 Non-Profit Audits required by, & performed in accordance with, the Single Audit Act, Circular A–133, are allowable. Other audit costs are allowable if included in an indirect cost rate proposal, if specifically approved by the awarding agency as a direct cost to award. Agreed-upon procedures to monitor subrecipients who are exempted from A–133 are allowable, subject to the conditions listed in A–133. 2 CFR Part 220 IHE 17

18. 8.Commencement & convocation costs 2 CFR Part 230 Non-Profit2 CFR Part 220 IHE Costs incurred for commencements & convocations are unallowable, except as provided for in Section F.9 of this Appendix. 18

19. 7.9.Communication Costs 2 CFR Part 230 Non-Profit Costs incurred for telephone services, local & long distance telephone calls, telegrams, postage, messenger, electronic / computer transmittal services & the like are allowable. 2 CFR Part 220 IHE 19

20. 8.10.Compensation for Personal Services— General Similarities 2 CFR Part 230 Non-Profit Documented payrolls approved by NPO official. Fringe benefits generally allowable Workman’s compensation generally allowable Furnished cars for personal use not allowable Pension plans generally allowable Includes Severance pay provisions 2 CFR Part 220 IHE Includes criteria for Acceptable Methods of Payroll Distribution Fringe benefits are generally allowable. Workmen's compensation, insurance generally allowable. Furnished cars for personal use are unallowable Pension Plans generally allowable Includes Severance pay provisions. 20 Read this section carefully!

21. 8.10.Compensation for Personal Services— General Variances 2 CFR Part 230 Non-Profit Life insurance on trustee’s are generally allowable. – Though policies where NPO is beneficiary not allowable. Training cost allowable as described in other section. Provisions for overtime, etc. are allowable. Incentive compensation provisionally allowable. 2 CFR Part 220 IHE Includes Salary rates for faculty members. Includes Non-institutional professional activities, or consulting. Tuition benefits for family members other than the employee are unallowable. Sabbatical may be allowable, given stipulations. 21

22. 10.13.Defense & Prosecution of Criminal/Civil Proceedings 2 CFR Part 230 Non-Profit Generally unallowable. Costs incurred in connection with any criminal, civil / administrative proceeding by a government are not allowable. Cost for defense of suits brought by its employees generally unallowable. Associated costs unallowable. Patent infringement litigation generally unallowable. 2 CFR Part 220 IHE Provisionally allowable. Costs incurred in connection with any criminal, civil / administrative proceeding by a government are not allowable. Cost for defense of suits brought by its employees generally unallowable. Associated costs unallowable. 22

23. 12. Deans of Faculty & Graduate Schools 2 CFR Part 230 Non-Profit2 CFR Part 220 IHE The salaries & expenses of deans of faculty & graduate schools, / their equivalents, & their staffs, are allowable. 23

24. 12.15.Donations & Contributions Part 1 2 CFR Part 230 Non-Profit Contributions/donations, made by the organization are unallowable. Donated/volunteer services may be furnished to an organization by professional & technical personnel, consultants, & other skilled & unskilled labor –value of which not reimbursable as a direct / indirect cost. May be used to meet cost sharing / matching requirements. 2 CFR Part 220 IHE 24

25. 12.15.Donations & Contributions Part 2 2 CFR Part 230 Non-Profit No basis for determining the fair market value of the services rendered, the recipient & the cognizant agency shall negotiate an appropriate allocation of indirect cost to the services. Explanation of how donated services are calculated in indirect rates. Donated goods / space may be furnished; value of which is not reimbursable either as a direct / indirect cost. May be used to meet cost share/matching. 2 CFR Part 220 IHE 25

26. 13.16.Employee Morale, Health & Welfare 2 CFR Part 230 Non-Profit Generally Allowable Costs of employee information publications, health clinics/infirmaries, recreational activities, employee counseling services, & any other expenses in accordance with NPO’s established practice is allowable. Equitably apportioned 2 CFR Part 220 IHE Generally Allowable Costs of employee information publications, health clinics/infirmaries, recreational activities, employee counseling services, & any other expenses in accordance with IHE’s established practice Equitably apportioned Addresses certain losses 26

27. 14.17. Entertainment 2 CFR Part 230 Non-Profit Costs of entertainment, including amusement, diversion, & social activities & any costs directly associated with such costs (such as tickets to shows / sports events, meals, lodging, rentals, transportation, & gratuities) are unallowable. 2 CFR Part 220 IHE 27 However, first consider program requirements.

28. 15.18.Equipment & Other Capital Expenditures 2 CFR Part 230 Non-Profit General capital expenditures are unallowable as direct charges, except with advanced agency approval. Special capital expenditures for equipment are allowable as direct costs, provided items are more than $5000 and have prior approval. Capital expenditures for improvements which increase value/ useful life are unallowable as a direct cost except with advanced agency approval. Equipment & other capital expenditures are generally unallowable as indirect cost. 2 CFR Part 220 IHE 28

29. 16.19.Fines & Penalties 2 CFR Part 230 Non-Profit Costs of fines & penalties resulting from violations of, / failure of the organization to comply with Federal, State, & local laws & regulations are unallowable except when incurred as a result of compliance with specific provisions of an award / instructions in writing from the awarding agency. 2 CFR Part 220 IHE Costs resulting from violations of, / failure of the institution to comply with, Federal, State, & local / foreign laws & regulations are unallowable, except when incurred as a result of compliance with specific provisions of the sponsored agreement or instructions in writing from the authorized official of the sponsoring agency authorizing in advance such payments. 29

30. 17.20.Fundraising & Investment 2 CFR Part 230 Non-Profit Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts & bequests, & similar expenses incurred solely to raise capital / obtain contributions are unallowable. Costs of investment counsel & staff & similar expenses incurred solely to enhance income from investments are unallowable. Fund raising & investment activities shall be allocated an appropriate share of indirect costs under the conditions described elsewhere in this part. 2 CFR Part 220 IHE 30

31. 19.22.Goods & Services for Personal Use 2 CFR Part 230 Non-Profit Costs of goods/services for personal use of the organization's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. 2 CFR Part 220 IHE Costs of goods / services for personal use of the institution's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. 31

32. 20.23.Housing & Personal Living Expenses 2 CFR Part 230 Non-Profit Costs of housing, allowances & personal living expenses for/of the organization's officers are unallowable as fringe benefit/indirect costs regardless of whether the cost is reported as taxable income to the employees. Costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award & approved by awarding agencies. 2 CFR Part 220 IHE 32

33. 24.27. Labor Relations Costs 2 CFR Part 230 Non-Profit Costs incurred in maintaining satisfactory relations between the organization & its employees, including costs of labor management committees, employee publications, & other related activities are allowable. 2 CFR Part 220 IHE Costs incurred in maintaining satisfactory relations between the institution & its employees, including costs of labor management committees, employees' publications, & other related activities, are allowable. 33

34. 27.30. Maintenance & Repair Costs 2 CFR Part 230 Non-Profit Maintenance & repair costs incurred for necessary maintenance & upkeep of buildings & equipment (including Federal property unless otherwise provided for) which keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings & equipment or appreciably prolong their intended life shall be treated as Capital Expenditures. 2 CFR Part 220 IHE 34

35. 28.31. Materials & Supplies 2 CFR Part 230 Non-Profit Costs incurred for materials, supplies, & fabricated parts necessary to carry out a Federal award are allowable. Purchased materials & supplies shall be charged at their actual prices. Incoming transportation charges are a proper part of materials & supplies costs. Only materials & supplies actually used for the performance of a Federal award may be charged as direct costs. Federally-donated/furnished materials used in performing a Federal award will be used without charge. 2 CFR Part 220 IHE 35

36. 29.32. Meetings & conferences 2 CFR Part 230 Non-Profit Costs incurred for meetings & conferences, the primary purpose of which is the dissemination of technical information, are allowable. This includes costs of meals, transportation, rental of facilities, speakers' fees, & other items incidental to such meetings / conferences. 2 CFR Part 220 IHE 36

37. 30.33. Memberships, Subscriptions & Professional Activity 2 CFR Part 230 Non-Profit Costs of the non-profit organization's membership in business, technical, & professional organizations are allowable. Costs of the non-profit organization's subscriptions to business, professional, & technical periodicals are allowable. Costs of membership in any civic / community organization are allowable with prior approval by Federal cognizant agency. Costs of membership in any country club / social / dining club / organization are unallowable. 2 CFR Part 220 IHE Costs of memberships, subscriptions & professional activity are allowable. Costs of the institution's membership in business, technical, & professional organizations are allowable. Costs of the institution's subscriptions to business, professional, & technical periodicals are allowable. Costs of membership in any civic / community organization are unallowable. Costs of membership in any country club / social / dining club / organization are unallowable. 37

38. 31. Organization Costs 2 CFR Part 230 Non-Profit Unallowable expenses, except with the prior approval of the awarding agency: Incorporation fees, Brokers' fees, Fees to promoters, organizers, management consultants, attorneys, accountants, investment counselors, and Those in connection with establishment or reorganization of an organization. 2 CFR Part 220 IHE 38

39. 33. Participant Support Costs 2 CFR Part 230 Non-Profit Participant support costs, which are direct costs for items such as: Stipends, Subsistence allowances, Travel allowances, & Registration fees paid on behalf of participants / trainees (but not employees) in connection with meetings, conferences, symposia, and training projects, are allowable with the prior approval of the awarding agency. 2 CFR Part 220 IHE 39

40. 36. Pre-agreement Costs 2 CFR Part 230 Non-Profit Pre-award costs are those incurred prior to the effective date of the award directly pursuant to the negotiation & in anticipation of the award. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award & only with the written approval of the awarding agency. 2 CFR Part 220 IHE Costs incurred prior to the effective date of the sponsored agreement, whether / not they would have been allowable thereunder if incurred after such date, are unallowable unless approved by the sponsoring agency. 40

41. 37. Professional Services Costs 2 CFR Part 230 Non-Profit Costs of professional & consultant services rendered by persons who are members of a particular profession / possess a special skill, & who are not officers / employees of the non-profit organization, are generally allowable. In determining the allowability of these costs there several factors to consider, some of which are Nature & scope of the service rendered in relation to the service required, Necessity of service, Past pattern of such costs, Impact of Federal awards on the non- profit organization's business, Whether the service can be performed more economically by direct employment rather than contracting, And others. Retainer fees must be supported by evidence of bona fide services available/rendered to be allowable. 2 CFR Part 220 IHE 41

42. Proposal Costs 2 CFR Part 230 Non-Profit2 CFR Part 220 IHE Proposal costs are the costs of preparing bids/proposals on potential federally & non-federally-funded sponsored agreements/projects, including the development of data necessary to support the institution's bids/proposals. Proposal costs of the current accounting period of both successful & unsuccessful bids & proposals normally should be treated as Indirect Costs & allocated currently to all activities of the institution; no proposal costs of past accounting periods will be allocable to the current period. However, the institution's established practices may be to treat proposal costs by some other recognized method, only if found to be reasonable & equitable. 42

43. 38.39. Publication & printing costs 2 CFR Part 230 Non-Profit Allowable publication costs include the costs of printing (including the processes of composition, plate- making, press work, binding, & the end products produced by such processes), distribution, promotion, mailing, and general handling. If these costs are not identifiable with a particular cost objective, they should be allocated as indirect costs to all benefiting activities of the non- profit organization. Page charges for professional journal publications are allowable as a necessary part of research costs where: (1) The research papers report work supported by the Federal Government; & (2) The charges are levied impartially on all research papers published by the journal, whether / not by federally-sponsored authors. 2 CFR Part 220 IHE 43

44. 39.40. Rearrangement & alteration costs 2 CFR Part 230 Non-Profit Costs incurred for ordinary / normal rearrangement & alteration of facilities are allowable. Special arrangement & alteration costs incurred specifically for the project are allowable with the prior approval of the awarding agency. 2 CFR Part 220 IHE 44

45. 41.42. Recruiting Costs 2 CFR Part 230 Non-Profit Generally allowable to the extent that such costs are incurred pursuant to a well-managed recruitment program. : “Help wanted” advertising, operating an employment office to secure & maintain an adequate staff Employees’ travel while recruiting personnel, applicants’ travel for interviews for prospective employment, Relocation incident to recruitment of new employees, are allowable Help wanted advertising that is excessive in size or includes more than just recruitment information is unallowable. Advertising, benefits, & salary allowances that do not meet the test of reasonableness or do not conform with the established practices of the organization are unallowable. Relocation costs for an employee that then resigns for reasons within his or her control within twelve months after being hired will be refunded to the Federal Government. 2 CFR Part 220 IHE 45

46. 43. Rental of Buildings & Equipment 2 CFR Part 230 Non-Profit Rental costs are allowable to the extent that the rates are reasonable. Rental arrangements should be reviewed periodically to determine if circumstances have changed. Rental costs under “sale & lease back” arrangements are allowable only up to the amount that would be allowed had the non-profit organization continued to own the property. Rental costs under “less-than-arms-length” leases are allowable. Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount that would be allowed had the non-profit organization purchased the property on the date the lease agreement was executed. Unallowable costs include amounts paid for profit, management fees, & taxes that would not have been incurred had the non-profit organization purchased the facility. 2 CFR Part 220 IHE 46

47. 45. Scholarships & Student Aid 2 CFR Part 230 Non-Profit2 CFR Part 220 IHE Scholarships, fellowships, & other programs of student aid are allowable only when purpose of grant is to provide training to selected participants. Tuition remission & other forms of compensation paid in lieu of, wages to students performing necessary work are allowable provided— Individual is conducting activities necessary to the sponsored agreement; In accordance with established educational institutional policy & consistently provided in a like manner to students in return for similar activities conducted in non-sponsored as well as sponsored activities; During the academic period, the student is enrolled in an advanced degree program at the institution/affiliated institution & the activities of the student in relation to the Federally-sponsored research project are related to the degree program; Tuition/other payments are reasonable compensation for the work performed & are conditioned explicitly upon the performance of necessary work; Institution's practice is to similarly compensate students in non-sponsored as well as sponsored activities. Charges for tuition remission & other forms of compensation paid to students as salaries & wages shall be subject to the reporting requirements stipulated in this Appendix & shall be treated as direct / indirect cost in accordance with the actual work being performed. Tuition remission may be charged on an average rate basis. 47

48. 45.46. Selling & Marketing 2 CFR Part 230 Non-Profit Costs of selling & marketing any products/services of the non-profit organization are unallowable (unless allowed under paragraph 1. of this appendix as allowable public relations cost). When necessary for the performance of Federal programs, these costs are allowable as direct costs, with prior approval by awarding agencies. 2 CFR Part 220 IHE Costs of selling & marketing any products / services of the institution are unallowable (unless allowed under subsection J.1 of this Appendix as allowable public relations costs or under subsection J.38 of this Appendix as allowable proposal costs). 48

49. 48.Student Activity Costs 2 CFR Part 230 Non-Profit2 CFR Part 220 IHE Costs incurred for intramural activities, student publications, student clubs, & other student activities, are unallowable, unless specifically provided for in the sponsored agreements. 49 However, first consider program requirements.

50. 49.51. Training Costs 2 CFR Part 230 Non-Profit Generally allowable. Undergraduate/post-graduate college level, allowable only when the course/degree pursued is relative to work, but see limitations. Contributions/donations to educational/training institutions are unallowable. Training & education costs in excess of stipulated may be allowed with prior approval. 2 CFR Part 220 IHE The cost of training provided for employee development is allowable. 50

51. 50.52. Transportation Costs 2 CFR Part 230 Non-Profit Transportation costs are allowable and may be Directly charged as transportation costs or added to the cost of such items or Charged to the appropriate indirect cost accounts if the organization follows a consistent, equitable procedure in this respect. 2 CFR Part 220 IHE 51

52. 51.53. Travel Costs 2 CFR Part 230 Non-Profit Transportation, lodging, subsistence, etc. by employees for official business is generally allowable. May be charged on an actual cost, or on per diem/mileage basis, or a combination of the two Consistent method used Lodging & subsistence Commercial air travel Excessive air travel other than commercial that exceeds the cost of allowable commercial air travel is unallowable. Foreign travel. 2 CFR Part 220 IHE Similar to NPOs Reasonable & allowable only to the extent do not exceed charges normally allowed by the IHE’ written travel policy. Commercial air travel. Stipulations for times when you could have excessive airfare. Excessive air travel other than commercial that exceeds the cost of allowable commercial air travel is unallowable. Foreign travel not addressed. 52

53. 52.54. Trustees 2 CFR Part 230 Non-Profit Travel & subsistence costs of trustees/directors are allowable. Costs restricted to limitations under travel costs. 2 CFR Part 220 IHE Travel & subsistence costs of trustees/directors are allowable. Costs restricted to limitations under travel costs. 53

54. Contact Information Tara Ramsey Education Program Specialist Office of Migrant Education 400 Maryland Ave. SW #3E309 Washington DC 20202 Tel: 202-260-2063 Fax: 202-205-0089 tara.ramsey@ed.gov 54